Presentation of Items of Other Comprehensive Income (OCI) : Frequently Asked Questions
Presentation of Items of Other Comprehensive Income (OCI) : Frequently Asked Questions
Presentation of Items of Other Comprehensive Income (OCI) : Frequently Asked Questions
(OCI)
1. What are the current requirements for presenting profit or loss and OCI in IAS 1
Presentation of Financial Statements? ................................................................................2
2. What is the IASB proposing in this exposure draft?............................................................3
3. Why is the IASB proposing a continuous statement with two sections?.............................4
3.2 What has changed since the 2007 amendment to IAS 1 to require the proposed
change in presentation?..................................................................................................6
(b) two statements: a statement displaying components of profit or loss (an income
statement), and a second statement beginning with profit or loss and displaying the
components of OCI (a statement of other comprehensive income).
to present separately:
Now Proposed
Statement of Profit or Loss and Other
Comprehensive Income
Profit or Loss Statement
Profit or Loss
Statement of Other
Comprehensive Income Other Comprehensive Income
OCI recycled
which items are presented in OCI and which items are presented in profit or loss;
or
3.1 Background
In its 2006 exposure draft Presentation of Financial Statements, the Board proposed that all
non-owner changes in equity should be presented either in a single statement or in two
statements. However, the proposals in that draft were not the same as what is currently being
proposed. In its 2006 exposure draft, the Board proposed that all gains and losses should be
presented together in a single statement. The current proposal is to present in one continuous
statement both the items presented in OCI and the items presented in profit or loss, but to
present them in two distinct and separate sections.
The discussion below on the 2006 exposure draft is for background purposes only.
Respondents to the 2006 exposure draft had mixed views about whether the Board should
permit a choice of displaying non-owner changes in equity in one statement or two statements.
While there was a range of views, most respondents preferred the two-statement approach
because it distinguishes between profit or loss and total comprehensive income; they believe
that with the two-statement approach, the 'income statement' remains a primary financial
statement. Respondents supported the presentation of two separate statements as a transition
The exposure draft of 2006 expressed the Board’s preference for a single statement of all
non-owner changes in equity. The Board provided several reasons for this preference. All
items of non-owner changes in equity meet the definitions of income and expenses in the
Framework. The Framework does not define profit or loss, and nor does it provide criteria
for distinguishing the characteristics of items that should be included in profit or loss from
those items that should be excluded from profit or loss. Consequently, the Board decided that
it was conceptually correct for an entity to present all non-owner changes in equity (ie all
income and expenses recognised in a period) in a single statement, because there are no clear
principles or common characteristics that can be used to separate income and expenses into
two statements.
However, in the Board's discussions with interested parties, it became clear that many were
strongly opposed to the concept of a single statement. They argued that there would be
undue focus on the bottom line of the single statement. In addition, many argued that it was
premature for the Board to conclude that presentation of income and expense in a single
statement was an improvement in financial reporting without also addressing the other
aspects of presentation and display, namely deciding which categories and line items should
be presented in a statement of recognised income and expense.
In the light of these views, although the Board preferred a single statement, it decided that an
entity should have the choice of presenting all income and expenses recognised in a period in
either one or two statements. An entity is prohibited from presenting components of income
and expense (ie non-owner changes in equity) in the statement of changes in equity.
Many respondents disagreed with the Board’s preference, and thought that a decision at this
stage would be premature. In their view, the decision on a single-statement or two-statement
approach should be subject to further consideration. They urged the Board to first address
other aspects of presentation and display, namely deciding which categories and line items
should be presented in a 'statement of comprehensive income'. The Board reaffirmed its
reasons for preferring a single-statement approach, and agreed to address other aspects of
display and presentation in the next stage of the project.
Employee benefits: there has been much discussion as to whether entities should
present remeasurements of employee benefit plans in profit or loss or in OCI. The
Board is proposing in its exposure draft on employee benefits that the remeasurement
component should be presented in OCI. This is because, although the changes
included in the remeasurement component may provide information that helps with an
assessment of the uncertainty of future cash flows, many regard those changes as not
providing useful information about the likely amount and timing of future cash flows.
In other words, the Board acknowledged that the nature and characteristics of items
included in OCI were conceptually different from the nature of items included in
profit or loss, and that they have different predictive value. For these reasons the
Board believes that they need to be presented separately.
Measuring financial liabilities: the Board has tentatively decided that for all financial
liabilities designated under the fair value option, an entity would be required to
present the total fair value change in profit or loss; and to present the portion
attributable to changes in own credit risk in OCI (with an offsetting entry to profit or
loss). Amounts presented in OCI would never be reclassified (recycled) into profit or
loss.
Consequently, because these items will now be presented in OCI, the Board thinks that it is
important for all items of income and expense to be easily visible.
The Board acknowledges that items presented in OCI are important to some people for
understanding the performance of an entity, while they may be less important for other
people. By requiring a statement of profit or loss and other comprehensive income, the
Board believes it can help users to assess the relevance of the individual income and expenses
OCI recycled
OCI is being used more (as a result of decisions and proposals in the projects on Employee
Benefits and Financial Instruments) so a clear presentation is more important. The IASB
proposes presenting those OCI items that will never be recycled to profit or loss separately
from those that may be recycled to profit or loss. The Board thinks that this will make
financial statements more understandable, and that it will give users a better understanding of
the effect that OCI items may have on an entity’s financial performance.
The Board acknowledges that more work is needed on conceptual issues regarding
performance reporting. However, the Board believes that it does not have to wait for such
discussions to be finalised before it can make smaller improvements, such as this proposed
amendment, in the meantime.
A future project could consider the wider issue of measuring and presenting performance.
However, the Board does not have any project on its agenda that deals with these issues.
To add a project to its agenda the Board will have to comply with the changes made to the
IASC Foundation’s Constitution in 2010. The IASB has full discretion in developing and
pursuing its technical agenda, subject to the following:
carrying out a public consultation every three years (the first of which shall begin no
later than 30 June 2011).
(b) before related tax effects, with one amount shown for the aggregate amount of income
tax relating to those items.
(This example intentionally provides a robust illustration regarding OCI. In practice, the size
of the OCI section will vary and should typically be smaller.)
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME