Accounting & Auditing

On December 23, 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-12, 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. ASU 2011-12 indefinitely defers the requirement to present items reclassified from accumulated other comprehensive income (AOCI) to net income separately with their respective components of net income and other comprehensive income (OCI).

All entities reporting items of comprehensive income in any period presented could be affected.

Since FASB issued ASU 2011-05, Comprehensive Income (Topic 220):  Presentation of Comprehensive Income, in June, stakeholders have raised concerns regarding the new requirement to present separately within net income reclassification adjustments of items out of AOCI. Specifically, there were concerns about whether preparers had adequate time to implement this requirement and whether potential additional costs were justified. Due to the time required to redeliberate and evaluate alternative presentation formats, the board decided to defer this requirement.    

Impact of Deferral

ASU 2011-12 defers the requirement for entities to present reclassification adjustments and the effect of those reclassification adjustments on the face of financial statements where net income is presented, by component of net income, and on the face of financial statements where OCI is presented, by component of OCI. During the deferral period, entities will need to comply with the existing requirements (pre-ASU 2011-05) in Accounting Standards Codification (ASC) 220, Comprehensive Income, for the presentation of reclassification adjustments. ASC 220 offers the option of presenting reclassification adjustments out of AOCI on the face of the statement in which OCI is presented or disclosing reclassification adjustments in the financial statement footnotes.

What Is Not Deferred

The deferral supersedes only the paragraphs in ASU 2011-05 pertaining to how, when and where reclassification adjustments are presented. As communicated in a BKD Alert issued in September, the main provision of ASU 2011-05 was the elimination of the current option under U.S. generally accepted accounting principles (GAAP) for entities to report components of comprehensive income in a statement of changes in stockholder equity.

After the effective date of ASU 2011-05, entities will be required to present components of comprehensive income either below the components of net income in a statement of comprehensive income (single continuous statement) or in a separate statement of comprehensive income beginning with total net income (two separate, but consecutive statements). ASU 2011-12 does not defer or otherwise change this requirement or any other requirements within ASU 2011-05.

Effective Date & Transition

The amendments within ASU 2011-12 are effective at the same time as the remaining amendments in ASU 2011-05. That is, the deferral of provisions related to reclassification adjustments and the remaining provisions of ASU 2011-05 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.

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