Question

Statement of profit or loss and comprehensive income and statement of changes in equity. Determine whether the following transactions would appear in the statement of profit or loss and other comprehensive income. If so explain how they would be disclosed.

(a)A gain on foreign currency translation of $83 000.

(b)As a result of a fall in share prices in a recession, directors decided to write down the value of the company’s investment, Shares in Pluto Ltd, by $80 000.

(c) Loss from discontinued business operations.

(d)Dividend paid of $1 500 000 in total.

(e)Inventory costing $120 000 is sold for $160 000.

(f)A transfer of $500 000 is made to general reserve from retained earnings.

Answer 1

PLEASE GV A RATING IF U LIKE MY EFFORTS, IT WILL KEEP US MOTIVATED. THANK YOU IN ADVANCE. In case u have a query post in comment column, will revert.

Ans :

What’s included in Other Comprehensive Income?

Other comprehensive income is shown on a company’s balance sheet. It is similar to retained earnings, which is impacted by net income, except it includes those items that are excluded from net income. This helps reduce the volatility of net income as the value of unrealized gains/losses moves up and down.

Common items included in the account include:

- Gains or losses on investments available for sale

- Gains or losses on derivatives held as cash flow hedges

- Foreign currency exchange gains or losses

- Pension plan gains or losses

Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2016

                              $m

Revenue       615·6

Cost of sales (435)

Gross profit 180·6

Investment income 46·1

Administrative costs (60·2)

Other expenses (61·3)

––––––

Operating profit 105·2

Net finance costs (16·9)

Group loss on disposal (8)

Share of profits of associate 3·2

––––––

Profit before tax            83·5

Income tax expense        (32·3)

––––––

Profit for the year          51·2

––––––

Other comprehensive income Items

that will not be reclassified to profit or loss

Gains on property revaluation                                 28·4

Remeasurement component of pension scheme      4

Share of other comprehensive income of associate 1·6

                                                                      ––––––

Other comprehensive income for the year                34

––––––

Total comprehensive income for year                     85·2

––––––

Profit attributable to:

Owners of the parent                                         45·6

Non-controlling interest                                         5·6

                                                                        ––––––

51·2

––––––

Total comprehensive income for year attributable to:

Owners of the parent 74·8

Non-controlling interest 10·4

`                       ––––––

                           85·2

                        ––––––

(a)A gain on foreign currency translation of $83 000 : As per IAS 21 The amount of exchange differences recognised in profit or loss and Net exchange differences recognised in other comprehensive income and accumulated in a separate component of equity .

(b) IFRS requires certain disclosures to be presented by category of instrument based on the IAS 39 measurement categories.

Financial assets measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition , held-to-maturity investments loans and receivables available-for-sale assets.

So it is disclosed profit or loss .

(c) Loss from discontinued business operations - Unlike GAAP reporting requirements, IFRS rules permit equity method investments to be classified as held for sale. Moreover, under IFRS entities may continue involvement with the discontinued operation. As with GAAP, discontinued operations are reported in a special section of the income statement.

IFRS 5:33(a) requires the presentation of a single amount in the statement of comprehensive income comprising the total of:

(i) the post-tax profit or loss of discontinued operations; and

(ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.

(d)Dividend paid of $1 500 000 in total - The dividends declared and paid by a corporation in the most recent year will be reported on these financial statements for the recent year . It does not effect income statement . it appears in Statement of equity and Reported as a reduction in retained earnings.

(e)Inventory costing $120 000 is sold for $160 000 – This will be recorded in sales ( 160000) and 120000 in cogs in statement of profit or loss.

(f)A transfer of $500 000 is made to general reserve from retained earnings.- It does not effect income statement . it appears in Statement of equity and Reported as a reduction in retained earnings.