New Statement of Comprehensive Income

6/23/11

By Daniel C. Dibella, CPA

On June 16, 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, which requires changes in the way comprehensive income is presented in financial statements. We first informed you of the changes in a June 2010 article when the draft standard was released, and the final standard has no significant changes to the draft.

Typically, banks issuing financial statements have opted to present comprehensive income within the Statement of Stockholders’ Equity. This presentation is now prohibited, and banks will have to select one of the following two options for the presentation of comprehensive income:

• A single continuous Statement of Comprehensive Income, which includes the components of net income and other comprehensive income, or
• Separate Statement of Income and Statement of Comprehensive Income, presented consecutively, which include the components of net income and other comprehensive income.

The new accounting standard impacts only the presentation of comprehensive income in financial statements, and does not change the manner in which net income and other comprehensive income is determined. Since banks have typically opted to present comprehensive income within the Statement of Stockholders’ Equity, with components of net income presented in the Statement of Income and components of other comprehensive income presented in the financial statement footnotes, the new presentation will more prominently display the components of other comprehensive income and will be a noticeable change for most readers of bank financial statements.

For nonpublic entities, the changes are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. For public entities, the changes are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted.