One comprehensive income statement: Do we need it?

Abstract

There are two ways in which comprehensive income can be disclosed. This can be either in the form of a separate financial statement as required by South Africa’s AC 101 and the International Accounting Standards Committee’s IASI in addition to the traditional statements, or in an expanded income statement. By requiring the preparation of a separate statement of changes in equity, the Accounting Practices Committee (and the LASC) have accorded the new statement equal status to the traditional income statement.

This article examines whether, in the New Zealand experience, users of financial statements support the single statement approach to reporting comprehensive income or whether the needs of users would be better served by two separate statements. The requirement in New’ Zealand, since 1994, to disclose comprehensive income in a separate statement has given users time to become familiar with the concept, enabling them to judge the usefulness of the additional statement approach and to consider the implications of a single integrated comprehensive statement.

There is growing international support for reporting both traditional net income and comprehensive income in one comprehensive income statement. However before this can be achieved, the unresolved issues of definition and format need to be addressed. The authors conclude that to leave comprehensive income as a separate statement is to risk relegating it to the status of little more than an addendum which is barely noticed and most often poorly understood.