BALIUAG UNIVERSITY

CPA Review Program

Financial Accounting and Reporting
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Module: Financial Statements: Statement of Comprehensive Income & Changes in Equity LVC
I. Statement of Comprehensive Income (IAS 1)
 Definition of terms
 Profit or loss – The total of income less expenses, excluding the components of other comprehensive
income.
 Other comprehensive income – Comprises items of income and expense (including reclassification
adjustments) that are not recognized in profit or loss as required or permitted by other IFRSs.
 Total comprehensive income – The change in equity during a period resulting from transactions and other
events, other than those changes resulting from transactions with owners in their capacity as owners. It
comprises all components of ‘profit or loss’ and of ‘other comprehensive income’.
 Presentation of comprehensive income
 An entity may present:
1. A single statement of profit or loss and other comprehensive income
- The statement of comprehensive income shall present, in addition to the profit or loss and other
comprehensive income sections:
a. profit or loss
b. total other comprehensive income
c. comprehensive income for the period, being the total of profit or loss and other
comprehensive income
2. A separate statement of profit or loss.
- The separate statement of profit or loss shall immediately precede the statement presenting
comprehensive income, which shall begin with profit or loss.
 An entity shall present the following items, in addition to the profit or loss and other comprehensive
income sections, as allocation of profit or loss and other comprehensive income for the period:
a. Profit or loss for the period attributable to:
i. Non-controlling interests
ii. Owners of the parent
b. Comprehensive income for the period attributable to:
i. Non-controlling interests
ii. Owners of the parent.
 An entity shall not present any items of income or expense as extraordinary items, in the statement(s)
presenting profit or loss and other comprehensive income or in the notes
 Information to be presented in the profit or loss section or the statement of profit or loss
The profit or loss section or the statement of profit or loss shall include line items that present the following
amounts for the period:
a. Revenue, presenting separately interest revenue calculated using the effective interest method;
b. Gains and losses arising from the derecognition of financial assets measured at amortized cost;
c. Finance costs
d. Impairment losses (including reversals of impairment losses or impairment gains) determined in
accordance (IFRS 9);
e. Share of the profit or loss of associates and joint ventures accounted for using the equity method;
f. If a financial asset is reclassified out of the amortized cost measurement category so that it is measured at
fair value through profit or loss, any gain or loss arising from a difference between the previous amortized
cost of the financial asset and its fair value at the reclassification date (IFRS 9);
g. If a financial asset is reclassified out of the fair value through other comprehensive income measurement
category so that it is measured at fair value through profit or loss, any cumulative gain or loss previously
recognized in other comprehensive income that is reclassified to profit or loss (IFRS 9);
h. tax expense; and
i. A single amount for the total of discontinued operations (IFRS 5)
 Classification of expense
 An entity shall present an analysis of expenses recognized in profit or loss using a classification based on
either:
a. Nature
b. Function

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Module: Financial Statements: Statement of Comprehensive Income & Changes in Equity LVC

 An example of a classification using the nature of expense method is as follows:

Revenue XX
Add: Other income XX
Total income XX
Less: Total expenses
Changes in inventories of finished goods and work in progress XX
Raw materials and consumables used XX
Employee benefits expense XX
Depreciation and amortization expense XX
Other expenses XX XX
Profit before tax XX
 An example of a classification using the function of expense method is as follows:
Revenue XX
Less: Cost of sales XX
Gross profit XX
Add: Other income XX
Total income XX
Less: Operating expenses
Distribution costs XX
Administrative expenses XX
Other expenses XX XX
Profit before tax XX
 Components of other comprehensive income
Other comprehensive income shall include:
a. Changes in revaluation surplus (IAS 16 & IAS 38);
b. Remeasurements of defined benefit plans (IAS 19);
c. Gains and losses arising from translating the financial statements of a foreign operation (IAS 21);
d. Gains and losses on financial assets measured at fair value through other comprehensive income
(IFRS 9);
e. The effective portion of gains and losses on hedging instruments in a cash flow hedge and the gains and
losses on hedging instruments that hedge investments in equity instruments measured at fair value
through other comprehensive income (IFRS 9);
f. For particular liabilities designated as at fair value through profit or loss, the amount of the change in fair
value that is attributable to changes in the liability’s credit risk (IFRS 9);
g. Changes in the value of the time value of options when separating the intrinsic value and time value of an
option contract and designating as the hedging instrument only the changes in the intrinsic value (IFRS 9);
and
h. Changes in the value of the forward elements of forward contracts when separating the forward element
and spot element of a forward contract and designating as the hedging instrument only the changes in the
spot element, and changes in the value of the foreign currency basis spread of a financial instrument
when excluding it from the designation of that financial instrument as the hedging instrument (IFRS 9).
 Tax effects on other comprehensive income
An entity may present items of other comprehensive income either:
a. Net of related tax effects
b. Before related tax effects with one amount shown for the aggregate amount of income tax relating to
those items.
 Disclosure requirements
 An entity shall disclose the amount of income tax relating to each item of other comprehensive income,
including reclassification adjustments, either in the statement of profit or loss and other comprehensive
income or in the notes.
 An entity shall disclose reclassification adjustments relating to components of other comprehensive
income. Examples are:
a. Other IFRSs specify whether and when amounts previously recognized in other comprehensive
income are reclassified to profit or loss.
b. Reclassification adjustments arise, for example, on disposal of a foreign operation (IAS 21) and when
some hedged forecast cash flows affect profit or loss (IFRS 9).
 When items of income or expense are material, an entity shall disclose their nature and amount
separately. Examples are:
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Module: Financial Statements: Statement of Comprehensive Income & Changes in Equity LVC
i. Write-downs of inventories to net realizable value or of property, plant and equipment to recoverable
amount, as well as reversals of such write-downs
ii. Restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring;
iii. Disposals of items of property, plant and equipment
iv. Disposals of investments
v. Discontinued operations
vi. Litigation settlements
vii. Reversals of provisions
 An entity classifying expenses by function shall disclose additional information on the nature of expenses,
including depreciation and amortization expense and employee benefits expense.
 Illustration of statement of comprehensive income
Required: Classify the accounts as part of profit and loss (P/L), other comprehensive income (OCI), or others.
 Accrued expense
 Accrued income
 Amortization of discount/premium on bonds payable
 Bond issue cost (Long-term bonds payable measured at amortized cost)
 Contributions and donations received from shareholders
 Cost of goods sold
 Deferred expense
 Deferred income
 Depletion on wasting assets
 Depreciation on PPE
 Distribution costs
 Dividends declared
 Dividends receive from investment in associate
 Dividends received from investment in trading securities
 Donation to charitable institutions
 Estimated warranty/premium expense
 Finance cost
 Freight-out
 Freight-in
 Gain/loss arising on initial recognition of biological assets
 Gain/loss from change in fair value of derivatives classified as fair value hedge
 Gain/loss from change in fair value of derivatives classified as cash flow hedge (effective portion)
 Gain/loss from change in fair value of derivatives classified as cash flow hedge (ineffective portion)
 Gain/loss from change in fair value of derivatives not designated as hedging instrument (speculation)
 Gain/loss from change in fair value of financial liability measured at fair value due to credit risk
 Gain/loss from change in fair value of financial liability measured at fair value other than from credit risk
 Gain/loss from expropriation of assets
 Gain/loss on extinguishment of debt
 Gain/loss on sale of equipment
 General and administrative expenses
 Impairment of assets
 Income tax expense
 Increase in the estimate on allowance for doubtful accounts
 Investment income from associate (equity method)
 Loss from employee strike
 Loss from natural disasters
 Overstatement of inventory in previous year
 Possible gain from contingent asset
 Probable gain from contingent asset
 Probable loss from contingent liability
 Probable loss from provision (i.e. lawsuits)
 Realization of revaluation increment on depreciable assets
 Remeasurement gain/loss on defined benefit plan liability/asset
 Revaluation loss
 Revaluation surplus
 Reversal of impairment loss
 Reversal of revaluation decrease
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 Module: Financial Statements: Statement of Comprehensive Income & Changes in Equity LVC
 Reversal of revaluation increase
 Sale of treasury shares at more than cost
 Sales
 Sales discount
 Service income
 Stock issuance cost
 Transaction costs incurred in the acquisition of financial asset at amortized cost
 Transaction costs incurred in the acquisition of financial asset at fair value through OCI
 Transaction costs incurred in the acquisition of financial asset at fair value through profit or loss
 Unrealized gain/loss on available-for-sale securities
 Unrealized gain/loss on foreign currency translation
 Unrealized gain/loss on trading securities

II. Statement of Changes in Equity (IAS 1)

 Information to be presented in the statement of changes in equity
The statement of changes in equity includes the following information:
a. Total comprehensive income for the period, showing separately the total amounts attributable to owners
of the parent and to non-controlling interests
b. For each component of equity, the effects of retrospective application or retrospective restatement
recognized in accordance with IAS 8
c. For each component of equity, a reconciliation between the carrying amount at the beginning and the
end of the period, separately (as a minimum) disclosing changes resulting from:
i. Profit or loss
ii. Other comprehensive income
iii. Transactions with owners in their capacity as owners, showing separately contributions by and
distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of
control.
 Example of statement of changes in equity
Share Share OCI Appropriation Retained Total
Capital Premium Accounts Reserves Earnings Shareholders’
Equity
Beginning balances XX XX XX XX XX XX
Additions during the period XX XX XX XX XX XX
Deductions during the XX XX XX XX XX XX
period
Ending Balances XX XX XX XX XX XX

 Multiple Choice Questions

I COMPANY provided the following information for the current year:
Income from continuing operations 5,000,000
Income from discontinued operations 1,000,000
Unrealized gain on financial assets at FVTPL 2,500,000
Unrealized gain on financial assets at FVTOCI 1,500,000
Unrealized gain on futures contract designated as a cash flow hedge 500,000
Actuarial loss during the year due to increase in PBO 400,000
Foreign translation adjustment – debit 100,000
Loss on credit risk of a financial liability designated at FVTPL 200,000
Revaluation surplus during the year 2,000,000
1. What amount should be reported as comprehensive income for the year?
a. 3,300,000 c. 6,000,000
b. 9,300,000 d. 9,500,000
J COMPANY had net income of P5,500,000, a positive P500,000 net cumulative effect of a change in accounting
policy, a P1,500,000 unrealized loss on available for sale securities, a positive P1,000,000 foreign currency
translation adjustment, and a P3,000,000 increase in share capital.
2. What is the comprehensive income?
a. 8,500,000 c. 5,500,000
b. 5,000,000 d. 8,000,000
K COMPANY provided the following net of tax figures for the current year:
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Module: Financial Statements: Statement of Comprehensive Income & Changes in Equity LVC
Net re-measurement loss on defined benefit plan 300,000
Unrealized gain on available for sale securities 1,500,000
Reclassification adjustment for gain on sale of available for sale securities
included in net income 250,000
Share warrants outstanding 400,000
Net income 7,700,000
3. What is the comprehensive income for the current year?
a. 8,650,000 c. 8,950,000
b. 8,900,000 d. 9,050,000
During the current year, L COMPANY reported in the statement of comprehensive income P5,000 in interest
revenue, P15,000 equity in associate’s earnings, and P25,000 gain on sale of available for sale securities. The sale
of securities increased the current portion of income tax expense by P10,000.
4. What is the total amount of reclassification adjustment of other comprehensive income?
a. 5,000 c. 35,000
b. 2,500 d. 15,000
M Company provided the following information for the year just ended:
Gross Revenue 25,000,000
Other income 2,000,000
Gain on property revaluation 1,500,000
Exchange gain on translation of foreign operations 2,000,000
Share in profits of associates 3,000,000
Share in OCI of associate (gain of financial assets at FVOCI) 200,000
Decrease in finished goods 3,000,000
Increase in goods in process 2,000,000
Decrease in raw materials 600,000
Raw materials purchased 2,400,000
Conversion costs incurred 2,400,000
Employee benefits expense 5,000,000
Depreciation and amortization 2,200,000
Impairment of property, plant and equipment 500,000
Other expenses 800,000
Finance costs 1,000,000
Unrealized loss on securities available for sale 500,000
Unrealized loss on cash flow hedges 200,000
Loss from discontinued operations 900,000
Actuarial loss on defined benefit obligation 1,000,000
Income tax expense 4,000,000
5. What is the amount of cost of goods sold to be reported in the statement of comprehensive income?
a. 6,400,000 c. 4,400,000
b. 5,400,000 d. 3,400,000
6. What is the amount of net income from continuing operation to be reported in the statement of comprehensive
income?
a. 10,100,000 c. 11,200,000
b. 9,200,000 d. 8,200,000
7. What is the amount of other comprehensive income to be reported in the statement of comprehensive income?
a. 1,100,000 c. 5,000,000
b. 500,000 d. 2,000,000
8. What is the amount of comprehensive income to be reported in the statement of comprehensive income?
a. 10,100,000 c. 11,200,000
b. 9,200,000 d. 8,200,000
N Company reported a total of P15,500,000 shareholders’ equity at the end of Year 1. For Year 2, the following
transactions occurred: P4,200,000 net income, P400,000 revaluation increment, P200,000 re-measurement loss on
employee benefit liability, P1,100,000 dividends declaration, P300,000 acquisition of treasury shares, P2,700,000
appropriation of retained earnings, and P1,000,000 issue price of ordinary shares.
9. What is the total shareholders’ equity at the end of Year 2?
a. 16,800,000 c. 19,300,000
b. 19,500,000 d. 20,100,000

“A good head and a good heart are always a formidable combination.” Nelson Mandela

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