Which aspects regarding shares must be disclosed in financial statements?

The requirement to disclose the number of shares authorized and issued in financial statements stems from the need for transparency and accountability in reporting the ownership and structure of equity in a company. This information allows stakeholders, including investors, creditors, and regulators, to assess the financial stability and capital structure of the entity.

When a company issues shares, it defines how many shares can be issued (authorized shares) and how many shares have actually been sold to investors (issued shares). This distinction is crucial because it affects the company's equity and can indicate potential dilution of share value if additional shares are issued in the future.

The authorized and issued shares provide a snapshot of the ownership and how the company capitalizes its operations, which is essential for investors analyzing ownership stakes and for calculating earnings per share. Disclosure of this information helps maintain trust in the financial reporting process by providing stakeholders with a clear understanding of the equity situation within the company.