Figure FSP 4-5 lists types of AOCI reclassification adjustments, along with references to the relevant guidance within the Codification that address the accounting for the reclassification. Figure FSP 4-5 also indicates the applicable FSP section where the presentation of the reclassification adjustments in the income statement is discussed.

Figure FSP 4-5
Types of reclassification adjustments with Codification and guide references

ASC 220-10-45-17 requires reporting entities to aggregate the information about amounts reclassified from AOCI into net income that is presented throughout the financial statements and to provide a roadmap to the related disclosures.

Reporting entities have two distinct disclosure requirements with respect to reporting AOCI. Both of these requirements can be met through disclosure on the face of the financial statements or in the notes.

First, ASC 220-10-45-14A requires reporting entities to present the changes in each component of AOCI, showing separately the amount of OCI impacted by current period activity and the amount of current period reclassifications out of AOCI. This can be done either before tax or after tax for each component, either in the relevant statement or in the notes.

Separately, ASC 220-10-45-17 through ASC 220-10-45-17B requires a reporting entity to provide additional information about the effects of significant reclassification adjustments on net income when those reclassifications (1) are significant and (2) occur in their entirety in that period. This may be done on the face of the income statement (see FSP 4.5.5) or in the notes (see FSP 4.5.6).

This disclosure requires identification of which line item(s) of the income statement are affected by the reclassification.

As discussed in ASC 220-10-45-17, a reporting entity is required to present the amount reclassified from each component of AOCI based on its source component of OCI (e.g., foreign currency, realized gains/losses and other-than-temporary impairment on available-for-sale debt securities, and realized gains/losses on cash flow hedges). Reporting entities are also required to provide the income statement line item affected by the reclassification (e.g., interest income or interest expense), unless the component is not required to be reclassified in its entirety. With the exception of certain pension and other postretirement benefit costs (see FSP 4.3.2) and certain insurance adjustments, this disclosure is required for all components. Finally, the disclosure should include amounts attributable to NCI. See FSP 4.5.5 for further information.

A reporting entity can present this information either (1) parenthetically on the face of the financial statements, if certain criteria are met (see FSP 4.5.5) or (2) in a single footnote (see FSP 4.5.6). Therefore, for all components of OCI, a reporting entity may either present a gross display on the face of the financial statements (i.e., reclassification adjustments by component, presented separately from other changes in the AOCI balance) or a net display with disclosure of the gross change in the footnotes. With both options, a reporting entity can present these amounts either before tax or net of tax; however, the presentation should be consistent in each reporting period.

Figure FSP 4-6 illustrates the options for presenting reclassifications out of AOCI.

Figure FSP 4-6
Options for presenting amounts reclassified out of each component of AOCI

If a component of AOCI is not required to be reclassified to net income in its entirety, the reporting entity should disclose that fact within the AOCI footnote. A cross-reference is required within the footnote to the related disclosure with additional details about the effect of the reclassification.

There is no explicit guidance in ASC 220 regarding how a reporting entity should present amounts attributable to NCI when it elects to disclose reclassifications from AOCI in a single footnote. Our view is that NCI should be included in each of the relevant components. In other words, amounts attributable to NCI would not be shown separately.

In practice, many reporting entities present the tax impact of NCI below the tax expense/benefit line for each component. Additionally, the total reclassifications in the rollforward of AOCI would be presented net of tax and inclusive of NCI, as shown in Figure FSP 4-8.

As noted in FSP 4.3.1, each component of OCI should be reported either (1) net of related tax effects or (2) before related tax effects with one amount shown for the aggregate income tax expense or benefit related to the total OCI items.

ASC 740, Income Taxes, prohibits allocating tax impacts of transactions involving AOCI based on past tax rates used in accumulating other comprehensive income transactions, sometimes called "backward tracing." Consistent with this principle, when amounts are reclassified into net income out of AOCI, we believe it would generally be appropriate to use the tax rate in effect at the time of the reclassification rather than using the tax rate in effect when the AOCI amount was initially recorded. This approach maintains consistency with the offsetting tax effect recognized in net income under the intraperiod allocation requirements of ASC 740.

Backward tracing could result in using different tax rates for different components of AOCI if the reclassified items relate to different tax jurisdictions. It could also result in items being reclassified using different tax rates than when the items were originally recorded in AOCI (e.g., when there have been changes in the valuation allowance). This result is consistent with the FASB's desire to simplify AOCI accounting, although it may seem different from the objective of OCI reclassification to prevent double counting in comprehensive income. For further considerations surrounding presentation and disclosure of income taxes, see FSP 16.

ASC 220-10-55-7 through ASC 220-10-55-8B provides examples of the alternative formats for disclosing the tax effects related to the components of OCI.