Financial Reporting Standards

CHAPTER 9

Stockholders’ Equity and Earnings Per Share

Introduction

Recall that owners’ equity (stockholders’ equity in the case of corporations) is defined as the residual interest in assets of the entity after deducting liabilities. Stockholders’ equity (SE) is not defined in itself other than being the net assets (assets – liabilities) of a business entity. There are five main sections of SE: Paid-In Capital,1 Retained Earnings, Accumulated Other Comprehensive Income, Noncontrolling Interest, and Treasury Stock. Noncontrolling interest arises in consolidated financial statements where the parent corporation controls a subsidiary but does not own 100% of its voting stock. An introduction to the accounting for noncontrolling interests was introduced ...