Standard-setters Amend Presentation of Comprehensive Income in Financial Statements
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have moved to amend the presentation of items of other comprehensive income (OCI) in financial statements in line with International Financial Reporting Standards (IFRSs) and those prepared in accordance with US generally accepted accounting principles (GAAP).
IAS 1 Presentation of Financial Statements was amended to require firms that prepare financial statements complying with the IFRS to group together items within OCI that may be reclassified to the profit or loss section of the income statement.
More recently, the IASB announced the completion of the improvements to the accounting standards for off balance sheet activities and joint arrangements following the issuance of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities.
David Tweedie, IASB Chairman, said: “These amendments maintain an appropriate separation between OCI and profit or loss while ensuring that the two can be easily read together.
“The changes do not address the issue of which items of income and expense should be included in profit or loss or OCI. The Board will be asking stakeholders in the near future whether this important issue should be added to the Board’s agenda.”
The changes also reaffirm existing rules in presenting the items in OCI and profit or loss, which should be done as if they are considered single statement or two consecutive statements.
Similarly, FASB issued the “Update to Topic 220: Presentation of Comprehensive Income”, aligning the US GAAP with the IFRSs for the presentation of OCI.
The standard-setters emphasized that the amendments “do not address which items should be presented in OCI or which and when items should be recycled through profit or loss.”
“However, requiring OCI to be presented as part of, or in close proximity to, the profit or loss (income) statement will make it easier for users of financial statements to assess the impact of OCI items on the overall performance of an entity and improve comparability between IFRSs and US GAAP.”
The IASB’s amendments to IAS 1 are set out in Presentation of Items of Other Comprehensive Income and are effective for financial years beginning on or after 1 July 2012.