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FASB Accounting Standards Codification

FASB Accounting Standards Codification

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FASB Accounting Standards Codification

Certified Public Accountants (CPAs) have for some time now been made aware of the

complexities of financial reporting due to FASB accounting standards codification in the US

GAAP. This is particularly with respect to reporting comprehensive income. The main aim of

doing this is to ensure ease in understanding and interpretation of these financial statements.

Despite what one might initially think, codification makes no alteration whatsoever to the

already existing US GAAP. As a result, codification reduces instances of non-compliance as the

accounting standards are easily understandable. It also plays a vital role in the process of

international convergence of accounting standards.

Comprehensive income is a more extensive classification of income than the traditional

income. It can be defined as the total change in equity for a reporting period other than

transactions with owners. Unrealized gains/losses in securities, pension liabilities and foreign

currency items are some of the things that form comprehensive income. Comprehensive income

does indeed differ from normal periodic income. One point to start from while examining this

difference is the realization of gains and losses that had not previously been included in the

income statement. Despite the differences between the two, both must be prepared and reported

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by companies. The difference between the opening and closing balance of OCI is usually due to

adjustments on aspects such as unrealized gains/losses.

In the balance sheet, some investments are reported at their fair value. The gains or losses

from these very investments might not be computed within the net income. It is such that are

separately reported to the shareholders as part of their equity as other comprehensive income

(loss). When a stock is held and not sold, its unrealized gain forms part of other comprehensive

income. Unrealized loss might also occur for those investments held to maturity (HTM). Say, the

amortized cost is above the fair value, it can be given two treatments. It might be reported as part

of the net income if the difference is regarded as temporary. Any amount exceeding the current

period credit loss is however recorded in the other comprehensive income (loss)

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Name Tutor Course Date FASB Accounting Standards Codification Certified Public Accountants (CPAs) have for some time now been made aware of the complexities of financial reporting due to FASB accounting standards codification in the US GAAP. This is particularly with respect to reporting comprehensive income. The main aim of doing this is to ensure ease in understanding and interpretation of these financial statements. Despite what one might initially think, codification makes no alteration whatsoever to the already existing US GAAP. As a result, codification reduces instances of non-compliance as the accounting standards are easily understandable. It also plays a vital role in the process of international convergence of accounting standards. Comprehensive income is a more extensive classification of income than the traditional income. It can be defined as the total change in equity f ...
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