I think a summary of which gains and losses go directly to Shareholder’s Equity of Balance Sheet by bypassing Income Statement under both IFRS and Us GAAP will be beneficial. To make a start: Under both IFRS and US GAAP, gains and losses from securities categorized as “Avalaible for Sale” are recognized in Other Comprehensive Income.
Under both IFRS and US GAAP, gains and losses on hedges classified as ‘Cash Flow’ hedges go to Other Comprehensive Income.
Both of these adjustments will violate clean surplus accounting and require adjustment when doing RI valuation. Under the all current translation method the currency gains or losses hit the BS in equity. In OCI or as a seperate line item in equity??
In OCI. Following is a list of most things that will hit OCI- (1) Gains/Losses on available for sale securities (2) Gains/losses on derivatives qualifying as cash flow hedges (3) Changes in the funded status of pension plans (4) F/X translation adjustments resulting from the all-current method
Guys, there are some particulars we may be missing. Consider: 1. Under IFRS, any forex g/l for AFS debt is recognized in the IS. IFRS forex g/l for equity, as well as GAAP’s treatment of both debt and equity, is recognized in OCI on the Equity Statement. 2. These derivatives recognise THE EFFECTIVE PORTION of g/l in OCI in Equity: Cashflow Hedge, and Net investment in foreign subsidiary. Fair Value Hedge and speculative derivatives are recog. in the IS. ***The portion of the derivative hedge that is not effective for CF and Net Invest in Foreign Sub are recog. in the IS. (Essentially, if the value of your foreign subsid drops $500 and your derivative appreciates $700, 500 in OCI and 200 in the IS) 3. F/X translation from the All-current (aka Translation) method for IFRS during hyperinflationary times is considered a purchasing power parity gain/loss and goes in the IS. This is a SPECIAL CASE of the All-Current Method, normally the CTA is in OCI in Equity. 4. You know how GAAP reports the funded status as the net pension asset, and IFRS includes a bunch of unamortized items (prior service costs, transition liability, and actuarial loss)? Well, GAAP recognizes those too, but in OCI in Equity. 5. What does the clean surplus relation mean? It means this should follow: Retained Earnings at opening + NI - DIV = Retained Earnings at closing. If this doesn’t hold, RI ain’t fun. 6. i am sure there are more…