Comprehensive Income

Question 1

Nonowner transactions

Answer 1

Comprehensive income

Question 2

What is comprehensive income?

Answer 2

Change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources

Question 3

What does comprehensive income consist of?

Answer 3

NI + OCI

Question 4

What does other comprehensive income consist of?

PUFE R => PUFE likes to Revalue his income

Answer 4

Pension adjustments
Unrealized gains and losses
Foreign currency items
Effective portion cash flow hedges
Revaluation surplus (IFRS only)

Question 5

Pension adjustments

Answer 5

Changes in pension plan due to gains/losses, prior service costs, and net transitions assets or obligations must be recognized in OCI in year the changes occur

Included in OCI until recognized as component of net periodic benefit cost

Question 6

Unrealized gains and losses (AFS securities)

Answer 6

• On available-for-sale securities
• That result from a debt security being transferred into AFS category from held-to-maturity
• Subsequent decreases/increases in FS of AFS securities previously written down as impaired

Question 7

Foreign currency items

Answer 7

Foreign currency translation adjustments and gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in foreign entity

Remain in OCI until sale/liquidation of investment in foreign entity

Question 8

Effective portion of CF hedges

Answer 8

Reported in OCI until CF associated with hedged items are realized

Question 9

Revaluation surplus (IFRS only)

Answer 9

Gains recognized when intangible assets and fixed assets are revalued

Question 10

Reclassification adjustments

Answer 10

Move OCI items from AOCI to IS (avoids double counting)

Question 11

Accumulated other comprehensive income

Answer 11

A component of equity that includes the total of OCI for the period and previous periods

Question 12

What accounts are NI and OCI closed to?

Answer 12

NI => R/E

OCI => AOCI

Question 13

True or Fales: Comprehensive income should be reported on a per share basis.

Answer 13

FALSE. Should not be reported on a per share basis

Question 14

Under US GAAP, how may comprehensive income be presented?

Answer 14

1. Single-statement approach

2. Two-statement approach

Question 15

Single-statement approach

Single statement starts with Sales

Answer 15

OCI items displayed individually and in total, below the NI amount

Question 16

Two-statement approach

Answer 16

Statement of comprehensive income immediately follows the income statement

Question 17

What are the required disclosures related to comprehensive income?

Answer 17

1. Tax effects of each component included in OCI
2. Changes in the accumulated balances of each component of OCI
3. Total AOCI in BS
4. Reclassification adjustments

Question 18

What is comprehensive income?

Answer 18

Change in equity of a business during a period from transactions and other events and circumstances from non-owner sources

Question 19

What does comprehensive include?

Answer 19

NI and OCI

Changes in equity except those resulting from investments by owners and distributions to owners

Question 20

Where is AOCI reported?

Answer 20

Stockholders’ equity on the BS

Question 21

What is not included in comprehensive income?

Answer 21

Stock transactions and dividends

Question 22

Should the income tax expense or benefit allocated to components be disclosed?

Answer 22

Yes, either on the face of the statements or in notes to the statements

Question 23

What must reclassification adjustments be shown in the FS that discloses comprehensive income?

Answer 23

To avoid double counting an item previously reported as comprehensive income, which would now be reported as NI

Question 24

What is the purpose of reporting comprehensive income?

Answer 24

To summarize all changes in equity from nonowner sources