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Comprehensive income Under SFAS 130, IAS 1

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Presentation Final

  1. 1. Dedication To our beloved Palestine, the country that made us what we are today To our dear families – deceased and alive – who walked us through every step of our lives. To our great university that gave us the opportunity to present this work.To our dear professor who provided us with great inspiration to achieve this point of our lives. To our well respected colleagues who have made a very understanding brotherhood among all. To our supportive friends who stood by our sides through everything in life and in studying.To US , as we get this opportunity to show our thoughts today, we hope we will succeed enough in future to work and share more. We dedicate this study …
  2. 2. Contents PART 1: PART 2: FASB – Part 3: IASB - Part 4:INTRODUCTION SFAS 130 IAS 1 conclusion Introduction to The differenceobjective of the Introduction to IAS 1 study and similarities SFAS 130 between two Comprehensive standards Income comprehensive FASB & IASB classifications financial income Effects of and terms statement elements amendments presentation Presentation of project Presenting comprehensive information for income comprehensive income Amendments to IAS 1 Amendments to SFAS 130 Interaction with other projects
  3. 3. PART 1: INTRODUCTION• Objective of the study• FASB & IASB financial statement presentation project
  4. 4. Part 1 : introduction• The main objectives of this study is to answer these questions: – What is the FASB and IASB financial statement presentation joint project? – What is the definition of Comprehensive Income according to SFAS 130 and IAS 1? – How comprehensive income should be reported? – What are the main differences between SFAS 130 and IAS 1? – And what are the amendments on the standards?
  5. 5. Part 1 : introductionFASB & IASB Projects:The joint project between the IASB and the US- FASB ‘s goal is to improve the usefulness of the financial information provided in an entity’s financial statements to assist management to better communicate its financial information to the users of its financial statements, and to help users in their decision-making.
  6. 6. Part 1 : introductionThe IASB is conducting the project in three main phases:Phase B (in progress)Replacement of IAS 1 and IAS 7 Addresses more fundamental issues for presentation of information in the financial statements.
  7. 7. PART 2: FASB – SFAS 130• Introduction to SFAS 130• Comprehensive income elements• Presenting information for comprehensive income• Amendments to SFAS 130
  8. 8. Part 2 :FASB - SFAS 130 Introduction to SFAS 130SFAS No. 130,, requires a company to report comprehensive income and its components in a full set of financial statements.Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.
  9. 9. Part 2 :FASB - SFAS 130• Comprehensive income can be most easily understood if it is divided into its two major components: Other Compreh Net comp. ensive income income income
  10. 10. Part 2 :FASB - SFAS 130• SFAS No. 130 requires a company to calculate reclassification adjustments for all items of other comprehensive income except minimum pension liability adjustments.
  11. 11. Part 2 :FASB - SFAS 130Comprehensive income elements Net income Income from continuing operations Income from discontinued operations Extraordinary items Cumulative effects of changes in accounting principles
  12. 12. Part 2 :FASB - SFAS 130Comprehensive income elements Other comp. income Gains and losses on foreign currency transactions Foreign currency translation adjustments Gains and losses on derivative instruments Unrealized holding gains and losses on available-for-sale securities Gains or losses associated with pension
  13. 13. Part 2 :FASB - SFAS 130 • Changes in equity during a period resulting from Not investments by owner andclassified distributions to owners. • Items required to be as reported as direct adjustments to paid-in OCI capital, retained earnings, or other non-income equity
  14. 14. Part 2 :FASB - SFAS 130Reporting comprehensive income• SFAS 130 does not require a specific format for the financial statement in which comprehensive income is reported. However, it does require the display of net income as a component of comprehensive income in that statement and that the statement be displayed
  15. 15. Part 2 :FASB - SFAS 130 Other Comprehensive income items can be reported in A statement of A separate changes in equity, The income statement of provided that statement comprehensive statement isbelow the total income that displayed as afor net income begins with net primary financial income statement and not in the notes
  16. 16. Part 2 :FASB - SFAS 130• It provides flexibility as to how that information may be displayed.• It may be reported at a gross amount or at net amount comprehensive income components may be disclosed either net of taxes or before taxes.
  17. 17. Part 2 :FASB - SFAS 130• Earnings Per Share amounts are not required for total comprehensive income or its components• The accumulated balance of other comprehensive income items is to be reported in the equity section of the balance sheet in a category separate from contributed capital and retained earnings.
  18. 18. Part 2 :FASB - SFAS 130The entity is not required to report other comprehensive income or It does not specify when tocomprehensive income if An entity recognize the items compose that has no items of other comprehensive income comprehensive income in any period presented. Amendments to SFAS 130 An entity shall display both of the An entity shall report in a following in that financial continuous statement of statement: comprehensive income all items that meet the definition of The net income comprehensive income The other comprehensive income.
  19. 19. Part 3: IASB -IAS 1• Introduction to IAS 1• Comprehensive Income classifications and terms• Presentation of comprehensive income• Amendments to IAS 1• Interaction with other projects
  20. 20. Part 3: IASB -IAS 1Introduction to IAS 1• IAS 1 sets overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content.• IAS 1 requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non- owner changes in equity (i.e. comprehensive income) are required to be presented in one statement of comprehensive income or in two statements.
  21. 21. Part 3: IASB -IAS 1 Comprehensive Income classifications and terms Minimum items on the face of the statement of comprehensive income should include: componen share of discontin total finance tax profit or ts of other the profit compreherevenue or loss of ued comprehe nsive costs expense operation loss nsive associates income income
  22. 22. Part 3: IASB -IAS 1Presentation of comprehensive income An entity has a choice of presenting: single statement of two statements comprehensive income a statement of comprehensive income an income statement displaying that begins with profit or loss and components of profit or loss displays components of other comprehensive income
  23. 23. Part 3: IASB -IAS 1• No items may be presented in the statement of comprehensive income or in the notes as extraordinary items.
  24. 24. Part 3: IASB -IAS 1An entity shall disclose separately the following items in the statement of comprehensive income as allocations for the period: Non- Total controlling comprehensive interest income for the period attributable to Owners of the parent
  25. 25. Part 3: IASB -IAS 1Amendments to IAS 1• The revised standard introduces “total comprehensive income”, which represents the change in equity during a period, other than changes resulting from transactions with owners in their capacity as owners.
  26. 26. Part 3: IASB -IAS 1Options - Previous IAS 1 Options - revised IAS 1•Income statement One statement approach•Statement of recognized income and •Statement of comprehensive incomeexpense •Statement of changes in equity•Equity note - other movements inequity arising from transactions withowners as owners•Income statement Two statement approach•Statement of changes in equity •Income statement •Statement of comprehensive income •Statement of changes in equity
  27. 27. Part 3: IASB -IAS 1• The proposed amendment does not change the calculation of EPS. This project does not change what is presented in profit or loss and what is presented in OCI, or how EPS is calculated. The proposed amendment simply changes the presentation of profit or loss and OCI so that they would be shown as two separate sections.
  28. 28. Part 3: IASB -IAS 1• Interaction with other projects permits an entity to make an irrevocable election to present in OCI changes in the fair value of any investment in equity instruments that is not held for trading • IFRS 9 includes proposed requirements to present in OCI re- measurements of pension plan assets and liabilities. • IAS 19
  29. 29. Part 3: IASB -IAS 1 At a minimum an insurer shall for insurance company include line items in its statement of comprehensive income that presents Underwriting margin, Claim expenses, Interest on insurance contract liabilities, Gains and losses at initial recognition• IFRS 4
  30. 30. Part 4: conclusion• The difference and similarities between two standards• Effects of amendments
  31. 31. The difference and similarities between two standards IASB FASB An entity shall present its total comprehensiveincome for a period either: comprehensive in a single statement of income may be, or comprehensive income presented within the in two statements—an statement of changes income statement and a in shareholders’ statement of equity. comprehensive income
  32. 32. The difference and similarities between two standards IASB FASB A change from the single-statement GAAP contains no approach to the two- restrictions onstatement approach, or changes in vice versa, is a change presentation in accounting policy format.
  33. 33. . IASB FASBAs a minimum, an entity shall include, in the statement of comprehensive income, the following amounts: *revenue *finance costs For non-SEC registrants, GAAP *share of the profit or loss of includes limited guidance for investments in associates items to be presented on the *tax expense face of the income statement. However, GAAP is generally*a single amount comprising the total consistent with IASB. of the post-tax profit or loss of a discontinued operation*the post-tax gain or loss recognized on the measurement to fair value
  34. 34. IASB FASBUnder the single-statement GAAP includesapproach, the statement of additional items of comprehensive income OCI, such as unrealized shall include all items of gains and losses on income and expense available-for-sale recognized in a period securities and the tax unless this IFRS requires effects of certain otherwise. items.
  35. 35. IASB FASB Under the two-statement approach, the income Like IFRS, in a two-statement shall display, as a statement approach, the minimum net income and statement of OCI begins other comprehensive with net income and income items that were then displays items of showed before OCI. Unlike IFRS, the The statement of entity need not break out its share of OCI of equity- comprehensive income method investments shall begin with profit or loss
  36. 36. IASB FASB Under this IFRS, the effects ofcorrections of errors and changes inaccounting policies are presented as retrospective adjustments of priorperiods rather than as part of profit Same or loss in the period in which they arise An entity shall present additional line items, headings and subtotalsin the statement of comprehensive Same income
  37. 37. IASB FASB An entity shall not present or describe any items of income Presentation of and expense as certain items as‘extraordinary items’ extraordinary is in the statement of comprehensive required. income
  38. 38. IASB FASBWhen items of income A material event or or expense are transaction that is material, an entity unusual in nature or shall disclose the occurs infrequently amount and nature of but not both should be those items either in reported as a separate the statement of component of income comprehensive from continuingincome or in the notes operations
  39. 39. Part 4: conclusion• Effects of amendments – With effect from 2009 it is expected that accounting statements prepared under IFRS would no longer have to be reconciled with US GAAP for SEC purposes. – Analysts would no longer have to contend with statements written in a different accounting language.
  40. 40. Part 4: conclusion– There is considerably enhanced emphasis on fair presentation of financial statements and the concept of fair value and accrual basis of accounting.– Since IFRS and US GAAP are the two most widely used standards, this project aims at bridging the gap.
  41. 41. Any questions ?! Done by: Sarah Alian Kayan AlSarraj Produced by: Mr. Emad AbuShabaan