Volume 21, No. 11: Other Comprehensive Income: FASB Adds A Touch Of (Re)Class


At this time last year, accounting observers were hopeful that the FASB and the IASB would reach a state of convergence in their accounting standards. A seemingly easy target: their joint effort on the statement of other comprehensive income (OCI). The two boards decided the statement of OCI should be presented immediately following the income statement, whether on the same page or as a separate statement. It seemed like the simplest thing in the world to agree upon, yet it became a metaphor for the entire convergence experience: nothing is as simple as it seems.

Subtle differences existed between the two standards where transactions are initially recorded in other comprehensive income, then subsequently recognized in the income statement. In accounting jargon, this is known as recycling. When it was time to implement the new standard at the end of 2011, companies found some unexpected difficulties in applying the FASB standard as it was written. To fully comply with the new standard, many additional lines would pollute the income statement for some companies. Those lines wouldn’t always add value for investors, some claimed.

The FASB has proposed a compromise to the standard that will alleviate clutter that might have arisen from the strict implementation of the original standard. It will show more about recycling transactions, but the amendment also shows the shortcomings in the reporting of postretirement benefits. It will also maintain the differences between U.S. accounting standards and IFRS, actually increasing them somewhat.

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