The International Accounting Standards Board's (IASB) definition of retained earnings is "the residual interest in the assets of the entity after deducting all its liabilities."

Question

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The IASB's definition of retained earnings does not directly refer to "the residual interest in the assets of the entity after deducting all its liabilities." This description more accurately defines equity. Retained earnings specifically refer to the portion of net income left over for the business after it has paid out dividends to its shareholders.

The International Accounting Standards Board's (IASB) Definition of Retained Earnings