Represents most but not all of non-owner OE changes (doesn’t include those reported in Retained Earnings Statement) Three ways of disclosure: separate income statement (two statement approach); combined income and OCI statement (single statement approach); Statement of Shareholders’ Equity. Comprehensive Income: Includes all changes of OE except distributions to and investment by owners OCI components: Unrealized gain/loss on SAS Unrealized pension gain/loss Foreign currency translation adjustments Certain gains/losses from derivatives The accumulated balances of each individual component of OCI must be reported. Decreases in current assets (accounts receivable, inventory, prepaid assets, etc.) 9. Increases in Current Assets (accounts receivable, inventory, prepaid assets,etc.) 6.This information can appear in the balance sheet, statement of owners’ equity or in the footnotes Statements of Cash flows The reporting basis of the statement of cash flows is cash and , all others that don’t belong to financing and investing are operating. Increases in Current Liabilities (accounts payable, deferred taxes, etc.) and Unearned Revenue Subtract out: 1. Decreases in Current Liabilities (accounts payable, deferred taxes, etc.) and Unearned Revenue Investing activities: .
Beginning balance and incremental amount (use average price level index increase rate) calculate separately.Ac SEC (AICPA Accounting Standards Executive Committee) Practice Bulletins and consensus positions of the FASB Emerging Issues Task Force (EITF) The EITF was established by the FASB and has 13 members.It was formed to develop consensus positions about how to account for new financial transactions and events 4.Direct method reflect sources and uses and the reconciliation (presented in a separate Reconciliation of “Net cash flow from operating income” with Net Income); Indirect method only reflects reconciliation, need to disclose interest and dividends paid. Effects on Cash of Foreign Currency Translation Non Cash Investing and Financing Activities: reflected in schedule or footnote (e.g.The conversion of debt to equity) Cash flow per share is specifically prohibited from being disclosed, unless based on contractual amounts.(return on capital is leftover resources) “Physical” capital maintenance: consider changes in price level 4. Comprehensive Income for the year — total non-owner changes (statement of comprehensive income) 4.Time period Principles: Historical cost Revenue recognition: when realized (conditions: goods/services provided, collectibility assured, expenses determined) Revenue: Matching Full disclosure: adequate disclosure Accounting Constraints Materiality: but no materiality threshold for illegal activities and related party transactions Industry peculiarity Conservatism Cost-Benefit SFAC #5 Recognition and Measurement in Financial Statements of Business Enterprises Full set of financial statements: 1. Cash Flows during the year (statement of cash flows) 5.Statement of cash flow match the first item of BS: cash definition of funds – cash; cash and cash equivalent – (the same) SFAC #1 Objectives: provide cash flow, economic resources, financial performance, management responsibility information Purpose: assisting users in making predictions relevant to investing and credit-granting decisions than with assisting in the evaluation of past performance Target Audience: Decision makers SFAC #2 Qualitative Characteristics of Accounting Information Relevance: timeliness, predictive value, feedback value Reliability: representational faithfulness, verifiability, neutrality, Comparability: Consistency: Assumptions: 1.Entity: shareholders own shares, entity own assets, nobody own treasure shares 2. Unit-of-measure A departure: “Financial” capital maintenance: return of capital, replace all used capital.Current Cost/Nominal Dollar: adjusts for specific price changes only 4.Current Cost/Constant Dollar: adjusts for both general and specific price changes.