F1 - Comprehensive Income

Question 1

Define comprehensive income.

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 distribution to owners.

Question 2

Identify five items included in other comprehensive income.

PUFER

Answer 2

Pension 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

List the three formats acceptable for reporting comprehensive income. Which format is prohibited under IFRS?

Answer 3

Statement of Comprehensive Income (single-statement approach)

Statement of Income followed by separate Statement of Comprehensive Invome (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 nonpublic companies as of 12/15/12)

Question 4

List some disclosure requirements for comprehensive income.

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