FAR-F1-M7-Statement of Comprehensive Income

Question 1

What is the formula for Comprehensive Income?

Answer 1

Comprehensive income = Net income + Other Comprehensive Income

Question 2

What is included in Other Comprehensive Income?

Answer 2

1. Unrealized gains and losses from AFS securities and also includes gains and losses from cash flow hedges.
2. Unrecognized gains and losses from pension costs. Also includes prior service costs previously not recognized.
3. Foreign currency translation adjustments.
4. Unrealized gains and losses from certain derivatives.

Question 3

Where is OCI reported?

Answer 3

OCI can be reported in the income statement, right below Net Income, or it can be reported in the Statement of Comprehensive Income, starting with net income and adding OCI. Either way, OCI items must be presented NET OF TAX and the tax effects must be disclosed.

Question 4

What is the treatment of comprehensive income items at the end of the reporting period?

Answer 4

Net income is closed to retained earnings (part of equity in the balance sheet). Other Comprehensive Income is closed to AOCI (which is also a part of equity in the balance sheet). OCI items will remain in AOCI in the balance sheet until they are realized, at which point they will be recognized through net income and removed from AOCI (balance sheet).

Question 5

Is the following statement true or false? Comprehensive Income, includes all changes in equity during a period except those resulting from owner investments and distributions to owners.

Answer 5

True

Question 6

Is the following statement true or false? OCI items must be presented NET OF TAX and related income tax expense or benefit allocated to components must be disclosed, either on the face of the statement or in notes to the statement.

Answer 6

True

Question 7

Is the following statement true or false? Accumulated OCI is a component of equity in the balance sheet and AOCI includes the total of OCI for the current period and all previous periods. OCI items are accumulated in AOCI while they are unrealized or unrecognized. When they are realized or recognized, they are reclassified from AOCI into net income and AOCI is reduced by that same amount.

Answer 7

True