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Comprehensive Income (Topic 220)

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Comprehensive Income (Topic 220) No. 2011-05 June 2011 Comprehensive Income (Topic 220) Presentation of Comprehensive Income The FASB Accounting Standards Codification® is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. An Accounting Standards Update is not authoritative; rather, it is a document that communicates how the Accounting Standards Codification is being amended. It also provides other information to help a user of GAAP understand how and why GAAP is changing and when the changes will be effective. For additional copies of this Accounting Standards Update and information on applicable prices and discount rates contact: Order Department Financial Accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk, CT 06856-5116 Please ask for our Product Code No. ASU2011-05. FINANCIAL ACCOUNTING SERIES (ISSN 0885-9051) is published quarterly by the Financial Accounting Foundation. Periodicals postage paid at Norwalk, CT and at additional mailing offices. The full subscription rate is $230 per year. POSTMASTER: Send address changes to Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. | No. 363 Copyright © 2011 by Financial Accounting Foundation. All rights reserved. Content copyrighted by Financial Accounting Foundation may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Foundation. Financial Accounting Foundation claims no copyright in any portion hereof that constitutes a work of the United States Government. Accounting Standards Update No. 2011-05 June 2011 Comprehensive Income (Topic 220) Presentation of Comprehensive Income An Amendment of the FASB Accounting Standards Codification® Financial Accounting Standards Board of the Financial Accounting Foundation 401 MERRITT 7, PO BOX 5116, NORWALK, CONNECTICUT 06856-5116 Accounting Standards Update 2011-05 Comprehensive Income (Topic 220) Presentation of Comprehensive Income June 2011 CONTENTS Page Numbers Summary ...........................................................................................................1–3 Amendments to the FASB Accounting Standards Codification® ..................... 5–42 Background Information and Basis for Conclusions ...................................... 43–48 Amendments to the XBRL Taxonomy ........................................................... 49–74 Summary Why Is the FASB Issuing This Accounting Standards Update (Update)? The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity, among other amendments in this Update. The amendments require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. Who Is Affected by the Amendments in This Update? All entities that report items of other comprehensive income, in any period presented, will be affected by the changes in this Update. What Are the Main Provisions? Under the amendments to Topic 220, Comprehensive Income, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in 1 the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments do not change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items. In both cases, the tax effect for each component must be disclosed in the notes to the financial statements or presented in the statement in which other comprehensive income is presented. The amendments do not affect how earnings per share is calculated or presented. How Do the Main Provisions Differ from Current U.S. Generally Accepted Accounting Principles (GAAP) and Why Are They an Improvement? Current U.S. GAAP allows reporting entities three alternatives for presenting other comprehensive income and its components in financial statements. One of those presentation options is to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. This Update eliminates that option. In addition, current U.S. GAAP does not require consecutive presentation of the statement of net income and other comprehensive income. Finally, current U.S. GAAP does not require an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income, which is required by the guidance in this Update. These changes apply to both annual and interim financial statements. These improvements will help financial statement users better understand the causes of an entity’s change in financial position and results of operations. 2 When Will the Amendments Be Effective? The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. How Do the Provisions Compare with International Financial Reporting Standards (IFRS)? This Update is the result of a joint project conducted by the FASB and the IASB to improve the presentation of comprehensive income in a manner that is as convergent as possible. IFRS currently permits components of other comprehensive income to be presented either in a single statement or in two consecutive statements. Therefore, the amendments will result in more converged guidance on how comprehensive income is presented under both U.S. GAAP and IFRS. Although the two Boards agree on how items of comprehensive income should be presented, other differences in reporting comprehensive income between U.S. GAAP and IFRS will remain that affect the comparability of financial statements prepared under U.S. GAAP and IFRS. In particular, there are some differences between the types of items reported in other comprehensive income and the requirements for reclassifying those items into net income. Removing certain presentation options will make it easier to compare statements of comprehensive income prepared using U.S. GAAP with those prepared using IFRS. 3 Amendments to the ® FASB Accounting Standards Codification Introduction 1. The Accounting Standards Codification is amended as described in paragraphs 2–24. In some cases, to put the change in context, not only are the amended paragraphs shown but also the preceding and following paragraphs. Terms from the Master Glossary are in bold type. Added text is underlined, and deleted text is struck out. Amendments to Subtopic 220-10 Comprehensive Income—Overall
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