Dual Reporting for Equity and Other Comprehensive Income under IFRS and U.S. GAAP

2 VIEWS ON EQUITY AND IMPLICATIONS

2.1 TERMINOLOGY AND DEFINITIONS OF TERMS

Several terms are used to indicate equity and related concepts in authoritative accounting literature. The multitude of terminology is such that it may not be clear where overlapping or inconsistencies exist. While generally some of these expressions may appear synonymous,¹ each may be found to have specific meanings and implications, to the extent that any particular expression underlines a peculiar aspect of the notion of equity according to the context in which it is used.

Generally, two different points of view alternate in discussions on equity: the perspective of the enterprise (also called the entity perspective) and that of its owners, i.e., the proprietary perspective. Sometimes, however, such different meanings may not be interchangeable.

Comment: For instance, as this section illustrates, equity may exist with no ownership interest (e.g., not-for-profit organization).

A residual-type interest may exist without equity (e.g., certain economic interests, or variable interests).

Criteria to distinguish equity from a liability may sometimes differ from those to define an interest in net assets.

One may argue that common dividends declared and not yet paid accrue to the shareholders and thus dividends payable are equity, not liabilities. This would be similar to the notion that retained earnings accrue to shareholders and that noncontrolling interests are part of equity. IFRS 17 acknowledges that ...