Statement of Comprehensive

Income
Prepared by: Gonzalo D. Ruales,
Jr. CPA, MBA
Learning objectives
1. Give examples of items of comprehensive
income
2. State the acceptable methods of presenting
items of income and expenses.
3. Prepare a Statement of Profit or Loss and
Comprehensive Income
Statement of Profit or Loss and Other
Comprehensive Income (Presentation)
• Either:
a. A single statement (statement of comprehensive
income); or
b. Two statements

• PAS 1 requires an entity to present information on

the following:
a. Profit or loss (Income Statement);
b. Other comprehensive income (OCI); and
c. Comprehensive income
Profit or loss (Income
Statement)
Profit or loss
• Income and expenses are usually recognized in
profit or loss unless:
a. They are items of other comprehensive income
(OCI); or
b. They are required by other PFRSs to be
recognized outside of profit or loss.
Profit or loss
• The following are NOT included in determining
the profit or loss for the period:
1. Correction of prior period error
2. Change in accounting policy
3. Other comprehensive income
4. Transaction with owners (e.g. issuance of share
capital, declaration of dividends, and the like)
 FORMAT
FORMAT OF
OF THE
THE INCOME
INCOME STATEMENT
STATEMENT

Elements of the Income Statement

INCOME – Increases in economic benefits during the
accounting period in the form of
 inflows or enhancements of assets or
 decreases of liabilities

that result in increases in equity, other than those relating to

contributions from shareholders.

Slide
4-8
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 FORMAT
FORMAT OF
OF THE
THE INCOME
INCOME STATEMENT
STATEMENT

Elements of the Income Statement

INCOME includes both revenues and gains.
 Revenues - ordinary activities of a company
 Gains - may or may not arise from ordinary activities.

Revenue Accounts Gain Accounts

 Sales revenue  Gains on the sale of long-term
 Fee revenue assets
 Interest revenue  Unrealized gains on trading
 Dividend revenue securities.
 Rent revenue
Slide
4-9
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 FORMAT
FORMAT OF
OF THE
THE INCOME
INCOME STATEMENT
STATEMENT

Elements of the Income Statement

EXPENSES – Decreases in economic benefits during the
accounting period in the form of
 outflows or depletions of assets or
 incurrences of liabilities

that result in decreases in equity, other than those relating to

distributions to shareholders.

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 FORMAT
FORMAT OF
OF THE
THE INCOME
INCOME STATEMENT
STATEMENT

Elements of the Income Statement

EXPENSES include both expenses and losses.
 Expenses - ordinary activities of a company
 Losses - may or may not arise from ordinary activities.

Expense Accounts Loss Accounts

 Cost of goods sold  Losses on restructuring
 Depreciation expense charges
 Interest expense  Losses on the sale of long-
 Rent expense term assets
 Salary expense
 Unrealized losses on trading
securities.
Slide
4-11
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 FORMAT
FORMAT OFOF 1. Sales or Revenue
2. Cost of Goods Sold
THE
THE INCOME
INCOME Gross Profit
STATEMENT
STATEMENT 3. Selling Expenses
4. Administrative or General Expenses
Intermediate 5. Other Income and Expense
Components Income from Operations
Companies generally 6. Financing costs
present some or all of Income before Income Tax
these sections and totals 7. Income Tax
within the income Income from Continuing Operations
statement. 8. Discontinued Operations
Net Income
9. Non-Controlling Interest
Slide 10. Earnings Per Share
4-12
 FORMAT
FORMAT OFOF
THE
THE INCOME
INCOME
STATEMENT
STATEMENT
Illustration

Includes all of the

major items in
previous list, except
for discontinued
operations.

ILLUSTRATION 4-2
Slide Income Statement
4-13
 CONDENSED
CONDENSED
INCOME
INCOME
STATEMENT
STATEMENT
More representative of
the type found in
practice.

ILLUSTRATION 4-3
Condensed Income
Statement

Company prepares
supplementary schedules to
support the totals.
ILLUSTRATION 4-4
Sample Supporting
Slide Schedule
4-14
 REPORTING
REPORTING WITHIN
WITHIN THE
THE INCOME
INCOME
STATEMENT
STATEMENT

Gross Profit
 Computed by deducting cost of goods sold from net
sales.
 Provides a useful number for evaluating performance
and predicting future earnings.

Unusual or incidental revenues are disclosed in other income

and expense.

Slide
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 REPORTING
REPORTING WITHIN
WITHIN THE
THE INCOME
INCOME
STATEMENT
STATEMENT
Income from Operations

 Determined by deducting selling and administrative

expenses as well as other income and expense from gross
profit.
 Highlights items that affect regular business activities.
 Used to predict the amount, timing, and uncertainty of
future cash flows.

Slide
4-16
LO 4
 INCOME FROM OPERATIONS
Expense Classification

Nature Function

 Cost of materials used  Employee benefits

 Direct labor incurred  Depreciation expense
 Delivery expense  Amortization expense
 Advertising expense

Slide
4-17
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 INCOME FROM OPERATIONS
Expense Classification

Nature Function

 Cost of goods sold

 Selling expenses
 Administrative
expenses

Slide
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 INCOME FROM OPERATIONS

Expense Classification

Illustration: The firm of Telaris Co. performs audit, tax, and

consulting services. It has the following revenues and expenses.

Slide
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 Expense Classification

Nature-of-Expense Approach
ILLUSTRATION 4-5

Slide
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 Review Question
Separate line items in an analysis of expenses by nature
include
a. Purchases of materials, transport costs, employee
benefits, depreciation, extraordinary items
b. Purchases of materials, distribution costs, administrative
costs, employee benefits, depreciation, taxes.
c. Depreciation, purchases of materials, transport costs,
employee benefits and advertising costs.
d. Cost of sales, administrative costs, transport costs and
distribution costs
 Expense Classification

Function-of-Expense Approach
ILLUSTRATION 4-6

The function-of-expense method is generally used in practice

although many companies believe both approaches have merit.
Slide
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 INCOME FROM OPERATIONS
ILLUSTRATION 4-7
Gains and Losses Number of Unusual Items
Reported in a Recent Year
by 500 Large Companies

Slide
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 INCOME FROM OPERATIONS

Gains and Losses

IASB takes the position that both

 revenues and expenses and
 other income and expense

should be reported as part of income from operations.

Companies can provide additional line items, headings, and subtotals

when such presentation is relevant to an understanding of the entity’s
financial performance.

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 INCOME FROM OPERATIONS

Gains and Losses

Additional items that may need disclosure:

 Losses on 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.
 Losses on restructurings of the activities and reversals of any
provisions for the costs of restructuring.
 Gains or losses on the disposal of items of property, plant, and,
equipment or investments.
 Litigation settlements.
 Other reversals of liabilities.

Slide
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 INCOME STATEMENT REPORTING
ILLUSTRATION 4-8
Income before Income Tax Presentation of
Finance Costs

Illustration 4-8

Slide Financing costs must be reported on the income statement.

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 INCOME STATEMENT REPORTING

Allocation to Non-Controlling Interest

When a company prepares a consolidated income statement,

IFRS requires that net income be allocated to the controlling
and non-controlling interest. This allocation is reported at the
bottom of the income statement, after net income.
ILLUSTRATION 4-9
Presentation of Non-Controlling Interest

(amounts given)
Slide
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 INCOME STATEMENT REPORTING
BE4-3: Presented below is some financial information related to
Volaire Group. Compute the following: Other
Income and
Expense
Revenues €800,000
Income from continuing operations 100,000 €800,000
Comprehensive income 120,000
Net income 90,000 100,000
Income from operations 220,000
Selling and administrative expenses 500,000 120,000
Income before income tax 200,000
90,000
Slide
Advance slide in presentation mode to reveal answers. €80,000 LO 4
4-28
 INCOME STATEMENT REPORTING
BE4-3: Presented below is some financial information related to
Volaire Group. Compute the following:
Financing
Costs
Revenues €800,000
Income from continuing operations 100,000 €800,000
Comprehensive income 120,000
Net income 90,000 100,000
Income from operations 220,000
Selling and administrative expenses 500,000 120,000
Income before income tax 200,000
90,000
Slide
Advance slide in presentation mode to reveal answers. €20,000 LO 4
4-29
 INCOME STATEMENT REPORTING
BE4-3: Presented below is some financial information related to
Volaire Group. Compute the following:

Income Tax

Revenues €800,000
Income from continuing operations 100,000 €800,000
Comprehensive income 120,000
Net income 90,000 - 100,000
Income from operations 220,000
Selling and administrative expenses 500,000 120,000
Income before income tax 200,000
90,000
Slide
Advance slide in presentation mode to reveal answers. €100,000 LO 4
4-30
 INCOME STATEMENT REPORTING
BE4-3: Presented below is some financial information related to
Volaire Group. Compute the following:
Discontinued
Operations
Revenues €800,000
Income from continuing operations 100,000 €800,000
Comprehensive income 120,000
Net income 90,000 100,000
Income from operations 220,000
Selling and administrative expenses 500,000 120,000
Income before income tax 200,000
- 90,000
Slide
Advance slide in presentation mode to reveal answers. - €10,000 LO 4
4-31
 INCOME STATEMENT REPORTING
BE4-3: Presented below is some financial information related to
Volaire Group. Compute the following: Other
Comprehensive
Income
Revenues €800,000
Income from continuing operations 100,000 €800,000
Comprehensive income 120,000
Net income 90,000 100,000
Income from operations 220,000
Selling and administrative expenses 500,000 120,000
Income before income tax 200,000
- 90,000
Slide
Advance slide in presentation mode to reveal answers. €30,000 LO 4
4-32
Other Comprehensive Income
(OCI)
Other Comprehensive Income (OCI)
• Comprises items of income and expense
(including reclassification adjustments) that are
not recognized in profit or loss as required or
permitted by other PFRSs (PAS 1.7)
Components of OCI
Reclassification Adjustments (included in OCI)
• “amounts reclassified to profit or loss in the
current period that were recognized in other
comprehensive income in the current or
previous periods” (PAS 1.7)
• Arise [for example] on:
▫ disposal of a foreign operation;
▫ derecognition of debt instruments measured at
FVOCI; or
▫ when a cash flow hedge becomes ineffective or
affects profit or loss
Reclassification Adjustments (included in OCI)
Take note!!
• A reclassification adjustment for a gain is a deduction in
OCI and an addition to profit or loss. –vice versa for a loss

• Reclassification adjustment do not arise on changes in:

▫ changes in revaluation surplus;
▫ derecognition of equity instruments designated at FVOCI; and
▫ remeasurements of the net defined benefit liability or asset

▫ -cumulative gains or losses in equity [on these items] are

transferred directly to retained earnings
 Review Question
Other comprehensive income includes all of the
following, except
a. Gain or loss arising from translating the financial
statements of a foreign operation.
b. Gain or loss on remeasuring available for sale
financial asset.
c. The effective portion of gain or loss on hedging
instrument in a cash flow hedge.
d. Dividend paid to shareholders
Total Comprehensive Income
Total Comprehensive Income
• “the change in equity during a period resulting
from transactions and other events, other than
those changes resulting from transactions with
owners in their capacity as owners” (PAS 1.7)

• The sum of profit or loss and other

comprehensive income (OCI)
Illustrations
Illustration 1
The following items were presented for the
purpose of determining comprehensive income:
Profit for the year 1,000
Increase in revaluation surplus 500
Remeasurements of the net defined benefit liability (asset) (100)
Net change in translation of foreign operation (200)
Dividends declared (50)
Stock rights 150

Requirements: (a) OCI and (b) comprehensive income

Solution
Profit for the year 1,000
Other comprehensive income:
Revaluation gain 500
Remeasurement 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
Note:
• The net other comprehensive income of P50,000
is carried to “reserves” or shown separately in
the statement of changes in equity.
Illustration 3
Solution
Illustration: Reconstruction of FS
ABC Co. reported profit after tax of P105,000.
ABC’s income tax rate is 30%. Operating expenses
for the year were 15% of sales and 25% of cost of
sales. Other expenses were 10% of sales.

Requirement: Compute for sales. Ans. P1million

Illustration: Reconstruction of FS
ABC Co. has the following information on December
31, 20x1:
• Cost of sales is P130,000
• Operating expenses are 13% of sales and 20% of
cost of sales
• Interest expense is 5% of sales
• Income tax rate is 30%. There were no temporary
difference during the year.

Requirement: Profit for the year. Ans. P23,800

 Review Question
It is the change in equity during a period resulting
from transactions and other events, other than
those changes resulting from transactions with
owners in their capacity as owners.
a. Profit or loss
b. Comprehensive income
c. Other comprehensive income
d. Share capital
 Review Question
14.The presentation and classification of items
in the financial statements shall be retained
from one period to the next.
a. Consistency of presentation
b. Materiality
c. Aggregation
d. Comparability
 Review Question
15.In presenting a statement of financial position, an entity
a. Must make the current and noncurrent presentation
distinction.
b. Must present assets and liabilities in order of liquidity.
c. Must choose either the current and noncurrent or the
liquidity presentation formats, meaning free choice of
presentation format.
d. Must make the current and noncurrent presentation
except when a presentation based on liquidity provides
information that is reliable and more relevant.