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4.5.5 Presenting reclassifications parenthetically on the face of the financial statements
Publication date: 14 Nov 2019
us Financial statement presentation guide
A reporting entity may only elect to present the information parenthetically on the face of the financial statement in which net income is presented if the following requirements are met:
- All of the reclassification adjustments have been reclassified to net income in their entirety.
- The reporting entity can identify the income statement line item impacted by the reclassification.
If a reporting entity elects to present the reclassification adjustments on the face of the financial statement in which net income is presented, it is also required to present parenthetically the aggregate tax effect of all of the reclassification adjustments on the income tax expense/benefit line item. Thus, under this approach, the reporting entity is also electing to present the reclassification adjustments on a before-tax basis.
4.5.5.1 Sample disclosure– reclassification adjustments in AOCI included in statement of income
Figure FSP 4-7 illustrates how a reporting entity may comply with the disclosure requirements in ASC 220-10-45-14 through ASC 220-10-45-17B when it elects to provide the required information for reclassification adjustments parenthetically on the face of the income statement. The first part of Figure FSP 4-7 illustrates the option to comply with ASC 220-10-45-17 through ASC 220-10-45-17B (the impact of reclassification on income statement line items) by presenting parenthetical disclosures on the face of the income statement. A separate footnote was used to comply with the requirements of ASC 220-10-45-14A, (the impact of reclassifications on components of AOCI), as illustrated in the second part of Figure FSP 4-7. Comparative information is not shown for simplicity.
Figure FSP 4-7
Sample consolidated statement of income, with reclassification adjustments presented on the face and a footnote showing changes in AOCI
Sample consolidated statement of income, with reclassification adjustments presented on the face and a footnote showing changes in AOCI
This example was partially excerpted from ASC 220-10-55-15A and ASC 220-10-55-17F.
FSP Corp
Consolidated Income Statement
For the year ended December 31, 20X7
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Revenues (includes $4,000 accumulated other comprehensive income reclassifications for net gains on cash flow hedges)
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$122,500
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Expenses (includes ($1,000) accumulated other comprehensive income reclassifications for net losses on cash flow hedges)
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(32,000)
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Other gains and losses
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5,000
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Gain on sale of securities (includes $4,000 accumulated other comprehensive income reclassifications for unrealized net gains on available-for-sale debt securities)
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4,000
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Income from operations before tax
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99,500
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Income tax expense (includes ($1,750) income tax expense from reclassification items)
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(24,875)
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Net income
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$74,625
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Note X: Changes in accumulated other comprehensive income by component
The following table presents a rollforward of accumulated other comprehensive income. All amounts are net of tax.
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Gains and losses on cash flow hedges |
Unrealized gains and losses on available-for-sale debt securities |
Total |
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Beginning balance, January 1, 20X7
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$(5,000)
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$8,000
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$3,000
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Other comprehensive income before reclassifications
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7,000
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8,000
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15,000
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Amounts reclassified from accumulated other comprehensive income
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(2,250)
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(3,000)
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(5,250)
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Net current-period other comprehensive income
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4,750
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5,000
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9,750
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Ending balance, December 31, 20X7
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$(250)
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$13,000
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$12,750
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When a reporting entity provides parenthetical disclosure on the income statement, as required, it shows the effect of the reclassifications upon income tax expense parenthetically as well. However, in the note showing changes in AOCI, all data presented is already net of tax (which is permitted, but not required). The example in Figure FSP 4-7 assumes a tax rate of 25%, which will enable the reader to agree the after-tax figures in the note to the pre-tax information provided in the income statement.
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