Comprehensive income

• is the change in equity during a period

resulting from transactions and other events,
other than changes resulting from
transactions with owners in their capacity as
owners.
Comprehensive income
Accordingly, comprehensive income includes the
following
1. Components of profit or loss
2. Components of other comprehensive
income
Profit or loss
• is the total of income less expenses, excluding
the components of other comprehensive
income.
Other comprehensive income (OCI)
• comprises items of income and expense
including reclassification adjustments that are
not recognized in profit or loss as required or
permitted by Philippine Financial Reporting
Standards.
Components of other comprehensive income
The components of "other comprehensive income"
include the following:
 1. Unrealized gain or loss on equity investment
measured at fair value through other comprehensive
income
2 Unnealized gain or loss on debt investment measured
at fair value through other comprehensive income
3. Gain or loss from translating the financial statements
of a foreign operation
4. Revaluation surplus during the year
Components of other comprehensive income
The components of "other comprehensive income"
include the following:
5. Unrealized gain or loss from derivative contracts
designated as cash flow hedge
6. Remeasurements of defined benefit plan
7. Change in fair value attributable to credit risk of a
financial liability designated at fair value through profit
or loss
Presentation of other comprehensive income
The amended PAS 1, paragraph 82A, provides that the
other comprehensive income section shall present line
items for amounts of other comprehensive income in
the period, classified by nature.
 
The line items for amounts of OCI shall be grouped as
follows:
1. OCI that will be reclassified subsequently to profit or
loss when specific conditions are met.
2. OCI that will not be reclassified subsequently to
profit or loss.
OCI that will be reclassified subsequently
to profit or loss
a. Gain or loss from translating financial
statements of a foreign operation.
b. Unrealized gain or loss on derivative
contracts designated as cash flow hedge.
c. Unrealized gain or loss on debt investment
measured at fair value through OCI.
OCI that will not be reclassified
subsequently to profit or loss
a. Unrealized gain or loss on equity investment
measured at fair value through OCI

b. Change in revaluation surplus.

c. Remeasurements of a defined benefit plan

d. Gain or loss attributable to credit risk of a financial

liability designated at fair value through profit or
loss
Presentation of comprehensive income
PAS 1, paragraph 81, provides that an entity has
two options of presenting comprehensive
income, namely:

1. Two-statement approach

2. Single statement approach

Income statement
• is a formal statement showing the financial
performance or profit or loss of an entity for a
period of time.
Usefulness of income statement
• Information about the financial performance
of an entity, in particular its profitability, is
useful in predicting the capacity of the entity
to generate cash flows from existing
resources.
Transaction approach
• This approach of computing net income or
loss requires the determination of how much
income was earned during the year and how
much expenses were incurred in earning the
revenue.

• The difference between the income and the

expenses is net income or net loss.
Income
• increase in economic benefit during the
accounting period in the form of inflow or
increase in asset or decrease in liability that
results in increase in equity, other than
contribution from equity participants.
Sources of income
a. Sales of merchandise to customers
 
b. Rendering of services
  
c. Use of entity resources

d. Disposal of resources other than products

Distinction between income and revenue
• The definition of income encompasses both
revenue and gains.

• Revenue arises in the course of the ordinary

regular activities of an entity.

• Income includes revenues and sources that

do not arise in the course of the ordinary
regular activities of an entity.
Expense
• decrease in economic benefit during the
accounting period in the form of outflow or
decrease in asset and increase in liability that
results in decrease in equity, other than
distribution to equity participants.
Distribution costs or selling expenses
• costs which are directly related to selling,
advertising and delivery of goods to
customers.
Administrative expenses
• cost of administering the business.
Other expenses
• expenses which are not directly related to the
distribution and administrative function.
No more extraordinary items
• PAS 1, paragraph 87, specifically mandates
that "an entity shall not present any items of
income and expense as extraordinary items, in
the income statement or statement of
comprehensive income or in the notes".
Separate disclosure
• PAS 1, paragraph 97, provides that when items
of income and expense are material, their
nature and amount shall be disclosed
separately.
Separate disclosure
Items of income and expense requiring disclosure
a. Writedown of inventory to net realizable value and reversal of
such writedown
b. Writedown of property, plant and equipment to recoverable
amount and reversal of such writedown
c. Restructuring of the activities of an entity and reversal of any
provision for the cost of restructuring
d. Disposal of an item of property, plant and equipment
e. Disposal of investment
f. Discontinued operation
g. Litigation settlement
h. Other reversal of provision
Line items
PAS 1, paragraph 82, provides that the line items in the statement
of comprehensive income are:
a. Revenue
b. Gain or loss from derecognition of financial asset measured at
amortized cost as required by PFRS 9
c. Finance cost
d. Share of income or loss of associate and joint venture
accounted for using the equity method
e. Income tax expense
f. A single amount comprising discontinued operations
g. Profit or loss for the period
h. Other comprehensive income
i. Comprehensive income for the period
Line items
The following items shall be disclosed on the face of the
income statement and statement of comprehensive
income.
 
a. Profit or loss attributable to non-controlling interest
and owners of the parent.

b. Total comprehensive income attributable non-

controlling interest and owners of the parent.
Forms of income statement
• PAS 1, paragraph 99, provides that an entity
shall present on the face of the income
statement an analysis of expenses using
classification based on either the function of
expenses or their nature within the entity,
whichever provides information that is
reliable and more relevant.
Functional presentation
• This form classifies expenses according to
their function as part of cost of goods sold,
distribution costs, administrative activities
and other activities.

• Entities classifying expenses by function shall

disclose additional information on the nature
of expenses.
Natural presentation
• Under this form, expenses are aggregated
according to their nature.
Natural presentation
Examples of "natural" expenses
a. Purchases
b. Employee benefit costs which include sales salaries,
office salaries, SSS contribution, medicare
contribution, bonuses and other employee benefits
c. Advertising costs
d. Transport costs including freight out and other
delivery expenses
e. Supplies which include store supplies and office
supplies
f. Depreciation
g. Other expenses
Which form of income statement?
• There is no prescribed format.

• PAS 1, paragraph 105, simply states that

because each method of presentation has
merit for different types of entities,
management is required to select the
presentation that is reliable and more
relevant.
Statement of comprehensive income
• The statement of comprehensive income
starts with the net income or loss as shown in
the income statement plus or minus the
components of other comprehensive income.

• The purpose of this statement is to provide a

more comprehensive information on financial
performance measured more broadly than the
income as traditionally computed.
Resources need to be owned by the company to be
included as part of its assets.

Is this true? (Yes or No)

No
Control is sufficient. As long as it allows the
possessor to obtain the risk and reward of
ownership.