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Financial Statement Presentation - Other Comprehensive Income

Date recorded:

The Board discussed a proposal for a possible limited scope amendment to IAS 1 Financial Statement Presentation. This amendment might be necessary to preserve a degree of comparability between the presentation of the statement of comprehensive income between IFRS and US GAAP, depending on the actions that the FASB might take in its Financial Instruments: Recognition and Measurement project.

Specifically, the staff presented a proposal to remove the option in IAS 1 paragraph 81 to present a statement displaying the components of profit or loss and a second statement beginning with profit or loss and displaying components of other comprehensive income (the 'two statement' option). The staff stressed that nothing in their proposal would change the items that could or should be presented in OCI, or whether an item should be reclassified upon derecognition.

Board members expressed surprise that the staff was bringing this proposal forward at this time. The latest version of IAS 1 had been in effect for less than ten months, and the last time the Board had suggested a single statement of comprehensive income it had faced near universal opposition. Now was not the time to reignite the embers of opposition and provide additional ammunition to those ill-disposed towards the IASB.

Noting the foregoing arguments, a Board member warned that, should they proceed with this proposal, all Board members voting in favour of the proposal before exposure must have the backbone to maintain their position afterwards: it was unlikely that the exposure process would raise any information or insight of which it was unaware already.

The Chairman noted that the proposal would need to be addressed carefully and as a true US GAAP convergence item. He noted also that the topic would be discussed with the FASB at its joint public meeting on 26-28 October, after which the IASB would be in a better position to judge whether the amendment would be needed.

The Board tentatively agreed to eliminate the alternative in IAS 1 paragraph 81 that permits the 'two statement approach' to presenting the statement of comprehensive income.

The Board also tentatively agreed to require that the single statement of comprehensive income be displayed with two sections: profit or loss and other comprehensive income.

By a majority (at least two opposed), the Board tentatively agreed that

  • components of OCI that would not be reclassified into profit or loss in future periods should be displayed together, and
  • components of OCI that would be reclassified into profit or loss in future periods should be displayed together.

The Board tentatively agreed to remove the option to permit an entity to display components of OCI net of tax. In addition, the Board agreed that income taxes related to items reported in OCI should be allocated between the two sub-classifications.

The Board will make a further determination about this possible project after the joint meeting with the FASB on 26-28 October 2009.

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