ASC 220-10
Overall
220 Income Statement—Reporting Comprehensive Income
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ASC 220-10 governs how an entity presents comprehensive income — net income plus other comprehensive income (OCI) — in a full set of general-purpose financial statements. Comprehensive income must be reported either in a single continuous statement or in two separate but consecutive statements (net income first, then OCI beginning with net income), with totals for net income, OCI, and comprehensive income (220-10-45-1 through 45-1B). The Subtopic addresses only presentation and disclosure; it does not specify when to recognize or how to measure the items making up comprehensive income (220-10-25-1; 220-10-30-1).
Key points (7)
- Comprehensive income measures all changes in equity from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners (220-10-10-1); investments by and distributions to owners and items charged directly to paid-in capital or retained earnings are not items of comprehensive income (220-10-45-10B).
- An entity must report comprehensive income in a single continuous statement (two sections: net income and OCI) or in two separate but consecutive statements, the second beginning with net income (220-10-45-1 through 45-1B); the terms 'comprehensive income' and 'other comprehensive income' need not be used (220-10-45-4).
- Items of OCI are enumerated in 220-10-45-10A and include foreign currency translation adjustments, cash flow hedge gains and losses, unrealized holding gains and losses on available-for-sale debt securities, pension/OPEB gains, losses, prior service costs and transition amounts, and instrument-specific credit risk changes on fair value option liabilities; components are classified based on their nature (220-10-45-1C).
- An entity with no items of OCI in any period presented, and an NFP following Subtopic 958-205, are outside the Topic's scope (220-10-15-3).
- OCI components may be presented net of tax or before tax with one aggregate tax amount, but the tax expense or benefit allocated to each OCI component (including reclassification adjustments) must be shown in the statement or disclosed in the notes (220-10-45-11; 45-12; 50-4), and the policy for releasing income tax effects from AOCI must be disclosed (220-10-50-1).
- The total of OCI for the period is transferred to a separate equity component, typically labeled accumulated other comprehensive income, and the changes in accumulated balances for each OCI component—separating current-period reclassifications from other current-period OCI—must be presented on the face of the statements or in the notes (220-10-45-14; 45-14A; 50-5).
- Reclassification adjustments must be determined for each OCI component to avoid double counting amounts included in both net income and OCI (220-10-45-15; 45-16), and significant amounts reclassified out of AOCI must be reported together in one place—parenthetically on the face of the statement of net income if all such amounts are reclassified to net income in their entirety in the same period (220-10-45-17; 45-17A), otherwise in a tabular note (220-10-50-6).
For students. This is the presentation backbone for OCI: know the two permitted formats, the list of OCI items in 220-10-45-10A, and the reclassification-adjustment mechanics. The most common misunderstanding is thinking ASC 220 tells you when to recognize or how to measure OCI items — it does not; the source Topics (320/326, 715, 815, 830, 825) do, and a separate 'statement of comprehensive income' is no longer permitted to be a non-consecutive or equity-statement presentation.
comprehensive incomeother comprehensive incomeaccumulated other comprehensive incomereclassification adjustmentsingle continuous statementtwo consecutive statementstax effects allocated to oci componentsnonowner changes in equity
Machine-generated study aid for ASC 220-10. Check the source paragraphs below.
220-10-00Status
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220-10-00-1
The following table identifies the changes made to this Subtopic.
220-10-05Overview and Background
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220-10-05-1
The Income Statement—Reporting Comprehensive Income Topic establishes standards for reporting and presentation of comprehensive income and its components in a full set of general-purpose financial statements. The Income Statement—Reporting Comprehensive Income Topic includes the following Subtopics:
- aOverall
- bUnusual or Infrequently Occurring Items
- cBusiness Interruption Insurance.
220-10-05-2
Each Subtopic in the Income Statement—Reporting Comprehensive Income Topic contains standalone guidance. There is no relationship between the individual Subtopics within this Topic. Each Subtopic provides presentation and disclosure guidance for the income statement matter indicated by the Subtopic title.
220-10-05-3
The Overall Subtopic provides general comprehensive income statement guidance. It also provides guidance on the structure of the Topic.
220-10-05-4
Subtopic 220-20 provides guidance about the presentation and disclosure of unusual or infrequently occurring items.
220-10-05-5
Subtopic 220-30 provides guidance on proceeds from business interruption insurance.
220-10-05-6
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
220-40-65-1Subtopic 220-40 provides guidance on expense disaggregation disclosures and selling expenses disclosures.220-10-10Objectives
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220-10-10-1
The purpose of reporting comprehensive income is to report a measure of all changes in equity of an entity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners.
220-10-10-2
If used with related disclosures and other information in the financial statements, the information provided by reporting comprehensive income should assist investors, creditors, and others in assessing an entity's activities and an entity's future cash flows.
220-10-10-3
Although total comprehensive income is a useful measure, information about the components that make up comprehensive income also is needed. A single focus on total comprehensive income is likely to result in a limited understanding of an entity's activities. Information about the components of comprehensive income often may be more important than the total amount of comprehensive income.
220-10-15Scope and Scope Exceptions
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Overall Guidance
220-10-15-1
The Scope Section of the Overall Subtopic establishes the pervasive scope for all Subtopics of the Income Statement—Reporting Comprehensive Income Topic. Unless explicitly addressed within specific Subtopics, the following scope guidance applies to all Subtopics of the Income Statement—Reporting Comprehensive Income Topic.
Entities
220-10-15-2
Except as noted in the following paragraph, the guidance in the Income Statement—Reporting Comprehensive Income Topic applies to all entities, including:
- aEntities that provide a full set of financial statements that report financial position, results of operations, and cash flows
- bInvestment companies, defined benefit pension plans, and other employee benefit plans that are exempt from the requirement to provide a statement of cash flows by paragraph 230-10-15-4.
220-10-15-3
The guidance in this Topic does not apply to the following entities:
- aAn entity that has no items of other comprehensive income in any period presented. In such cases, the entity is not required to report other comprehensive income or comprehensive income. See paragraph 220-10-45-10A for items that are required to be reported as other comprehensive income.
- bA not-for-profit entity (NFP) that is required to follow the provisions of Subtopic 958-205.
220-10-15-5
The guidance in the Income Statement—Reporting Comprehensive Income Topic applies to general-purpose statements that purport to present results of operations in conformity with generally accepted accounting principles (GAAP).
220-10-25Recognition
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220-10-25-1
This Subtopic does not specify when to recognize the items that make up comprehensive income.
220-10-30Initial Measurement
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220-10-30-1
This Subtopic does not specify how to measure the items that make up comprehensive income.
220-10-35Subsequent Measurement
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220-10-35-1
Paragraph 220-10-30-1 states that this Subtopic does not specify how to measure the items that make up comprehensive income.
220-10-45Other Presentation Matters
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Reporting Comprehensive Income
220-10-45-1
This Subtopic requires an entity to report comprehensive incomeeither in a single continuous financial statement or in two separate but consecutive financial statements.
220-10-45-1A
An entity reporting comprehensive income in a single continuous financial statement shall present its components in two sections, net income and other comprehensive income. If applicable, an entity shall present the following in that financial statement:
- aA total amount for net income together with the components that make up net income.
- bA total amount for other comprehensive income together with the components that make up other comprehensive income. As indicated in paragraph 220-10-15-3, an entity that has no items of other comprehensive income in any period presented is not required to report comprehensive income.
- cTotal comprehensive income.
220-10-45-1B
An entity reporting comprehensive income in two separate but consecutive statements shall present the following:
- aComponents of and the total for net income in the statement of net income
- bComponents of and the total for other comprehensive income as well as a total for comprehensive income in the statement of comprehensive income, which shall be presented immediately after the statement of net income. A reporting entity shall begin the second statement with net income.
220-10-45-1C
An entity shall present, either in a single continuous statement of comprehensive income or in a statement of net income and statement of other comprehensive income, all items that meet the definition of comprehensive income for the period in which those items are recognized. Components included in other comprehensive income shall be classified based on their nature. For related guidance, see paragraphs .
220-10-45-4
This Subtopic does not require that an entity use the terms comprehensive income or other comprehensive income in its financial statements, even though those terms are used throughout this Subtopic.
220-10-45-5
Paragraph 810-10-50-1A(a) states that, if an entity has an outstanding noncontrolling interest, amounts for both net income and comprehensive income attributable to the parent and net income and comprehensive income attributable to the noncontrolling interest in a less-than-wholly-owned subsidiary shall be reported in the financial statement(s) in which net income and comprehensive income are presented in addition to presenting consolidated net income and comprehensive income. For more guidance, see paragraph 810-10-50-1A(c).
220-10-45-7
Items included in net income are presented in various components. Those components can include items of income from continuing operations and discontinued operations. This Subtopic does not change those components or other requirements for reporting the results of operations included in net income.
220-10-45-7A
Net income shall reflect all items of profit and loss recognized during the period with the sole exception of error corrections as addressed in Topic 250. However, the requirement that net income be presented as one amount does not apply to the following entities that have developed income statements with formats different from those of the typical commercial entity:
- aInvestment companies
- bInsurance entities
- cCertain not-for-profit entities (NFPs).
220-10-45-10A
Items of other comprehensive income include the following:
- aForeign currency translation adjustments (see paragraph 830-30-45-12)
- bGains and losses on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity, commencing as of the designation date (see paragraph 830-20-35-3(a))
- cGains and losses on intra-entity foreign currency transactions that are of a long-term-investment nature (that is, settlement is not planned or anticipated in the foreseeable future), when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting entity's financial statements (see paragraph 830-20-35-3(b))
- dGains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges (see paragraph 815-20-35-1(c))
- ddFor derivatives that are designated in qualifying hedging relationships, the difference between changes in fair value of the excluded components and the initial value of the excluded components recognized in earnings under a systematic and rational method in accordance with paragraphs 815-20-25-83A and 815-35-35-5A
- eUnrealized holding gains and losses on available-for-sale debt securities (see paragraph 326-30-35-2)
- fUnrealized holding gains and losses that result from a debt security being transferred into the available-for-sale category from the held-to-maturity category (see paragraph 320-10-35-10(c))
- g
- h
- iGains or losses associated with pension or other postretirement benefits (that are not recognized immediately as a component of net periodic benefit cost) (see paragraph 715-20-50-1(j))
- jPrior service costs or credits associated with pension or other postretirement benefits (see paragraph 715-20-50-1(j))
- kTransition assets or obligations associated with pension or other postretirement benefits (that are not recognized immediately as a component of net periodic benefit cost) (see paragraph 715-20-50-1(j)).
- lChanges in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected (see paragraph 825-10-45-5).
- mThe effect of changes in the discount rates used to measure traditional and limited-payment long-duration insurance contracts (see paragraph 944-40-35-6A(b)(1)).
- nThe effect of changes in the fair value of a market risk benefit attributable to a change in the instrument-specific credit risk (see paragraph 944-40-35-8A).
220-10-45-10B
None of the following items qualify as an item of comprehensive income:
- aChanges in equity during a period resulting from investments by owners and distributions to owners
- bItems required to be reported as direct adjustments to paid-in capital, retained earnings, or other nonincome equity accounts such as the following types of transactions:
- 1A reduction of shareholders' equity related to employee stock ownership plans (see paragraph 718-740-25-5)
- 2Recognition of tax benefits related to deductible temporary differences and carryforwards arising from a quasi-reorganization as defined in Subtopic 852-20 (see paragraph 852-740-45-3)
- 3Net cash settlement resulting from a change in value of a contract that gives the entity a choice of net cash settlement or settlement in its own shares (see paragraph 815-40-25-4(b)(2)).
- 1
Presentation of Income Tax Effects
220-10-45-11
An entity shall present components of other comprehensive income in the statement in which other comprehensive income is reported either net of related tax effects or before related tax effects with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items.
220-10-45-12
An entity shall present the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, in the statement in which those components are presented or disclose it in the notes to financial statements. Example 1 (see paragraphs 220-10-55-7 through 55-8B) illustrates the alternative formats for disclosing the tax effects related to the components of other comprehensive income. (See paragraph 220-10-50-4.)
220-10-45-12A
H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act), reduced the U.S. federal corporate income tax rate and made other changes to U.S. federal tax law. An entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. If an entity does not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act, it shall provide the disclosures in paragraph 220-10-50-3. If an entity elects to reclassify the income tax effects of the Tax Cuts and Jobs Act, the amount of that reclassification shall include the following:
- aThe effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included.
- bOther income tax effects of the Tax Cuts and Jobs Act on items remaining in accumulated other comprehensive income that an entity elects to reclassify, subject to the disclosures in paragraph 220-10-50-2(b).
220-10-45-14
The total of other comprehensive income for a period shall be transferred to a component of equity that is presented separately from retained earnings and additional paid-in capital in a statement of financial position at the end of an accounting period. A descriptive title such as accumulated other comprehensive income shall be used for that component of equity.
220-10-45-14A
An entity shall present, either on the face of the financial statements or as a separate disclosure in the notes, the changes in the accumulated balances for each component of other comprehensive income included in that separate component of equity, as required in paragraph 220-10-45-14. In addition to the presentation of changes in accumulated balances, an entity shall present separately for each component of other comprehensive income, current period reclassifications out of accumulated other comprehensive income and other amounts of current-period other comprehensive income. Both before-tax and net-of-tax presentations are permitted provided the entity complies with the requirements in paragraph 220-10-45-12. Paragraph 220-10-55-15 illustrates the disclosure of changes in accumulated balances for components of other comprehensive income as a separate disclosure in the notes to financial statements. (See paragraph 220-10-50-5.)
Reclassification Adjustments
220-10-45-15
Reclassification adjustments shall be made to avoid double counting of items in comprehensive income that are presented as part of net income for a period that also had been presented as part of other comprehensive income in that period or earlier periods. For example, gains on investment securities that were realized and included in net income of the current period that also had been included in other comprehensive income as unrealized holding gains in the period in which they arose must be deducted through other comprehensive income of the period in which they are included in net income to avoid including them in comprehensive income twice (see paragraph 320-10-40-2). Example 3 (see paragraphs ) illustrates the presentation of reclassification adjustments in accordance with this paragraph.
220-10-45-16
An entity shall determine reclassification adjustments for each component of other comprehensive income. The requirement for a reclassification adjustment for foreign currency translation adjustments is limited to translation gains and losses realized upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity (see paragraphs 830-30-40-1 through 40-1A).
220-10-45-17
An entity shall separately provide information about the effects on net income of significant amounts reclassified out of each component of accumulated other comprehensive income if those amounts all are required under other Topics to be reclassified to net income in their entirety in the same reporting period. An entity shall provide this information together, in one location, in either of the following ways:
- aOn the face of the statement where net income is presented
- bAs a separate disclosure in the notes to financial statements.
220-10-45-17A
If an entity chooses to present information about the effects of significant amounts reclassified out of accumulated other comprehensive income on net income, on the face of the statement where net income is presented, the entity shall present parenthetically by component of other comprehensive income the effect of significant reclassification amounts on the respective line items of net income. An entity also shall present parenthetically the aggregate tax effect of all significant reclassifications on the line item for income tax benefit or expense in the statement where net income is presented. However, if an entity chooses to use a separate line item or items in the income statement to present significant pension cost components or other postretirement benefit cost components reclassified out of accumulated other comprehensive income, it shall no longer be required to present those pension cost components or other postretirement benefit cost components parenthetically. If an entity is unable to identify the line item of net income affected by any significant amount reclassified out of accumulated other comprehensive income in a reporting period (including when all reclassifications for the period are not to net income in their entirety), the entity must follow the guidance in paragraph 220-10-50-6. Paragraph 220-10-55-17F provides an example of presentation of the effect of reclassification on the face of the statement where net income is presented.
Interim-Period Reporting
220-10-45-18
Subtopic 270-10 clarifies the application of accounting principles and reporting practices to interim financial information, including interim financial statements and summarized interim financial data of publicly traded companies issued for external reporting purposes. An entity shall report a total for comprehensive income in condensed financial statements of interim periods in a single continuous statement or in two consecutive statements.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1Subtopic 270-10explains the application of accounting principles and reporting practices to interim financial statements and notes in accordance with generally accepted accounting principles. An entity shall report a total for comprehensive income in condensed statementsof interim periods in a single continuous statement or in two consecutive statements. 220-10-45-18A
Publicly traded companies must meet the reporting requirements in this Subtopic at each reporting period. Companies shall follow the guidance in Subtopic 270-10 for the level of detail required for condensed financial statements for interim-period financial statements.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1Publicly traded companies must meet the reporting requirements in this Subtopic at each reporting period. All entities shall follow the guidance in Subtopic 270-10 for the level of detail required for condensed statements for interim-period financial statements.220-10-45-18B
Nonpublic entities must meet the reporting requirements in this Subtopic at each reporting period, except for the requirements in paragraphs 220-10-45-17 through 45-17B. Nonpublic entities are not required to meet the requirements in paragraphs 220-10-45-17 through 45-17B for interim reporting periods but are required to meet them for annual reporting periods.
220-10-50Disclosure
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<strong class="ph b">Disclosing Changes and Certain Income Tax Effects within Accumulated Other Comprehensive Income</strong>
220-10-50-1
An entity shall disclose a description of the accounting policy for releasing income tax effects from accumulated other comprehensive income.
220-10-50-2
An entity that elects to reclassify the income tax effects of H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act), in accordance with paragraph 220-10-45-12A shall disclose in the period of adoption both of the following:
- aA statement that an election was made to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings
- bA description of other income tax effects related to the application of the Tax Cuts and Jobs Act that are reclassified from accumulated other comprehensive income to retained earnings, if any (see paragraph 220-10-45-12A(b)).
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1Paragraph superseded by Accounting Standards Update No. 2025-11.220-10-50-3
An entity that does not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act in accordance with paragraph 220-10-45-12A shall disclose in the period of adoption a statement that an election was not made to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1Paragraph superseded by Accounting Standards Update No. 2025-11.220-10-50-4
An entity shall present the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, in the statement in which those components are presented or disclose it in the notes to financial statements. Example 1 (see paragraphs 220-10-55-7 through 55-8B) illustrates the alternative formats for disclosing the tax effects related to the components of other comprehensive income. (See paragraph 220-10-45-12.)
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, an entity shall present the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, in the statement in which those components are presented or disclose it in the notes to financial statements. Example 1 (see paragraphs 220-10-55-7 through 55-8B) illustrates the alternative formats for disclosing the tax effects related to the components of other comprehensive income. (See paragraph 220-10-45-12.)220-10-50-5
An entity shall present, either on the face of the financial statements or as a separate disclosure in the notes, the changes in the accumulated balances for each component of other comprehensive income included in that separate component of equity, as required in paragraph 220-10-45-14. In addition to the presentation of changes in accumulated balances, an entity shall present separately for each component of other comprehensive income, current period reclassifications out of accumulated other comprehensive income and other amounts of current-period other comprehensive income. Both before-tax and net-of-tax presentations are permitted provided the entity complies with the requirements in paragraph 220-10-45-12. Paragraph 220-10-55-15 illustrates the disclosure of changes in accumulated balances for components of other comprehensive income as a separate disclosure in the notes to financial statements. (See paragraph 220-10-45-14A.)
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, an entity shall present, either on the face of the financial statements or as a separate disclosure in the notes, the changes in the accumulated balances for each component of other comprehensive income included in that separate component of equity, as required in paragraph 220-10-45-14. In addition to the presentation of changes in accumulated balances, an entity shall present separately for each component of other comprehensive income, current period reclassifications out of accumulated other comprehensive income and other amounts of current-period other comprehensive income. Both before-tax and net-of-tax presentations are permitted provided the entity complies with the requirements in paragraph 220-10-45-12. Paragraph 220-10-55-15 illustrates the disclosure of changes in accumulated balances for components of other comprehensive income as a separate disclosure in the notes to financial statements. (See paragraph 220-10-45-14A.)220-10-50-6
If an entity chooses to disclose information about significant amounts reclassified out of accumulated other comprehensive income in the notes to financial statements or is required to do so by paragraph 220-10-45-17A, it shall disclose the significant amounts by each component of accumulated other comprehensive income and provide a subtotal of each component of comprehensive income. The subtotals for each component shall agree with the requirements in paragraph 220-10-45-14A. Both before-tax and net-of-tax presentations are permitted provided the entity complies with the requirements in paragraph 220-10-45-12. For each significant reclassification amount, the entity shall identify, for those amounts that are required under other Topics to be reclassified to net income in their entirety in the same reporting period, each line item affected by the reclassification on the statement where net income is presented. For any significant reclassification for which other Topics do not require that reclassification to net income in its entirety in the same reporting period, the entity shall cross-reference to the note where additional details about the effect of the reclassifications are disclosed. Paragraph 220-10-55-17E provides an example of a note presentation in a tabular format of the effect of reclassifications out of accumulated other comprehensive income. (See paragraph 220-10-45-17B.)
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1If an entity chooses to disclose information about significant amounts reclassified out of accumulated other comprehensive income in the notes to interim and annual financial statements or is required to do so by paragraph 220-10-45-17A, it shall disclose the significant amounts by each component of accumulated other comprehensive income and provide a subtotal of each component of comprehensive income. The subtotals for each component shall agree with the requirements in paragraph 220-10-45-14A. Both before-tax and net-of-tax presentations are permitted provided the entity complies with the requirements in paragraph 220-10-45-12. For each significant reclassification amount, the entity shall identify, for those amounts that are required under other Topics to be reclassified to net income in their entirety in the same reporting period, each line item affected by the reclassification on the statement where net income is presented. For any significant reclassification for which other Topics do not require that reclassification to net income in its entirety in the same reporting period, the entity shall cross-reference to the note where additional details about the effect of the reclassifications are disclosed. Paragraph 220-10-55-17E provides an example of a note presentation in a tabular format of the effect of reclassifications out of accumulated other comprehensive income. (See paragraph 220-10-45-17B.)220-10-55Implementation Guidance and Illustrations
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Implementation Guidance
220-10-55-1
This Section provides Examples of reporting formats for comprehensive income, required disclosures, and a corresponding statement of financial position. The illustrations are intended as examples only. Other formats or levels of detail may be appropriate for certain circumstances. An entity is encouraged to provide information in ways that are most understandable to investors, lenders, and other external users of financial statements. For simplicity, the Examples provide information only for a single period; however, most entities are required to provide comparative financial statements. In addition to the Examples in this Section, paragraph 810-10-55-4C illustrates one method for reporting comprehensive income if the entity has one or more less-than-wholly-owned subsidiaries.
Illustrations
220-10-55-4
This Example illustrates the various formats that may be used to report comprehensive income as discussed in paragraphs .
220-10-55-5
Brackets are used to highlight certain basic totals that must be presented in financial statements to comply with the provisions of this Subtopic. This Subtopic requires not only presenting those certain basic totals but also reporting components of those aggregates. For example, among other items, it requires reporting information about unrealized gains and losses on available-for-sale debt securities, foreign currency items, gains or losses associated with pension or other postretirement benefits, prior service costs or credits associated with pension or other postretirement benefits, and transition assets or obligations associated with pension or other postretirement benefits.
220-10-55-6
The tables use the term comprehensive income to label the total of all parts of comprehensive income, including net income. The tables use the term other comprehensive income to label revenues, expenses, gains, and losses that are included in comprehensive income but excluded from net income. This Subtopic does not require that an entity use those terms in its financial statements. Other equivalent terms, such as total nonowner changes in equity, can be used as labels for what this Subtopic refers to as comprehensive income.
220-10-55-7
The following illustrates the statement of comprehensive income for the year ended December 31, 201X, with other comprehensive income components shown net of tax effects.
Entity XYZ Consolidated Statement of Comprehensive Income " Year Ended December 31, 201X" Revenues " $140,000 " Expenses " (65,700)" Other gains and losses " 8,000 " Gain on sale of securities " 2,500 " Income from operations before tax " 84,800 " Income tax expense " (21,200)" [Net income " 63,600 " ] Less: net income attributable to the noncontrolling interest " $(12,720)" Net income attributable to Entity XYZ shareholders " 50,880 " Earnings per share Basic and diluted 0.46 "Other comprehensive income, before tax:" Foreign currency translation adjustments (a) " 8,000 " Unrealized gains on debt securities: (b) $ Unrealized holding gains arising during period "13,000" Less: reclassification adjustment for gains included in net income " (1,500)" " 11,500 " Defined benefit pension plans: (c) Prior service cost arising during period " (1,600)" Net loss arising during period " (1,600)" Less: amortization of prior service cost included in net periodic pension cost 100 " (2,500)" [Other comprehensive income " 17,000" ] [Comprehensive income " 80,600 " ] Less: comprehensive income attributable to the noncontrolling interest " (16,120)" Comprehensive income attributable to Entity XYZ shareholders " $64,480 " (a) "It is assumed that there was no sale or liquidation of an investment in a foreign entity. Therefore, there is no reclassification adjustment for this period." (b) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (current-period gain and reclassification adjustment) in the notes to financial statements." (c) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (prior service cost and net loss for the defined benefit pension plans less amortization of prior service cost) in the notes to financial statements."
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
105-10-65-10The following illustrates the statement of comprehensive income for the year ended December 31, 201X, with other comprehensive income components shown net of tax effects.
Entity XYZ Consolidated Statement of Comprehensive Income " Year Ended December 31, 201X" Revenues " $140,000 " Expenses " (65,700)" Other gains and losses " 8,000 " Gain on sale of securities " 2,500 " Income from operations before tax " 84,800 " Income tax expense " (21,200)" [Net income " 63,600 " ] Less: net income attributable to the noncontrolling interest " $(12,720)" Net income attributable to Entity XYZ shareholders " 50,880 " Earnings per share Basic and diluted 0.46 "Other comprehensive income, net of tax:" Foreign currency translation adjustments (a) " 8,000 " Unrealized gains on debt securities: (b) $ Unrealized holding gains arising during period "13,000" Less: reclassification adjustment for gains included in net income " (1,500)" " 11,500 " Defined benefit pension plans: (c) Prior service cost arising during period " (1,600)" Net loss arising during period " (1,000)" Less: amortization of prior service cost included in net periodic pension cost 100 " (2,500)" [Other comprehensive income " 17,000" ] [Comprehensive income " 80,600 " ] Less: comprehensive income attributable to the noncontrolling interest " (16,120)" Comprehensive income attributable to Entity XYZ shareholders " $64,480 " (a) "It is assumed that there was no sale or liquidation of an investment in a foreign entity. Therefore, there is no reclassification adjustment for this period." (b) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (current-period gain and reclassification adjustment) in the notes to financial statements." (c) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (prior service cost and net loss for the defined benefit pension plans less amortization of prior service cost) in the notes to financial statements."
220-10-55-8
Alternatively, components of other comprehensive income could be presented before tax with one amount shown for the aggregate income tax expense or benefit, as shown in the following single continuous statement of comprehensive income.
Entity XYZ Consolidated Statement of Comprehensive Income " Year Ended December 31, 201X" Revenues " $140,000 " Expenses " (65,700)" Other gains and losses " 8,000 " Gain on sale of securities " 2,500 " Income from operations before tax " 84,800 " Income tax expense " (21,200)" [Net income " 63,600 " ] Less: net income attributable to the noncontrolling interest " $(12,720)" Net income attributable to Entity XYZ shareholders " 50,880 " Earnings per share Basic and diluted 0.46 "Other comprehensive income, before tax:" Foreign currency translation adjustments (a) " 10,666 " Unrealized gains on debt securities: (b) $ Unrealized holding gains arising during period " 17,333" Less: reclassification adjustment for gains included in net income " (2,000)" " 15,333 " Defined benefit pension plans: (c) Prior service cost arising during period " (2,133)" Net loss arising during period " (1,333)" Less: amortization of prior service cost included in net periodic pension cost 133 " (3,333)" "Other comprehensive income, before tax" " 22,666 " 6 [Income tax expense related to items of other comprehensive income " (5,666)" ] ] "[Other comprehensive income, net of tax" " 17,000" ] [Comprehensive income " 80,600 " ] Less: comprehensive income attributable to the noncontrolling interest " (16,120)" Comprehensive income attributable to Entity XYZ shareholders " $64,480 " (a) "It is assumed that there was no sale or liquidation of an investment in a foreign entity. Therefore, there is no reclassification adjustment for this period." (b) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (current-period gain and reclassification adjustment) in the notes to the financial statements." (c) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (prior service cost and net loss for the defined benefit pension plans less amortization of prior service cost) in the notes to the financial statements."
220-10-55-8A
The following table illustrates disclosure of the tax effects allocated to each component of other comprehensive income in the notes to financial statements for the year ended December 31, 201X.
"Entity XYZ Notes to Financial Statements Year Ended December 31, 201X " Before-Tax Amount Tax (Expense) or Benefit Net-of-Tax Amount Foreign currency translation adjustments " $10,666 " " $(2,666)" " $8,000 " Unrealized gains on debt securities: Unrealized holding gains arising during period " 17,333 " " (4,333)" " 13,000 " Less: reclassification adjustment for gains realized in net income " (2,000)" 500 " (1,500)" Net unrealized gains " 15,333 " " (3,833)" " 11,500 " Defined benefit pension plans: Prior service cost from plan amendment during period " (2,133)" 533 " (1,600)" Less: amortization of prior service cost included in net periodic pension cost 133 (33) 100 Net prior service cost arising during period " (2,000)" 500 " (1,500)" Net loss arising during period " (1,333)" 333 " (1,000)" "Defined benefit pension plans, net" " (3,333)" 833 " (2,500)" Other comprehensive income " $22,666 " " $(5,666)" " $17,000 "
220-10-55-8B
Alternatively, the tax amounts for each component can be presented in the statement in which each component of other comprehensive income is presented.
220-10-55-9
The following illustrates the statements of net income and other comprehensive income for the year ended December 31, 201X, with other comprehensive income components presented net of tax effects.
Entity XYZ Consolidated Statement of Comprehensive Income " Year Ended December 31, 201X" Revenues " $140,000 " Expenses " (65,700)" Other gains and losses " 8,000 " Gains on sale of securities " 2,500 " Income from operations before tax " 125,000 " " 84,800 " Income tax expense " (31,250)" " (21,200)" [Net income " 63,250 " " 63,600 " ] Less: net income attributable to the noncontrolling interest " (12,720)" Net income attributable to Entity XYZ " $50,880 " Earnings per share Basic and diluted 0.46 0.46 (b) "This illustrates the gross display. Alternatively, a net display can be used, with disclosure of the gross amounts (current-period gain and reclassification adjustment) in the notes to the financial statements." (c) "This illustrates the gross display. Alternatively, a net display can be used, with disclosure of the gross amounts (prior service cost and net loss for the defined benefit pension plans less amortization of prior service cost) in the notes to financial statements."
Entity XYZ Statement of Consolidated Comprehensive Income " Year Ended December 31, 201X" Net income " $63,600 " "Other comprehensive income, net of tax:" Foreign currency translation adjustments (a) " 8,000 " Unrealized gains on debt securities: (b) Unrealized holding gains arising during period " $13,000 " Less: reclassification adjustment for gains included in net income " (1,500)" " 11,500 " Defined benefit pension plans: (c) Prior service cost arising during period " (1,600)" Net loss arising during period " (1,000)" Less: amortization of prior service cost included in net periodic pension cost 100 " (2,500)" [Other comprehensive income " 17,000 " ] [ Comprehensive income " 80,600 " ] Less: comprehensive income attributable to the noncontrolling interest " (16,120)" Comprehensive income attributable to Entity XYZ shareholders " $64,480 " (a) "It is assumed that there was no sale or liquidation of an investment in a foreign entity. Therefore, there is no reclassification adjustment for this period." (b) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (current-period gain and reclassification adjustment) in the notes to the financial statements." (c) "This illustrates the gross display of amounts reclassified out of accumulated other comprehensive income. Alternatively, a net display can be used, with disclosure of the gross amounts (prior service cost and net loss for the defined benefit pension plans less amortization of prior service cost) in the notes to the financial statements."
220-10-55-10A
The following table illustrates the presentation of accumulated other comprehensive income in the statement of financial position, as discussed in paragraph 220-10-45-14.
Entity XYZ Consolidated Statement of Financial Position " December 31, 201X" Assets: Cash " $150,000 " Accounts receivable " 175,000 " Available-for-sale debt securities " 112,000 " Plant and equipment " 985,000 " Total assets " $1,422,000 " Liabilities: Accounts payable " $112,500 " Accrued liabilities " 78,583 " " 78,233 " Liability for pension benefits " 130,667 " Notes payable " 318,500 " Total liabilities " $640,250 " " $639,900 " Equity: Common stock " $200,000 " Paid-in capital " 400,000 " Retained earnings " 141,750 " " 111,680 " [ Accumulated other comprehensive income " 40,000 " " 32,000 " ] Total Entity XYZ shareholders' equity " 743,680 " Noncontrolling interest " 38,420 " Total equity " 781,750 " " 782,100 " Total liabilities and equity " $1,422,000 "
220-10-55-11
The following table illustrates the presentation of accumulated other comprehensive income in the statement of changes in equity for the year ended December 31, 201X, as discussed in paragraph 220-10-45-14.
Entity XYZ Consolidated Statement of Changes in Equity " Year Ended December 31, 201X" Total Comprehensive Income (a) "Retained Earnings" Accumulated Other Comprehensive Income Common Stock Paid-in Capital Noncontrolling Interest Beginning balance " $561,500 " " $88,500 " " $70,800 " " $23,000 " " $18,400 " " $150,000 " " $300,000 " " $22,300 " Net income " 63,250 " " 63,600 " [ " $63,250 " " 63,250 " " 50,880 " " 12,720 " Other comprehensive income " 17,000 " " 17,000 " " 17,000 " " 13,600 " " 3,400 " Common stock issued " 150,000 " " 50,000 " " 100,000 " Dividends declared on common stock " (10,000)" " (10,000)" Ending balance " $781,750 " " $782,100 " " $141,750 " " $111,680 " " $40,000 " " $32,000 " " $200,000 " " $400,000 " " $38,420 "
220-10-55-12
The following table illustrates the statement of changes in equity for the year ended December 31, 201X, as discussed in paragraph 220-10-45-14.
Entity XYZ Consolidated Statement of Changes in Equity " Year Ended December 31, 201X" Retained earnings Balance at January 1 " $70,800 " Net income attributable to Entity XYZ " 50,880 " Dividends declared on common stock " (10,000)" Balance at December 31 " 111,680 " Accumulated other comprehensive income Balance at January 1 " 18,400 " Other comprehensive income " 13,600 " Balance at December 31 " 32,000 " Common stock Balance at January 1 " 150,000 " Shares issued " 50,000 " Balance at December 31 " 200,000 " Paid-in capital Balance at January 1 " 300,000 " Common stock issued " 100,000 " Balance at December 31 " 400,000 " Total Entity XYZ Shareholders' Equity " 743,680 " Noncontrolling interest Balance at January 1 " 22,300 " Net income attributable to noncontrolling interest " 12,720 " OCI attributable to noncontrolling interest " 3,400 " Balance at December 31 " 38,420 " Total equity " $782,100 "
220-10-55-15
The following table illustrates the disclosure of changes in the balances of each component of accumulated other comprehensive income, as required by paragraph 220-10-45-14A. The amounts in this illustration correspond to the amounts in the Example in paragraph 220-10-55-17E and demonstrate the relationship between the requirements in paragraph 220-10-45-14A and the requirements in paragraph 220-10-50-6 for this entity.
Entity XYZ Notes to Financial Statements Changes in Accumulated Other Comprehensive Income by Component (a) "For the Period Ended December 31, 201X" Gains and Losses on Cash Flow Hedges Unrealized Gains and Losses on Available-for-Sale Securities Defined Benefit Pension Items Foreign Currency Items Total Beginning balance " $(1,200)" " $1,000 " " $(8,800)" " $1,300 " " $(7,700)" "Other comprehensive income before reclassifications" " 3,000 " " 2,500 " " (3,000)" " 1,000 " " 3,500 " "Amounts reclassified from accumulated other comprehensive income" (750) " (1,500)" " 4,500 " - " 2,250 " "Net current-period other comprehensive income" " 2,250 " " 1,000 " " 1,500 " " 1,000 " " 5,750 " Ending balance " $1,050 " " $2,000 " " $(7,300)" " $2,300 " " $(1,950)" (a) All amounts are net of tax. Amounts in parentheses indicate debits.
220-10-55-15A
The following table illustrates the disclosure of changes in the balances of each component of accumulated other comprehensive income, as required by paragraph 220-10-45-14A. The amounts in this illustration correspond to the amounts in the Example in paragraph 220-10-55-17F.
Entity ABC Notes to Financial Statements Changes in Accumulated Other Comprehensive Income by Component (a) "For the Period Ended December 31, 201X" Gains and Losses on Cash Flow Hedges Unrealized Gains and Losses on Available-for-Sale Debt Securities Total Beginning balance " $(5,000)" " $8,000 " " $3,000 " "Other comprehensive income before reclassifications" " 7,000 " " 8,000 " " 15,000 " "Amounts reclassified from accumulated other comprehensive income " " (2,250)" " (3,000)" " (5,250)" "Net current-period other comprehensive income" " 4,750 " " 5,000 " " 9,750 " Ending balance $(250) " $13,000 " " $12,750 " (a) All amounts are net of tax. Amounts in parentheses indicate debits.
220-10-55-15B
The presentation of unrealized gains and losses on available-for-sale debt securities illustrated in paragraphs 220-10-55-15 through 55-15A is aggregated for simplicity and, therefore, does not necessarily comply with all of the disclosures that may be required in Topic 320 or 326 (for example, disclosures about available-for-sale debt securities with an allowance for credit losses in paragraph 326-30-45-2).
220-10-55-15C
For life insurers, amounts reclassified out of accumulated other comprehensive income exclude changes in unrealized gains and losses on available-for-sale debt securities associated with direct adjustments made to policy liabilities necessary to reflect these balances as if such unrealized gains and losses were realized.
220-10-55-16
Alternatively, the changes in the balances of each component of other comprehensive income included in accumulated other comprehensive income can be presented as a reconciliation in a statement of changes in equity.
220-10-55-17A
The effect of reclassifications on the line items in the statement in which net income is presented, as described in paragraph 220-10-45-17, should be presented on either a before-tax basis or a net-of-tax basis consistent with the entity's method of presentation for the line items in the statement where net income is presented. In either case, the total for this disclosure should agree with the total amount of reclassifications for each component of comprehensive income that complies with the presentation requirements in paragraph 220-10-45-14A. The illustration in paragraph 220-10-55-17E presents the effect of reclassifications on the line items of net income on a before-tax basis, but it also shows totals for each component, which agree with the ending balances presented in paragraph 220-10-55-15, which is on an after-tax basis.
220-10-55-17B
An entity with significant defined benefit pension costs reclassified out of accumulated other comprehensive income should identify the amount of each pension cost component reclassified out of accumulated other comprehensive income and make reference to the relevant pension cost disclosure that provides greater detail about these reclassifications.
220-10-55-17C
A life insurer may make adjustments to unrealized gains and losses on available-for-sale debt securities for the effect on relevant assets and liabilities (as specified in paragraph 320-10-S99-2 for public entities) as if the unrealized gains and losses had been realized. In such cases, the life insurer should cross-reference to the related notes.
220-10-55-17D
Some entities may not have a separate line item for realized gains/(losses) on the sale of securities and, instead, will include this amount as part of another line item, for example, other income/(expense).
220-10-55-17E
The following illustrates a disclosure in a tabular format of significant amounts reclassified out of each component of accumulated other comprehensive income, as required by paragraph 220-10-50-6. The amounts used in this Example correspond to those in the Example in paragraph 220-10-55-15.
Entity XYZ Notes to Financial Statements Reclassifications Out of Accumulated Other Comprehensive Income (a) "For the Period Ended December 31, 201X" "Details about Accumulated Other Comprehensive Income Components" Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the Statement Where Net Income Is Presented Gains and losses on cash flow hedges Interest rate contracts " $1,000 " Interest income/(expense) Credit derivatives (500) Other income/(expense) Foreign exchange contracts " 2,500 " Sales/revenue Commodity contracts " (2,000)" Cost of sales " 1,000 " Total before tax (250) Tax (expense) or benefit $750 Net of tax "Unrealized gains and losses on available-for-sale debt securities" " $2,300 " "Realized gain/(loss) on sale of securities" (285) Impairment expense Insignificant items (15) " 2,000 " Total before tax (500) Tax (expense) or benefit " $1,500 " Net of tax Amortization of defined benefit pension items Prior-service costs " $(2,000)" (b) Other income/(expense) Transition obligation " (2,500)" (b) Other income/(expense) Actuarial gains/(losses) " (1,500)" (b) Other income/(expense) " (6,000)" Total before tax " 1,500 " Tax (expense) or benefit " $(4,500)" Net of tax Total reclassifications for the period " $(2,250)" Net of tax (a) Amounts in parentheses indicate debits to profit/loss. (b) These accumulated other comprehensive income components are components of net periodic pension cost (see pension note for additional details).
220-10-55-17F
The following illustrates presentation of the effect on certain line items of net income of significant amounts reclassified out of each component of accumulated other comprehensive income, as required by paragraph 220-10-45-17A. The amounts in this Example agree with the amounts in the Example in paragraph 220-10-55-15A. This presentation should only be used if all significant reclassifications out of accumulated other comprehensive income are reclassified to net income in their entirety in the same reporting period.
Entity ABC Statement of Income "For the Period Ended December 31, 201X" "Revenues (includes $4,000 accumulated other comprehensive income reclassifications for net gains on cash flow hedges)" " $122,500 " "Expenses (includes ($1,000) accumulated other comprehensive income reclassifications for net losses on cash flow hedges) " " (32,000)" Other gains and losses " 5,000 " "Gain on sale of securities (includes $4,000 accumulated other comprehensive income reclassifications for unrealized net gains on available-for-sale debt securities) " " 4,000 " Income from operations before tax " 99,500 " "Income tax expense (includes ($1,750) income tax expense from reclassification items)" " (24,875)" Net income " $74,625 "
220-10-55-18
This Subtopic requires that an entity determine reclassification adjustments for each component of other comprehensive income. An entity may present those adjustments out of accumulated other comprehensive income on the face of the statement in which other comprehensive income is presented, or it may disclose reclassification adjustments in the notes to the financial statements. Paragraphs provide the guidance on reclassification adjustments. Example 1 (paragraphs ) illustrates the reclassification presentation relating to unrealized gains or losses on securities and amortized prior service costs.
220-10-55-19
The following Case illustrates the calculation of reclassification adjustments for available-for-sale debt securities under paragraphs . It is intended as an illustration only; it does not represent an actual situation:
- a
- bAvailable-for-sale debt securities (Case B).
220-10-55-20
Case B involves a nonpublic entity that follows the practice of recognizing all unrealized gains and losses on available-for-sale debt securities in other comprehensive income before recognizing them as realized gains and losses in net income. Therefore, the before-tax amount of the reclassification adjustment recognized in other comprehensive income is equal to, but opposite in sign from, the amount of the realized gain or loss recognized in net income.
220-10-55-24
The available-for-sale interest-bearing debt securities (bonds) in this Case were purchased at a premium to yield 6.5 percent. Interest income is included in net income based on the historical yield, and the bonds decline in fair value during the first two years in which they are held.
220-10-55-25
On December 31, 1995, registration of Micki Inc.'s 8-year, 8 percent debentures, interest payable annually, became effective and the entire issue of $10,000,000 was sold at par immediately. At the end of each of the next four years, the closing prices and the related market interest rates to maturity were as follows.
December 31 Price ($000) Yield (%) 1996 $102.6 7.5 1997 107.3 6.5 1998 96.1 9.0 1999 92.2 10.5
220-10-55-26
On December 31, 1997, Entity purchased $1,000,000 of Micki Inc.'s bonds on the open market at 107.3 and classified them as available for sale. Entity continued to hold the bonds until December 31, 1999, at which time they were sold at 92.2. Entity prepared the following schedules in relation to the bonds.
Cost-Based Carrying Amount, Interest Income, and Premium Amortization (a) (b) (c) (d) (e) Beginning Cash Interest Interest Premium Ending Carrying Received Income Amortization Carrying Year Value [8% × par] [(a) × 6.5%] [(b) - (c)] Value [(a) - (d)] 1997 $1,073,000 1998 $1,073,000 $80,000 $69,745 $10,255 1,062,745 1999 1,062,745 80,000 69,078 10,922 1,051,823
Calculation of Before-Tax Holding Loss (a) (b) (c) (d) (e) Year Ended Ending Change Holding Ended Carrying Fair in Fair Premium Loss 31-Dec Value Value Value Amortization [(c) + (d)] 1997 $1,073,000 $1,073,000 $- 1998 1,062,745 961,000 (112,000) $10,255 $(101,745) 1999 1,051,823 922,000 (39,000) 10,922 (28,078)
Net-of-Tax Holding Losses (Assume a Tax Rate of 30 Percent) Before Tax Income Tax Net of Tax Holding losses recognized in other comprehensive income: Year ended December 31, 1998 $(101,745) $30,523 $(71,222) Year ended December 31, 1999 (28,078) 8,423 (19,655) Total loss $(129,823) $38,946 $(90,877)
Amounts Reported in Net Income and Other Comprehensive Income for the Years Ended December 31, 1998 and December 31, 1999 1998 1999 Net income: Interest income $69,745 $69,078 Loss on sale of bonds (129,823) Income tax (expense) benefit (20,923) 18,223 Amounts realized in net income 48,822 (42,522) Other comprehensive income: Holding loss arising during period, net of tax (71,222) (19,655) Reclassification adjustment, net of tax 90,877 Net (loss) gain recognized in other comprehensive income (71,222) 71,222 Total impact on comprehensive income $(22,400) $28,700
220-10-55-27
The following before-tax entries would be made to record the purchase, accrue interest (using the effective interest method based on cost), recognize the change in fair value, and record the sale.
December 31, 1997: Investment in bonds $1,073,000 Cash $1,073,000 To record purchase of bond December 31, 1998: Cash 80,000 Investment in bonds 10,255 Interest income (to earnings) 69,745 To record interest income on the bond, amortize the premium, and record cash received Unrealized holding loss (to other comprehensive income) 101,745 Investment in bonds 101,745 To adjust carrying amount of bond to fair value Accumulated other comprehensive income 101,745 Unrealized holding loss 101,745 Interest income 69,745 Retained earnings 69,745 To close nominal accounts to real accounts at year-end December 31, 1999: Cash 80,000 Investment in bonds 10,922 Interest income (to earnings) 69,078 To record interest income on the bond, amortize the premium, and record cash received Unrealized holding loss (to other comprehensive income) 28,078 Investment in bonds 28,078 To adjust carrying amount of bond to fair value Accumulated other comprehensive income 28,078 Unrealized holding loss 28,078 To close nominal account to real account at year-end Cash 922,000 Loss on sale of securities (to earnings) 129,823 Investment in bonds 922,000 Reclassification adjustment (to other comprehensive income) 129,823 To record sale of bond Reclassification adjustment 129,823 Accumulated other comprehensive income 129,823 Retained earnings 60,745 Interest income 69,078 Loss on sale of securities 129,823 To close nominal accounts to real accounts at year-end
220-10-65Transition and Open Effective Date Information
Source downloaded: .Record version 1a82faf1d8d5. Effective date must be checked in the source.
220-10-65-1
Paragraph superseded on 06/17/2013 after the end of the transition period stated in Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.
220-10-65-2
Paragraph superseded on 06/17/2013 after the end of the transition period stated in Accounting Standards Update No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.
220-10-65-3
Paragraph superseded on 06/26/2015 after the end of the transition period stated in Accounting Standards Update No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.
220-10-65-4
Paragraph superseded on 07/20/2020 after the end of the transition period stated in Accounting Standards Update No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
220-10-S00StatusSEC
Source downloaded: .Record version ec54fb5bfd77. Effective date must be checked in the source.
220-10-S00-1
The following table identifies the changes made to this Subtopic.
| Paragraph | Action | Accounting Standards Update | Date |
| 220-10-S15-1 | Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 |
| 220-10-S25-1 | Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 |
| 220-10-S25-2 | Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 |
| 220-10-S30-1 | Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 |
| Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 | |
| 220-10-S50-1 | Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 |
| 220-10-S99-1 | Amended | Accounting Standards Update No. 2019-07 | 07/26/2019 |
| Added | Maintenance Update 2017-19 (PDF) | 11/15/2017 | |
| 220-10-S99-2 | Amended | Accounting Standards Update No. 2019-07 | 07/26/2019 |
| 220-10-S99-4 | Amended | Accounting Standards Update No. 2023-03 | 07/14/2023 |
| 220-10-S99-5 | Amended | Accounting Standards Update No. 2023-03 | 07/14/2023 |
| 220-10-S99-7 | Amended | Accounting Standards Update No. 2017-14 | 11/22/2017 |
220-10-S15ScopeSEC
Source downloaded: .Record version f35501a04e82. Effective date must be checked in the source.
Entities
220-10-S15-1
See paragraph 205-10-S99-5, Regulation S-X Rule 5-01, for entities to which this Subtopic applies.
220-10-S25RecognitionSEC
Source downloaded: .Record version 8e71aadc67bf. Effective date must be checked in the source.
Allocation of Expenses
220-10-S25-1
See paragraph 220-10-S99-3, SAB Topic 1.B.1, Questions 1 and 4, for SEC Staff views on the allocation of expenses from a parent to its subsidiary for purposes of preparing separate financial statements.
220-10-S25-2
See paragraph 220-10-S99-4, SAB Topic 5.T, for SEC Staff views on the recognition of expenses paid by principal stockholders.
220-10-S30Initial MeasurementSEC
Source downloaded: .Record version d3245b542abb. Effective date must be checked in the source.
Allocation of Expenses
220-10-S30-1
See paragraph 220-10-S99-3, SAB Topic 1.B.1, Questions 2 and 3, for SEC Staff views on the measurement of expenses allocated from a parent to its subsidiary for purposes of preparing separate financial statements.
220-10-S45Other PresentationSEC
Source downloaded: .Record version 787d8bba738f. Effective date must be checked in the source.
General Requirements
220-10-S45-1
See paragraph 220-10-S99-1, Regulation S-X Rule 3-03, for the instructions to income statement requirements.
Format
220-10-S45-2
See paragraph 220-10-S99-2, Regulation S-X Rule 5-03, for requirements pertaining to the presentation and classification of various items within the income statement.
220-10-S45-3
See paragraph 220-10-S99-3, SAB Topic 1.B.1, Question 1, for SEC Staff views on the presentation of expenses allocated from a parent to its subsidiary for purposes of preparing separate financial statements.
220-10-S45-4
See paragraph 505-10-S99-5, SAB Topic 4.F, for SEC Staff views on the income statement presentation for limited partnerships.
220-10-S45-5
See paragraph 220-10-S99-6, SAB Topic 7.D, for SEC Staff views on the presentation of income before depreciation and depletion in the income statement.
220-10-S45-6
See paragraph 220-10-S99-8, SAB Topic 11.B, for SEC Staff views on excluding depreciation and depletion from cost of sales for purposes of the income statement.
Income or Loss Applicable to Common Stock
220-10-S45-7
See paragraph 220-10-S99-5, SAB Topic 6.B, for SEC Staff views on income statement presentation when the registrant has preferred stock dividends.
Classification of Operating Subsidies
220-10-S45-8
See paragraph 220-10-S99-7, SAB Topic 11.A, for SEC Staff views on presentation of operating subsidies within the income statement.
220-10-S50DisclosureSEC
Source downloaded: .Record version bccb728be7a6. Effective date must be checked in the source.
Allocation of Expenses
220-10-S50-1
See paragraph 220-10-S99-3, SAB Topic 1.B.1, Questions 2 through 4, for SEC Staff views on disclosure requirements when expenses are allocated from a parent to its subsidiary for the purposes of preparing separate financial statements.
220-10-S99SEC MaterialsSEC
Source downloaded: .Record version 738c0a564101. Effective date must be checked in the source.
SEC Rules, Regulations, and Interpretations
220-10-S99-1
The following is the text of Regulation S-X Rule 3-03, Instructions to Statement of Comprehensive Income Requirements (17 CFR 210.3-03).
- (a) The statements required shall be prepared in compliance with the applicable requirements of this regulation.
- (b) If the registrant is engaged primarily (1) in the generation, transmission or distribution of electricity, the manufacture, mixing, transmission or distribution of gas, the supplying or distribution of water, or the furnishing of telephone or telegraph service; or (2) in holding securities of companies engaged in such businesses, it may at its option include statements of comprehensive income and cash flows (which may be unaudited) for the twelve-month period ending on the date of the most recent balance sheet being filed, in lieu of the statements of comprehensive income and cash flows for the interim periods specified.
- (c) If a period or periods reported on include operations of a business prior to the date of acquisition, or for other reasons differ from reports previously issued for any period, the statements shall be reconciled as to sales or revenues and net income in the statement or in a note thereto with the amounts previously reported: Provided, however, That such reconciliations need not be made (1) if they have been made in filings with the Commission in prior years or (2) the financial statements which are being retroactively adjusted have not previously been filed with the Commission or otherwise made public.
- (d) Any unaudited interim financial statements furnished shall reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. A statement to that effect shall be included. If all such adjustments are of a normal recurring nature, a statement to that effect shall be made; otherwise, there shall be furnished information describing in appropriate detail the nature and amount of any adjustments other than normal recurring adjustments entering into the determination of the results shown.
- [45 FR 63687, Sept. 25, 1980. Redesignated at 47 FR 29836, July 9, 1982, and amended at 50 FR 25215, June 18, 1985; 50 FR 49532, Dec. 3, 1985; 57 FR 45292, Oct. 1, 1992; 64 FR 1734, Jan 12, 1999; 83 FR 50199, Oct. 4, 2018].
220-10-S99-2
The following is the text of Regulation S-X Rule 5-03, Statements of Comprehensive Income (17 CFR 210.5-03).
- (a) The purpose of this rule is to indicate the various line items which, if applicable, and except as otherwise permitted by the Commission, should appear on the face of the statements of comprehensive income filed for the persons to whom this article pertains (see § 210.4-01(a)).
- (b) If income is derived from more than one of the subcaptions described under § 210.5-03.1, each class which is not more than 10 percent of the sum of the items may be combined with another class. If these items are combined, related costs and expenses as described under § 210.5-03.2 shall be combined in the same manner.
- 1. Net sales and gross revenues. State separately:
- (a) Net sales of tangible products (gross sales less discounts, returns and allowances),
- (b) operating revenues of public utilities or others;
- (c) income from rentals;
- (d) revenues from services; and
- (e) other revenues.
- Amounts earned from transactions with related parties shall be disclosed as required under § 210.4-08(k).
- A public utility company using a uniform system of accounts or a form for annual report prescribed by federal or state authorities, or a similar system or report, shall follow the general segregation of operating revenues and operating expenses reported under § 210.5-03.2 prescribed by such system or report.
- If the total of sales and revenues reported under this caption includes excise taxes in an amount equal to 1 percent or more of such total, the amount of such excise taxes shall be shown on the face of the statement parenthetically or otherwise.
- 2. Costs and expenses applicable to sales and revenues.
- State separately the amount of
- (a) cost of tangible goods sold,
- (b) operating expenses of public utilities or others,
- (c) expenses applicable to rental income,
- (d) cost of services, and
- (e) expenses applicable to other revenues.
- Merchandising organizations, both wholesale and retail, may include occupancy and buying costs under caption 2(a). Amounts of costs and expenses incurred from transactions with related parties shall be disclosed as required under § 210.4-08(k).
- 3. Other operating costs and expenses. State separately any material amounts not included under caption 2 above.
- 4. Selling, general and administrative expenses.
- 5. Provision for doubtful accounts and notes.
- 6. Other general expenses. Include items not normally included in caption 4 above. State separately any material item.
- 7. Non-operating income.
- State separately in the statement of comprehensive income or in a note thereto amounts earned from
- (a) dividends,
- (b) interest on securities,
- (c) profits on securities (net of losses), and
- (d) miscellaneous other income.
- Amounts earned from transactions in securities of related parties shall be disclosed as required under § 210.4-08(k). Material amounts included under miscellaneous other income shall be separately stated in the statement of comprehensive income or in a note thereto, indicating clearly the nature of the transactions out of which the items arose.
- 8. Interest and amortization of debt discount and expense.
- 9. Non-operating expenses.
- State separately in the statement of comprehensive income or in a note thereto amounts of
- (a) losses on securities (net of profits) and
- (b) miscellaneous income deductions.
- Material amounts included under miscellaneous income deductions shall be separately stated in the statement of comprehensive income or in a note thereto, indicating clearly the nature of the transactions out of which the items arose.
- 10. Income or loss before income tax expense and appropriate items below.
- 11. Income tax expense. Include under this caption only taxes based on income (see § 210.4-08(h)).
- 12. Equity in earnings of unconsolidated subsidiaries and 50 percent or less owned persons. State, parenthetically or in a note, the amount of dividends received from such persons. If justified by the circumstances, this item may be presented in a different position and a different manner (see § 210.4-01(a)).
- 13. Income or loss from continuing operations.
- 14. Discontinued operations.
- 15-17. [Reserved]
- 18. Net income or loss.
- 19. Net income attributable to the noncontrolling interest.
- 20. Net income attributable to the controlling interest.
- 21. Other comprehensive income.
- State separately the components of and the total for other comprehensive income. Present the components either net of related tax effects or before related tax effects with one amount shown for the aggregate income tax expense or benefit. State the amount of income tax expense or benefit allocated to each component, including reclassification adjustments, in the statement of comprehensive income or in a note.
- 22. Comprehensive income.
- 23. Comprehensive income attributable to the noncontrolling interest.
- 24. Comprehensive income attributable to the controlling interest.
- 25. Earnings per share data.
- [45 FR 63671, Sept. 25, 1980, as amended at 45 FR 76977, Nov. 21, 1980; 50 FR 25215, June 18, 1985; 74 FR 18615, Apr. 23, 2009; 83 FR 50202, Oct. 4, 2018]
SEC Staff Guidance
220-10-S99-3
The following is the text of SAB Topic 1.B.1, Costs Reflected in Historical Income Statements.
- Facts: A company (the registrant) operates as a subsidiary of another company (parent). Certain expenses incurred by the parent on behalf of the subsidiary have not been charged to the subsidiary in the past. The subsidiary files a registration statement under the Securities Act of 1933 in connection with an initial public offering.
- Question 1: Should the subsidiary's historical income statements reflect all of the expenses that the parent incurred on its behalf?
- Interpretive Response: In general, the staff believes that the historical income statements of a registrant should reflect all of its costs of doing business. Therefore, in specific situations, the staff has required the subsidiary to revise its financial statements to include certain expenses incurred by the parent on its behalf. Examples of such expenses may include, but are not necessarily limited to, the following (income taxes and interest are discussed separately below):
- 1. Officer and employee salaries,
- 2. Rent or depreciation,
- 3. Advertising,
- 4. Accounting and legal services, and
- 5. Other selling, general and administrative expenses.
- When the subsidiary's financial statements have been previously reported on by independent accountants and have been used other than for internal purposes, the staff has accepted a presentation that shows income before tax as previously reported, followed by adjustments for expenses not previously allocated, income taxes, and adjusted net income.
- Question 2: How should the amount of expenses incurred on the subsidiary's behalf by its parent be determined, and what disclosure is required in the financial statements?
- Interpretive Response: The staff expects any expenses clearly applicable to the subsidiary to be reflected in its income statements. However, the staff understands that in some situations a reasonable method of allocating common expenses to the subsidiary (e. g., incremental or proportional cost allocation) must be chosen because specific identification of expenses is not practicable.
- In these situations, the staff has required an explanation of the allocation method used in the notes to the financial statements along with management's assertion that the method used is reasonable.
- In addition, since agreements with related parties are by definition not at arms length and may be changed at any time, the staff has required footnote disclosure, when practicable, of management's estimate of what the expenses (other than income taxes and interest discussed separately below) would have been on a stand alone basis, that is, the cost that would have been incurred if the subsidiary had operated as an unaffiliated entity. The disclosure has been presented for each year for which an income statement was required when such basis produced materially different results.
- Question 3: What are the staff's views with respect to the accounting for and disclosure of the subsidiary's income tax expense?
- Interpretive Response: Recently, a number of parent companies have sold interests in subsidiaries, but have retained sufficient ownership interests to permit continued inclusion of the subsidiaries in their consolidated tax returns. The staff believes that it is material to investors to know what the effect on income would have been if the registrant had not been eligible to be included in a consolidated income tax return with its parent.
- Some of these subsidiaries have calculated their tax provision on the separate return basis, which the staff believes is the preferable method. Others, however, have used different allocation methods.
- When the historical income statements in the filing do not reflect the tax provision on the separate return basis, the staff has required a pro forma income statement for the most recent year and interim period reflecting a tax provision calculated on the separate return basis.FN1
- FN1 Paragraph 40 of Statement 109 [paragraph 740-10-30-27] states: "The consolidated amount of current and deferred tax expense for a group that files a consolidated tax return shall be allocated among the members of the group when those members issue separate financial statements.... The method adopted... shall be systematic, rational, and consistent with the broad principles established by [Statement 109] [Subtopic 740-10]. A method that allocates current and deferred taxes to members of the group by applying [Statement 109] [Subtopic 740-10] to each member as if it were a separate taxpayer meets those criteria.
- Question 4: Should the historical income statements reflect a charge for interest on intercompany debt if no such charge had been previously provided?
- Interpretive Response: The staff generally believes that financial statements are more useful to investors if they reflect all costs of doing business, including interest costs. Because of the inherent difficulty in distinguishing the elements of a subsidiary's capital structure, the staff has not insisted that the historical income statements include an interest charge on intercompany debt if such a charge was not provided in the past, except when debt specifically related to the operations of the subsidiary and previously carried on the parent's books will henceforth be recorded in the subsidiary's books. In any case, financing arrangements with the parent must be discussed in a note to the financial statements. In this connection, the staff has taken the position that, where an interest charge on intercompany debt has not been provided, appropriate disclosure would include an analysis of the intercompany accounts as well as the average balance due to or from related parties for each period for which an income statement is required. The analysis of the intercompany accounts has taken the form of a listing of transactions (e. g., the allocation of costs to the subsidiary, intercompany purchases, and cash transfers between entities) for each period for which an income statement was required, reconciled to the intercompany accounts reflected in the balance sheets.
220-10-S99-4
The following is the text of SAB Topic 5.T, Accounting for Expenses or Liabilities Paid by Principal Stockholder(s).
- (Replaced by SAB 107).
- Facts: Company X was a defendant in litigation for which the company had not recorded a liability in accordance with FASB ASC Topic 450, Contingencies. A principal stockholder FN34 of the company transfers a portion of his shares to the plaintiff to settle such litigation. If the company had settled the litigation directly, the company would have recorded the settlement as an expense.
- FN34 The FASB ASC Master Glossary defines principal owners as "owners of record or known beneficial owners of more than 10 percent of the voting interests of the enterprise."
- Question: Must the settlement be reflected as an expense in the company's financial statements, and if so, how?
- Interpretive Response: Yes. The value of the shares transferred should be reflected as an expense in the company's financial statements with a corresponding credit to contributed (paid-in) capital.
- The staff believes that such a transaction is similar to those described in FASB ASC paragraph 718-10-15-4 (Compensation—Stock Compensation Topic), which states that "share-based payments awarded to a grantee by a related party or other holder of an economic interest FN35 in the entity as compensation for goods or services provided to the reporting entity are share-based payment transactions to be accounted for under this Topic unless the transfer is clearly for a purpose other than compensation for goods or services to the reporting entity." As explained in this paragraph, the substance of such a transaction is that the economic interest holder makes a capital contribution to the reporting entity, and the reporting entity makes a share-based payment to its grantee in exchange for goods or services provided to the reporting entity.
- FN35 The FASB ASC Master Glossary defines an economic interest in an entity as "any type or form of pecuniary interest or arrangement that an entity could issue or be a party to, including equity securities; financial instruments with characteristics of equity, liabilities or both; long-term debt and other debt-financing arrangements; leases; and contractual arrangements such as management contracts, service contracts, or intellectual property licenses." Accordingly, a principal stockholder would be considered a holder of an economic interest in an entity.
- The staff believes that the problem of separating the benefit to the principal stockholder from the benefit to the company cited in FASB ASC Topic 718 is not limited to transactions involving stock compensation. Therefore, similar accounting is required in this and otherFN36 transactions where a principal stockholder pays an expense for the company, unless the stockholder's action is caused by a relationship or obligation completely unrelated to his position as a stockholder or such action clearly does not benefit the company.
- FN36 For example, SAB Topic 1.B indicates that the separate financial statements of a subsidiary should reflect any costs of its operations which are incurred by the parent on its behalf. Additionally, the staff notes that AICPA Technical Practice Aids §4160 also indicates that the payment by principal stockholders of a company's debt should be accounted for as a capital contribution.
- Some registrants and their accountants have taken the position that since FASB ASC Topic 850, Related Party Disclosures, applies to these transactions and requires only the disclosure of material related party transactions, the staff should not analogize to the accounting called for by FASB ASC paragraph 718-10-15-4 for transactions other than those specifically covered by it. The staff notes, however, that FASB ASC Topic 850 does not address the measurement of related party transactions and that, as a result, such transactions are generally recorded at the amounts indicated by their terms. FN37 However, the staff believes that transactions of the type described above differ from the typical related party transactions.
- FN37 However, in some circumstances it is necessary to reflect, either in the historical financial statements or a pro forma presentation (depending on the circumstances), related party transactions at amounts other than those indicated by their terms. Two such circumstances are addressed in Staff Accounting Bulletin Topic 1.B.1, Questions 3 and 4. Another example is where the terms of a material contract with a related party are expected to change upon the completion of an offering (i.e., the principal shareholder requires payment for services which had previously been contributed by the shareholder to the company).
- The transactions for which FASB ASC Topic 850 requires disclosure generally are those in which a company receives goods or services directly from, or provides goods or services directly to, a related party, and the form and terms of such transactions may be structured to produce either a direct or indirect benefit to the related party. The participation of a related party in such a transaction negates the presumption that transactions reflected in the financial statements have been consummated at arm's length. Disclosure is therefore required to compensate for the fact that, due to the related party's involvement, the terms of the transaction may produce an accounting measurement for which a more faithful measurement may not be determinable.
- However, transactions of the type discussed in the facts given do not have such problems of measurement and appear to be transacted to provide a benefit to the stockholder through the enhancement or maintenance of the value of the stockholder's investment. The staff believes that the substance of such transactions is the payment of an expense of the company through contributions by the stockholder. Therefore, the staff believes it would be inappropriate to account for such transactions according to the form of the transaction.
220-10-S99-5
The following is the text of SAB Topic 6.B, Accounting Series Release 280—General Revision Of Regulation S-X: Income Or Loss Applicable To Common Stock.
- Facts: A registrant has various classes of preferred stock. Dividends on those preferred stocks and accretions of their carrying amounts cause income applicable to common stock to be less than reported net income.
- Question: In ASR 280, the Commission stated that although it had determined not to mandate presentation of income or loss applicable to common stock in all cases, it believes that disclosure of that amount is of value in certain situations. In what situations should the amount be reported, where should it be reported, and how should it be computed?
- Interpretive Response: Income or loss applicable to common stock should be reported on the face of the income statement FN1 when it is materially different in quantitative terms from reported net income or loss FN2 or when it is indicative of significant trends or other qualitative considerations. The amount to be reported should be computed for each period as net income or loss less: (a) dividends on preferred stock, including undeclared or unpaid dividends if cumulative; and (b) periodic increases in the carrying amounts of instruments reported as redeemable preferred stock (as discussed in Topic 3.C) or increasing rate preferred stock (as discussed in Topic 5.Q).
- FN1 When a registrant reports net income and total comprehensive income in one continuous financial statement, the registrant must continue to follow the guidance set forth in the SAB Topic. One approach may be to provide a separate reconciliation of net income to income available to common stock below comprehensive income reported on a statement of income and comprehensive income.
- FN2 The assessment of materiality is the responsibility of each registrant. However, absent concerns about trends or other qualitative considerations, the staff generally will not insist on the reporting of income or loss applicable to common stock if the amount differs from net income or loss by less than ten percent.
220-10-S99-6
The following is the text of SAB Topic 7.D, Income Before Depreciation.
- Facts: Occasionally an income statement format will contain a subtitle or caption titled "Income before depreciation and depletion."
- Question: Is this caption appropriate?
- Interpretive Response: The staff objects to this presentation because in the staff's view the presentation may suggest to the reader that the amount so captioned represents cash flow for the period, which is rarely the case (see ASR 142).
220-10-S99-7
The following is the text of SAB Topic 11.A, Operating-Differential Subsidies.
- Facts: Company A has received an operating-differential subsidy pursuant to the Merchant Marine Act of 1936, as amended.
- Question: How should such subsidies be displayed in the statement of comprehensive income?
- Interpretive Response: Revenue representing an operating-differential subsidy under the Merchant Marine Act of 1936, as amended, must be set forth as a separate line item in the statement of comprehensive income either under a revenue caption presented separately from revenue from contracts with customers accounted for under ASC Topic 606 or as credit in the costs and expenses section.
220-10-S99-8
The following is the text of SAB Topic 11.B, Depreciation and Depletion Excluded from Cost of Sales.
- Facts: Company B excludes depreciation and depletion from cost of sales in its income statement.
- Question: How should this exclusion be disclosed?
- Interpretive Response: If cost of sales or operating expenses exclude charges for depreciation, depletion and amortization of property, plant and equipment, the description of the line item should read somewhat as follows: "Cost of goods sold (exclusive of items shown separately below)" or "Cost of goods sold (exclusive of depreciation shown separately below)." To avoid placing undue emphasis on "cash flow," depreciation, depletion and amortization should not be positioned in the income statement in a manner which results in reporting a figure for income before depreciation.