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Statement of Comprehensive Income: Irene Mae C. Guerra, CPA, CTT

The document discusses key financial statements used to report an entity's financial performance and position, including: 1) The income statement (or statement of comprehensive income), which reports an entity's revenues, expenses, and profits/losses over a period of time. It may include other comprehensive income items beyond traditional net income. 2) The statement of changes in equity, which reconciles the opening and closing balances of an entity's equity accounts, showing components of comprehensive income and transactions with owners. 3) The statement of retained earnings (no longer required but part of statement of changes in equity), which discloses changes to an entity's retained earnings balance, including net income, dividends, and appropriations.

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Ruaya Ailyn
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182 views

Statement of Comprehensive Income: Irene Mae C. Guerra, CPA, CTT

The document discusses key financial statements used to report an entity's financial performance and position, including: 1) The income statement (or statement of comprehensive income), which reports an entity's revenues, expenses, and profits/losses over a period of time. It may include other comprehensive income items beyond traditional net income. 2) The statement of changes in equity, which reconciles the opening and closing balances of an entity's equity accounts, showing components of comprehensive income and transactions with owners. 3) The statement of retained earnings (no longer required but part of statement of changes in equity), which discloses changes to an entity's retained earnings balance, including net income, dividends, and appropriations.

Uploaded by

Ruaya Ailyn
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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STATEMENT OF

COMPREHENSIVE
INCOME
Irene Mae C. Guerra, CPA, CTT
Income Statement - is a formal statement showing the financial performance
or profit or loss of an entity for a period of time .

Financial Performance is primarily measured in terms of the level of income


earned by the entity through the effective and efficient utilization of
resources. (Results of operations – profitability – useful in the capacity of the
entity to generate cash flows from existing resources.)

Transaction approach is the conventional or traditional preparation of income


statement as per PFRS.
Comprehensive Income – change in equity during a period resulting from
transactions and other events, other than changes resulting from transactions
with owners in their capacity as owners.

In other words, comprehensive income includes :


a. Components of Profit or Loss
b. Components of Other Comprehensive Income

Profit or Loss
- is the total income less expenses excluding the components of other
comprehensive income. (net income or net loss)
Other Comprehensive Income
- items of income and expenses including reclassification adjustments
that are not recognized as P/L

Components of OCI:
a. Unrealized G/L on investment in equity instrument measured at FV thru
OCI
b. Unrealized G/L on debt investment measured at FV thru OCI
c. G/L from translation of FS as foreign operation
d. Changes in revaluation surplus
e. Unrealized G/L from derivative contracts – cash flow hedge
f. Remeasurements of defined benefit plan
g. Change in FV attributable to credit risk of a financial liability designated
at FVPL
Presentation of OCI
PAS 1 provides that OCI shall present lines for amounts of OCI in the period, classified by
nature.
a. OCI that will be reclassified subsequently to P/L when specific conditions are met.
b. OCI that will not be reclassified subsequent to P/L but to retained earnings.

OCI that will be reclassified subsequently to P/L when specific conditions are met.
c. G/L from translating FS of a foreign operation.
d. Unrealized G/L on derivative contracts designated as a cash flow hedge.
e. Unrealized G/L on debt investment measured at FVOCI

OCI that will not be reclassified subsequent to P/L but to retained earnings.
f. Unrealized G/L on equity investment measured at FVOCI
g. Change in Revaluation surplus
h. Remeasurement of defined benefit plan
i. G/L attributable to credit risk of a financial liability designated at FV thru PL
SOURCES OF INCOME
a. Sales of merchandise to customers
b. Rendering of Services
c. Use of entity resources
d. Disposal of resources other than
products

COMPONENTS OF EXPENSES
a. Cost of Sales or Cost of Goods Sold
b. Distribution costs or selling expenses
c. Administrative expenses
d. Other Expenses
e. Income tax expense
Distribution Costs – selling, advertising, and delivery of goods to
customers. Salesmen’s salaries, sales commissions, travelling and
marketing expenses, advertising and publicity expenses, freight out,
depreciation of delivery equipment, and store equipment, and others.

Administrative Expenses – cost of administering the business. All operating


expenses not related to selling and COGS. Office Salaries, Doubtful
Accounts, expenses of general executives, and general accounting and
credit department, office supplies used, certain taxes, contributions,
professional fees, depreciation of office building and office equipment and
amortizations of intangibles.

Other Expenses – not directly related to selling and administrative


function. Charges of income such as loss o sale of trading securities, loss o
sale of PPE, loss on sale of long-term investment and other losses.
No more extraordinary items to be presented by the entity in any items of
income and expense under IS or OCI or in notes.

Separate Disclosure - when items of income and expense are material


Items of income and expense requiring disclose
a. Writedown of inventory to net realizable value and reversal of such writedown
b. Writedown of PPE to recoverable amount and reversal of such writedown
c. Reconstructing of the activities of an entity and reversal of any provision for
the cost of restructuring
d. Disposal of an item of PPE
e. Disposal of investment
f. Discontinued operation
g. Litigation settlement
h. Other reversal of provision
Line Items of Income Statement and Statement of Comprehensive Income:
a. Revenue
b. Gain and Loss from the derecognition of financial asset @ amortized cost
c. Finance Cost
d. Share in income or loss of associate and joint venture @ equity method
e. Income tax expense
f. G/L on reclassification of a financial asset from amortized cost to FV thru PL
g. G/L o n reclassification of a financial asset from FV thru OCI to FV thru PL
h. The single amount comprising discounted operations
i. P/L for the period
j. Other comprehensive income
k. Comprehensive Income for the period

The ff item shall be disclosed on the face of the income statement and statement of
comprehensive income:
a. P/L – NCI and owners of the parent b. Total CI – NCI and owners of the parent
Forms of Income
Statement
a. Functional Presentation
Classifies expenses
according to their function
as past of COS,
distribution costs,
administrative cost, etc.
Forms of Income
Statement
a. Natural Presentation
Nature of expense
method. Under expenses
are no longer classified as
COS, DC, AC. Expenses
which are of the same
nature are grouped or
aggregated and presented
as one item.

PAS 1 does not prescribe


any format.
Two options of presenting comprehensive income:
A. Two Statements:
1.Income Statement – P/L
2.Statement of Comprehensive Income – beginning with P/L plus or
minus the components of OCI.

B. Single Statement of CI – combined statement (A+B) in a single


statement
STATEMENT OF COMPREHENSIVE INCOME
purpose: a more comprehensive information on financial performance measured
more broadly than the income as traditionally computed.
SINGLE STATEMENT OF COMPREHENSIVE INCOME

Combined IS and OCI


STATEMENT OF CHANGES IN EQUITY
Equity – residual interest in the assets of an entity after deducting all of the
liabilities. (Net assets = Total assets – Total Liabilities.

Subclassifications:
a. Share Capital – funds contributed by shareholders equal to the par or
stated value
b. Share Premium – funds contributed by shareholders in excess of par or
stated value
c. Retained Earnings – unappropriated and appropriated.
STATEMENT OF CHANGES IN EQUITY
is a basic statement that shows the movements in the elements or components of
the shareholder’s equity.

1. Total comprehensive income for the period


2. Each component of equity, the effects of changes in accounting policies and
corrections of error
3. A reconciliation between the carrying amount at the beginning and end of the
period, separately disclosing changes from:
a. P/L
b. Each item of CI
c. Transactions with owners in their capacity as owners showing separately
contributions by and distributions to owners.
STATEMENT OF RETAINED EARNINGS
-shows the changes affecting directly the retained earnings of an entity and relates the income
statement to the statement of financial position.

Retained Earnings – is the amount of net income left over the business after it has paid out dividends to
its shareholders.

Data that affects the retained earnings that should clearly disclosed in the statement of retained
earnings:
a. P/L for the period
b. Prior period errors
c. Dividends declared and paid to shareholders
d. Effect of change in accounting policy
e. Appropriation of retained earnings

*this statement is no longer a required basic


statement but it is part of the statement of
changes in equity.
Retained Earnings Appropriated
The amount of appropriation is deducted from the unappropriated balance of RE.
If the appropriation is subsequently canceled, it is reverted or added back to the
unappropriated balance.

RE may be appropriated for the following reasons:


a. Legal requirement, as in the case of TS
b. Contractual requirement, as in the case of bond redemption
c. Entity Policy, as in the case of an appropriation for contingencies.

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