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  • Hi.

  • Else here.

  • And in this video, we'll be exploring the statement

  • of comprehensive income IFRS.

  • Remember in our last video, we covered the income statement,

  • which provides users with a measure of profitability.

  • The profit or loss at the bottom of the income statement

  • is used as an opening number in the statement

  • of comprehensive income.

  • This statement then adds or deducts more complex items,

  • which are, as yet, unrealized.

  • This includes gains and losses from foreign currency

  • and adjustments to value of other assets and liabilities

  • at fair value, rather than historical cost, as well as

  • other items, which are left for more advanced accounting

  • courses.

  • The statement of comprehensive income

  • provides a broader definition of profit or loss,

  • one that includes both realized and unrealized amounts.

  • In order to understand unrealized,

  • we'll compare it to the concept of realized.

  • When you sell a service, the sale is in the past.

  • Your company has provided the service to the customer

  • already.

  • Revenue from that sale would go on the income statement,

  • because it's realized.

  • It's in the past.

  • What if a company bought shares in another company?

  • The value of the shares when they were purchased

  • was $950,000.

  • And that would go on the statement of financial position

  • as an asset, because it has future economic benefit

  • to the company.

  • What if by the end of the year, those shares

  • had declined in value and were only worth $800,000?

  • That would be a loss of $150,000.

  • But because you still hold the shares, the loss is unrealized.

  • It's a paper loss, not a realized loss,

  • because you have not sold the shares as yet.

  • That unrealized loss, net of taxes,

  • would be recorded on the statement

  • of comprehensive income.

  • Unrealized gains or losses are amounts

  • that have not been realized, because we still own or control

  • the item that has caused the gain or the loss.

  • Now, let's look at the structure of the statement

  • of comprehensive income.

  • Again, the statement starts with a heading, which must always

  • include the company name, the title

  • of the financial statement, and the time period covered.

  • The statement of comprehensive income

  • than lists the profit or loss, if the company's expenses

  • are greater than the revenues, from the income statement

  • first, followed by any other comprehensive income items.

  • Here, I've used the example of foreign currency

  • and fair-valuing investments.

  • All the other comprehensive income items

  • must be listed net of tax.

  • This means that any applicable tax amounts have already

  • been deducted.

  • Here, the other comprehensive income items

  • are an overall gain, but they could have just as easily

  • been an overall loss.

  • These amounts, added or deducted from the beginning profit

  • or loss amount, are equal to total comprehensive income.

  • Again, remember that other comprehensive income amounts

  • are unrealized gains or losses.

  • Pause the video to answer this check your understanding

  • question.

  • IFRS requires the statement of comprehensive income to be--

  • the correct answer is C. A corporation may decide

  • to combine comprehensive income and income in one statement

  • or have two separate statements, as I've shown in this video.

  • Why does IFRS require a statement

  • of comprehensive income?

  • The developers of IFRS felt that unrealized gains and losses

  • of a corporation could have enormous impact on user

  • decisions.

  • And by ignoring these amounts, user confusion would result.

  • By adding or deducting these unrealized amounts

  • from the more traditional definition of profit,

  • users would have a more comprehensive representation

  • of income, in order to make decisions

  • about possible future outcomes.

  • Remember that profit or loss from the income statement

  • is the opening balance in the statement

  • of comprehensive income.

  • The income statement is, therefore,

  • connected to the statement of comprehensive income.

  • How is this statement of comprehensive income

  • connected to the other financial statements?

  • The amount or amounts of other comprehensive income

  • is used in the statement of changes in equity,

  • as part of the accumulated other comprehensive income.

  • So again, the order of the statements

  • is the income statement first, the statement

  • of comprehensive income next, and then

  • the statement of changes in equity, which we'll be covering

  • in an upcoming video.

Hi.

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Financial Statements - Lecture 5 - Statement of Comprehensive Income - IFRS

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    陳虹如 posted on 2017/06/23
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