PRESENTATION OF FINANCIAL STATEMENT

INCOME STATEMENT
An income statement is a formal statement showing the financial performance of an entity
for a given period of time.
The transaction approach is the traditional preparation of the income statement in
conformity with the accounting standards.
Information about financial performance is useful in predicting future performance and
ability to generate future cash flows.
Comprehensive income
Comprehensive income is the change in equity during a period resulting from transactions
and other events, other than changes resulting from and to owners in their capacity as owners.
Accordingly, comprehensive income includes:
a) Components of profit or loss
b) Components of other comprehensive income
Profit or Loss
The term profit or loss is the total income less expenses, excluding the components of other
comprehensive income.
In other words, this is the bottom line in the traditional income statement.
An entity may use net income to describe profit or loss.
Other comprehensive income (OCI)
Other comprehensive income comprises of income and expenses including reclassification
adjustments that are not recognized in profit or loss as required or permitted by PFRS.
The components of other comprehensive income include the following:
a) Unrealized gain or loss on equity investment measured at fair value through other
comprehensive income.
b) Unrealized gain or loss on debt instrument measured at fair value through other
comprehensive income.
c) Gain or loss from translation of the financial statements of foreign operation.
d) Revaluation surplus during the year.
e) Unrealized gain or loss from derivative contracts designated as cash flow hedge
f) Remeasurement of defined benefit plan, actuarial gain or loss.
g) Changes in fair value attributable to credit risk of a financial liability designated at fair
value through profit or loss.
Presentation of other comprehensive income
PAS 1, paragraph 82A, provides that the statement of comprehensive income during the
period shall present line items for the amounts of other comprehensive income during the period
classified by nature.
The line items are grouped as follows:
a) OCI that will be reclassified subsequently to profit or loss when specific conditions are
met.
1. Unrealized gain or loss on debt investments measured at fair value through
comprehensive income.
2. Gain or loss from translating financial statements of a foreign operation.
3. Unrealized gain or loss on derivative contracts designated as cash flow hedge.
b) OCI that will not be reclassified subsequently to profit or loss but to retained earnings.
1. Unrealized gain or loss on equity investment measured at fair value through other
comprehensive income.
2. Reevaluation surplus of the year.
3. Remeasurements of defined benefit plan, including actuarial gain or loss
4. Changes in fair value attributable to credit risk of a financial liability designated at
fair value through profit or loss.
Presentation of comprehensive income
An entity has two options of presenting comprehensive income, namely:
1. Two statements
2. Single statement
Sources of income
1. Sales of merchandise to customers
2. Rendering of services
3. Use of entity resources
4. Disposal of resources other than products
Components of expense
1. Cost of goods sold
2. Distribution cost or selling expense
3. Administrative Expenses
4. Other expenses
5. Income tax expense
Forms of income statement
1. Functional presentation
2. Natural presentation
 The standard does not require prescribe form on all forms of business.
SAMPLE OF STATEMENT OF COMPREHENSIVE INCOME