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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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Work cited
Accounting Trends and Techniques—2009 (New York: AICPA, 2009), p. 447.
“Financial Statement Presentation,” International Accounting Standard No. 1 (IASCF), as
amended effective January 1, 2009.
“Property, Plant and Equipment,” International Accounting Standard No. 16 (IASCF), as
amended effective January 1, 2009.
“Intangible Assets,” International Accounting Standard No. 38 (IASCF), as amended effective
January 1, 2009.

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