FAR F1 M7 Statement of Comprehensive Income

3.4 Required Disclosures: All formats must disclose:

-The tax effects of each component -changes in the accumulated balances ---The changes in accumulated balances by component may be shown on the face or in the notes to the financial statement -Total accumulated other comprehensive income in the balance sheet as an item of other equity -The reclassification adjustments, which are made to avoid double accounting

Unrealized Gains and Losses The following types of unrealized gains and losses on certain investments in debt securities are reported as components of other comprehensive income until the securities are reported as components of other comprehensive income until the securities are sold:

-Unrealized holding gains and losses on "available -for-sale debt securities" -Unrealized holding gains and losses that result from a debt security being transferred into the "available-for-sale" category from "held to maturity" -Subsequent decreases or increases in the fair value of "available-for-sale" debt securities previously written down as impaired

Under U.S GAAP and IFRS, what are the 2 ways a comprehensive income statement may be presented in?

-a single step statement of comprehensive income (single-statement approach) -an income statement followed by a separate statement of comprehensive income that begins with net income (two-statement approach)

Step 2: Other Comprehensive Income goes to

-goes to equity (accumulated OCI)

What is included in other comprehensive income?

-revenues -expenses -gains -losses that are included in comprehensive income but excluded from net income under GAAP and/or IFRS

Step 1: Net Income

1. Income from continued operations 2. Discontinued operations

Describe Accumulated Other Comprehensive Income

= Equity -It is a balance sheet account and is reported in the statement of financial position -it's just like Retained earnings -U.S. GAAP: what goes in - will come out

In interim periods issued to shareholders, how should comp income be reported?

A total for comprehensive income shall be reported in condensed financial statements of interim periods issued to shareholders

How does the two-statement approach display comprehensive income?

As a separate statement that immediately follows the income statement

What do reclassification Adjustments do?

Avoid double accounting -Reclassification adjustments move other comprehensive income items from accumulated other comprehensive income to the income statement

Financial Statement Reporting How should comprehensive income and its components be displayed in a financial statement ?

Comprehensive income and its components shall be displayed in a financial statement that is presented with the same prominence as the other financial statements that constitute a full set of financial statements. Comprehensive income should not be reported in a per share basis

The Comprehensive income Rule:

Comprehensive income includes net income but excludes transactions with owners such as dividends or stock purchases. Comprehensive income per share should not be displayed.

What is the purpose of reporting comprehensive income?

Comprehensive income represents all changes in stockholder's equity that come from nonowner sources. Therefore comprehensive income includes all net income plus any and all components of other comprehensive income

Respectively, what do cumulative currency-translation adjustments and changes in market value of inventory effect

Cumulative currency-translation adjustments would affect Other comprehensive income market value of inventory would affect net income

Instrument Specific Credit Risk

For liabilities for which the fair value option is elected, changes in fair value that are attributable to instrument-specific credit risk are included in comprehensive income

Foreign Currency Items

Foreign currency translation adjustments remain in other comprehensive income until the sale or liquidation of the investment in the foreign entity

What is the formula for Other comprehensive income?

Net Income (PER income statement) + Other Comprehensive Income(PUFUER) Comprehensive Income

What does P.U.F.I.E.R. stand for?

Pension Adjustments Unrealized Gains and Losses(Available-for-Sale Debt Securities) --Debt securities are broken out between trading and available for sale Foreign Currency Items Instrument Specific Credit Risk Effective Portion of Cash Flow Hedges Revaluations SURPLUS (IFRS Only)

KEY: At the end of each accounting period, all components of comprehensive income are closed to _______. Net income is closed to ____________, and Other Comprehensive Income for the current period is closed to __________:

The Balance Sheet Retained earnings Accumulated Other Comprehensive Income

Effective Portion of Cash Flows

The effective portion of a cash flow hedge is reported as a component of other comprehensive income until the cash flows associated with the hedge item are realized

Revaluation Surplus (IFRS Only)

Under IFRS, revaluation surpluses (gains) recognized when intangible assets and fixed assets are revalued are also included in other comprehensive income.

Statement of Comprehensive Income, what is it?

Whenever you have income or a gain, or expenses or losses that are NOT ready to be reported on the income statement, it is put here It is the change in equity (net assets) of a business during a period

In regard to tax, components of comprehensive income may be reported:

either net of tax or before tax, with one amount shown for the aggregate income tax expense/benefit

How is the amount of income tax expense or benefit allocated to each component of other comprehensive income disclosed?

either on the face of the statement in which those components are displayed or in the notes to the financials

Exercise 1

https://docs.google.com/document/d/1D6ToM1Durd-rgno3iD_zPJKoFDfnnEGD0hJVgKoZ9FI/edit?usp=sharing

Exercise 2

https://docs.google.com/document/d/1D6ToM1Durd-rgno3iD_zPJKoFDfnnEGD0hJVgKoZ9FI/edit?usp=sharing