Point of view: Other comprehensive income -- A consistent approach would improve information for investors

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Point of view 08/23/2012 by Assurance services
Point of view: Other comprehensive income -- A consistent approach would improve information for investors

At a glance

The FASB and IASB have a number of projects underway that could further expand or otherwise change what is reported within net income, and outside of net income within other comprehensive income. Existing accounting standards do not provide clear principles for when items should be excluded from net income and recognized in other comprehensive income. In this Point of view, we observe that we have heard many diverse views from investors, preparers, standard setters, and auditors on this topic. We believe that more consistency regarding the attributes of items initially excluded from net income would be beneficial for investors...

The FASB and IASB have a number of projects underway that could further expand or otherwise change what is reported within net income, and outside of net income within other comprehensive income. Existing accounting standards do not provide clear principles for when items should be excluded from net income and recognized in other comprehensive income. In this Point of view, we observe that we have heard many diverse views from investors, preparers, standard setters, and auditors on this topic. We believe that more consistency regarding the attributes of items initially excluded from net income would be beneficial for investors. As the FASB and IASB near completion of the current major convergence projects, we believe they should turn a greater portion of their attention to establishing appropriate criteria for items reported within other comprehensive income.

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have a number of projects underway that could further expand or otherwise change what is reported within net income, and outside of net income within other comprehensive income. For example, their projects on financial instruments, leasing, and insurance contracts may change which items are recognized in other comprehensive income. However, existing accounting standards do not provide clear principles for when items should be excluded from net income and recognized in other comprehensive income.

This topic is central to the overall objective and relevance of financial reporting; that is, to provide decision useful information to investors. Investors depend on measures of company performance such as net income, operating income, and earnings-per-share. Maintaining those measures and making them more meaningful and consistent for investors is important.

In the accompanying Point of View, we observe that we have heard many diverse views from investors, preparers, standard setters, and auditors on how this matter should be addressed. So much so, that gaining consensus on a path forward may be challenging. Nevertheless, we believe that more consistency regarding the attributes of items initially excluded from net income would be beneficial for investors. As the FASB and IASB near completion of the current major convergence projects, we believe they should turn a greater portion of their attention to establishing appropriate criteria for making this determination.