Equity variation – Definition, what it is and concept

An equity variation is a change in the heritage of an organization that is produced due to a change in its assets. It often occurs as a result of an action of the company itself.

The operations carried out by any organization are likely to motivate changes in the compositions of their respective heritage.

The daily activity of companies commonly has transactions or actions of purchases and sales, as well as payments and collections.

All of them are considered variations and affect your assets by modifying at all times your real image and its assessment.

They are produced by operations undertaken by companies and that result in a variation in their assets. They usually have a positive or negative origin based on whether it is a lost or one gain.

Types of equity variation

There are several types of equity variation based on the operations carried out by the organization:

  • Modification Variation Following the occurrence of losses or gains, the capital or the net worth of the company suffer a change. It will be positive if they increase or negative if they decrease. An example would be the purchase by an individual of 100 shares of a company in a bag.
  • Permutative or qualitative variation. These do not produce changes in capital or equity. Another way of looking at it is like the null alteration of the accounting assets and liabilities of a company. As an example, there would be a case of a company that exchanges one machine for another with the same rating.
  • Mixed variation. This is an intermediate modality between the previous options and which consists of changes in accounting or valuation criteria. For example, an entrepreneur can cancel a short-term debt by renegotiating his credit and changing it in the long term. Although the amount to be paid is accounted for by the same amount, this change alters the net worth.

Tax consequences of an equity variation

Typically, this type of equity variation is monitored by the economic controls and institutions of the countries. In that sense, they often go hand in hand with taxation or assessment specific.

The taxes aimed at affecting them in the Spanish case would be the Personal income tax in the case of natural persons and the Corporation tax in that of mercantile societies.