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Where does "other comprehensive income" fit into the "chart of accounts"?

09. Mar 2023
7

Hi all,

Both the IFRS and GAAP taxonomy has OCI items listed under the "Statement of comprehensive income", and of course the equivalent "Accumulated OCI" under "Equity" in the "Statement of financial position".

However, in your "Expanded COA" there are no OCI items listed under neither "Expenses by Type" nor "Expenses by Nature", but you do have "Accumulated OCI" listed under "Equity".

I'm curious why this is?

To account for OCI items, I would choose either of these two approaches:

APPROACH 1:
-Account for both "Profit (loss)" items and "OCI" items under Expenses, and then move them to equivalent "Equity" accounts on year end.

APPROACH 2:
-Account for only "Profit (loss)" items under Expenses, and move them to "Retained earnings" under "Equity" on year end.
-Account for "OCI" items to equivalent "Equity" accounts throughout the year.

It looks like your "Expanded COA" only allows for APPROACH 2.

But then again, I'm curious why you wouldn't use APPROACH 1, since I feel it's more clean and also makes reporting "total comprehensive income" more straight-forward?

Submitted by ababjarna on Thu, 03/09/2023 - 19:13

Also, see the following recommendations here on page 6:
https://api.scienceweb.uz/storage/publication_files/2456/5836/63d23cdba9...

"In our opinion, it is advisable to open accounts designed to reflect other total income in the current chart of accounts. This is due to the fact that, in accordance with the requirements of international standards, any result that is reflected in the increase in the assets of private equity holders, in addition to adding additional private capital, is income.

Based on this view, other comprehensive income should first accumulate in accounts opened for other types of comprehensive income. At the end of the reporting period, these income accounts will need to be transferred to the corresponding private equity accounts."

Submitted by Mladek on Thu, 03/09/2023 - 21:57

Whether an item is reported in net income or comprehensive income is generally considered a reporting rather than recognition issue.  Thus, an account can be taken to either depending on its character so a COA section devoted to OCI is not necessary (nor has anyone ever requested one).

However, it would be possible to incorporate a stand alone OCI sub-section into the COA. Perhaps, after studying if further, we will update the COA to include a stand alone OCI sub-section.

Stay tuned.

Submitted by ababjarna on Thu, 03/09/2023 - 22:40

Thanks for the quick reply!

And you are right. This is indeed a decision whether the accounting or the reporting should cover OCI items.

But as the paper points out, OCI items are essentially either income or expenses items, and should therefore be accounted for in the income/expenses accounts in the COA throughout the year, and only at year end (or at period end) be transferred to the corresponding equity accounts.

This is obviously the same logic you would follow for Profit(loss) items, so why do it differently for OCI items?

And yes, an updated COA with a stand alone OCI sub-section, would be hugely appreciated! :)

Submitted by Mladek on Fri, 03/10/2023 - 06:58

I am not convinced OCI should have a separate, stand-alone set of accounts.  Rather I think the accounts associated OCI should be classified with other similar items.  After all, a gain is a gain regardless if it’s reported in NI or OCI.  I think adding an entire separate section would just add unnecessary clutter. Perhaps a better alternative would be to associate items with OCI at the attribute, rather than account, level (this is the same logic that puts the current / non-current distinction to the expanded COA).  However, I’m not convinced this is absolutely necessary, but maybe the paper will change my mind.

In any event, if you really want a COA with a stand-alone OCI section, I could have one put together.

I see you have pro view, so consider it a customer service.
 

Submitted by abjarna on Fri, 03/10/2023 - 17:11

Thank you Robert!

If you're up for the task, I would appreciate this a lot and it would be hugely helpful. :)

Submitted by Mladek on Sun, 03/12/2023 - 08:49

After thinking it over, I still don't think a separate OCI section is necessary. However, since you want one, I had it added.  To make it as easy to map as possible, it keeps to the structure of the IFRS/US GAAP taxonomies.  Also, because I do not think it's necessary, I only had it added to the two IFRS / US GAAP specific COAs, not the universal.

You can download them here.

Submitted by ababjarna on Wed, 03/15/2023 - 13:53

Thank you again Robert,

Great service!

I will most definitely use them for the reasons mentioned above.

Thank you,
Atli

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