Equity: Q3

Q3: What is other comprehensive income?

A:

Other comprehensive income are those items of income and expense not included in a firm’s profit or loss figure for a year:

“Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards.”

AASB 101 Presentation of Financial Statements para 7

Examples of possible components of Other comprehensive income are:

“The components of other comprehensive income include:

(a)     changes in revaluation surplus (see AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets);

(b)     remeasurements of defined benefit plans (see AASB 119 Employee Benefits);

(c)     gains and losses arising from translating the financial statements of a foreign operation (see AASB 121 The Effects of Changes in Foreign Exchange Rates);

(d)     gains and losses from investments in equity instruments designated at fair value through other comprehensive income in accordance with paragraph 5.7.5 of AASB 9 Financial Instruments;

(da)  gains and losses on financial assets measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A of AASB 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 in accordance with paragraph 5.7.5 of AASB 9 (see Chapter 6 of AASB 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 (see paragraph 5.7.7 of AASB 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 (see Chapter 6 of AASB 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 (see Chapter 6 of AASB 9).”

AASB 101 para 7

Other comprehensive income includes items that fit within the definition of income in AASB CF Framework but not within the definition of revenue. For this reason, Other comprehensive income does not appear in a firm’s Income statement. It may be shown in a Consolidated statement of comprehensive income, which may be separate to, and in addition to, the firm’s Income statement (as it is with Ryman Healthcare); or may be integrated into the Income statement as a single Consolidated statement of comprehensive income. Also, some or all of Other comprehensive income may appear in the Statement of changes in equity (as it does with Ryman Healthcare).

videoAlso, see Martin’s videos Other Comprehensive Income

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