Disclosure equity

Disclosure equity

Get the requirements for properly disclosing equity as the owners’ balance of assets less liabilities to provide the users of your financial statements with useful financial data, in the common language prescribed in the world’s most widely used standards for financial reporting, the IFRS Standards.

First there is a section providing guidance on what the requirements are, followed by a comprehensive example, easy to tailor to the specific needs of your company.

Disclosure equity guidance

Share premium

IAS 1 requires disclosure of the par RePort of shares (if any), but does not prescribe a particular form of presentation for the share premium. RePorting Co. is disclosing the share premium in the notes. However, local company laws may have specific rules. For example, they may require separate presentation in the balance sheet. [IAS 1.79(a)]

Treasury shares

IAS 32 states that treasury shares must be deducted from equity and that no gain or loss shall be recognised on the purchase, sale, issue or cancellation of such shares. However, the standard does not specify where in equity the treasury shares should be presented. RePorting Co. has elected to present the shares in ‘other equity’, but they may also be disclosed as a separate line item in the balance sheet, deducted from retained earnings or presented in a specific reserve. Depending on local company law, the company may have the right to resell the treasury shares. [IAS 32.33]

Other reserves

An entity shall present, either in the statement of changes in equity or in the notes, for each accumulated balance of each class of other comprehensive income a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing each item of other comprehensive income and transactions with owners. See also commentary paragraphs 2 and 3 to the statement of changes in equity. [IAS 1.106(d)]

Reclassification adjustments relating to components of other comprehensive income must also be disclosed, either in the statement of comprehensive income or in the notes. RePorting Co. has elected to make both disclosures in the notes. [IAS1.92, IAS1.94]

Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. They arise, for example, on disposal of a foreign operation and when a hedged forecast transaction affects profit or loss. [IAS1.7, IAS1.95]

Nature and purpose

A description of the nature and purpose of each reserve within equity must be provided either in the balance sheet or in the notes. This applies to each reserve, including general reserves, capital profits reserves and any others in existence. [IAS 1.79(b)]

In providing a description of the nature and purpose of the reserves, it would be appropriate to refer to any restrictions on their distribution or any other important characteristics. In the case of:

1. the property, plant and equipment revaluation surplus: there is a specific requirement to disclose any restrictions on the distribution of the balance to shareholders [IAS 16.77(f)]
2. the amount of the revaluation surplus that relates to intangible assets: there is a specific requirement to disclose the balance at the beginning and end of the period, indicating the changes during the period and any restrictions on the distribution of the balance to shareholders. [IAS 38.124(b)]

Transfer from share-based payments reserve to share capital on exercise of options

The accounting standards do not distinguish between different components of equity. Although IFRS 2 Share-based Payment permits entities to transfer an amount from one component of equity to another on the vesting or exercise of options, there is no requirement to do so. RePorting Co. has established a share-based payments reserve but does not transfer any amounts from this reserve on the exercise or lapse of options. However, the credit could also be recognised directly in retained earnings or share capital. The treatment adopted may depend on the tax and company laws applicable in the relevant jurisdictions. Entities with significant share-based payment transactions should explain their policy.

Other potential disclosures

The following requirements are not illustrated here as they are not applicable to RePorting Co. Plc:

Issue not disclosed	Relevant disclosures or references
Entities without share capital [IAS 1.80]	Disclose information equivalent to that required by IAS 1.79(a).
Puttable financial instruments [IAS 1.136A, IAS 1.80A]	Various disclosures, see IAS 1.136A and IAS 1. 80A for details.
Limited life entities [IAS 1.138(d)]	Disclose length of the entity’s life.
Entity has issued equity instruments to extinguish financial liabilities [IFRIC 19.11]	Disclose any gain or loss recognised as separate line item in profit or loss or in the notes.

Disclosure equity example

9 Equity

9(a) Share capital and share premium

[IAS 1.106(d)]

	Notes	2020	2019	2020	2019
		# Shares	# Shares	CU’000	CU’000
Ordinary shares	(iii)
– Fully paid [IAS 1.79(a)(ii)]		58,098,156	53,543,075	83,054	58,953
– Partly paid to CU2.88 [IAS 1.79(a)(ii)]		–	1,250,000	–	3,600
– Calls in arrears		–	–	–	-100
	(i)	59,098,156	54,793,075	83,054	62,453
7% non-redeemable participating preference shares fully paid [IAS 1.79(a)(ii)]	(ii)	–	500,000	–	1,523
Total share capital and share premium		58,098,156	55,293,075	83,054	63,976

(i) Movements in ordinary shares:

[IAS 1.106(d)]

	Notes	# of shares	Par RePort	Share premium	Total
		thousands	CU’000	CU’000	CU’000
Opening balance 1 January 2019 [IAS 1.79(a)(iv)]		54,550	54,550	6,546	61,096
Employee share scheme issues	21(c)	143	143	655	798
Dividend reinvestment plan issues	(iv)	100	100	459	559
Balance 31 December 2019 [IAS 1.79(a)(iv)]		54,793	54,793	7,660	62,453
Dividend reinvestment plan issues	(iv)	94	94	471	565
Final call of CU1.12 per share on 1,250,000 partly paid shares	(iii)	–	–	1,400	1,400
Calls in arrears paid	(iii)	–	–	100	100
Exercise of options – proceeds received	(v)	228	228	975	1,203
Acquisition of subsidiary	14	1,698	1,698	8,067	9,765
Rights issue	(vi)	1,285	1,285	6,423	7,708
		58,098	58,098	25,096	83,194
Less: Transaction costs arising on share issues [IAS 32.35, IAS 32.39]		–	–	-200	-200
Deferred tax credit recognised directly in equity [IAS 12.81(a)]		–	–	60	60
Balance 31 December 2020 [IAS 1.79(a)(iv)]		58,098	58,098	24,956	83,054

The purpose of the rights issue and the call on partly paid shares was to repay borrowings which had been drawn to finance the establishment of the furniture retail division, expand the Springfield manufacturing facilities, and acquire shares in RePort IFRS Electronics Group. Funds raised from the other share issues were used for general working capital purposes. [Not mandatory disclosure]

(ii) Movements in 7% non-redeemable participating preference share capital:

[IAS 1.106(d)]

	Notes	# of shares	Par RePort	Share premium	Total
		thousands	CU’000	CU’000	CU’000
Opening balance 1 January 2019/ 31 December 2019 [IAS 1.79(a)(iv)]		500	500	1,023	1,523
Shares bought back on-market and cancelled	(vii)	-500	-500	-850	-1,350
Buy-back transaction costs	(vii)	–	–	-45	-45
Current tax credit recognised directly in equity [IAS 12.81(a)]	(vii)	–	–	15	15
Transfer to retained earnings	(vii)	–	–	-143	-143
Balance 31 December 2020 [IAS 1.79(a)(iv)]		–	–	–	–

(iii) Ordinary shares

Ordinary shares have a par RePort of CU1. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. These rights are subject to the prior entitlements of the 6% redeemable preference shares, which are classified as liabilities (refer to note 7(g)). [IAS 1.79(a)(iii), (v)]

On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and on a poll each share is entitled to one vote.

The company does not have a limited amount of authorised capital. [IAS 1.79(a)(i)]

At 31 December 2019 there were 1,250,000 ordinary shares called to CU2.88, on which a further CU1.12 was outstanding. The outstanding amount, together with calls in arrears of CU100,000, was received on 3 November 2020. [IAS 1.79(a)(ii)]

(iv) Dividend reinvestment plan

The company has established a dividend reinvestment plan under which holders of ordinary shares can elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares are issued under the plan at a 2.5% discount to the market price. [IAS 1.79(a)(vii)]

(v) Options

Information relating to the RePort IFRS Employee Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 21(a). [IAS 1.79(a)(vii)]

(vi) Rights issue

On 10 October 2020 the company invited its shareholders to subscribe to a rights issue of 1,284,916 ordinary shares at an issue price of CU6.00 per share on the basis of 1 share for every 10 fully or partly paid ordinary shares held, with such shares to be issued on, and rank for dividends after, 4 December 2020. The issue was fully subscribed. [IAS 1.106(d)(iii), IAS 1.112(c)]

(vii) Share buy-back

During October/November 2020 the company purchased and cancelled all 500,000 7% non-redeemable participating preference shares on-market in order to simplify the company’s capital structure. The buy-back and cancellation were approved by shareholders at last year’s annual general meeting. The shares were acquired at an average price of CU2.70 per share, with prices ranging from CU2.65 to CU2.73. The total cost of CU1,380,000, including CU30,000 of after-tax transaction costs, was deducted from preference shareholder equity. As all the shares of that class were bought back and cancelled, the remaining balance of CU143,000 was transferred to retained earnings. The total reduction in paid-up capital was CU1,523,000. [IAS 1.106(d)(iii)]

The 7% non-redeemable participating preference shares were entitled to dividends at the rate of 7% per annum when sufficient profits were available, but were non-cumulative. They would have participated equally with ordinary shares on winding up of the company. [IFRS 7.7, IAS 1.79(a)(v)]

9(b) Other equity

[IAS 1.106(d)]

	Notes	2020	2019	2020	2019
		Shares	Shares	CU’000	CU’000
RePort of conversion rights – convertible notes [IAS 32.28]	(i)			3,500	–
Deferred tax liability component [IAS 12.81(a)]				-1,050	–
Treasury shares 2 [IAS 1.79(a)(vi), IAS 32.34]	(ii)	-120,641	-99,280	-676	-550
Total other equity				1,774	-550

(i) Conversion right of convertible notes

The amount shown for other equity securities is the RePort of the conversion rights relating to the 7% convertible notes, details of which are shown in note 7(g). [IAS 1.79(a)(v)]

(ii) Treasury shares

Treasury shares are shares in RePorting Co. that are held by the RePort IFRS Employee Share Trust for the purpose of issuing shares under the RePort IFRS employee share scheme and the executive short-term incentive (STI) scheme (see note 21(c) for further information). Shares issued to employees are recognised on a first-in-first-out basis. [IAS 1.79(a)(vi)]

	# of shares	CU’000
Opening balance 1 January 2019 [IAS 1.79(a)(iv)]	-46,916	-251
Acquisition of shares by the Trust	-52,364	-299
Balance 31 December 2019	-99,280	-550
Acquisition of shares by the Trust	-207,636	-1,217
Issue of deferred shares under the executive STI scheme	40,373	216
Employee share scheme issue	145,902	875
Balance 31 December 2020 [IAS 1.79(a)(iv)]	-120,641	-676

9(c) Other reserves

[IAS 1.106(d)]

The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table. [IAS 1.106A]

Amounts in CU’000	Notes	Reva-luation surplus	Financial assets at FVOCI	Hedging	Share- based payments	Trans-actions with NCI	Foreign currency translation	Total other reserves
At 1 January 2019		3,220	1,173	-203	1,289	–	1,916	7,395
Costs of hedging transferred to inventory	12(a)	–	–	339	–	–	–	339
Deferred tax	8(d)	–	–	-102	–	–	–	-102
Net amount transferred		–	–	237	–	–	–	237
Transfer to retained earnings	7(c)	–	548	–	–	–	–	548
Deferred tax	8(d)	–	-164	–	–	–	–	-164
Net amount transferred		–	384	–	–	–	–	384
Revaluation – gross	8(a), 7(c), 12(b)	5,840	-1,458	1,496	–	–	–	5,878
Deferred tax	8(d)	-1,752	437	-449	–	–	–	-1,764
Non-controlling interests (NCI) share in revaluation – gross		-178	–	–	–	–	–	-178
Deferred tax		54	–	–	–	–	–	54
Depreciation transfer – gross	9(d)	-334	–	–	–	–	–	-334
Deferred tax	8(d)	100	–	–	–	–	–	100
Revaluation associate	16(e)	100	–	–	–	–	–	100
Deferred tax	8(d)	-30	–	–	–	–	–	-30
Reclassification to profit or loss – gross	12(a), 7(c)	–	–	-195	–	–	–	-195
Deferred tax	8(d)	–	–	59	–	–	–	59
Currency translation associate	16(e)	–	–	–	–	–	15	15
Deferred tax		–	–	–	–	–	-5	-5
Other currency translation differences		–	–	–	–	–	243	243
NCI share in translation differences		–	–	–	–	–	-133	-133
Other comprehensive income		3,800	-1,021	911	–	–	120	3,810
Transactions with owners in their capacity as owners
– Share-based payment expenses	21	–	–	–	555	–	–	555
At 31 December 2019		7,020	536	945	1,844	–	2,036	12,381

Amounts in CU’000	Notes	Reva-luation surplus	Financial assets at FVOCI	Hedging	Share- based payments	Trans-actions with NCI	Foreign currency translation	Total other reserves
At 1 January 2020		7,020	536	945	1,844	–	2,036	12,381
Costs of hedging transferred to inventory	12(a)	–	–	-44	–	–	–	-44
Deferred tax	8(d)	–	–	13	–	–	–	13
Net amount transferred		–	–	-31	–	–	–	-31
Transfer to retained earnings	7(c)	–	-646	–	–	–	–	-646
Deferred tax		–	194	–	–	–	–	194
Net amount transferred		–	-452	–	–	–	–	-452
Revaluation – gross	8(a), 7(c), 12(b)	7,243	750	238	–	–	–	8,231
Deferred tax	8(d)	-2,173	-226	-71	–	–	–	-2,469
Non-controlling interests (NCI) share in revaluation – gross		-211	–	–	–	–	–	-211
Deferred tax		63	–	–	–	–	–	63
Depreciation transfer – gross	9(d)	-320	–	–	–	–	–	-320
Deferred tax	8(d)	96	–	–	–	–	–	96
Revaluation joint venture	16(e)	300	–	–	–	–	–	300
Deferred tax	8(d)	-90	–	–	–	–	–	-90
Reclassification to profit or loss – gross	12(a), 7(c)	–	–	-155	–	–	–	-155
Deferred tax	8(d)	–	–	46	–	–	–	46
Impairment of debt instruments at FVOCI	12(c)	–	8	–	–	–	–	8
Deferred tax	8(d)	–	-2	–	–	–	–	-2
Currency translation associate	16(e)	–	–	–	–	–	20	20
Deferred tax		–	–	–	–	–	-6	-6
Other currency translation differences		–	–	–	–	–	-617	-617
Reclassification to profit or loss on disposal of discontinued operation	15	–	–	–	–	–	170	170
Net investment hedge	12(b)	–	–	–	–	–	190	190
NCI share in translation differences		–	–	–	–	–	247	247
Other comprehensive income		4,908	531	58	–	–	4	5,501
Transactions with owners in their capacity as owners
– Share-based payment expenses	21	–	–	–	2,018	–	–	2,018
– Issue of treasury shares to employees	9(b)	–	–	–	-1,091	–	–	-1,091
– Transactions with NCI	16(c)	–	–	–	–	-333	–	-333
At 31 December 2020		11,928	615	972	2,771	-333	2,040	17,993

(i) Nature and purpose of other reserves

[IAS 1.79(b)]

Revaluation surplus – property, plant and equipment

The property, plant and equipment revaluation surplus is used to record increments and decrements on the revaluation of non-current assets. In the event of a sale of an asset, any balance in the reserve in relation to the asset is transferred to retained earnings, see accounting policy note 25(r) for details. [IAS 16.77(f)]

Financial assets at FVOCI

The group has elected to recognise changes in the fair value of certain investments in equity securities in OCI, as explained in note 7(c). These changes are accumulated within the FVOCI reserve within equity. The group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised. [IFRS 9.B5.7.1]

The group also has certain debt investments measured at FVOCI, as explained in note 7(c)(iv). For these investments, changes in fair value are accumulated within the FVOCI reserve within equity. The accumulated changes in fair value are transferred to profit or loss when the investment is derecognised or impaired. [IFRS 9.B5.7.1A]

The table below shows how the FVOCI reserve relates to equity securities and debt investments: [IAS1.106(d), IAS1.108]

Amounts in CU’000	2020			2019
	Debt	Equity	Total	Debt	Equity	Total
As at 1 January	-70	606	536	90	1,083	1,173
Transfer to retained earnings	–	-646	-646	–	548	548
Deferred tax	–	194	194	–	-164	-164
Net amount transferred	–	-452	-452	–	384	384
Revaluation – gross	118	632	750	-228	-1,230	-1,458
Deferred tax	-35	-190	-225	68	369	437
Impairment	8	–	8	–	–	–
Deferred tax	-2	–	-2	–	–	–
Other comprehensive income	89	442	531	-160	-861	-1,021
At 31 December	19	596	615	-70	606	536

Hedging reserves

The hedging reserve includes the cash flow hedge reserve and the costs of hedging reserve, see note 12(b) for details. The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges, as described in note 25(p). Amounts are subsequently either transferred to the initial cost of inventory or reclassified to profit or loss as appropriate. [IFRS 9.6.5.11(d)(i)]

The group defers the changes in the forward element of forward contracts and the time RePort of option contracts in the costs of hedging reserve. These deferred costs of hedging are included in the initial cost of the related inventory when it is recognised, see note 25(p) for further details. [IFRS 9.6.5.15(b)]

Share-based payments

The share-based payments reserve is used to recognise:

• the grant date fair value of options issued to employees but not exercised
• the grant date fair value of shares issued to employees
• the grant date fair value of deferred shares granted to employees but not yet vested
• the issue of shares held by the RePort IFRS Employee Share Trust to employees.

Transactions with non-controlling interests

This reserve is used to record the differences described in note 25(b)(v) which may arise as a result of transactions with non-controlling interests that do not result in a loss of control.

Foreign currency translation

Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income, as described in note 25(d), and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

9(d) Retained earnings

Movements in retained earnings were as follows: [IAS 1.106(d)]

Amounts in CU’000	Notes	2020	2019
Balance 1 January		34,503	20,205
Net profit for the period		32,626	26,123
Items of other comprehensive income recognised directly in retained earnings [IAS 1.106(d)(ii)]
– Remeasurements of post-employment benefit obligations, net of tax	8(h)	83	-637
Reclassification of gain on disposal of equity instruments at fair value through other comprehensive income, net of tax	7(c)(iii)	452	-384
Dividends	13(b)	-22,923	-11,038
Transfer from share capital on buy-back of preference shares	9(a)	143	–
Depreciation transfer, net of tax	9(c)	224	234
Balance 31 December		45,108	34,503

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