FASB changed the format for reporting amounts reclassified out of other comprehensive income (OCI) in a move designed to increase transparency at minimal cost.
Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, does not change current requirements for reporting net income or other comprehensive income in financial statements.
All the information required by the ASU, released Tuesday, already is required to be disclosed elsewhere in the financial statements. The ASU simply creates new presentation requirements. Organizations will be required to:
- Present the effects on the line items of net income of significant amounts reclassified out of accumulated OCI, but only if the item reclassified is required to be reclassified to net income in its entirety during the same reporting period. Presentation should occur either on the face of the statement where net income is presented, or in the notes.
- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. An example would be when a portion of the amount reclassified out of accumulated OCI initially is transferred to a balance sheet account rather than directly to income or expense.
OCI includes gains and losses that initially are excluded from
net income for an accounting period. Later, those gains and losses are
reclassified out of accumulated OCI into net income.
All public and private companies that report items of OCI are required to comply with the ASU. Public companies are required to comply for interim and annual reporting periods.
Private companies are required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated OCI for interim and annual reporting periods. But private companies are required to provide information about the impact of reclassifications on line items of net income only for annual reporting periods.
The ASU takes effect for reporting periods beginning after Dec. 15, 2012, for public companies, and for reporting periods beginning after Dec. 15, 2013, for private companies.
“The update improves reporting in a manner that enhances reporting for users of financial statements, without imposing significant costs to preparers of financial statements,” FASB Chairman Leslie Seidman said in a news release.
Some industry executives wrote comment letters expressing satisfaction with the requirements. Others objected to being required to report the same information in more than one place.
“Since most of the disclosures … overlap information that is already required under existing standards, we question the incremental benefit of these redundant disclosure requirements,” Hess Corp. CFO John Rielly said in a comment letter.
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Ken Tysiac (
ktysiac@aicpa.org
) is a JofA senior editor.
