Nn

• Statement of Comprehensive Income: a structured statement showing the financial performance of a business entity for a given period, covering monthly, quarterly, semi-monthly, or annually
• Income: increases in economic benefits during the accounting period in the form of inflows or enhancement of assets or decreases of liabilities that result in increases in equity
• Expenses: decreases in economic benefits during the accounting period in the form of outflows or depletion of assets or incurrence of liabilities that result in decreases in equity
• Recognition of Income and Expenses in the Statement of Comprehensive Income:

  • Income is recognized when an increase in future economic benefits related to an increase in asset or a decrease of a liability has arisen that can be measured reliably
  • Expenses are recognized when a decrease in future economic benefits related to a decrease in assets or an increase in liability has arisen that can be measured reliably
• Methods of Recognizing Expenses in the Statement of Comprehensive Income:

  • Matching costs with revenues
  • Systematic and rational allocation
  • Immediate recognition
• Two methods of determining the net income or profit of a business entity:

  1. Capital maintenance approach

  2. Transaction approach
• Capital Maintenance Approach:

  • Financial Capital Maintenance: profit is earned if the financial amount of net assets at the end of the period exceeds the beginning, measured in nominal monetary units
  • Physical Capital Maintenance: profit is earned if the physical productive capacity at the end exceeds the beginning, measured using the current cost basis
• Differences between Financial and Physical Capital Maintenance:

  • Financial: changes in asset and liability prices are disregarded, net assets measured using historical cost
  • Physical: changes in asset and liability prices are considered, net assets measured using current costs
• Income includes revenues (e.g., sales, fees) and gains, while expenses encompass losses and outflows of economic benefits
• Nature of Expense Method: expenses are aggregated in the statement of comprehensive income according to their nature, not allocated among different functions within the entity
• Function of Expense or Cost of Sales Method: classifies expenses according to their function as part of cost of sales, distribution, or administrative activities
• Disclosure of Information in the Statement of Comprehensive Income:

  • Items excluded from profit or loss: revaluation surplus, gains and losses from translating financial statements of foreign operations, gains and losses on remeasuring available-for-sale financial assets, correction of errors, effect of changes in accounting policies