Acctg26

Intermediate
Accounting 3
Instructor: Cyra Mae M. Lanestosa , CPA
Statement of
Comprehensive
Income
Learning 01 Define statement of
comprehensive income
Objectives
02 Identify the components of
comprehensive income

03 Obtain comprehensive
understanding about other
comprehensive income
Learning 04 Determine the presentation
requirement, and other
Objectives pertinent criteria and
guidelines underlying
accounting and reporting of
comprehensive income
embodied in the standards.

05 Present income statement

following the functional and
natural presentation
Income Statement Vs. Comprehensive Income

Income Statement
Total of income less expenses , excluding
components of other comprehensive income
Comprehensive Income
Change in equity during a period resulting from
transactions and other events , other than changes
resulting from transactions with owners in their
capacity as owners

Includes profit or loss and other comprehensive

income
Other Comprehensive Income

Comprises items of income and

expense including reclassification
adjustments that are not recognized
in profit or loss as required or
permitted by Philippine Financial
Reporting Standards
Components of Other Comprehensive Income
OCI that will be reclassified
a. Unrealized gain or loss on debt
investment measured at fair value
through OCI

b. Gain or loss from translating the

financial statements of a foreign
operation

c. Unrealized gain or loss on derivative

contracts designated as a cash flow
hedge
OCI that will not be reclassified
a. Unrealized gain or loss on equity
investment measured at fair value
through OCI
Note : Under PFRS 9 , it is reclassified to
Retained Earnings
b. Change in revaluation surplus

c. Remeasurements of a defined
benefit plan

d. Gain or loss attributable to credit

risk of a financial liability designated at
fair value through profit or loss
Presentation of Comprehensive Income
1. Two statement approach
a. Income Statement showing the components of profit or loss
b. Statement of Comprehensive Income beginning with profit or loss
as shown in the income statement plus or minus the components
of other comprehensive income
2. Single statement approach
a. combined statement showing components of profit or loss and
components of other comprehensive income in a single statement
of comprehensive income
 EXAMPLAR COMPANY
Income Statement
Year ended December 31, 2019
Note
Net sales (1) 9,000,000
Cost of goods (2) (5,400,000)
Gross income 3,600,000
Other income (3) 900,000
Investment income (4) 500,000
Total income 5,000,000
Expenses:
Distribution costs (5) 1,350,000
Administrative expenses (6) 1,000,000
Other expenses (7) 320,000
Finance cost (8) 200,000 2,870,000
Income before tax 2,130,000
Income tax expense 580,000
Net income 1,550,000
Illustration
Using the net income in the preceding illustration, the separate statement of
comprehensive income may appear as follows:

EXAMPLAR COMPANY
Statement of Comprehensive Income
Year ended December 31, 2019

Net income 1,550,000

OCI to be reclassified to profit or loss:
foreign currency translation gain 150,000
Unrealized loss on derivative
contract designated as cash
flow hedge (100,000) 50,000

Comprehensive income 1,600,000

Single statement of comprehensive income
Another option in presenting the components of profit or loss and components of other
comprehensive income is to prepare a single statement of comprehensive income.

This single statement is the combined income statement and statement of comprehensive
income.
The single statement of comprehensive income following the functional presentation may appear as follows:
EXAMPLAR COMPANY
Statement of Comprehensive Income
Year ended December 31, 2019
Net sales 9,000,000
Cost of goods sold (5,400,000)
Gross income 3,600,000
Other income 900,000
Investment income 500,000
Total income 5,000,000
Expenses:
Distribution costs 1,350,000
Administrative expenses 1,000,000
Other expenses 320,000
Finance cost 200,000 2,870,000
Income before tax 2,130,000
Income tax expense 580,000
Net income 1,550,000
OCI to be reclassified to profit or loss:
Foreign currency translation gain 150,000
Unrealized loss on derivative
contract design as
cash flow hedge (100,000) 50,000
Comprehensive income 1,600,000
 Income from Continuing Operations

REVENUES EXPENSES
Inflows of resources resulting Outflows of resources incurred
from providing goods or services in generating revenue
to customers

GAINS AND LOSSES INCOME TAX EXPENSE

Increases or decreases in equity Presented as separate item
from peripheral or incidental
transactions of an entity
Components of Expenses
a. Cost of goods sold or cost of sales
b. Distribution cost or selling expenses
c. Administrative Expenses
d. Other Expenses
e. Income Tax Expense
COST OF GOODS SOLD
Cost of goods sold of a merchandising entity
Beginning inventory 500,000
Net purchase 2,000,000
Goods available for sale 2,500,000
Ending inventory (300,000)
Cost of goods sold 2,200,000
Gross purchases 1,900,000
Freight in 150,000
Total 2,050,000
Purchase returns, allowances and discounts (50,000)
Net purchase 2,000,000
Cost of goods sold of a manufacturing entity
Beginning raw materials 500,000
Net purchase 2,000,000
Raw materials available for use 2,500,000
Ending raw material (300,000)
Raw materials used 2,200,000
Direct labor 3,000,000
Factory overhead 1,300,000
Total manufacturing cost 6,500,000
Beginning goods in process 900,000
Total cost of goods in process 7,400,000
Ending goods in process (1,000,000)
Cost of goods manufactured 6,400,000
Beginning finished goods 1,600,000
Goods available for sale 8,000,000
Ending finished goods (1,500,000)
Cost of goods sold 6,500,000
Distribution Cost
- Directly related to selling , advertising and delivery of
goods to customers
a. Salesmen’s salaries
b. Sales commissions
c. Traveling and marketing expenses
d. Advertising and publicity expenses
e. Freight out
f. Depreciation of delivery equipment and store
equipment
Administrative Expenses
- Cost of administering the business
- Not related to selling and COGS

a. Doubtful accounts
b. Office salaries and expenses
c. Office supplies expense
d. Contributions to charity
e. Professional fees
f. Depreciation of office building and office
equipment
g. Amortization of intangible assets
Other Expenses
- Expenses and losses from peripheral or incidental
transactions of the entity
- Not directly related to distribution and administrative
function

a. Loss on sale of PPE

b. Loss on sale of noncurrent investment
c. Loss on sale of intangible asset
d. Casualty loss
e. Expropriation Loss
 Extraordinary items
- event or transaction that is both:
a. Unusual in nature ; and
b. Infrequent in occurence
- considered component of income from continuing
operations

Separate Disclosure
- The nature and amount of material items of income and
expense shall be disclosed separately
Forms of income statement
Income statement may be presented in two ways :

a. Functional Presentation
- Traditional and common form
- Classifies expenses according to their function
- Still requires disclosure of additional information on the nature of
expenses

b. Natural presentation
- Nature of expense method
- Expenses are aggregated according to their nature
Functional income statement
EXAMPLAR COMPANY
Income Statement
Year ended December 31, 2019
Note
Net sales (1) 9,000,000
Cost of goods (2) (5,400,000)
Gross income 3,600,000
Other income (3) 900,000
Investment income (4) 500,000
Total income 5,000,000
Expenses:
Distribution costs (5) 1,350,000
Administrative expenses (6) 1,000,000
Other expenses (7) 320,000
Finance cost (8) 200,000 2,870,000
Income before tax 2,130,000
Income tax expense 580,000
Net income 1,550,000
Note 1 – Net sales
Gross sales 9,300,000
Sales return and allowance (100,000)
Sales discount (200,000)
Net sales 9,000,000

Note 2 – Cost of goods sold

Inventory, January 1 1,500,000
Purchases 6,000,000
Freight in 300,000
Total 6,300,000
Purchase return and allowance (150,000)
Purchase discount (250,000) 5,900,000
Goods available for sale 7,400,000
Inventory, December 31 (2,000,000)
Cost of goods sold 5,400,000
Note 3 – Other income
Interest revenue 180,000
Dividend revenue 120,000
Rent revenue 100,000
Gain from expropriate 500,000
Total 900,000
Note 4 – Investment income
Share in net income of associate (25%) 500,000
Note 5 – Distribution costs
Sales salaries 600,000
SSS and Philhealth – sales 20,000
Sales commission 180,000
Advertising 100,000
Store supplies expense 50,000
Delivery expense 250,000
Depreciation – store equipment 150,000
Total distribution costs 1,350,000
Note 6 – Administrative expenses
Official salaries 650,000
SSS and Philhealth – office 30,000
Bonuses 100,000
Office supplies expense 70,000
Taxes and licenses 20,000
Doubtful accounts 40,000
Depreciation – office equipment 90,000
Total administrative expenses 1,000,000
Note 7 – Other expenses
Loss on sale of investment 30,000
Loss on sale of property 120,000
Casualty loss from earthquake 170,000
Total 320,000
Note 8 – Finance cost
Interest expense on bank loan 50,000
Interest expense on bonds payable 150,000
Total finance cost 200,000
Natural income statement
EXAMPLAR COMPANY
Income Statement
Year ended December 31, 2019
Note
Net sales (1) 9,000,000
Other income (2) 900,000
Investment income (3) 500,000
Total income 10,400,000
Expenses:
Increase in inventory (4) (500,000)
Net purchase (5) 5,900,000
Employee benefit costs (6) 1,400,000
Sales commission 180,000
Advertising 100,000
Supplies expense (7) 120,000
Delivery expense 250,000
Depreciation (8) 240,000
Taxes and licenses 20,000
Doubtful accounts 40,000
Other expenses (9) 320,000
Finance cost (10)200,000 8,270,000
Income before tax 2,130,000
Income tax expense 580,000
Net income 1,550,000
Note 1 – Net sales
Gross sales 9,300,000
Sales return and allowance (100,000)
Sales discount (200,000)
Net sales 9,000,000
Note 2 – other income
Interest revenue 180,000
Dividend revenue 120,000
Rent revenue 100,000
Gain from expropriation 500,000
Total 900,000
Note 3 – Investment income
Share in net income of associate (25%) 500,000
Note 4 – Increase in inventory
Inventory – December 31 2,000,000
Inventory – January 1 1,500,000
Note 5 – Net purchase
Purchase 6,000,000
Freight in 300,000
Purchase return and allowance (150,000)
Purchase discount(250,000)
Net purchase 5,900,000
Note 6 – Employee benefit cost
Sales salaries 600,000
SSS and Philhealth – sales 20,000
Office salaries 650,000
SSS and Philhealth – office 30,000
Bonuses 100,000
Total employee costs 1,400,000
Note 7 – Supplies expense
Store supplies 50,000
Office supplies 70,000
Note 8 – Depreciation
Depreciation – store 150,000
Depreciation – office 90,000
Total depreciation 240,000
Note 9 – Other expenses
Loss on sale of investment 30,000
Loss on disposal of property 120,00
Casualty loss from earthquake 170,000
Total 320,000
Note 10 – Finance cost
Interest expense on bank loan 50,000
Interest expense on bonds payable 150,000
Total finance cost 200,000
Which form of income statement?
There is no prescribed format.
PAS 1, paragraph 105, simply states that because each method of
presentation has required to select the presentation that is reliable
and more relevant.

The cost of goods sold method usually would provide more relevant
information to the users.
Any questions?
THANK YOU
End of Lecture 1