FAR - Statement of Comprehensive Income

Question 1

What is the formula for determining Comprehensive Income?

Answer 1

Comprehensive Income = Net Income + Other Comprehensive Income (OCI) (Net Income, Unrealized G/L on AFS debt securities, foreign currency translation adjustment, unrecognized G/L on pension benefits, deferred G/L on certain hedging transactions)

Question 2

What are the elements of Other Comprehensive Income (OCI)?

Answer 2

1. Unrealized holding gains/losses on available-for-sale securities.
2. Gains/losses on derivatives designated, qualifying, and effective as cash flow hedges.
3. Certain amounts associated with recognition of the funded status of post-retirement benefit plans (pension costs).
4. Certain foreign currency items.

Question 3

Does Comprehensive Income include changes from investments by and distribution to owners?

Answer 3

No. It includes all other changes during a period.

Question 4

The purpose of reporting Comprehensive Income is…

Answer 4

…to reflect changes in owner and non-owner sources.

Question 5

What is the acceptable financial statement presentation of Comprehensive Income?

Answer 5

1. As a separate “Statement of Comprehensive Income”

2. Combined with the Income Statement to provide a “Statement of Net Income and Comprehensive Income”