Comprehensive Income Reporting

Acc703

Comprehensive Income Reporting

Presented by Dan Gao

Dan Gao

2010/11/23

Dan Gao

Acc703

Comprehensive Income Reporting

Introduction

Companies use comprehensive income to measure the changed value of an owner’s interest in a business by all operating and financial events. To capture the effects of dilution and options, comprehensive income measures the value on a per-share basis. By doing this, comprehensive income eliminates the effects of “1) equity transaction for which the owner would be indifferent, 2) dividend payments, 3) share buy-backs and 4) share issues at market value” (Wikipedia, 2010). In my paper, I will introduce the definition of comprehensive income, the components of comprehensive income, Standards about comprehensive income reporting, and different treatments of comprehensive income reporting under FIRS and US GAAP.

Definition

Comprehensive income is defined by Financial Accounting Standards Board (FASB), as “the change in equity (net asset) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners” (FASB Statement 130). Comprehensive income can be divided into two major components, net income and other comprehensive income.

Net Income

Net income is “the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period” (Wikipedia, 2010). Net income is the traditional measure of companies’ performance, and it is reported in companies’ income statement. It represents gains that have already been realized. Net income is from continuing operations, discontinued operations, extraordinary items, or cumulative effects of changes in accounting principles. It is calculated by using net sales revenue minus cost of goods sold, selling, administrative and general expenses,...