Do you love the technical side of accounting so much that sometimes you find yourself on the Financial Accounting Standards Board (FASB) website hitting refresh on your browser over and over again hoping there will be a new pronouncement out that you can read up on? If so, you are in luck. The FASB just released Accounting Standards Update 2011-05, which rewrites the guidance in the Accounting Standards Codification (ASC) 220 regarding how companies must present comprehensive income in their financial statements. The new standard narrows the reporting options from three to two. Companies are now given the choice of whether they want to display income in a single statement or two separate statements. The new standard eliminates the current option for companies to display OCI in the statement of changes in shareholders’ equity. The new standard is effective for periods beginning after December 15, 2011 and early adoption is permitted.
If you hate when new technical standards come out, you will be pleased to know that this standard only changes the presentation of comprehensive income; it does not affect what must be reported in net income vs. comprehensive income. Unfortunately, that may change in the future based on Board Member Larry Smith’s comments that the “board agreed to increase the prominence of items reported in other comprehensive income, which will grow as a result of a number of other projects currently in process at the FASB.” He is referring to a new sweeping, controversial standard that FASB is developing on how companies must account for financial instruments, which will likely increase the amounts that companies will report through OCI in certain circumstances. I’ll be waiting on the edge of my seat for that one.