Gains and losses that bypass net income but affect stockholders' equity are referred to as QuestionComprehensive IncomeComprehensive Income a.comprehensive income. b.other comprehensive income.c.prior period income.d.unusual gains and losses.
Companies must display the components of other comprehensive income in one of two ways:Comprehensive IncomeComprehensive Income
One Statement Approach Comprehensive Income Comprehensive Income Illustration 4-24 Advantage – does not require the creation of a new financial statement. Disadvantage - net income buried as a subtotal on the statement.
Illustration 4-19 Two Statement Approach Comprehensive Income Comprehensive Income Illustration 4-25
Reports the changes in each stockholders’ equity account and total equity for the period. Following items are disclosed in the statement: ► Issuances of shares and distributions (dividends) to owners. ► Reconciliation of the carrying amount of each component of stockholders’ equity from the beginning to the end of the period. Statement of Stockholders’ Equity Comprehensive Income Comprehensive Income
Statement of Stockholders’ Equity Statement of Stockholders’ Equity
Statement of Stockholders’ Equity Statement of Stockholders’ Equity Balance Sheet Presentation
Under GAAP, companies must report an item as extraordinary if it is unusual in nature and infrequent in occurrence. Extraordinary items are prohibited under IFRS. Under IFRS, companies must classify expenses by either nature or function. GAAP does not have that requirement, but the SEC requires a functional presentation. IFRS identifies certain minimum items that should be presented on the income statement. GAAP has no minimum information requirements. However, the SEC rules have more rigorous presentation requirements. RELEVANT FACTS - Differences
IFRS does not define key measures like income from operations. SEC regulations define many key measures and provide requirements and limitations on companies reporting non-GAAP/IFRS information. Under IFRS, revaluation of property, plant, and equipment, and intangible assets is permitted and is reported as other comprehensive income. The effect of this difference is that application of IFRS results in more transactions affecting equity but not net income. RELEVANT FACTS - Differences
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