Chapter 1 Section 7: Comprehensive Income Flashcards
Define comprehensive income
All changes in equity from transactions other than owner-related ones
Components of comprehensive income
Net inc (IDEA)+Other Comprehensive Income (PUFER)
Define other comprehensive income
Items included in comprehensive income, but excluded from net income
Components of other comprehensive income
PUFER
Pension adjustments Unrealized gains and losses on AFS Foreign currency items Effective portion of cash flow hedges Revaluation surplus (IFRS only)
How do pension adjustments factor into OCI?
All changes in the funded status of a pension plan due to everything that is amortized with pensions go to OCI until recognized as a component of net periodic benefit cost.
How do unrealized gains and losses from AFS factor into OCI?
Any changes that result from the revaluation of available-for-sale securities goes to OCI until they are realized when the security is sold.
How do foreign currency items factor into OCI?
Any foreign currency translation adjustments and gains and losses on foreign currency transactions that are designated as economic hedges of a net investment ina foreign entity are in OCI.
How does a revaluation surplus factor into OCI?
When fixed assets or intangibles are revalued, gains go to OCI (losses are on the income statement). The gains never go to income, but they go to retained earnings when the related asset is used or derecognized.
What are reclassification adjustments and why are they used?
They move OCI items from AOCI to the income statement to avoid double counting.
What happens to OCI at the end of a period?
It is closed to the balance sheet (AOCI), like net income is closed to retained earnings.
Should comprehensive income be reported on a per share basis?
no
How can comprehensive income be displayed under US GAAP and IFRS?
Single statement approach: single statement of comprehensive income
Two statement approach: income statement followed by separate statement of comprehensive income that begins with net income
Outline the single statement approach
Revenues (summarized) Expenses (summarized) Income before taxes Income tax Net income OCI, net of income tax: Pension adjustment Unrealized gain/loss on AFS Foreign currency items Effective portion of cash flow hedge OCI Comprehensive Income
Outline the statement of comprehensive income when the two statement approach is used
Net income OCI, net of income tax: Pension adjustment Unrealized gain/loss on AFS Foreign currency items Effective portion of cash flow hedge OCI Comprehensive Income
How important is the statement of comprehensive income?
It is just as important, and shall be displayed just as prominently as, the other financial statements
