F-1 COMPREHENSIVE INCOME

Question 1

Q: Define comprehensive income. FAR 1-29

Answer 1

• Change in equity (net assets) that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners and distributions to owners.

Question 2

Q: Identify five items included in other comprehensive income.

Hint: “PUFER”

FAR 1-30

Answer 2

• ** P**ension adjustments.
• Unrealized gains and losses on available-for-sale securities.
• Foreign currency translation adjustments and gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in a foreign entity.
• Effective portions of cash flow hedges.
• Revaluation surpluses (IFRS only).

Question 3

Q: List the three formats acceptable for reporting comprehensive income.

Which format is prohibited under IFRS?

FAR 1-31

Answer 3

• Statement of Comprehensive Income (single-statement approach).
• Statement of Income followed by separate Statement of Comprehensive Income (two-statement approach).
• Component of the Statement of Owners’ Equity (prohibited under IFRS, will be prohibited under U.S. GAAP for public companies as of 12/15/11 and for non-public companies as of 12/15/12).

Question 4

Q: List some disclosure requirements for comprehensive income.

FAR 1-32

Answer 4

• Tax effects of each component included in current “Other Comprehensive Income.”
• Changes in the accumulated balances of components of “Other Comprehensive Income.”
• Total accumulated other comprehensive income.
• Reclassification adjustments between other comprehensive income and net income.