Bonus issues reallocate equity without impacting profit

Steps:

• Identify bonus issue as free shares from reserves to existing shareholders, no cash exchange.
• Recognize it transfers amounts from reserves to share capital, keeping total equity unchanged.
• Locate in statement of changes in equity, which details equity movements like reserve transfers.
• Confirm impact on statement of financial position, where share capital rises and reserves fall.

Why A is correct:

• Per IAS 1, bonus issues are equity transactions shown in the statement of changes in equity for reserve-to-capital transfers and in the statement of financial position for updated equity components.

Why the others are wrong:

• B: Statement of profit or loss unaffected, as no income or expense arises.
• C: Omits statement of changes in equity, required for detailing the issue.
• D: Statement of profit or loss irrelevant, since bonus issues are non-trading events.

Final answer: A