Volume 5, No. 8


Rewriting The Income Statement: Introducing:  Since the early 1980's, FASB pronouncements have treated equity as a sort of "holding tank" for earnings volatility. Rather than report certain changes in assets and liabilities as components of income, such changes were reported in a separate section of equity. These bypass treatments had a calming effect on earnings - but submerged from view the results of all financial activity. Comprehensive income purports to show all of the changes in a particular period that affected an entity's wealth. That's accomplished by lifting those "buried" activities out of the equity section and displaying them in a revised income statement or a separate statement of comprehensive income. The FASB's proposal gives companies a choice: either way, greater visibility of these items should be a positive for analysts.

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