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Journal entry — Other comprehensive income — FASB redeliberates reclassification adjustment proposals

Published on: Nov 16, 2012

At its November 14, 2012, meeting, the FASB discussed feedback on and redeliberated its August 2012 proposed ASU Presentation of Items Reclassified Out of Accumulated Other Comprehensive Income. The Board reached tentative decisions on (1) new presentation options for the proposed disclosures, (2) reporting requirements for interim periods, and (3) the transition method and effective dates.

Presentation Options

The proposed ASU would require entities to disclose, in two separate tables in the footnotes, additional information about items reclassified out of accumulated other comprehensive income (AOCI). In the first table, entities would be required to separately present, in addition to changes in AOCI by component of other comprehensive income (OCI) as required by current U.S. GAAP, the amount of the total change that is attributable to reclassification adjustments. In the second table, entities would be required to present information about the effect that significant reclassification adjustments have on the respective line items of net income (only for reclassification adjustments that are reclassified to net income in their entirety).

At the meeting, the Board tentatively decided that entities can present the information in formats other than a table as long as it is in a single location. Specifically, the FASB tentatively decided that entities can present the “table 2” information in either (1) a footnote or (2) a parenthetical display on the face of the statement in which net income is presented. However, the FASB also indicated that because many entities that will elect to present the information in a footnote may still be inclined to use a tabular format, the final ASU should include application guidance and examples of the disclosures.

Interim Reporting Periods

The proposed ASU would require entities to provide the new disclosures for both annual and interim periods; however, many respondents were concerned about presenting the full disclosures in condensed interim financial statements. The FASB tentatively decided that the disclosures would still be required for interim periods but noted that public entities should continue to consult applicable SEC interim reporting guidance1 to determine whether to include such disclosures in their quarterly filings. In turn, the Board also tentatively decided that for interim periods, nonpublic entities would not be required to present information on the effect that significant reclassification adjustments have on the respective line items of net income.

Transition and Effective Date

In the proposed ASU, the FASB asked respondents to provide feedback on the feasibility of making the new disclosure requirements effective for public entities as early as annual periods ending after December 15, 2012 (December 15, 2013, for nonpublic entities). In light of significant concerns about the accelerated adoption date that were expressed during the comment process, the FASB tentatively decided that the new guidance would instead be effective, for public entities, for reporting periods beginning after December 15, 2012. Nonpublic entities would still have an additional year to adopt the new requirements (i.e., reporting periods beginning after December 15, 2013). The FASB also confirmed that the new disclosures should be applied prospectively.

 


[1] SEC Regulation S-X, Article 10, provides guidance on the presentation of interim financial statements.

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