FAR 1-3: Comprehensive Income

Question 1

Define comprehensive income

Answer 1

Change in equity (net assets) that results from revenue, expenses, gains, & losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners & distributions to owners

Question 2

Identify 5 items included in other comprehensive income

PUFER

Answer 2

• PENSION adjustments
• UNREALIZED gains & losses on available-for-sale securities
• FOREIGN currency translation adjustments & gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in a foreign entity
• EFFECTIVE portions of cash flow hedges
• REVALUATION surpluses (IFRS only)

Question 3

List the 3 formats acceptable for reporting comprehensive income. Which format is prohibited under IFRS (& GAAP as of 2012)?

Answer 3

Single statement approach:
*Statement of Income & Comprehensive Income

Two statement approach:

• Statement of Comprehensive Income
• Component within the Statement of Owners’ Equity (prohibited under IFRS & GAAP)

Question 4

List some disclosure requirements for comprehensive income

Answer 4

• Tax effects of each component included in current “Other Comprehensive Income”
• Accumulated balances of components of “Other Comprehensive Income”
• Total accumulated other comprehensive income
• Reclassification adjustments between other comprehensive income & net income