On June 16, 2011 the Financial Accounting Standards Board and the International Accounting Standards Board issued amended standards for the presentation of comprehensive income and other comprehensive income (OCI). In the U.S., the amendment was issued as Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The IASB effected the change by amending IAS 1, Presentation of Financial Statements.
As noted in FASB's press release
...(ASU) No. 2011-05 Comprehensive Income (Topic 220): Presentation of
Comprehensive Income... is intended to increase the prominence of other comprehensive income in financial statements.
In US GAAP, the ASU will supersede some of the guidance in Topic 220 of the accounting Codification.
The main provisions of this Update provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one or two consecutive financial statements:
- A single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income.
- In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income.
The option in current GAAP that permits the presentation of other comprehensive
income in the statement of changes in equity has been eliminated.
As noted in the IASB's press release
...the amendment [to IAS 1] ... will improve and align the presentation of items of other comprehensive income (OCI) in financial statements prepared in accordance with International Financial Reporting Standards (IFRSs) and those prepared in accordance with US generally accepted accounting principles (GAAP).
The amendments to IAS 1 Presentation of Financial Statements require companies preparing financial statements in accordance with IFRSs to group together items within OCI that may be reclassified to the profit or loss section of the income statement. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements.
Read more in this edition of KPMG's Defining Issues