3) Comprehensive Income

Question 1

Define COMPREHENSIVE INCOME.

Answer 1

Change in equity (net assets) that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners and distributions to owners.

Question 2

Identify five items included in Other Comprehensive Income.

Hint: PUFER

Answer 2

• Pension adjustments
• Unrealized gains and losses on available-for-sale securities
• Foreign currency translation adjustments and gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in a foreign entity
• Effective portions of cash flow hedges
• Revaluation surpluses (IFRS only)

Question 3

List the two formats acceptable for reporting Comprehensive Income. How does this compare with IFRS?

Answer 3

• Statement of Comprehensive Income (single-statement approach)
• Statement of Income followed by a separate Statement of Comprehensive Income (two-statement approach)

U.S. GAAP and IFRS both allow the same two presentations.

Question 4

List some disclosure requirements for Comprehensive Income.

Answer 4

• Tax effect of each component included in current “Other Comprehensive Income”
• Changes in the accumulated balances of components of “Other Comprehensive Income”
• Total accumulated other comprehensive income
• Reclassification adjustments between other comprehensive income and net income