What is Shareholders’ Equity?
Shareholders’ equity is the residual interest in the assets of a company after deducting all liabilities. It represents what would remain for the owners if the company sold all assets and paid all debts. Major components are paid-up capital, share premium, reserves, retained earnings, and treasury shares.
How It Works
- Add paid-up capital (par value of issued shares).
- Add share premium (amount paid above par).
- Add accumulated retained earnings and statutory or voluntary reserves.
- Subtract treasury shares (own shares bought back) to arrive at total equity.
Saudi Context
Saudi joint-stock and listed companies present shareholders’ equity by component in their IFRS balance sheet and the statement of changes in equity. The Capital Market Authority requires detailed equity movement disclosures for Tadawul issuers, and ZATCA examines equity for zakat base calculations.
Example
A Saudi company has SAR 100 million paid-up capital, SAR 20 million share premium, SAR 30 million reserves, SAR 50 million retained earnings, and SAR 10 million treasury shares. Total shareholders’ equity is SAR 190 million.