Accounting & Auditing

On June 16, 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income. The main provision within this ASU is the elimination of the alternative to present the components of comprehensive income within the statement of changes in stockholders' equity.

All entities that report items of other comprehensive income could be affected.

Key Provisions

Under current U.S. generally accepted accounting principles (GAAP), Accounting Standards Codification (ASC) Topic 220, Comprehensive Income, there are three alternatives for reporting the components of other comprehensive income:

1. Below the components of net income in a statement of comprehensive income
2. In a separate statement of comprehensive income beginning with total net income
3. In a statement of changes in stockholders' equity

The amendments within this ASU require all non-owner changes in stockholders' equity to be presented either in a single continuous statement of comprehensive income (Option 1 above) or in two separate but consecutive statements (Option 2). The ASU eliminates the third alternative altogether.

Regardless of the approach, the entity must present on the face of the financial statements reclassification adjustments for items reclassified from other comprehensive income to net income in the statement(s). The previous option to disclose reclassification adjustments in the footnotes has been eliminated.

The total for accumulated other comprehensive income should continue to be presented separately from retained earnings and additional paid-in capital on the statement of financial position. In addition, if applicable, an entity will continue to separately present items of net income and comprehensive income attributable to its parent and any noncontrolling interest.

Tax Effects

The requirements continue to provide an option to present components of other comprehensive income, either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of the other comprehensive income items. Entities still must present parenthetically on the face of the statement, or disclose in the footnotes, the tax allocated to each component of other comprehensive income, including reclassification adjustments.

Effective Date & Transition Requirements

The new U.S. GAAP requirements are effective for public entities as of the beginning of fiscal years beginning after December 15, 2011, including interim periods, and for nonpublic entities for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted, since compliance with the required presentation is already acceptable. In addition, full retrospective application is required. The amendments do not require any transition disclosure.

To learn more about how these changes could affect your organization, contact your BKD advisor.