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Financial statement presentation – Other comprehensive income

Date recorded:

The Boards continued their discussions on the presentation of comprehensive income project. Having provided a preliminary summary of respondent feedback at the October joint meeting, the staff presented the Boards with a detailed analysis of respondent feedback, and posed several questions to the Boards, including:

  • whether the Boards should postpone the project until a convergent concept for other comprehensive income (OCI) is developed
  • alternatives for the presentation of comprehensive income and its components;
  • effective dates and transition
  • whether the Boards want to redeliberate other prior decisions or to affirm those decisions
  • IASB-only issues on separating OCI items based on whether they may be reclassified (recycled) or not and title of the statement containing profit or loss and other comprehensive income
  • FASB-only issue regarding the presentation of OCI for entities with non-controlling interests.

The staff provided the Boards with a summary of respondent feedback, noting that both the IASB and FASB received significant feedback from constituents who urged the Boards to develop a conceptual framework to define the concept of OCI prior to issuing any specific presentation guidance. However, the staff recommended the Boards continue with the presentation project, citing the long period of time it would take to develop such a framework, and that certain users expressed a pressing need for a single statement.

By majority votes, both Boards agreed with the staff's recommendation to continue with the project as planned. However, members of both the IASB and FASB agreed with constituents' comments regarding the need to develop a conceptual framework for OCI. In this regard, Board members also recognised there are still underlying differences between IFRSs and U.S. GAAP regarding which items are recognised in OCI, and which items are reclassified into profit and loss. While supporting the recommendation to continue with the project, some Board members also suggested that a conceptual framework project for OCI be added to its calendars to address the issue. In citing support for continuing with the project now, a FASB member noted that aligning the presentation of OCI for IFRSs and U.S. GAAP would help users to better understand and more clearly identify the fundamental differences that currently exist.

In responding to the summary of feedback received on the project, one FASB member suggested that the diverse opinions received from constituents should be captured in the final standard's basis for conclusions.

The staff also noted that mixed views were received on whether or not to require a single continuous statement of comprehensive income. Accordingly, the staff presented the Boards with three presentation alternatives:

  • Alternative 1: Retain the current requirement to present OCI in a continuous statement of comprehensive income while eliminating other presentation options for OCI
  • Alternative 2: Permit the option for reporting entities to present OCI in a continuous statement of comprehensive income or in two separate but consecutive statements (currently one of the presentation options in IFRS and U.S. GAAP)
  • Alternative 3: Require reporting entities to present OCI using a consecutive two-statement approach.

The Boards discussed the three alternatives, including the examples provided by the staff. Multiple Board members noted the similarities between the examples, and, that in practice, the alternatives may all lead to similar results (i.e. a single statement that is split into two pages and two separate statements on consecutive pages would be largely similar). After deliberations, both the IASB and the FASB voted in favor of Alternative 2.

Having voted in favor of the alternative permitting the option for either a single comprehensive statement or two consecutive statements, the staff presented the Boards with possible titles for the statements. The staff indicated it would be clearer to use separate titles if two statements are presented, and therefore recommended to the Boards the titles "Statement of Profit and Loss" and "Statement of Other Comprehensive Income", noting that preparers are permitted to use alternate titles. The Boards agreed with the need to maintain simplicity, and both voted in favor of the staff's recommendation.

The FASB unanimously voted to make its final standard effective for fiscal years beginning after December 15, 2011. The IASB voted to make its final standard effective for fiscal years beginning after January 1, 2012. In addition, both Boards agreed with the Staff's recommendation to require full retrospective application of the final standard.

The IASB confirmed its proposal to require entities to present items of OCI that will be reclassified to profit or loss (recycled) in subsequent periods separately from items of OCI that will not be reclassified to profit or loss.

The FASB agreed with the staff's recommendation on the requirement to allocate net income and comprehensive income to non-controlling interests and to owners, in order to be consistent between IFRS and U.S. GAAP. The staff noted this was already required under U.S. GAAP, and was brought to the Board's attention to clarify a misconception expressed by certain respondents.

Lastly, both the IASB and the FASB voted unanimously to permit the staff to begin the drafting and balloting process for the final standard.

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