An Executive Guide to IFRS: Content, Costs and Benefits to Business

Statement of Comprehensive Income

To the newcomer to IFRS, this is probably the strangest part of the financial reporting package. To oversimplify, this is the traditional income statement or profit and loss account, with an extra bit added on at the bottom to show value changes. The Statement of Comprehensive Income is therefore:

Profit and Loss Account (Transactions)

+/– Other Comprehensive Income (Unrealized value changes)

= Total Comprehensive Income.

IAS 1 allows companies to show the Profit and Loss and Other Comprehensive Income on two separate pages. Some standard-setters object to this, but many companies think that the nature of the information in each part is different, and it misleads investors to put them together.

Comprehensive income is based on the idea that the key issue in accounting recognition and measurement is the assets and liabilities. At an extreme, one would, at each balance sheet date, measure the assets and liabilities and the difference between them would be equity. The difference in equity from one balance sheet to the next is comprehensive income. This gives you:

Assets1 – Liabilities1 = Equity1

Assets2 – Liabilities2 = Equity2

Δ Assets – Δ Liabilities = Δ Equity = Total Comprehensive Income for the reporting period.

And then, in order to understand the company’s value generating activities better:

Total Comprehensive Income = Completed trading transactions + value changes.

In practice that theoretical position does not break down in such a straightforward ...