Trends & Developments - February 2013 - FASB Issues New Requirements for Amounts Reclassified out of AOCI
On February 5, 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, in an effort to improve the transparency of reporting reclassifications out of accumulated other comprehensive income (AOCI). The update does not amend the current requirements for reporting net income or other comprehensive income (OCI) in financial statements. It does, however, add some new disclosure requirements for items reclassified out of AOCI.
EXPANDED DISCLOSURE FOR AOCI BY COMPONENT
The ASU requires companies to separately present (a) reclassification adjustments and (b) current-period OCI for each component of OCI, instead of just the total change of each component of OCI. Presentation of the information’s pre-tax effect and net-of-tax effect are allowable under the ASU, as long as a company presents the income tax benefit or expense attributed to each component of OCI and reclassification adjustments in either the financial statement or the notes to the financial statements.
SIGNIFICANT ITEMS RECLASSIFIED OUT OF AOCI
The ASU also requires companies to provide information about significant items reclassified out of AOCI to net income in in their entirety either:
- on the face of the statement where net income is presented, or
- as a separate disclosure in the notes to the financial statements.
Companies choosing to disclose on the face of the financial statement where net income is presented will include the pre-tax reclassification amount in parentheses on the line item affected. The total tax as a result of significant reclassification adjustments disclosed on the face of the financial statement which includes net income would be presented parenthetically on the income tax expense (benefit) line.
Companies opting to disclose in the notes to the financial statements must disclose in a separate footnote (a) the amount reclassified and (b) the individual income statement line items affected. Either pre-tax or net-of-tax presentation is acceptable.
For significant partial net income reclassifications, an entity would cross reference the footnote disclosure that contains information about the impact of the reclassifications.
EFFECTIVE DATES AND TRANSITION
The standard is effective prospectively for public entities for annual and interim reporting periods beginning after December 15, 2012. Private companies may adopt the standard one year later but early adoption is permitted.
Trends & Developments - February 2013 Issue