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OCI - INTERMEDIATE ACCOUNTING

INTERMEDIATE ACCOUNTING
Course

Accountancy (BSA2)

729 Documents
Students shared 729 documents in this course
Academic year: 2023/2024
Uploaded by:
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This document has been uploaded by a student, just like you, who decided to remain anonymous.
Quezon City University

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INCOME STATEMENT

 Formal statement showing financial

performance (profit or loss) for a specific

period.

 Measures financial performance by

income earned and efficient resource

utilization.

 Also known as results of operations.

 Includes income, expenses, gains, losses,

and net income/loss for the period.

 Follows the transaction approach,

determining income earned and expenses

incurred.

 Helps predict an entity's ability to generate

cash flows from existing resources.

COMPREHENSIVE INCOME

 Represents changes in equity during a

period from transactions and events,

excluding owner-related changes.

 Comprehensive income includes both

profit/loss and other comprehensive

income.

PROFIT OR LOSS

 Profit or loss is the result of subtracting

expenses from income.

 It's the "bottom line" on a traditional

income statement.

 Net income or net loss can be used

interchangeably to describe profit or loss.

OTHER COMPREHENSIVE INCOME

 Comprises items of income and expense

not recognized in profit or loss under

financial reporting standards.

 Includes items like unrealized gains/losses

on investments, foreign exchange effects,

and more.

COMPONENTS OF OCI

1. Unrealized gains/losses on equity

investments at fair value.

2. Unrealized gains/losses on debt

investments at fair value.

3. Gains/losses from translating financial

statements of foreign operations.

4. Revaluation surplus during the year.

5. Unrealized gains/losses from derivative

contracts designated as cash flow hedges.

6. Remeasurements of defined benefit plans.

7. Change in fair value due to credit risk of a

financial liability designated at fair value

through profit or loss.

PRESENTATION OF OCI

 According to PAS 1 (Philippine Accounting

Standards 1), OCI must be presented with

line items classified by nature.

Line items for OCI include:

a. OCI that will be reclassified to profit or loss

when specific conditions are met.

b. OCI that will not be reclassified to profit or

loss but transferred to retained earnings.

OCI That Will Be Reclassified Subsequently

to Profit or Loss:

These are items in other comprehensive

income that may be moved to profit or loss in

the current period.

Examples include:

a. gains or losses from translating foreign

financial statements

b. unrealized gains/losses on cash flow

hedge derivatives

c. unrealized gains/losses on debt

investments measured at fair value

through OCI.

Reclassification adjustments are amounts that

were previously recognized in OCI and are

now being transferred to profit or loss.

OCI That Will Be Reclassified to Retained

Earnings:

These are items in other comprehensive

income that are transferred to retained

earnings.

Examples include:

a. unrealized gains/losses on equity

investments measured at fair value

through OCI

b. changes in revaluation surplus

c. remeasurements of defined benefit plans

d. gains/losses related to the credit risk of

financial liabilities designated at fair value

through profit or loss.

Presentation of Other Comprehensive

Income

There are two presentation options:

1. Two-statement approach, which includes a

separate income statement and a

statement of comprehensive income.

2. Single statement approach, which

combines both profit/loss and components

of OCI in a single statement of

comprehensive income.

Sources of Income:

a. Income can come from various sources,

including sales of merchandise

b. rendering of services (such as

professional fees and commissions)

c. use of entity resources (like interest and

rent income),

d. disposal of resources other than products

(e., gains on sales of investments or

property).

e. Components of Expense:

Expenses are categorized into cost of goods

sold (COGS), distribution costs (selling

expenses), administrative expenses, other

expenses, and income tax expenses.

Classifications of Expense:

a. Cost of goods sold or cost of sales

b. Distribution costs or selling expenses

c. Other expenses

d. Income tax expense

Distribution Costs (Selling Expenses):

 Salesmen's salaries

 Sales commissions

 Traveling and marketing expenses

 Advertising and publicity expenses

 Freight out

 Depreciation of delivery equipment and

store equipment

Administrative Expenses:

 Doubtful accounts

 Office salaries and expenses of general

executives

 Office supplies expense

 Contributions to charity

 Professional fees

 Depreciation of office building and office

equipment

 Amortization of intangible assets

Other Expenses:

 Loss on sale of trading investment

 Loss on sale of property, plant, and

equipment

 Loss on sale of noncurrent investment

 Loss on sale of intangible asset

 Casualty loss from natural disasters

(earthquake, typhoon, hurricane, tsunami,

flood, fire, storm surge, etc.)

 Expropriation loss

These classifications help businesses

categorize and track their expenses for

financial reporting and analysis purposes.

No More Extraordinary Items:

Extraordinary items are not recognized under

accounting standards, and instead, unusual

and infrequent items are considered as

components of income from continuing

operations.

Separate Disclosure of Items of Income

and Expense:

When material, items of income and expense

should be disclosed separately.

Specific circumstances that require separate

disclosure are provided in paragraph 98 of

PAS 1.

Line Items in the Income Statement:

 PAS 1 lists various line items for the

income statement and statement of

comprehensive income, including revenue,

gain/loss from derecognition of financial

assets, finance costs, income tax

expenses, and more.

Forms of Income Statement:

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OCI - INTERMEDIATE ACCOUNTING

Course: Accountancy (BSA2)

729 Documents
Students shared 729 documents in this course

University: Quezon City University

Was this document helpful?
INCOME STATEMENT
Formal statement showing financial
performance (profit or loss) for a specific
period.
Measures financial performance by
income earned and efficient resource
utilization.
Also known as results of operations.
Includes income, expenses, gains, losses,
and net income/loss for the period.
Follows the transaction approach,
determining income earned and expenses
incurred.
Helps predict an entity's ability to generate
cash flows from existing resources.
COMPREHENSIVE INCOME
Represents changes in equity during a
period from transactions and events,
excluding owner-related changes.
Comprehensive income includes both
profit/loss and other comprehensive
income.
PROFIT OR LOSS
Profit or loss is the result of subtracting
expenses from income.
It's the "bottom line" on a traditional
income statement.
Net income or net loss can be used
interchangeably to describe profit or loss.
OTHER COMPREHENSIVE INCOME
Comprises items of income and expense
not recognized in profit or loss under
financial reporting standards.
Includes items like unrealized gains/losses
on investments, foreign exchange effects,
and more.
COMPONENTS OF OCI
1. Unrealized gains/losses on equity
investments at fair value.
2. Unrealized gains/losses on debt
investments at fair value.
3. Gains/losses from translating financial
statements of foreign operations.
4. Revaluation surplus during the year.
5. Unrealized gains/losses from derivative
contracts designated as cash flow hedges.
6. Remeasurements of defined benefit plans.
7. Change in fair value due to credit risk of a
financial liability designated at fair value
through profit or loss.
PRESENTATION OF OCI
According to PAS 1 (Philippine Accounting
Standards 1), OCI must be presented with
line items classified by nature.
Line items for OCI include:
a. OCI that will be reclassified to profit or loss
when specific conditions are met.
b. OCI that will not be reclassified to profit or
loss but transferred to retained earnings.
OCI That Will Be Reclassified Subsequently
to Profit or Loss:
These are items in other comprehensive
income that may be moved to profit or loss in
the current period.
Examples include:
a. gains or losses from translating foreign
financial statements
b. unrealized gains/losses on cash flow
hedge derivatives
c. unrealized gains/losses on debt
investments measured at fair value
through OCI.
Reclassification adjustments are amounts that
were previously recognized in OCI and are
now being transferred to profit or loss.
OCI That Will Be Reclassified to Retained
Earnings:
These are items in other comprehensive
income that are transferred to retained
earnings.
Examples include:
a. unrealized gains/losses on equity
investments measured at fair value
through OCI
b. changes in revaluation surplus
c. remeasurements of defined benefit plans

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