D. Comprehensive Income—is defined as all changes in equity for a
period except those due to owner investments and dividends.
1. Includes: Unrealized gains and losses on AFS securities,
foreign currency adjustments and certain pension adjustments.
2. Can be reported in financial statements in one of two ways
(new FASB guidelines):
a. on a separate statement of comprehensive income that
immediately follows the income statement
b. On the lower section of the income statement (as a single
statement of income and comprehensive income).
IV. Global View—Compares U.S. GAAP to IFRS
A. Accounting for Noninfluential Securities—both systems are
broadly similar. Differences in terminology exist.
B. Accounting for Influential Securities—both systems are broadly
similar. Differences in terminology exist.
V. Decision Analysis—Components of Return on Total Assets
A. Assesses financial performance and can be separated into two
1. Profit margin (net income divided by net sales) reflects the
percentage of net income in each dollar of net sales.
2. Total asset turnover (net sales divided by average total assets)
reflects a company's ability to produce net sales from total
Average total assets
Net Sales xNet Sales
Average total assets
VI. Investments in International Operations—Appendix C-A
A. Exchange Rates Between Currencies
1. Price of one currency stated in terms of another currency is
called a foreign exchange rate.
2. These rates fluctuate due to changing economic and political
conditions (include the supply and demand for currencies and
expectations about future events).
B. Sales and Purchases Listed in a Foreign Currency
1. Companies making sales (or purchases) for which they receive
(or pay) foreign currency must translate the transaction
amounts into domestic currency. The transaction is recorded
using exchange rates on the date of the event.
2. Prior to statements, and/or at point of collection/payment,
adjustments to receivables/payables resulting from change in
exchange rates must be recorded. These adjustments result in
Foreign Exchange Gains/Losses.