F1 - M7 - Statement of Comprehensive Income Flashcards
What is Comprehensive Income?
Change in Equity (Net Assets) from non-owner sources
Net Income + Other Comprehensive Income
Closes to Accumulated OCI at the end of the period
Should NOT be reported on a per share basis
What is the purpose of the Statement of Comprehensive Income?
To reconcile the change in equity (net assets) from non-owner sources.
Keeps companies from hiding “stuff” in equity
What is Other Comprehensive Income?
Revenues, Expenses, Gains, Losses that are included in Comprehensive Income but excluded from Net Income
PUFER
What are the components of Other Comprehensive Income?
P - Pension Adjustments
U - Unrealized Gains/Losses (Available-For-Sale Securities)
F - Foreign Currency Items
E - Effective Portion of Cash Flow Hedges
R - Revaluation Surplus (IFRS ONLY)
(P) Pension Adjustments
Changes in the funded status of a pension plan
Due to gains/losses, prior service costs, and net transition assets/obligations
When are pension adjustments reclassified from OCI?
When they are recognized as a net periodic benefit cost
IFRS - OCI Treatment
Same as GAAP, except…
Certain actuarial gains/losses may be included in OCI. These are not reclassified to net income in subsequent periods.
(U) Unrealized Gains/Losses (Available-For-Sale Securities)
Reported in OCI until the securities are sold.
Examples:
- Unrealized holding gains/losses on available-for-sale securities
- Unrealized holding gains/losses that result from debt security being transferred to “available for sale” from “held to maturity”
- Subsequent decreases or increases in fair value of “available for sale” securities previously written down as impaired
(F) Foreign Currency Items
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.
When are Foreign Currency Items reclassified from OCI?
When there is a sale or liquidation of the investment in the foreign entity
(E) Effective Portion of Cash Flow Hedges
Reported as OCI until the associated hedge cash flows are realized
(R) Revaluation Surplus
IFRS ONLY
Surpluses (Gains) when intangible assets and fixed assets are revalued
Not reclassified to net income in subsequent periods - instead, may be transferred directly to retained earnings when the related asset is used or derecognized
What is the purpose of Reclassification Adjustments?
To avoid double accounting
Moves OCI items from Accumulated OCI to the Income Statement
Accumulated OCI
Component of Equity
Includes the total of OCI from current period and all previous periods.
OCI is closed to Accumulated OCI at the end of the current period.
Who should present Comprehensive Income?
For-Profit companies or companies that have OCI.
Excludes:
Not-For-Profit companies
Companies who do not have OCI
How should Comprehensive Income be reported?
Two options:
1 - Single Statement of Comprehensive Income (Single-Step Approach)
2 - Income Statement, followed by a separate Statement of Comprehensive Income that begins with Net Income (Two-Statement Approach)
Single-Statement Approach
Comprehensive Income
Displays OCI items individually and in total below net income
Two-Statement Approach
Displays OCI as a separate statement that immediately follows the income statement
Tax Effect on Comprehensive Income
Components may be reported either a) net of tax or b) before related tax effects, with one amount shown for aggregate income tax expenses or benefit
Income Tax Expense or Benefit
Amount to allocate is disclosed on either the face of the financial statements or in the footnotes
Is Comprehensive Income reported in the interim period financials?
Yes
Required Disclosure for Comprehensive Income
- Tax effects of each component
- Change in AOCI balance of each component
- Total Accumulated OCI in the balance sheet
- Reclassification Adjustments
*Reclassification adjustments and current period OCI must be separately disclosed
What is the formula for Comprehensive Income?
Net Income + OCI (Current Period)
How are revaluation gains and losses reported?
Revaluation Gains are reported in OCI
Revaluation Losses are reported in Net Income
How are unrealized gains and losses on trading securities reported?
Trading securities goes to the income statement
Foreign Translation Revaluation
Goes to the Income Statement
Regular Foreign Translation Costs go to OCI
Pension - Prior Service Costs
Prior service costs recognized in the year of adjustment should be recorded to Pension Benefits Obligation (PBO) and OCI.
Unrecognized prior service cost in AOCI is amortized to pension expense over the plan participants remaining years of service.
