STATEMENT OF

COMPREHENSIVE INCOME
OBJECTIVES
o Define statement of comprehensive income
o Identify the elements comprising the statement
of comprehensive income;
o Differentiate statement of financial position from
statement of comprehensive income;
o Discuss the concept of income and expenses
recognition;
o Describe the differences basis of recognizing
expense;
 OBJECTIVES
o Identify the two methods of determining net
income;
o Differentiate financial capital maintenance from
physical capital maintenance;
o Discuss the forms of statement of comprehensive
income presentation; and
o Discuss the disclosure requirements on
statement of comprehensive income.
ELEMENTS COMPRISING THE
STATEMENT OF COMPREHENSIVE
INCOME
Income is increase in economic benefits during
the accounting period in the form of inflows or
enhancement of assets or decrease of liabilities
that results in increase in equity other than those
relating to contributions from equity
participants.
Expenses are decreases in economic benefits
during the accounting period in the form of
outflows or depletion of assets or incurrence of
liabilities that result in decrease in equity, other
than those relating to distribution to equity
participants.
DIFFERENCES BETWEEN STATEMENT OF
FINANCIAL POSITION AND STATEMENT OF
COMPREHENSIVE INCOME
Statement of Statement of
Financial Position Comprehensive
Income
As to accounting Assets, liabilities and Income and expenses
elements presented equity
As to the nature of Presents the financial Presents the result of
the statement as to position, liquidity, operation
financial data solvency, financial profitability of the
structure and business entity
capacity for adaption
As to the date of the As of a given date For a given period
financial statement (one day only) (month, quarter,
semi-annual or
annual)
RECOGNITION OF INCOME AND EXPENSES
Recognition is the process of incorporating in the statement
of comprehensive income an item that meets the definition
of income and expense and satisfies the criteria for
recognition.

An item that meets the definition income and expenses

should be recognized if:

A. It is probable that any future economic benefits

associated with the item will flow to or from the entity;
and
B. The item has a cost or value that can be measured with
reliability.

Note: the failure to recognize an income or express is not rectified

by disclosure of the accounting policies used nor by notes or
explanatory materials.
RECOGNITION OF INCOME
Income is recognized in the statement of
comprehensive income when an increase in future
economic benefits related to an increase in an assets
of a liability has arisen that can be measured reliably.
This means, in effect, that recognition of income occurs
simultaneously with the recognition of increase in
assets or decrease in liabilities, for example, the net
increase in assets arising on a sale of goods or
services or the decrease in liabilities arising from the
waiver of a debt payable.
Generally, income is recognized when revenue has been
earned already where it can be measured reliably and
has some sufficient degree of certainty.
RECOGNITION OF EXPENSES
Expenses are recognized in the income statement
when a decrease in future economic benefits
related to a decrease in assets or an increase of a
liability has arisen that can be measured
reliably. This means, in effect, that recognized of
expenses occurs simultaneously with the
recognition of an increase in liabilities or a
decrease of assets, for example, the accrual of
employee salary or the depreciation of
machinery.
METHODS OF RECOGNIZING EXPENSES
An item that meets the recognition criteria of
expense is recognized in the income statement on
the following basis:

Matching costs with revenue

Systematic and rational allocation
Immediate recognition
MATCHING WITH REVENUES.
Expenses are in the statement of comprehensive
income on the basis of association costs incurred
and the earning of specific items of income.
This process involves the simultaneous or
recognition of revenues and expenses that results
directly and jointly from the same transaction or
events.
For example, the various components of expense
making up the cost of goods sold are recognized
in the same time as the income derived from the
sale of goods.
SYSTEMATIC AND ALLOCATION
When economic benefits are expected to arise over
several accounting period and the association
with income can only be broadly or indirectly
determined, expenses are recognized in the
statement of comprehensive income on the basis
of systematic and rational allocation procedures.
This allocation procedure is intended to recognize
expenses in the accounting periods in which the
economic benefits associated with item is
consumed or expired.
IMMEDIATE RECOGNITION
An expense is recognize immediately in the
statement of comprehensive income when
expenditure produces no future benefits or when
the future economic benefits do not qualify for
recognition in the statement of financial position
as an asset.
As expense is also recognized in income
statement in those cases when a liability under
product warranty arises.
TWO METHODS ON DETERMINING THE NET
INCOME OR PROFIT OF A BUSINESS ENTITY

CAPITAL MAINTENANCE APPROACH

Is concerned with how an entity defines the

capital it seeks to maintain. Under this only
inflows of assets in excess of amount needed to
maintain capital may be regarded as profit.
profit under this is measured by simply
comparing the capital at the end of the period
against the capital at the beginning of the
period.
TWO CONCEPTS OF CAPITAL
MAINTENANCE APPROACH
1. Financial capital maintenance
Under this concept, a profit earned only if the
financial amount of the net assets at the end of the
period exceeds the financial amount of the net assets
at the beginning of the period, after excluding any
distributions to, and contributions from, owners
during the period.
2. Physical Capital maintenance
A profit is earned only if the physical productive
capacity of the entity at the end of the period
exceeds the physical productive capacity at the
beginning of the period after, 3excluding any
distribution to and contributions from, owners
during the period
DIFFERENCES BETWEEN THE TWO
CONCEPTS OF CAPITAL MAINTENANCE

Effect of the changes Measurement of net

in the prices of assets assets
and liabilities
Financial capital
maintenance Disregarded Historical cost

Physical Capital
maintenance Considered Current Cost
FORMULAS TO COMPUTE THE NET INCOME
USING THE CAPITAL MAINTENANCE
APPROACH
Formula 1
Net assets-end xxx
Less: Net assets beginning xxx
Income before adjustments capital xxx
distribution
Add: Distributions to owner xxx
Total xxx
Less: Additional contributions from owners xxx
Net Income xxx

An alternative formula may appear as follows

Net asset-end of the period xxx

Add: Dividends paid or withdrawal made xxx

Total xxx
Less: Net Asset, beginning of the period xxx
Additional shares issuance/ capital xxx xxx
contributions
Net income xxx
REMEMBER
assets net assets
assets net assets
liability net assets
liability net assets

The net increase in net assets (increase in net assets minus

decrease in net assets) will then be adjusted by
contributions from or distributions to owner

Net increase in net assets xxxx

Add: Dividends paid or withdrawal made xxxx
Total xxxx
Less: Additional share issuance or capital xxxx
Net income xxxx
TRANSACTION APPROACH
It is the traditional method of determining net
income or profit in accordance with the
Philippine Accounting Standard
The elements is directly related to the
measurement of profit are income and expenses.

Basic formula to compute net income

Income xxxxx
Less: Expenses xxxxx
Net Income(loss) xxxxx
INCOME
Income is increases in economic benefits during the
accounting period in the form of inflows or
enhancement of assets or decrease of liabilities that
result in increase in equity other than those relating
to contributions from equity participants.

Revenue- arises in the course of ordinary activities of

an entity and is referred to by a variety of different
names includes sales, fees, interest, dividends,
royalties and rent.
Gains- represents in economic benefits and as such
are not different in nature from revenue

Note: gains are often reported in the income statement

net of related expenses.
EXPENSES
Expenses are decreases in economic benefits
during the accounting period in the form of
outflows or depletion of assets or incurrence's of
liabilities that result in decrease in equity, other
than those relating to distribution to equity
participants.

PROFIT
Profit is the residual amount that remains after
expenses, including capital maintenance
adjustment where appropriate, have been
deducted from income. If expenses exceed income,
the more relevant.
METHODS OF PRESENTING THE STATEMENT
OF COMPREHENSIVE INCOME

PAS 1 mentioned two methods of presenting the

statement of comprehensive income, namely
1. Nature of expense method

2. Function of expense or cost of sale method

Both methods provides an indication of those

cost that might vary, directly or indirectly, with
the level of sales or production of the entity.
FUNCTION OF EXPENSE OR COST OF SALES
METHOD
This method is presenting the statement of comprehensive
income classifies expenses according to their functions as part
of cost, distribution or administrative activities

It may appear as:

Revenue xxx
Less: Cost of Sales xxx
Gross income xxx
less: Selling or distribution expenses xxx
Administrative expenses xxx
.Finance costs xxx
Other expenses xxx xxx
Net income xxx
DISCLOSURE OF INFORMATION OF
COMPREHENSIVE I

Note: All items of income and expenses

recognized in a period shall be included in profit
or loss unless a Standard or an Interpretation
requires otherwise.

However, circumstances may exist when particular

items may be excluded from the profit or loss for
the current period. The ff. Items are excluded
from profit or loss;
 Revaluation surplus
Gains and losses arising on
translating the FS of a foreign
operation
Gains or losses on remeasuring
available-for-sale financial assets
Correction of errors
Effect of changes in accounting
policy
 As a minimum, the face of the statement of
comprehensive income shall include line items
that present the following amounts for the
period:
Revenue
Finance cost
Share of the profit or loss of associates and joint
ventures accounted for using the equity method
Tax expense
Single amount comprising the total of post-tax
profit or loss on the disposal of assets from
discontinued operation
profit or loss
 The following item shall be disclosed on the face
of the statement of comprehensive income as
allocations of profit or loss for the period

1. Profit or loss attributable to minority interest\

2. Profit or loss attributable to equity holders of
the parent.

Note: An entity shall not present any items of

income and expenses as extraordinary items,
either on the face of the income statement or in
the notes. When items of income and expenses
are material, their nature and amounts shall be
disclosed separately.
 INFORMATION TO BE DISCLOSED
SEPARATELY ON THE NOTE

1. Write down of inventories to net realizable value or

of property, plant and equipment to recoverable
amount, as well as reversal of such write-downs.
2. Restructuring of the activities of an entity and
reversals of any provisions for the cost of
restructuring
3. Disposal of items of property, plant and equipments
4. Disposal of investments
5. Discontinued operations
6. Litigation settlements
7. Other reversal of provisions
THANK
YOU!!!!!!
PRESENTOR
GROUP 4:
OLIQUINO,MARIANNE GRACE D.
SALVACION, SHANIZA
OLANDEZ, ANGELA
BOLVAR, JENNY ROSE