The last couple of years you may have noticed that in your financial statements you are receiving an additional statement called the Statement of Comprehensive Income. You may also find yourself wondering why it is there and why do you need it. It is not really telling me much to begin with so why have it.

The simple answer is that you have the statement because the FASB(Financial Accounting Standards Board) requires it. The FASB is the main rule making organization of the accounting profession. They release rules that are deemed necessary to make sure everyone is accounting for the same types of things in the same way. They want us all to be speaking the same language. So what prompted the FASB to decide that we needed this statement.

The issue was raised years ago. In the past, several items of income were decided not to be reported as income, but instead decide to record these items directly to equity. It originally started out with one item and over time, many items were allowed to be treated the same. The most common item in this category was the unrealized gain on marketable securities. Members of the FASB began questioning the practice because it had been causing income statements to be possibly materially misstated from so many items not going through.

Debate among the FASB began as to whether to go back to recording these items as income or not. Members became very divided. Members were adamant about one way or the other. The issue was debated and this alternative was devised. They decided to create a separate statement that shows the income effects of these items on the net income of the company. This caused the income statement not to be affected but gave the information to people of the additional possible effects. Basically this statement was created as a compromise of the FASB.

The FASB has decided that we need this statement. For a company that has many items of comprehensive income it can be very helpful. For our clients we only tend to see one item appear at a time. It may appear to be a useless statement for you, but is required to be prepared. If you would like to learn more about this statement and fully understand it please ask any one of our staff. They will steer you in the right direction.