Question

Codification Research Case Chapter 4 Intermediate Accounting

If your school has a subscription to the FASB Codification, log in and prepare responses to the following. Provide Codification references for your ­responses.

a.   What authoritative literature addresses comprehensive income? When was it issued?

b.   Provide the definition of comprehensive income.

c.   Define classifications within net income and give examples.

d.   Define classifications within other comprehensive income and give examples. e.   What are reclassification adjustments?

Answer 1

(a)        FASB ASC 220 – Presentation, Comprehensive Income. The predecessor standard for this topic is FAS No. 130 Reporting Comprehensive Income (Issued June, 1997). By following this Codification String: Presentation > 220 Comprehensive Income > 10 Overall > 5 Background and then click on Printer-Friendly with sources, FAS 130 is identified; you can then go to www.fasb.org/st/ to find the issue date.

(b)        The definition of comprehensive income (Master Glossary of ASC): The change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

(c)        Classifications within net income and examples (FASB ASC 220-10-45-7):

45-7        [Items included in net income are displayed in various classifications. Those classifications can include income from continuing operations, discontinued operations and extraordinary items. This Subtopic does not change those classifications or other requirements for reporting results of operations.]

(d)       The classifications within other comprehensive income (220-10-45-13):

45-13      [Items included in other comprehensive income shall be classified based on their nature. For example, other comprehensive income shall be classified separately into foreign currency items, gains or losses associated with pension or other postretirement bene­fits, prior service costs or credits associated with pension or other postretirement benefits, transition assets or obligations associated with pension or other postretirement benefits, and unrealized gains and losses on certain investments in debt and equity securities. Additional classifications or additional items within current classifications may result from future accounting standards.

(e)        Reclassification adjustments (FASB ASC 220-10-45-15)

45-15      Reclassification adjustments shall be made to avoid double counting in comprehensive income items that are displayed as part of net income for a period that also had been displayed
as part of other comprehensive income in that period or earlier periods. For example, gains on investment securities that were realized and included in net income of the current period that also had been included in other comprehensive income as unreal­ized holding gains in the period in which they arose must be deducted through other comprehensive income of the period in which they are included in net income to avoid including them in comprehensive income twice (see paragraph 320-10-40-2).