Restricted earnings are usually disclosed in the footnotes to the financial statements, but may sometimes be disclosed in a reserve account in the equity section of the balance sheet.

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Restricted earnings refer to a portion of a company's profits that are not available for distribution to shareholders in the form of dividends. Instead, these earnings are retained within the company for specific purposes, such as complying with legal requirements, contractual obligations, or internal company policies. The restrictions are often imposed by creditors, regulators, or the company's board of directors.
In financial reporting, restricted earnings are typically disclosed in the footnotes to the financial statements. The footnotes provide additional information and context about the financial condition and results of operations of the company, which are not readily apparent from the face of the financial statements. The disclosure of restricted earnings in the footnotes would typically include the nature of the restrictions, the amount of earnings that are restricted, and the expected duration of the restrictions.
In some cases, restricted earnings may also be presented in the equity section of the balance sheet. When this occurs, a separate reserve account within the equity section is created to represent the restricted portion of retained earnings. This reserve account is often labeled as "restricted retained earnings" or a similar term to clearly indicate that these funds are not available for general corporate use or for distribution to shareholders.
The presentation of restricted earnings in a reserve account on the balance sheet helps to distinguish these funds from unrestricted retained earnings, which are available for use at the discretion of the company's management. By segregating restricted earnings in this manner, both the company and its stakeholders, including shareholders, creditors, and analysts, can better understand the company's financial flexibility and the potential future availability of funds for dividends or other purposes.
In summary, restricted earnings are disclosed to provide transparency about the portion of a company's profits that are not freely available for distribution or other uses. Whether disclosed in the footnotes or as a reserve account on the balance sheet, the presentation of restricted earnings is an important aspect of financial reporting that helps users of financial statements assess the company's financial health and operational constraints.

Restricted Earnings Are Usually Disclosed in the Footnotes to the Financial