F1M7 Flashcards
Other comprehensive income formula
net income + other comprehensive income
Net income contains the following items
- income from continuing operations
2. discontinued operations
Comprehensive income definition
change in equity (net assets) from NON-OWNER sources
Where does net income go?
retained earnings
Other comprehensive income goes to
accumulated OCI
PUFIE
P: pension adjustment U: unrealized gain or loss on available for sale securities F: Foreign Currency Items I: Instrument specific credit risk E: effective portion of cash flow hedges
Unrealized gains/losses (available for sale securities)
- MTM to OCI
- Debt security transferred from AFS to ‘held to maturity’
- Subsequent decreases or incomes in fair value of AFS debt, previously written off as impaired
Foreign Currency Items
- Translation method = CTA (cumulative translation adjustment)
- re measurement method = gain/loss on IS
Instrument Specific Credit Risk
changes in fair value attributable to instrument-specific credit risk included in comprehensive income
Effective portion of cash flow hedges
- matching principle
- cash flow hedge is reported as OCI until the cash flow is realized
Purpose of reclassification adjustment
moves OCI to income statement to avoid double accounting
accumulated OCI
equity; holding tank that will be closed later to the balance sheet
comprehensive income is stated with
same prominence as the other financial statements; NOT on per share basis
Single statement approach
includes calculation to determine net income
two statement approach
includes net income per the income statement
Tax is reported on the other comprehensive income statement
EITHER net or aggregated at the end of the statement
OCI disclosure
either on the face or in the notes; you have the choice
Required disclosure OCI
- tax effects of each component
- changes in accumulated balances (face OR notes)
- total accumulated OCI in balance sheet
- reclassification adjustments
