In the year it adopted Statement no. 130, it had activities relating to marketable securities defined as available-for-sale under Statement no. 115. Information on the company’s portfolio—stock A in particular—is summarized in exhibit 2, below. At January 1, 199X, the company’s portfolio consisted of 100 shares of stock A, which had a cost and market price of $10 per share and a portfolio of other stocks with a market price of $15,000. At March 31, 199X, the market price of stock A was $1,080 and that of the other stocks was $15,500.
The statement of comprehensive income is made up of two parts: net income and comprehensive income. Other comprehensive income elements come after net income.
It’s very important to take one more look at the difference between other comprehensive income and accumulated other comprehensive income. These topics will be revisited in the Investments chapter later in this book however, the basics should be considered. Means a subsidiary substantially all of whose outstanding voting shares are owned by its parent and/or the parent’s other wholly owned subsidiaries.
Basically, comprehensive income consists of all of the revenues, gains, expenses, and losses that caused stockholders’ equity to change during the accounting period. A registrant that files its financial statements in accordance with or provides a reconciliation to U.S. Generally Accepted Accounting Principles (U.S. GAAP) must use amounts determined under U.S. GAAP. A foreign private issuer that files its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) must use amounts determined under IFRS-IASB. Other comprehensive income (“OCI”) is part of stockholders equity on the balance sheet and is not part of the income statement.
The net income in the income statement will be the yardstick for the financial institution to assess the creditworthiness of a company. The EPS is calculated from the net income, which determines the worth of a company’s stock. However, if there is no clear basis to identify the period or the amount that should be reclassified, the Board, when developing IFRS standards, may decide that no classification should occur. It’s important to note that EPS measures the amount of dollars earned by each common share, NOT the dollar amount paid to shareholders in the form of dividends. The earnings per share amounts are not required for ASPE companies. This is because ownership of privately owned companies is often held by only a few investors, compared to publicly-traded IFRS companies where shares are held by many investors. All companies are required to report each of the categories above net of their tax effects.
You must now present the components of the reclassification either on the face of the income statement or in the footnotes. If some of the reclassification does not go to net income — for example, if it becomes part of inventory — you must cross-reference these amounts to other required disclosures in the financial statements.
The income statement presents information on the financial results of a company’s business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what costs it incurred in connection with generating that revenue. The basic equation underlying the income statement, ignoring gains and losses, is Revenue minus Expenses equals Net income. This reading focuses on the income statement, and the term income statement will be used to describe either the separate statement that reports profit or loss used for earnings per share calculations or that section of a statement of comprehensive income that reports the same profit or loss.
One that does not present this subtotal is said to be presented in a single-step format. Revenues, gains, expenses, and losses describe changes in equity due to profit-generating transactions.
The net income will aid the equity holders and other stakeholders in identifying the efficiency and sustainability define comprehensive income of the company in terms of profit. The net income should not be overstated as it will deceive the stakeholders.