and Other Comprehensive
Income
Income and expenses for the period may
be presented in either:
* A single statement of profit or loss and
other comprehensive income (statement
of comprehensive income); or
* Two statements - (1) a statement of
profit or loss (income statement) and (2) a
statement presenting comprehensive
income.
Profit or loss
Profit or loss is income less expenses, excluding the components
of other comprehensive income.
The following are not included in determining the profit or loss for
the period:
TRANSACTION ACCOUNTING
1. Correction of prior period • Direct adjustment to the beginning
error. balance of retained earnings. The
adjustment is presented in the
statement of changes in equity.
2. Change in accounting • Similar treatment to correction of
policy. prior period error.
• Changes during the period are
3. Other comprehensive presented in the "other
income. comprehensive income" section of
the statement of comprehensive
income.
• Recognized directly in
4. Transactions with owners equity. Transactions during the
(e.g., issuance of share period are presented in the
capital, declaration of statement of changes in equity.
dividends, and the like)
The profit or loss section shows line
items that present the following
amounts for the period:
A. revenue, presenting separately interest revenue;*
B. finance costs;
C. gains and losses arising from the derecognition of
financial assets measured at amortized cost;
D. impairment losses and impairment gains on
financial assets;
E. gains and losses on reclassifications of financial
assets from amortized cost or fair value through other
comprehensive income to fair value through profit or
loss;
F. share in the profit or loss of associates and joint
ventures;
G. tax expense; and
Circumstances that would give rise
to the separate disclosure of items
of income and expense include:
A. write-downs of inventories to net realizable
value or of property, plant and equipment to
recoverable amount, as well as reversals of
such write-downs;*
B. restructurings of the activities of an entity
and reversals of any provisions for
restructuring costs;* C. disposals of items of
property, plant and equipment;*
D. disposals of investments;*
E. discontinued operations;*
F. litigation settlements; and*
G. other reversals of provisions.
Extraordinary items
PAS 1 prohibits the presentation of extraordinary items in the statement of profit or loss and other comprehensive income or in the notes.
Presentation of Expenses
Expenses may be presented using either of the following methods:
Nature of expense method - Under this method, expenses are aggregated according to their nature (eg., depreciation, purchases of materials, transport costs, employee benefits and advertising
costs) and are not reallocated according to their functions within the entity.
Function of expense method (Cost of sales method) - Under this method, an entity classifies expenses according to their function (e.g., cost of sales, distribution costs, administrative expenses, and
other functional classifications). At a minimum, cost of sales shall be presented separately from other expenses.
if the function of expense method is used additional disclosures on the nature of expense and employee benefit expense
Following are the major categories of expenses under the function of expense method:
1. Cost of sales
2. Distribution costs (selling expenses)
3. Administrative expenses (General and administrative expenses)Administrative expenses is a residual category of expenses, meaning an expense is included in this
category if it does not qualify for classification under the other categories.
4. Other expenses (e.g., losses)
5. Finance costs (Interest expenses)
6. Income tax expense
Administrative expenses
is a residual category of expenses, meaning an expense is included in this category if it does not qualify for classification under the other categories.
Other Comprehensive income "comprises items income and expense including reclassification adjustments) that are not recognized in profit or loss as required or
permitted by other PFRSs“
The components of other comprehensive income includethe following:
A. Changes in revaluation surplus;
B. Remeasurements of the net defined benefit liability (asset);
C. Gains and losses on investments designated or measured fair value through other comprehensive income (FVOCI);
D. Gains and losses arising from translating the financial.
E. Effective portion of gains and losses on hedging instruments in a cash flow hedge;
F. Changes in fair value of a financial liability designated at fair value through profit or loss (FVPL) that are attributable to
changes in credit risk;
G. Changes in the time value of option when the option's intrinsic value and time value are separated and only
theinstrument; and changes in the intrinsic value is designated as the hedging instrument
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.
Reclassification Adjustments
Items of OCI include reclassification
adjustments.
*Reclassification adjustments arise, for
example, on disposal of a foreign operation,
derecognition of debt instruments measured
at EVOCI, or when a cash flow hedge becomes
ineffective or affects profit or loss.
On derecognition (or when the cash flow
hedge becomes ineffective), the cumulative
gains and losses that were accumulated in
equity on these items are reclassified from OCI
to profit or loss. The amount reclassified is
called the reclassification adjustment.
A reclassification adjustment for a gain is a deduction
in OCI and an addition to profit or loss. This is to avoid
double inclusion in total comprehensive income. On
the other hand, a reclassification adjustment for a loss
is an addition to OCI and a deduction from profit or
loss.
Reclassification adjustments do not arise on changes
in revaluation surplus, derecognition of equity
instruments designated at FVOCI, and
remeasurements of the net defined benefit liability
(asset).
On derecognition, the cumulative gains and losses
that were accumulated in equity on these items are
transferred directly to retained earnings, rather
than to profit or loss as reclassification adjustment.
Presentation of OCI
The other comprehensive income section shall group items of OCI
into the following:
A. Those for which reclassification adjustment is allowed; and
B. Those for which reclassification adjustment is not allowed.
The entity's share in the OCI of an associate or joint venture
accounted for under the equity method shall also be presented
separately and also grouped according to the classifications above.
Total Comprehensive income
is the sum of profit or loss and other
comprehensive income. it comprises all non
owners changes in equity. presenting
information on comprehensive income and not
just profit or loss, helps user better assess
overall financial performance of the entity.
Illustration 1: Comprehensive income were presented for the
determining comprehensive income.
The following determining comprehensive income.
Profit for the year 1000
Increase in revaluation surplus 500
!Requirements:!
Compute for (a)
Remeasurements of the other
net defined benefit liability (asset) (100)
comprehensive
income and(b)
(200)
Net change in translation of foreign operation comprehensive
income.
(50)
Dividends declared
150
Stock rights
Profit for the year 1000
Other comprehensive income:
Revaluation gain 500
Remeasurements of the net defined benefit
liability (asset) (100)
Translation loss on foreign operation (200)
Total other comprehensive income (a) 200
Total comprehensive income (b) 1,200
Illustration 2: Sample Statement of comprehensive income
single statement presentation/ Function of expense method)
Entity A
Statement of profit or loss and other comprehensive income
For the year ended December 31, 20×2
Other Comprehensive Income, after 20X2 20X0
tax:
Items that will not be reclassified
subsequently to profit or loss:
- 23,000
(1,000) 2,000
Gain on property revaluation
Remeasurements of defined benefit plan
(1,000) 25,000
Items that may be reclassified subsequently to
profit or loss: 53,000 20,000
Gain on translation of foreign operations (2,000) (5,000)
Cash flow hedges
51,000 15,000
OTHER COMPREHENSIVE INCOME FOR THE YR. 50,000 40,000
TOTAL COMPREHENSIVE INCOME FOR THE YR. 350,000 240,000
