B. GENERAL PURPOSE FINANCIAL STATEMENTS - 3. STATEMENT OF COMPREHENSIVE INCOME

Question 1

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3. STATEMENT OF COMPREHENSIVE INCOME

What does it report?

Answer 1

The idea behind comprehensive income is to show a total picture of all operating income, gains, & losses.

Net income + other comprehensive income = Comprehensive income.

Question 2

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“Other Comprehensive Income” items (4)

Answer 2

• Unrealized gains or losses on AFS securities
• Unrealized gains or losses from certain derivative transactions
• Unrecognized gains or losses from pension costs
• Foreign currency translation adjustments

Question 3

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Comprehensive income can be presented two ways:

Answer 3

In combination with the income statement: Other comprehensive income would be added just below ‘net income’.

Or as a separate statement: You’d have the income statement and a separate statement of comprehensive income. The separate statement starts with net income and then reports other comprehensive income.

Question 4

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Other Comprehensive Income

Reclassification Adjustments

Answer 4

“Accumulated other comprehensive income” (AOCI)

• Reported in the shareholders’ equity section of the balance sheet.
• The OCI items are accumulated there until the gain is realized (such as an AFS security actually being sold)
• Then will be reclassified through net income and the AOCI is reduced by that amount, otherwise these gains would be counted twice.
• These reclassification adjustments are reported in the notes to the financial statements.