Chapter 6

STATEMENT OF COMPREHENSIVE INCOME

Definition
Comprehensive income is change in equity during period resulting
mula sa transactions at other events, maliban sa changes sa
trasnsactions with owners in their capacity as owners.
Old term sya ng income statement.
Ang statement of comprehensive income statement and other
comprehensive income.
Shows the financial performance of the entity
Consists of revenue and expenses

Accordingly, comprehensive income includes the following:

1. Components of profit or loss

2. Components of other comprehensive income

Profit or Loss

Profit or loss is after the deducting the expenses from the total income, excluding
the components of other comprehensive income.

Other comprehensive income

Ang othercomprehensive income ay naglalaman ng items ng income and
expenses, kasama ang reclassification adjustments na hindi ni-recognized sa
profit or loss as required or permitted ng PFRS.

Ang nilalaman ng other comprehensive income ay:

1. Unrealized gain or loss on equity investments na mini-measure at fair value
through other comprehensive income.
2. Unrealized gain or loss on debt investments na mini-measure at fair value
through other comprehensive income.
 3. Gain or loss on foreign translation
4. Revaluation surplus during the year
5. Unrealized gain or losses on hedging (cash flow hedge)
6. Gain or loss sa defined benefit obligations (acturial gains or losses)
7. Gain or loss attributable to credit risk of a financial liability designated at fair
value through profit or loss

Presentation of other comprehensive income (OCI)

Requires entities to group items presented in OCI based on whether they are potentially
reclassifiable to profit or loss subsequently.

The line items for amounts of OCI shall be grouped as follows:

1. OCI that will be reclassified subsequently to profit or loss kung mami-meet
nito ang specific conditions.
a. Gains or losses arising mula sa pagta-translate ng financial statements ng
foreign operations.
b. Effective portion ng gains or losses sa hedging instruments in a cash flow
hedge.
c. Unrealized gains or losses sa debt investment measured at fair value
through OCI.
2. OCI that will not be reclassified subsequently to profit or loss.
a. Unrealized gain or loss on equity investments na mini-measure at fair
value through other comprehensive income.
b. Revaluation surplus. Ang realization ng revaluation surplus ay sa
pamamagitan ng retained earnings.
c. Gain or loss sa defined benefit obligations. Ang remeasurement nito ay
hindi nare-recycled subsequently sa profit or loss pero maaaring mai-
transfer within equity or retained earnings.
d. Gain or loss attributable to credit risk of a financial liability designated at
fair value through profit or loss. Ang gain or loss nito ay maaaring i-recycle
subsequently within equity or retained earnings.
Presentation of comprehensive income
PAS 1, paragraph 81, provides na entity ay may dalawang options sa pagpe-present ng
comprehensive income, namely:

Two-statement approach

a. Ang income statement na nagpapakita ng components ng profit or loss.

b. Ang statement of comprehensive income na nagsisimula sa profit or loss na nasa
income statement plus or minus nag components ng other comprehensive
income.

Single statement approach

Ito ayang pinagsamang statement ng components ng profit or loss at components ng

other comprehensive income sa isang single statement of comprehensive income.

Reclassification adjustments ay amounts na ni- reclassified sa profit or loss in the

current period na ni-recognized sa other comprehensive income ng current or previous
periods.

PAS 1, paragraph 88, provide na ang entity ay dapat na mag-recognize ng lahat ng

items ng income and expenses during a period sa profit or loss maliban lamang kung
may ni- require ang PFRS na iba.

However, ini-specifies ng PAS 8 ang dalawang circumstances, ang correction of errors

at ang effect ng changes in accounting policies na nire-recognize outside ng profit or
loss.

Income statement
Ang income statement ay nagpapakita ng financial performance ng isang entity for a
period of time.
Ang financial performances ng isang entity ay primarily measured in term sa leveling
income na kinita ng entity through effective at efficient na paggamit ng kanilang
resources. Ito ay mas kilala rin as result of operations.

Ang income statement ay nagpe-present ng income, expenses, gains, losses, and net
income or loss na ni- recognized during the period. Ito ay nagpe-present ng indication in
comformity sa PFRS ng result ng profit directed mula sa activities during the period.

Ang income statement ay prepared for a period of time. Meaning, a period ay dapat na
mag-expire bago ang financial statements ng isang entity ay ma-measure properly. It
covers the period, unlike ng statement of financial position which is prepared as of a
given date or particular moment in time.

Usefulness of income statement

Ang information about sa financial performance ng entity (profitability) ay useful sa pag-

predict ng capacity ng entity namakapag-generate ng cash flows mula sa kanilang
existing resources. Ito ay useful din sa pagfo-form ng judgment about sa effectiveness
ng employing additional resources.

Transaction approach
Ang transaction approach ay ang conventional at traditional na approach sa
pagpe-prepare ng income statement in comformity with PFRS.
This approach ng pagco-compute ng net income or loss ay nagrerequire ng
determination kung makano ang na-earned na income during the period at
makanong expenses ang na-incurred nila para makapag-earned ng revenue.
Ito ay ang direct result sa pag-aapply ng principle of matching costs kaya tinawag
din itong matching approach.
This approach has proved na acceptable procedure sap ag-determine ng
income.nag-oofer ito ng detailed presentation ng lahat ng income at expenses na
na-incurred para makapag-earned ng revenue.
Income
The conceptual framework defines income as increase sa economic benefit during the
accounting period in the form of inflow or increase in asset or decrease sa liability na
nagre-result ng increase sa equity ng entity, bukod sa contribution mula sa equity
participants.

Sa madaling salita, ang income ay pagpapasok ng future economic benefit na

nakakadagdag sa equity bukod sa contribution mula sa owners.

Sources of income

Specifically, ang income ay galling sa mga sumusunod na ordinary activities:

a. Pagbebenta ng merchandise sa customers

Ang income mula sa sales ay dapat i-include lahat ng sales sa customers during
the period.
Ang sales return, allowances, and discounts at dapat na i-deduct sa gross sales
para maging net sales.
b. Pagrerender ng services
Income mula sa pagre-render ng services, includes professional fees, media
advertising commissions, admission fees for artistic performance and tuition
fees.
c. Paggamit ng entity resources

Ang income mula sa pagggamit ng entity resources includes rent, interest, royalty at
dividend income.

d. Pagdi-dispose ng resources other than products

Examples ng income mula sa disposal ng resources ay gain on sale of investments,

gain on sale of property, plant and equipment at gain on sale of intangible assets.
Distinction between income and revenue
The definition of income encompasses both revenue and gains.
Technically, ang revenue ay resulta ng ordinary regular activities ng isang
entity at ito referred by a variety of different names including sales, fees,
interest, dividends, royalties and rent.
ang gains ay nagrerepresent ng other items na na-meet ang definition ng
income at hindi resulta ng ordinary course ng regular activities ng isang entity.
Ang sales ng merchandise sa customers at revenue mula sapagre-render ng
services ay ang principal income ng entity.
Ang kinita mula sa paggamit ng entity resources at disposal ng other
resources ay known as other income.
Ang other income ay nagre-represent ng revenue at gains from peripheral or
incidental transactions ng entity.

Expense

Under ng conceptual framework, ang expense ay kabawasan sa

economic benefit during the accounting period in the form of outflow or
decrease sa net asset at increase sa liability na nagreresulta sa pagliit ng
equity, other than sa distribution sa equity participants.
Simply stated, ang expense ay outflow ng future economic benefit na
nagpapaliit ng equity, other than distribution or dividend na binabayad sa
owners.
Specifically, expense include the following:

a. Cost of goods sold or cost of sales

COST OF GOODS SOLD OF AN MERCHANDISING ENTITY
Inventory, beginning xx
Net purchases xx
Goods available for sale xx
LESS: Inventory, ending xx
Cost of goods sold xx
Gross purchases xx
Freight in xx
Total xx
LESS:
purchase return, allowances, and discounts xx
Net purchases xx
 b. Distribution costs or selling expenses
Ang distribution costs or selling expenses ay costs na directly related sa pagbebenta,
pag-aadvertise at pagdedeliver ng goods sa customers.
distribution costs include:
1. Salesmens salaries
2. Sales commissions
3. Traveling and marketing expenses
4. Advertising and publicity expenses
5. Freight out
6. Depreciation of delivery equipment and store equipment

c. Administrative expenses
Ang administrative expenses ay cost ng administering the business. included dito
lahat ng operating expenses na hindi related sa selling at cost of sales.
Administrative expenses include:
1. Doubtful accounts
2. Office salaries and expenses of general executives
3. Office supplies expense
4. Contributions to charity
5. Professional fees
6. Depreciation of office building and office equipment
7. Amortization of intangible assets

d. Other expenses- These are expenses na hindi directly related sa distribution

and administrative function.
Other expenses include:
1. Loss on sales of trading investment
2. Loss on sale of property, plant, and equipment
3. Loss on sale of noncurrent investment
4. Loss on sale of intangible asset
5. Casualty loss from earthquake, typhoon, hurricane, tsunami, flood, fire, storm
surge, and other natural disaster
6. Expropriation loss
 Ang other expenses ay expenses at losses from peripheral or incidental
transction ng isang entity. Ito ay hindi directly related sa primary or principal
operations pero part ng operating activities ng entity.
e. Income tax expense

No more extraordinary items

PAS 1, paragraph 87, specifically mandate na ang entity ay hindi dapat mag-
present ng any items ng income at expenses as extraordinary items sa income
statements or statement of comprehensive income or in the notes.

unusual at infrequent items ng income at expense ay kino-consider na

component of income from continuing operation.

ang expropriation loss at casualty loss mula sa earthquake, typhoon, flood, fire at
iba pang natural disaster ay considered na component ng income from
continuing operations.

Separate disclosure

Sabi sa PAS 1, paragraph 97, kapag ang items ng income at expense ay

material, ang nature at amount nila ay na i-disclosed separately.

Items of income and expense requiring disclosure

a. Writedown of inventory to net realizable value and reversal of such writedown
b. Writedown of property, plant and equipment to recoverable amount and
reversal of such writedown
c. Restructuring of the activities of an entity and reversal of any provision for the
cost of restructuring
d. Disposal of an item of property, plant and equipment
e. Disposal of investment
f. Discontinued operation
g. Litigation settlement
h. Other reversal of provision
Line items
a. Revenue
b. Gain or loss from derecognition of financial asset measured at amortized cost as
required by PFRS 9
c. Finance cost
d. Share of income or loss of associate and joint venture accounted for using the
equity method
 e. Income tax expense
f. Single amount comprising discontinued operations
g. Profit or loss for the period
h. Other comprehensive income
i. Comprehensive income for the period

Ang mga sumusunod ay mga item na dapat i-disclosed sa income statement at

statement of comprehensive income.
a. Profit or loss attributable to noncontrolling interest and owners of the parent.
b. Total comprehensive income attributable to noncontrolling interest and owners of
the parent.

Form of income statement

Functional presentation
Ang functional presentation ay ang traditional at common form ng income
statement
Kilala din ito na cost of goods sold method
This functional presentation ay kina-classify ang expenses according sa function
nito as part ng cost of goods sold, distribution costs, administrative activities, and
other activities.
Ang entity na nagka-classifying expenses according to their function ay dapat na
mag-disclose ng additional information sa nature ng expenses, including
depreciation, amortization and employee benefit costs.
Natural presentation
This presentation is referred to as the nature of expense method
Under this form, ang expenses ay pinagsasama-sama according sa nature at
hindi ina- allocate among the various function sa loob ng entity.
In other words, ang natural expenses ay hindi na kina-classify as cost of
goods sold, distribution costs, administrative and other activities
Examples of natural expenses
a. Purchases
b. Advertising costs
c. Depreciation
d. Transport costs including freight out and other delivery expenses
Functional income statement
Sample Company
Income Statement
Year Ended December 31, 2015

Net sales xx
Cost of goods sold xx
Gross income xx
Other income xx
Investment income xx
Total income xx
Expenses
Distribution costs xx
Administrative expenses xx
Other expenses xx
Finance cost xx xx
Income before tax xx
Income tax expense xx
Net income xx
Natural income statement
Sample Company
Income Statement
Year Ended December 31, 2015

Net sales xx
Other income xx
Investment income xx
Total income xx
Expenses
Increase in inventory xx
Net purchases xx
Employee benefit costs xx
Sales commission xx
Advertising xx
Supplies expense xx
Delivery expense xx
Depreciation xx
Taxes and licenses xx
Doubtful accounts xx
Other expenses xx
Finance cost xx
Income before tax xx
Income tax expense xx
Net income xx