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Statement of income and retained earnings
Extract from FRS102: Section 6.4-6.5
6.4 The statement of income and retained earnings presents an entity’s profit or loss and changes in retained earnings for a reporting period.
Paragraph 3.18 permits an entity to present a statement of income and retained earnings in place of a statement of comprehensive income and a statement of changes in equity if the only changes to its equity during the periods for which financial statements are presented arise from profit or loss, payment of dividends, corrections of prior period material errors, and changes in accounting policy.
6.5 An entity shall present, in the statement of income and retained earnings, the following items in addition to the information required by Section 5 Statement of Comprehensive
Income and Income Statement:
(a) retained earnings at the beginning of the reporting period;
(b) dividends declared and paid or payable during the period;
(c) restatements of retained earnings for corrections of prior period material errors;
(d) restatements of retained earnings for changes in accounting policy; and
(e) retained earnings at the end of the reporting period.
OmniPro comment
The simplified statement of income and retained earnings can be provided where the only transactions during the year are:
- profit or loss;
- payment of dividends;
- corrections of prior period material errors; and
- changes in accounting policy.
See illustration below of this requirement. Note Company law requires disclosure of shareholders’ funds for each year presented so if the full statement of changes in equity is not provided, the profit and loss reserve and the movement in shareholders funds’ reserve will need to be included in the financial statements.
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Example 3: SOCI Statement of Comprehensive Income |
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For the year ended 31 December 2015 |
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Notes |
2015 |
2014 Restated |
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CU |
CU |
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Turnover |
1 |
XXXXX |
XXXXX |
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Cost of sales |
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(XXXX) |
(XXXX) |
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Gross profit |
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XXXX |
XXXX |
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Selling and distribution costs |
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(XXX) |
(XXX) |
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Administrative expenses |
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(XXX) |
(XXX) |
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Other operating income |
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XXX |
XXX |
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Operating profit |
3 |
XXX |
XXX |
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Income from shares in group undertakings |
4 |
XXX |
XXX |
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Income from shares in other financial assets |
4 |
XXX |
XXX |
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Income from shares in participating interests |
5 |
XXX |
XXX |
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Profit on ordinary activities before interest and taxation |
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XXXX |
XXXX |
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Interest receivable and similar income |
6 |
XXX |
XXX |
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Interest payable and similar income |
7 |
(XXX) |
(XXX) |
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Profit on ordinary activities before taxation |
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XXXX |
XXXX |
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Tax on profit on ordinary activities |
8 |
(XXX) |
(XXX) |
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| Profit on ordinary activities after taxation and profit for the financial year | 100,000 | 355,500 | ||
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Retained earnings brought forward at 1 January 2015 (1 January 2014) as previously reported |
414,600 |
63,600 |
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Prior period adjustment – change in accounting policy |
9 XXX |
XXX |
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Prior period adjustment – correction of error |
10 90,000 |
85,500 |
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Retained earnings brought forward at 1 January 2015 (1 January 2014) as restated |
11 504,600 |
504,600 |
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Dividend paid |
12 XXX |
(XXX) |
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Retained earnings brought forward at 1 January 2015 (1 January 2014) |
13 604,600 |
504,600 |
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