Reporting Preferences under the Comprehensive Income Standard

Examining Its Use in Practice

Charles E. Jordan, DBA, CPA, and Stanley J. Clark, PhD, CPA

Effective in 1998, Statement of Financial Accounting Standards (SFAS) 130, Reporting of Comprehensive Income [now Accounting Standards Codification (ASC) Topic 220, “Comprehensive Income”], required that companies report comprehensive income and its components in a financial statement that is given equal prominence with other financial statements. In the exposure draft to the standard, FASB proposed reporting comprehensive income on a performance-based financial statement prepared using one of two alternatives: 1) a continuous statement of income with the top part being a traditional income statement leading to the determination of net income, and the items of other comprehensive income (OCI) serving as adjustments to net income in order to derive a bottom-line number (i.e., comprehensive income), or 2) a freestanding statement of comprehensive income that begins with net income, adjusted for the OCI items in order to arrive at comprehensive income.