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
