Presentation of ‘other comprehensive income’ items

IAS 1 requires separate presentation of items that may be recycled to profit or loss, and those that cannot be reclassified.

Presentation of financial performance of an entity in line with IFRS Accounting Standards requires the entity to present income and expenses either in profit or loss (P/L) or outside P/L, namely in other comprehensive income (OCI). In principle, income and expenses presented in OCI are those items that do not form part of the core operations of the entity and therefore, presenting them in OCI results in the P/L providing more relevant information about the financial performance of the entity. ‘Recycling’ is the process whereby items previously recognised in other comprehensive income are subsequently reclassified to profit or loss as an accounting adjustment but referred to in IAS 1 as ‘reclassification adjustments’.
Key considerations behind reclassification of OCI items to P/L include: realization of gains and losses; matching revenue and expenses; avoidance of double-counting and looking at the nature and purpose of OCI items (temporal or permanent value changes).

ITEMS THAT ARE RECLASSIFIED TO P/L

  • FV gains or losses on debt instruments measured in accordance with IFRS 9.4.1.2A
  • Effective portion of gains or losses on hedging instruments on cash flow hedges
  • Effective portion of gains or losses on hedging instruments relating to hedging of net investment in foreign operation
  • Foreign currency gains or losses on disposal of foreign operation
  • FV gains or losses on time value of an option where intrinsic value designated as hedging instrument
  • FEC gains or losses on forward element of FEC where spot element designated as the hedging instrument and the hedge
    will result in financial assets/liabilities or firm commitment in financial assets/liabilities
  • Insurance finance income or expenses based on systematic allocation per IFRS 17.88(b)

ITEMS THAT ARE NOT RECLASSIFIED TO P/L

  • Revaluation of property, plant and equipment and intangible assets
  • Actuarial gains and losses of defined benefit plans
  • FV gains or losses on equity instruments designated at FVOCI
  • Actuarial gains or losses on defined benefit plans
  • FV gains or losses on financial liabilities from change in credit risk
  • FV gains or losses on time value of an option where only intrinsic value designated as hedging instrument and hedge will result in non-financial assets or non-financial liabilities
  • Insurance finance income or expenses that eliminates accounting mismatch per IFRS 17.89(b)

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Zamicebo Dlamini
Email: Zamicebo.d@nexia-sabt.co.za