statement of income and comprehensive income
DESCRIPTION
Statement of Income and Comprehensive Income. Chapter 3. What Does the Term “Income” Mean? . “Income” may refer to only revenues; or “Income” may refer to ancillary sources of revenue such as “interest income”; or - PowerPoint PPT PresentationTRANSCRIPT
Copyright © 2010 McGraw-Hill Ryerson Ltd
Slides prepared by Ingrid McLeod-Dick – Finance Department – Schulich School of Business
Intermediate Accounting 5Intermediate Accounting 5thth ed. ed.Thomas H. BeechySchulich School of BusinessYork University
Joan E. D. ConrodFaculty of ManagementDalhousie University
Elizabeth FarrellSchulich School of BusinessYork University
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-2
Statement of Income and Comprehensive Income
Chapter 3
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-3
What Does the Term “Income” Mean?
“Income” may refer to only revenues; or “Income” may refer to ancillary sources of
revenue such as “interest income”; or “Income” or “net income” may refer to profit or
loss for the period which might also be referred to as “earnings”
Be careful to understand how the term is being used
LO 3-1
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-4
Economic Income vs. Accounting Income
Economic Income: an increase in the wealth of a corporation; a measure of income based on events rather than transactions.
Accounting income: Using the historical cost measurement principle, accounting income is an increase in the reported wealth of a corporation based on actual transactions completed.
LO 3-1
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-5
Economic Income vs. Accounting Income (cont’d)
IFRS standards are moving towards the concept of economic income since some “value changes” are recognized, even though no transaction has occurred:Financial assets and liabilities are reported at
fair value at each reporting periodCompanies may choose to fair value PP&E
and investment propertiesBiological assets are measured at fair value
less costs to sell
LO 3-1
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-6
Comprehensive Income
Defined as all changes to owner’s equity that are not the result of transactions with owners
Includes:Periodic profit or loss; and Other comprehensive income (OCI)
LO 3-1
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-7
Comprehensive Income Statement These amounts may be presented as:
a single continuous statement called the Statement of Comprehensive Income (preferred presentation format); or
two separate statements - called the Income Statement and the Statement of Comprehensive Income (which starts with the profit of loss)
LO 3-1
Copyright © 2010 McGraw-Hill Ryerson Ltd 3-8
Other Comprehensive Income (OCI)
OCI includes changes in values that have not been realized which might represent: Items that will be recognized in income once
realized (i.e. fair value changes in financial assets) Items that will be matched by an offsetting gain or
loss in a future period (i.e. a qualifying hedge of a future transaction)
Items that will impact retained earnings directly and not “recycle” through to net earnings (i.e. revaluation surpluses on property, plant and equipment)
LO 3-1