Comprehensive
Income
FAS Statement No. 130
Comprehensive
Income
| Read "How Companies Report Income," Luecke, Randall W. and Meeting, David T., Journal of Accountancy, May, 1998, pages 45-52. |
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| 1 | This statement establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. |
| 2 | Current operating
performance income concept excluded extraordinary and nonrecurring
gains and losses from income.
All inclusive income concept includes all items recognized during the period in income, regardless of whether they are considered to be results of operations of the period. APB No. 9 and APB No. 30 largely adopted the all-inclusive income concept. |
| 3 | Although following the all-inclusive concept of income, specific exceptions were made to that concept by requiring that certain changes in assets and liabilities not be reported in a statement that reports results of operations for the period in which they are recognized by instead be included in balances within a separate component of equity in a statement of financial position (balance sheet.) Examples include FASB No. 12, Accounting for Certain Marketable securities, No. 52, Foreign Currency Translation, No. 80, Accounting for Futures Contracts, No. 87, Employers' Accounting for Pensions, and No. 115, Accounting for Certain Investments in Debt and Equity Securities. |
| 4 | Concerns have been expressed about the increasing number of items that are by-passing the income statement. |
| STANDARDS OF FINANCIAL ACCOUNTING AND
REPORTING
Scope |
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| 6 | This statement applies to all enterprises that provide a full set of financial statements... |
| 7 | This statement discusses how to report and display comprehensive income and its components. It does not specify how to recognize or measure the items that make up comprehensive income. |
| Definition of Comprehensive Income | |
| 8 | Per Concepts Statement No. 6, " the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners" |
| 9 | Concepts Statement No. 5 stated that " a full set of financial statements for a period should show: Financial position..., earnings (net income)..., comprehensive income(total nonowner changes in equity) ... cash flows..., and investments and distributions to owners...." |
| Use of the Term Comprehensive Income | |
| 10 | This statement uses the term
comprehensive
income to describe the total of all components of comprehensive
income, including net income.
Other comprehensive income refers to revenues, gains, and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. These terms are not required to be used in financial statements. |
| Purpose of Reporting Comprehensive Income | |
| 11 | ... to report a measure of all changes in
equity of an enterprise that result from recognized transactions and other
economic events of the period other than transactions with owners in their
capacity as owners.
Prior to this statement, some of those changes were reported in the income statement while others were reported with a separate component of equity in the balance sheet. |
| 12 | should assist investors and others in assessing an enterprise's activities and the timing and magnitude of an enterprise's future cash flows. |
| 13 | A single focus on total comprehensive income is likely to result in a limited understanding of an enterprise's activities. Information about the components of comprehensive income often may be more important than the total amount of comprehensive income. |
| Reporting and Display of Comprehensive Income | |
| 14 | All components of comprehensive income shall be reported in the financial statements in the period recognized. A total amount for comprehensive income shall be displayed in the financial statement where the components of other comprehensive income are reported. |
| Classifications within Comprehensive Income | |
| 15 | This statement divides comprehensive income into net income and other comprehensive income. An enterprise shall continue to display an amount for net income. An enterprise that has no items of comprehensive income in any period is not required to report comprehensive income. |
| Classifications within net income | |
| 16 | This statement does not change classifications or other requirements for reporting results of operations. If appropriate, an enterprise shall continue to report income from continuing operations, discontinued operations, extraordinary items, and cumulative effects of changes in accounting principle. |
| Classifications within Other Comprehensive Income | |
| 17 | items in other comprehensive income shall be classified based upon their nature. Additional classifications ...may result from future accounting standards. |
| Reclassification adjustments | |
| 18 | Adjustments shall be made to avoid double counting in comprehensive income items that are displayed as part of net income for a period that had been displayed as part of other comprehensive income in that period or earlier periods. These adjustments are referred to as reclassification adjustments. |
| 20 | An enterprise may display reclassification adjustments on the face of the financial statement in which comprehensive income is reported, or it amy disclose reclassification adjustments in the notes to the financial statements. |
| Alternative Formats for Reporting Comprehensive Income | |
| 22 | An enterprise shall display comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements that constitute a full set of financial statements. No specific format is required for that financial statement but net income should be displayed as a component of comprehensive income in that financial statement. |
| 23 | An enterprise is encouraged to display the components of other comprehensive income and total comprehensive income below the total for net income in a statement that reports results of operations or in a separate statement of comprehensive income that begins with net income. |
| 24 | An enterprise may display components of other comprehensive income either (a) net of related tax effects, or (b) before related tax effects with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items. |
| 25 | An enterprise shall disclose the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, either on the face of the statement in which those components are displayed or in the notes to the financial statements. |
| Reporting Other Comprehensive Income in the Equity Section of a Statement of Financial Position. | |
| 26 | The total of other comprehensive income
for a period shall be transferred to a component of equity that is displayed
separately from retained earnings and additional paid-in capital in a statement
of financial position at the end of an accounting period.
A descriptive title such as accumulated other comprehensive income shall be used for this component of equity. An enterprise shall disclose accumulated balances for each classification in that separate component of equity on the face of a statement of financial position, in a statement of changes in equity, or in notes to the financial statements. |
| Effective Date and Transition | |
| 34 | The provisions of this Statement shall be effective for fiscal years beginning after December 15, 1997. Earlier application is permitted. If comparative financial statements are provided for earlier years, those financial statements shall be reclassified to reflect application of the provisions of this statement. |
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