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4.5.6 Presenting reclassifications in a footnote
Publication date: 14 Nov 2019
us Financial statement presentation guide
Many reporting entities that have numerous reclassification adjustments elect to present the amounts reclassified out of AOCI in a footnote rather than on the face of the financial statement in which net income is presented. Some believe that including multiple reclassification adjustments clutters the appearance of the income statement.
Other reporting entities may not meet the requirements discussed in FSP 4.5.5 to present reclassified amounts on the face of the financials. This could occur when a reporting entity has a reclassification adjustment that is initially capitalized (and, therefore, the reporting entity has not reclassified the total amount in its entirety), or when it is unable to identify the impacts on the income statement line items. Instead, the reporting entity will present the information in the footnotes and cross-reference to the other applicable notes.
One common example of when a reporting entity may not meet the requirements discussed in FSP 4.5.5 to present reclassified amounts on the face of the financials is when it has a defined benefit pension plan and capitalizes a portion of the service cost component of net periodic pension cost in inventory. In this instance, the amount reclassified from AOCI during a period is not recognized in net income until the inventory is sold. Therefore, the reporting entity is not able to present reclassification adjustments on the face of the financials. Instead, it should disclose all of its reclassification adjustments in a single footnote (see Figure FSP 4-8). In that note, the income statement line item affected only needs to be shown for components reclassified to net income in their entirety. Other components, such as net periodic pension cost, should be cross-referenced to the related footnote (e.g., the pension footnote).
If a reporting entity elects, or is required, to present the information in a single footnote, the disclosure can be presented before tax or net of tax as long as the entity complies with the requirements of ASC 220-10-45-12 related to the presentation of the income tax effects on OCI. The reclassification adjustments should reconcile by component to the AOCI disclosure.
If a reporting entity presents the information in a single footnote, ASC 220-10-45-17B requires that the subtotals for each component of the disclosure agree to the AOCI rollforward required by ASC 220-10-45-14A.
4.5.6.1 Sample disclosure – Footnote displaying changes in AOCI
Figure FSP 4-8 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 in a single footnote. The first table in the figure demonstrates how the reporting entity complied with ASC 220-10-45-14A, while the second table demonstrates how the reporting entity complied with ASC 220-10-45-17 through ASC 220-10-45-17B. Comparative information is not shown for simplicity.
Figure FSP 4-8
Sample disclosure: Reclassification adjustments in AOCI by component – single footnote presentation
Sample disclosure: Reclassification adjustments in AOCI by component – single footnote presentation
This example was partially excerpted from ASC 220-10-55-15 and ASC 220-10-55-17E.
Excerpt from ASC 220-10-55-15
Gains and losses on cash flow hedges
|
Unrealized gains and losses on available-for-sale debt securities
|
Defined benefit pension items
|
Foreign currency items
|
Changes in fair value attributable to instrument-specific credit risk
|
Total
|
||||||
Beginning balance, January 1, 20X7 |
$(1,200)
|
$1,000
|
$(8,800)
|
$1,300
|
500
|
$(7,200)
|
|||||
Other comprehensive income before reclassifications
|
3,000
|
2,500
|
(3,000)
|
1,000
|
200
|
3,700
|
|||||
Amounts reclassified from accumulated other comprehensive income
|
(750)
|
(1,500)
|
4,500
|
-
|
(100)
|
2,150
|
|||||
Net current-period other comprehensive income |
2,250
|
1,000
|
1,500
|
1,000
|
100
|
5,850
|
|||||
Ending balance, December 31, 20X7
|
$1,050
|
$2,000
|
$(7,300)
|
$2,300
|
600
|
$(1,350)
|
ASC 220 includes an illustration of the income statement line items affected by the reclassifications out of accumulated other comprehensive income:
Excerpt from ASC 220-10-55-17E
Reclassifications out of accumulated other comprehensive income
For the period ended December 31, 20X1
Details about accumulated other comprehensive income components
|
Amount reclassified from accumulated other comprehensive income
|
Affected line item in the statement where income is presented
|
|
Gains and losses on cash flow hedges
|
|||
Interest rate contracts
|
$1,000
|
Interest income (expense)
|
|
Credit derivatives
|
(500)
|
Other income (expense)
|
|
Foreign exchange contracts
|
2,500
|
Sales/revenue
|
|
Commodity contracts
|
(2,000)
|
Cost of sales
|
|
1,000
|
Total before tax
|
||
(250)
|
Tax (expense) or benefit
|
||
$750
|
Net of tax
|
||
Unrealized gains and losses on available-for-sale debt securities
|
|||
$2,300
|
Realized gain (loss) on sale of securities
|
||
(285)
|
Impairment expense
|
||
Insignificant items
|
(15)
|
||
2,000
|
Total before tax
|
||
(500)
|
Tax (expense) or benefit
|
||
$1,500
|
Net of tax
|
||
Amortization of defined pension items
|
|||
Prior-service costs
|
$(2,000)
|
Other income/(expense)
|
|
Transition obligation
|
(2,500)
|
Other income/(expense)
|
|
Actuarial gains/(losses)
|
(1,500)
|
Other income/(expense)
|
|
(6,000)
|
Total before tax
|
||
1,500
|
Tax (expense) or benefit
|
||
$(4,500)
|
Refer to pension footnote
|
||
Total reclassification for the period
|
$(2,250)
|
Net of tax
|
|
a Amounts in parentheses indicate debits to profit/loss.
b These accumulated other comprehensive income components are components of net periodic pension cost (see pension note for additional details).
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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