Equity Share Capital Under the Statement of Changes in Equity

Equity Share Capital explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Part I of Schedule III contains not only a balance sheet format but a Statement of Changes in Equity — and its first section reconciles share capital in a way the old format never required.

AccountsMonthly reportAccounting & BookkeepingOutsource Accounting & BookkeepingMonthly accounting · GST reconciliation · Financial reportsAccurate BooksGST ReconciliationExpert TeamGet Started →

The Division I difference

The share capital disclosure requirements are common under Non-Ind AS Schedule III as well as Ind AS Schedule III. But:

• Division II restricts the disclosures to "Equity";
• Division I makes them applicable for all kinds of "Share Capital", with an exception that different classes of preference shares are to be treated separately.

The reason is the Ind AS 32 definition. Preference shares that are liabilities in substance never reach the equity section of a Division II balance sheet at all, so a share-capital-wide disclosure would make no sense there.

The reconciliation

For both the current and the previous reporting period:

1. Balance at the beginning of the reporting period;
2. Changes in equity share capital due to prior period errors;
3. Restated balance at the beginning of the reporting period;
4. Changes in equity share capital during the year;
5. Balance at the end of the reporting period.

The Note 6(D)(I) disclosures

Clause (a) — number and amount of shares authorised. Authorised share capital, or nominal capital, means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company. This disclosure is provided for instruments entirely equity in nature as well as for compound instruments that have an equity component, to the extent applicable.

Clause (b) — number of shares issued, subscribed and fully paid, and subscribed but not fully paid. Three categories:

• issued — those offered for subscription within the authorised limit;
• subscribed and fully paid; and
• subscribed but not fully paid.

Though the disclosure is only for numbers, the amount for each category should also be disclosed to make it relevant. And where shares are not fully called, it should be appropriate to state the amount per share called, even though there is no express requirement.

Issued versus subscribed

It is possible that all shares offered are not subscribed to, and to the extent of the unsubscribed portion there will be a difference between shares issued and subscribed. Subscribed share capital means such part of the capital which is for the time being subscribed by the members of a company.

The statutory backdrop

Section 2(84) defines a share as a share in the share capital of a company, including stock. Section 2(30) defines a debenture to include debenture stock, bonds or any other instrument evidencing a debt, whether or not constituting a charge. Section 43 gives two kinds of share capital for a company limited by shares — equity share capital and preference share capital.

Ind AS 32 cuts across all of that, defining an equity instrument as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities — a definition that is principle based as compared to the legal definition.

Common mistakes

• Applying Division I's all-share-capital disclosures to a Division II balance sheet.
• Omitting the prior period error and restated balance lines.
• Presenting the reconciliation for the current period only.
• Giving share numbers without the corresponding amounts.