FAR 1 - Comprehensive Income

Question 1

Define comprehensive income?

Answer 1

Change in equity (net assets) of a business enterprise during a period. Does not include investment by owners and distributions to owners.

Question 2

What is the definition of comprehensive income?

Answer 2

Net Income
+ Other Comprehensive Income
= Comprehensive Income

Question 3

What is in other comprehensive income?

Answer 3

1) Pension Adjustment - gains or losses
2) Unrealized gains and loses - available for sale securities
3) Foreign currency translations adjustments gains and losses
4) Effective portion of cash flow hedge

5) Revaluation Surplus (IFRS only)

Question 4

What is the purpose of reclassification adjustments?

Answer 4

Avoids double counting (not ready for income statement, waiting to go into income statement)

“Soon you will move the OCI items from AOCI income to the income statement”

Question 5

Net income is reported on a per share basis, is comprehensive income reported on per share basis?

Answer 5

No, comprehensive income is not reported on a per share basis.

Question 6

What are the two approaches of showing comprehensive income?

Answer 6

1) Single statement approach - starts with sales revenues and works all the way down to comprehensive income.
2) Two-statement approach - starts with net income

Question 7

How to show taxes in other comprehensive income? Where is income tax expense or benefit shown?

Answer 7

You can show components either net of tax or before tax effects and then another line for income tax expense.

Income tax expense can be shown either on face of the statement or notes to the financial statement.

Question 8

Do you have to do a statement of comprehensive in interim reports?

Answer 8

YES.