FASB Rethinks Changes in Presenting Other Comprehensive Income

The Financial Accounting Standards Board is proposing to defer some of the changes it required earlier this year in the presentation of other comprehensive income on financial statements after hearing objections from various quarters.

Earlier this year, FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” The update aimed to increase the prominence of other comprehensive income in financial statements, in order to help financial statement users better understand the cause of a company’s change in financial position and the results of the company’s operations. However, FASB soon heard concerns that the new presentation requirements reclassifying items out of accumulated other comprehensive income would be costly for preparers and add unnecessary complexity to financial statements (see FASB May Delay Comprehensive Income Requirements).

In response, FASB has decided to reconsider whether it is necessary to require public companies, private companies and not-for-profit organizations to present reclassification adjustments by component in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements.

As a result, FASB has issued a proposed Accounting Standards Update to defer the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income.

FASB cautioned, however, that it is not proposing to defer the requirement to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements.

The latest proposal is to defer only those changes in Update 2011-05 that related to the presentation of reclassification adjustments. The amendments in the proposed update would supersede only those paragraphs that pertain to how and where reclassification adjustments are presented. While FASB is considering the operational concerns about the presentation requirements for classification adjustments, entities would continue to report reclassifications out of accumulated comprehensive income consistent with the presentation requirements in effect before Update 2011-05.

The proposed amendments would be effective at the same time as the amendments in Update 2011-05. Therefore, the amendments in the proposed update would be effective for public entities for fiscal years, and interim periods within those years, beginning after Dec. 15, 2011. For nonpublic companies and not-for-profit organizations, the amendments in the proposed update would be effective for fiscal years ending after Dec. 15, 2012, and interim and annual periods thereafter. The proposed update is available at www.fasb.org.

Comments on the proposed deferral are due Nov. 23, 2011.