end of the reporting period, that reporting period's total of other comprehensive income is transferred to a component of equity. It is presented separately from retained earnings and additional paid‐in capital on the balance sheet. (ASC 220‐10‐45‐14) On the face of the financial statements, or as a note, the entity must present:
The changes in the accumulated balances of each component of other comprehensive income, and
Current period reclassifications out of accumulated other comprehensive income and other amounts of other comprehensive income, either before‐tax or net‐of‐tax.(ASC 220‐10‐45‐14A and 50‐5)
Reclassification Adjustments Some items impact other comprehensive income in one period and then affect net income in the same or a later period. Adjustments of that type are called reclassification adjustments. (ASC 220‐10‐45‐15)8 The process of including in net income an item previously reported in other comprehensive income is often referred to as “recycling.” The entity determines the reclassification adjustments for each component of other comprehensive income. The sale of an investment in a foreign entity may trigger an adjustment for foreign currency items that had been included in other comprehensive income previously. In such a case, the requirement for a reclassification is limited to accumulated foreign currency translation gains or losses). An adjustment is also necessary upon the complete (or substantially complete) liquidation of an investment in a foreign entity. See ASC 830‐30‐40‐1 through 40‐1A for more information.
Amounts accumulated in other comprehensive income from cash flow hedges are reclassified into earnings in the same period(s) in which the hedged forecasted transactions (such as a forecasted sale) affect earnings. If it becomes probable that the forecasted transaction will not occur, the net gain or loss in accumulated other comprehensive income must be immediately reclassified. (ASC 815‐30‐35‐38)
Reclassification adjustments required by other Topics can be presented by component of other comprehensive income, either:
In a single note, or
Parenthetically on the face of their annual financial statement.(ASC 220‐10‐45‐17 and 50‐6 describes the information requirements for disclosure in the notes)
If an entity chooses to present information for items reclassified out of AOCI on the face of the statement, the entity should present parenthetically:
The effect of significant amounts reclassified from each component of AOCI based on its source, and
The aggregate tax effect of those significant reclassifications on the line item for income tax expense or benefit.(ASC 220‐10‐45‐17A)
If an entity uses a separate line item in the income statement to present pension or other postretirement benefit cost components reclassified out of AOCI, the entity is not required to present those items parenthetically. (ASC 220‐10‐45‐17A)
If an entity chooses or is required to place the information reclassified out of AOCI in the notes, it should provide:
The significant amounts by each component of AOCI,
A subtotal of each component of AOCI, and
For those amounts required by other Topics to be reclassified to net income in their entirety in the same reporting period, the line items affected by the reclassification.
If a component is only partially reclassified to net income, entities must cross‐reference to the related footnote for additional information. (ASC 220‐10‐50‐6)
Interim Reporting For interim reporting, entities must present a total for comprehensive income but are not required to present the individual components of OCI. Entities that present two statements in their annual financial reports have the option of using a single‐statement approach in their condensed interim financial statements. Using one statement avoids the presentation of a separate statement of comprehensive income that contains only one line item for total comprehensive income. (ASC 220‐10‐45‐18) Nonpublic entities are not required to meet the requirements for reclassifications in interim reporting. (ASC 220‐10‐45‐18B)
ASC 220‐20, Unusual Items or Infrequently Occurring Items
Items that are unusual or infrequent should be reported as a separate component of income from continuing operations or in the notes. The EPS effect of these items should not be reported on the face of the income statement. (ASC 220‐20‐45‐1 and 50‐1)
In addition, the entity should disclose the nature and financial effects of each event or transaction on the face of the income statement as a separate component of continuing operations, or alternatively, in notes to financial statements. (ASC 220‐20‐50‐3 and 45‐16)
ASC 220‐30, Business Interruption Insurance
In general, proceeds from insurance claims are classified based on the nature of the loss and requires judgment. As long as it does not conflict with other guidance, entities should classify recoveries from business interruption insurance in the statement of operations. (ASC 220‐30‐45‐1) In the notes to the financial statements, the entity should include:
The nature of the event causing business interruption losses.
Aggregate amount of interruption insurance recoveries and the line item where classified.(ASC 230‐30‐50‐1)
The proceeds related to lost assets should not be recorded as reductions of the costs to rebuild or replace the insured asset.
DISCLOSURE AND PRESENTATION EXAMPLES
Example 5.1: Basic Order of Income Statement and Comprehensive Income Statement
| Statement of Income |
| Income from continuing operations Sales or service revenues Costs of goods sold Operating expenses Remaining excess of fair value over cost of acquired net assets in a business combination Gains and losses Other revenues and expenses Items that are unusual or infrequent, gross Income tax expense related to continuing operations |
| Results from discontinued operations Income (loss) from operations of a discontinued component Gain (loss) from disposal of a discontinued component |
| Net income |
| Earnings per share information |
| Other comprehensive income Foreign currency translation adjustments Unrealized gains (losses) on securities Adjustments related to pension liabilities or assets Gains/losses on cash‐flow hedging items Gains/losses on hedges of forecasted foreign‐currency‐denominated transactions Reclassification adjustment (may be shown gross or net of tax, details may be disclosed in note) Income tax related to other comprehensive income (if components are not shown net of tax) |
| Comprehensive income |
| Earnings per share information |
Example 5.2: A Multiple‐Step Format for Income from Continuing Operations
| Sales: | |||
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