Share premium as equity reserve

Steps:

• Share premium arises when shares are issued above nominal value, forming part of shareholders' equity.
• Equity components like share premium are not revenue, so they bypass the statement of profit or loss.
• In the statement of financial position, share premium appears under equity reserves.
• The statement of changes in equity records the issuance transaction, showing the premium's addition to equity.

Why A is correct:

• Under IAS 1, share premium is classified as equity and presented in the statement of financial position's equity section, with changes from issuance detailed in the statement of changes in equity.

Why the others are wrong:

• B: Share premium is not income, so it does not appear in the statement of profit or loss.
• C: Omits the statement of financial position, where share premium is reported as an equity reserve.
• D: Ignores the statement of changes in equity, which captures the premium from share issuance.

Final answer: A