Entities with an Outstanding Noncontrolling Interest

In addition to presenting consolidated net income and comprehensive income, entities with an outstanding noncontrolling interest are required to report the following items in the financial statement in which net income and comprehensive income are presented:

• Amount of net income and comprehensive income attributable to the parent
• Amount of net income and comprehensive income attributable to the noncontrolling interest in a less-than-wholly-owned subsidiary.

  (ASC 220-10-45-5)

Items of Other Comprehensive Income

ASC 220-10-45-10A lists the following as items currently within other comprehensive income:

• Foreign currency translation adjustments (see paragraph 830-30-45-12).
• Gains and losses on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity, commencing as of the designation date (see paragraph 830-20-35-3(a)).
• Gains and losses on intra-entity foreign currency transactions that are of a long-term investment nature (that is, settlement is not planned or anticipated in the foreseeable future), when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting entity's financial statements (see paragraph 830-20-35-3(b)).
• Gains and losses (effective portion) on derivative instruments that are designated as, and qualify as, cash flow hedges (see paragraph 815-20-35-1(c)).
• Unrealized holding gains and losses on available-for-sale securities (see paragraph 320-10-45-1).¹
• Unrealized holding gains and losses that result from a debt security being transferred into the available-for-sale category from the held-to-maturity category (see paragraph 320-10-35-10(c)).
• Amounts recognized in other comprehensive income for debt securities classified as available-for-sale and held-to-maturity related to an other-than-temporary impairment recognized in accordance with Section 320-10-35 if a portion of the impairment was not recognized in earnings.²
• Subsequent decreases (if not an other-than-temporary impairment) or increases in the fair value of available-for-sale securities previously written down as impaired (see paragraph 320-10-35-18).³
• Gains or losses associated with pension or other postretirement benefits (that are not recognized immediately as a component of net periodic benefit cost) (see paragraph 715-20-50-1(j)).
• Prior service costs or credits associated with pension or other postretirement benefits (see paragraph 715-20-50-1(j)).
• Transition assets or obligations associated with pension or other postretirement benefits (that are not recognized immediately as a component of net periodic benefit cost) (see paragraph 715-20-50-1(j)).
  • Changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected (see paragraph 825-10-45-5).⁴

The following items do not quality as comprehensive income:

• Changes in equity resulting from investment by and distributions to owners
• Items that are direct adjustments to paid-in-capital, retained earnings, or other non-income equity accounts.

  (ASC 220-10-45-10B)

Other comprehensive income is recognized and measured in accordance with the accounting pronouncement that deems it part of other comprehensive income.

Accumulated Other Comprehensive Income

At the end of the reporting period, that reporting period's total of other comprehensive income is transferred to a component of equity. It is presented separately from retained earnings and additional paid-in capital on the balance sheet. (ASC 220-10-45-14) The changes in the accumulated balances of each component of other comprehensive income are presented either:

• On the face of the financial statements, or
• As a note.

  (ASC 220-10-45-14A)

Reclassification Adjustments

Some items impact other comprehensive income in one period and then affect net income in the same or a later period. For example, an unrealized holding gain on an available-for-sale debt security is included in other comprehensive income in the period in which the market fluctuation occurs. Later, perhaps years later, the security is sold, and the realized gains are included in net income. An adjustment to the unrealized holding gain component of other comprehensive income is necessary to avoid double counting the gain—once in net income in the current year and once in other comprehensive income in the earlier period. Adjustments of that type are called reclassification adjustments. (ASC 220-10-45-15) The process of including in net income an item previously reported in other comprehensive income is often referred to as “recycling.”

Usually, a sale triggers the need for a reclassification adjustment.

• The sale of an available-for-sale security in the current period triggers the need for an adjustment for the gains (losses) that had been included in other comprehensive income in a prior period.
• The sale of an investment in a foreign entity triggers an adjustment for foreign currency items that had been included in other comprehensive income previously (i.e., accumulated translation gains or losses).

  (ASC 220-10-45-16)

Amounts accumulated in other comprehensive income from cash flow hedges are reclassified into earnings in the same period(s) in which the hedged forecasted transactions (such as a forecasted sale) affect earnings. If it becomes probable that the forecasted transaction will not occur, the net gain or loss in accumulated other comprehensive income must be immediately reclassified.

An adjustment is also necessary upon the complete (or substantially complete) liquidation of an investment in a foreign entity.

Only minimum pension liabilities will not require reclassification adjustments (because they will not be reported in net income in any future period).⁵

Reclassification adjustments can be presented by component of other comprehensive income, either:

• In a single note, or
• Parenthetically on the face of their annual financial statement.

  (ASC 220-10-45-17)

Disclosures for items reclassified out of AOCI include:

• The effect of significant amounts reclassified from each component of AOCI based on its source,
• The income statement line items affected by the reclassification.

  (ASC 220-10-45-17A)

If a component is only partially reclassified to net income, entities must cross-reference to the related footnote for additional information. (ASC 220-10-45-17b)

Income Tax Effects

The tax effects of each component of other comprehensive income must be presented in the statement in which those components are presented or in the notes of the financial statements. (ASC 220-10-45-12) The items of other comprehensive income can be reported either:

• Net of related tax effects in the statement, or
• Gross with the tax effects related to all components reported on a single, separate line.

If gross reporting is used, the notes to the financial statements must disclose the tax effects related to each component (if there is more than one component). The examples below illustrate the two presentations.

Interim Reporting

For interim reporting, entities must present a total for comprehensive income but are not required to present the individual components of OCI. Entities that present two statements in their annual financial reports have the option of using a single-statement approach in their condensed interim financial statements. Using one statement avoids the presentation of a separate statement of comprehensive income that contains only one line item for total comprehensive income. (ASC 220-10-45-18) Nonpublic entities are not required to meet the requirements for reclassifications in interim reporting. (ASC 220-10-45-18B)