off topic -- Fasb 158

[abanky]

I couldn't find the correct forum to ask this question, but i knew the people in here would have the answer.

In layman's terms, could someone explain to me "Accumulated Other Comprehensive Income" as described by FASB 158?

It might be thursday or just me, but i just can't grasp the concept... Thank you in advance.

[Guest DBtech]

Here's the technical definition from FAS 130:

Definition of Comprehensive Income

8. Comprehensive income is defined in Concepts Statement 6 as “the change in equity [net

assets] of a business enterprise during a period from transactions and other events and

circumstances from nonowner sources. It includes all changes in equity during a period except

those resulting from investments by owners and distributions to owners” (paragraph 70).

9. In Concepts Statement 5, the Board stated that “a full set of financial statements for a

period should show: Financial position at the end of the period, earnings (net income) for the

period, comprehensive income (total nonowner changes in equity) for the period, cash flows

during the period, and investments by and distributions to owners during the period” (paragraph

13, footnote references omitted). Prior to issuance of this Statement, the Board had neither

required that an enterprise report comprehensive income, nor had it recommended a format for

displaying comprehensive income.

I think of AOCI as a "contra" account offsetting minimum pension liability so that the balance sheet doesn't have to show a reduction in equity--that's the old FAS 132 treatment--I'm pretty sure it serves the same purpose under FAS 158, even though minimum pension liability no longer exists. I believe OCI was originally developed to recognize currency gains and losses realized by multi-national firms.

[Guest flogger]

Prior to FAS158 it was required to book a hit to equity (balance sheet only) if the cumulated charges to the P&L were less than the ABO minus the unrecognized past service liability. 158 says the charge to equity must be taken to the extent that the cumulated charges to the P&L are less then the PBO (no longer the ABO). There is no longer an offset for the unrecognized PSL.