(upbeat music)
-: Let's apply the flowchart on the disclosure
of comprehensive income to an example.
Have this flowchart in front of you
and make your own notes
as we work through the example.
Before we begin,
there should be note some potentially confusing terminology.
The words comprehensive income
and other comprehensive income or OCI
are used throughout the module.
Don't get confused into thinking these are the same.
Comprehensive income refers to both profit and loss
as well as other comprehensive income.
Other comprehensive income is only a portion of
or a sub-component of comprehensive income.
Consider the following extract of entity A's trial balance.
Prepare the statement of comprehensive income
for entity A.
IAS 1, paragraph 10 A gives us a choice
of two approaches.
The first is to have two separate statements.
One for profit and loss
and one for the combination of profit and loss and OCI.
Note that the total of profit and loss
on the first statement gets carried over
to the beginning of the second statement.
The second approach is a single statement comprising
of both profit and loss and OCI.
Now we have to decide whether to include them
in profit and loss or OCI.
The general rule in terms of IAS 1 paragraph 88
requires all incomes and expenses to be included
in profit and loss unless there's an IFRS
that requires it to be included in OCI.
So what then are some of the standards
that are exceptions to this general rule?
Standards that require inclusion in OCI
are IAS 8, for correction of errors and changes
in accounting policies, IAS 16 and IAS 38 for revaluations,
IAS 19 for the re-measurement
of defined benefit plans,
IAS 21 relating to gains and losses
from translating financial statement
of foreign operations and IAS 9
has paragraphs that specifically require inclusion in OCI.
So if we go through the extract trial balance
for entity A, the following items would follow
the general rule and fall under profit and loss
in terms of IAS 1, paragraph 88.
Revaluation surplus will be included in OCI
because it relates to specific requirements
in IAS 16 that is one of the exceptions.
So we know which items are to be included
in profit and loss in OCI.
Now we need to consider specific requirements
for the disclosure within each section.
The final profit and loss
as well as the consolidated comprehensive income
needs to be allocated between non-controlling interests
and the parent entity's owners.
This relates to business combinations
which is covered in a later module.
If we do a single statement of profit and loss
and other comprehensive income,
we can present the profit and loss section as follows.
Incomes less expenses gives us profit before tax.
In this example, we assume that tax expense is 34,000.
You should note that items can be aggregated
and presented as a single line item
but there are specific items
such as finance costs
which are required to be separately discoed.
This is in terms of IAS 1, paragraph 82 B.
Items can be included in OCI section net of tax
or before tax with an aggregate amount of tax
for all OCI items.
If we choose to present the OCI section net of tax,
our statement would extend to include the gray-shaded area.
However, there's a further disclosure requirement
for the OCI section.
That is items need to be split
between those that may subsequently be reclassified
to profit and loss
and those that may not subsequently reclassified
to profit and loss.
In our example, revaluation surplus
will not be subsequently reclassified to profit and loss
and so it will appear under this heading in the OCI section.
Finally, we need to reflect the total comprehensive income
which is the sum of profit and loss
or profit for the year and other comprehensive income.
To recap, when preparing the statements of profit and loss,
and other comprehensive income,
there are choices that are available
as well as specific disclosure requirements
that must be complied with.