Proceedings

a result of diverging views between the two representatives, FASB and board
members, the solution found was to choose the option between the two preferences:
� the presentation of comprehensive income as a statement of performance, in
two possible options: either as a financial statement that is different from
profit and loss account that includes two items: the net income shown in the
income statement and other comprehensive income. The category of other
gains and losses includes changes in fair values of financial instruments
available for sale, the gain or loss from derivatives, adjustments to the pension
plans, the differences arising from translating the financial statements of
foreign entities, or drawing a single statement of financial performance that
includes both the evidence presented in the profit and loss and other gains and
losses component.
� presentation of comprehensive income as part of the statement of changes in
equity.
ASB in the UK was the first regulator that in 1992 adopted the concept of
comprehensive income by FRS Rule 3 Statement of Total Recognised gains and
losses. The publication of the Statement of total recognised gains and losses is
justified by the ASB in that British accounting rules or statutory provisions allow the
direct observation in equity of gains and losses as well as the revaluation of property,
differences in conversion, latent gains or losses on financial instruments, gains and
losses arising from pension funds. Statement of total recognised gains and losses is
specific to British accounting being seen as a situation that facilitates forecasting,
ASB arguing this:
„The disclosure of these components is designed to facilitate understanding of
the performance achieved in a period and to assist users in deciding on the
extent to which past results are useful in helping to assess potential future
results.” (ASB, 1992, FRS 3)
FRS 3 also states the preparation of a statement reconciliation of the net income
obtained under conditions in which the economic entity has revalued the tangible
outcome with the net income that would have been obtained in historical costs. The
role of this statement is to allow comparability between the financial statements of
entities which have opted for the revaluation of tangible and financial statements of
entities which have remained at historical cost. This must be presented in the notes to
financial statements and it has no equivalent in international practice. Information
should be presented only if the differences between the two results are
significant. Differences may be due to:
� if assets are revalued, depreciation is based on the revalued amount, if assets
had not been revalued, the depreciation would have been based on historical
cost;
� if assets are sold, profit is the difference between the selling price and the
revalued carrying amount, while for the assets valued at cost, the profit is
higher because it represents the difference between the sale price (the same)
and the historical book value (lower).
Introducing this reconciliation statement between the historical costs and the net
income in fair values provides very relevant information, especially for users of
accounting information who are skeptical on the fair value determined after
~ 970 ~