F1 - M7 - Statement of Comprehensive Income

Question 1

What is Comprehensive Income?

Answer 1

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

Question 2

What is the purpose of the Statement of Comprehensive Income?

Answer 2

To reconcile the change in equity (net assets) from non-owner sources.

Keeps companies from hiding “stuff” in equity

Question 3

What is Other Comprehensive Income?

Answer 3

Revenues, Expenses, Gains, Losses that are included in Comprehensive Income but excluded from Net Income

PUFER

Question 4

What are the components of Other Comprehensive Income?

Answer 4

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)

Question 5

(P) Pension Adjustments

Answer 5

Changes in the funded status of a pension plan

Due to gains/losses, prior service costs, and net transition assets/obligations

Question 6

When are pension adjustments reclassified from OCI?

Answer 6

When they are recognized as a net periodic benefit cost

Question 7

IFRS - OCI Treatment

Answer 7

Same as GAAP, except…

Certain actuarial gains/losses may be included in OCI. These are not reclassified to net income in subsequent periods.

Question 8

(U) Unrealized Gains/Losses (Available-For-Sale Securities)

Answer 8

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

Question 9

(F) Foreign Currency Items

Answer 9

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.

Question 10

When are Foreign Currency Items reclassified from OCI?

Answer 10

When there is a sale or liquidation of the investment in the foreign entity

Question 11

(E) Effective Portion of Cash Flow Hedges

Answer 11

Reported as OCI until the associated hedge cash flows are realized

Question 12

(R) Revaluation Surplus

Answer 12

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

Question 13

What is the purpose of Reclassification Adjustments?

Answer 13

To avoid double accounting

Moves OCI items from Accumulated OCI to the Income Statement

Question 14

Accumulated OCI

Answer 14

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.

Question 15

Who should present Comprehensive Income?

Answer 15

For-Profit companies or companies that have OCI.

Excludes:
Not-For-Profit companies
Companies who do not have OCI

Question 16

How should Comprehensive Income be reported?

Answer 16

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)

Question 17

Single-Statement Approach

Comprehensive Income

Answer 17

Displays OCI items individually and in total below net income

Question 18

Two-Statement Approach

Answer 18

Displays OCI as a separate statement that immediately follows the income statement

Question 19

Tax Effect on Comprehensive Income

Answer 19

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

Question 20

Income Tax Expense or Benefit

Answer 20

Amount to allocate is disclosed on either the face of the financial statements or in the footnotes

Question 21

Is Comprehensive Income reported in the interim period financials?

Answer 21

Yes

Question 22

Required Disclosure for Comprehensive Income

Answer 22

• 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

Question 23

What is the formula for Comprehensive Income?

Answer 23

Net Income + OCI (Current Period)

Question 24

How are revaluation gains and losses reported?

Answer 24

Revaluation Gains are reported in OCI

Revaluation Losses are reported in Net Income

Question 25

How are unrealized gains and losses on trading securities reported?

Answer 25

Trading securities goes to the income statement

Question 26

Foreign Translation Revaluation

Answer 26

Goes to the Income Statement

Regular Foreign Translation Costs go to OCI

Question 27

Pension - Prior Service Costs

Answer 27

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.