ACCA Strategic Business Leader (SBL) Practice Exam

What does the statement of changes in equity describe?

1. Performance of operational processes

2. Changes in a company's ownership interest

3. Results of cash inflows and outflows

4. Strategic business unit performance

The correct answer is: Changes in a company's ownership interest

The statement of changes in equity provides a detailed account of the changes in a company's ownership interest throughout a specific reporting period. This statement typically includes information related to the beginning and ending balances of equity components, such as share capital, retained earnings, and other reserves. It reflects how profits or losses have influenced equity, along with other transactions that affect ownership interests, such as new share issuances or dividends declared. This statement is particularly important as it illustrates how each element of equity has changed, helping stakeholders understand the factors influencing ownership structure and the financial strength of the entity. This understanding can provide valuable insights into the company’s capital management and the impact of its financial performance on equity. The other options do not accurately describe the statement of changes in equity: while operational processes, cash flows, and strategic unit performance are significant aspects of business analysis, they are not the focus of this specific financial statement. Instead, they would be found in other reports, such as the statement of cash flows or operational performance reviews.