In brief: FASB finalizes new requirements on items reclassified from accumulated other comprehensive income (Revised February 14, 2013*) (No. 2013-05)
In brief
What's new?
On February 5, 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the board’s redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. The new requirements will take effect for public companies in fiscal years, and interim periods within those years, beginning after December 15, 2012 (the first quarter of 2013 for public, calendar-year companies).
Background
In its 2011 standard on the presentation of comprehensive income1, the FASB required reclassification adjustments from accumulated other comprehensive income to be measured and presented by income statement line item in net income and also in other comprehensive income on the face of the financial statement. However, in response to financial statement preparers concerns, the FASB indefinitely deferred2 this requirement pending further outreach.
The FASB believes that this new standard addresses preparer concerns for a practical approach, while balancing the financial statement users need for greater transparency about the impact of reclassification adjustments on net income.
What are the key provisions?
The standard requires that public and non-public companies present information about reclassification adjustments from accumulated other comprehensive income in their annual financial statements in a single note or on the face of the financial statements. Public companies will also have to provide this information in their interim financial statements.
The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., the release due to cash flow hedges from interest rate contracts) and the income statement line items affected by the reclassification (e.g., interest income or interest expense). If a component is not required to be reclassified to net income in its entirety (e.g., the net periodic pension cost), companies would instead cross reference to the related footnote for additional information (e.g., the pension footnote).
The standard gives companies the flexibility to present the information either in the notes or parenthetically on the face of the financial statements provided that all of the required information is presented in a single location.
Who's affected?
All public and non-public companies that report items of other comprehensive income could be affected. Not-for-profit organizations are exempt from the new requirements.
What's the effective date?
The standard is effective prospectively for public entities for fiscal years, and interim periods with those years, beginning after December 15, 2012. Non-public companies may adopt the standard one year later. Early adoption is permitted.
Questions?
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Financial Instruments team in the National Professional Services Group (1-973-236-7803).
Authored by:
Donald Doran
Partner
Phone: 1-973-236-5280
Email: donald.a.doran@us.pwc.com
Chris Filiaggi
Senior Manager
Phone: 1-973-236-5358
Email: christopher.filiaggi@us.pwc.com
* This In brief was revised to clarify the effective date of ASU 2013-02.
[1] Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income
[2] Accounting Standards Update No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05
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