FASB Issues Accounting Standards Update to Improve Presentation of Comprehensive Income

The Financial Accounting Standards Board (FASB) today issued Accounting Standards Update (ASU) No. 2011-05 Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The Update is intended to increase the prominence of other comprehensive income in financial statements.

In US GAAP, the ASU will supersede some of the guidance in Topic 220 of the accounting Codification.

The main provisions of this Update provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one or two consecutive financial statements:

• A single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income.
  
• In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income.

The option in current GAAP that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated.

Leslie F. Seidman, chairman of the FASB, said: “We heard from investors there was a need to present other comprehensive income information more prominently in financial statements. This Update, which was developed jointly with the International Accounting Standards Board, responds to those investor needs, and will bring greater consistency and prominence to the reporting of other comprehensive income around the world.”

The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted, because compliance with the amendments is already permitted.