By: Logan Bell
October 3, 2012
The Accounting Standards Update (ASU) 2011-05, Comprehensive Income: Presentation of Comprehensive Income was issued to increase the importance of items reported in other comprehensive income. The FASB, along with IASB, worked jointly to improve and converge the reporting and presentation requirements for items contained in other comprehensive income. At the same time FASB issued ASU 2011-05, IASB issued an amendment to IAS 1, Presentation of Financial Statements, which implemented the same reporting and presentation requirements as FASB’s new standard (ASU 2011-05). As a result, the new standard has achieved increased comparability between entities reporting under US GAAP and those under IFRS; however the standard has received just criticism in reference to a particular requirement as well.
The standard’s most notable change requires “entities to present items of net income and other comprehensive income either in one continuous statement – referred to as the statement of comprehensive income – or in two separate, but consecutive, statements of net income and other comprehensive income” (Doran 2). Previously, GAAP allowed entities to report components of other comprehensive income within the statement of shareholders’ equity in addition to the options above. ASU 2011-05 effectively eliminated the presentation of comprehensive income and its components in the statement of changes in equity. Recent convergence projects between FASB and IASB are requiring entities to more frequently classify items that were once accounted for elsewhere as components of other comprehensive income. Due to the increase in the number of items being reported in other comprehensive income and the potential for an even greater increase in items classified as other comprehensive income as a result of convergence projects, FASB believes these items should be displayed more prominently in the financial statements (New