Statement of Comprehensive Income JOR

(Summarized from Valix, PAS 1 and PFRS 15)

Statement of Comprehensive Income

The statement of comprehensive income presents the financial performance of an entity for a
period of time.

The statement of comprehensive income shall present, in addition to profit or loss and other
comprehensive income:
1. Profit or loss
2. Total other comprehensive income
3. Comprehensive income for the period (Profit or loss and other comprehensive income)

If an entity presents a separate statement of profit or loss it does not present the profit or loss
section in the statement presenting comprehensive income.

The transaction approach is the conventional or traditional preparation of income statement in

conformity of the PFRS. This approach requires how much income was earned during the year
and how much expenses were incurred in earning the revenue.

Profit or Loss
This is the total amount of income less expenses, before considering the components of other
comprehensive income. This is the bottom line in a traditional income statement.

Conventionally called net income or net loss.

Other Comprehensive Income

These are items of income and expenses not recognized in the net income or net loss of an
entity as permitted by the PFRS.

Components of other comprehensive income:

1. Revaluation surplus
2. Remeasurement gains or losses on a defined benefit obligation
3. Unrealized gains or losses on equity investments measured through FVOCI
4. Unrealized gains or losses on debt investments measured through FVOCI
5. Unrealized gains or losses from derivative contracts designated as cash flow hedge
6. Gain or loss on translation
7. Change in fair value attributable to credit risk of a financial liability designated at FVPL.

Par. 82A, The other comprehensive income section shall present line items classified by nature
and grouped into those that, in accordance with the PFRS:
1. Will not be classified subsequently to profit or loss;
2. Will be classified subsequently to profit or loss.
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

Items reclassified to profit or loss Items reclassified to retained earnings:

A. Unrealized gains or losses A. Revaluation surplus

on debt investments B. Remeasurement gains or losses on
measured through FVOCI a defined benefit obligation
B. Gain or loss on translation C. Unrealized gains or losses on equity
C. Unrealized gains or losses investments measured through
from derivative contracts FVOCI
designated as cash flow D. Change in fair value attributable to
hedge credit risk of a financial liability
designated at FVPL.

Presentation of Comprehensive Income

1. Two statement approach
a. A separate income statement.
b. A statement of comprehensive income beginning with the net income plus or
minus the components of other comprehensive income.

2. Single statement approach – this is a combined statement comprised both of the net
income or loss for the period and components of other comprehensive income.

Par. 99, an entity shall present an analysis of expenses recognized in profit or loss using a
classification based on either, whichever provides information that is more reliable and more
relevant:
1. Nature of expense method
2. Function of expense method

Par. 82, specifies the information that needs to be presented in the face of the statement of
comprehensive income:
1. Revenue
2. Gains and losses arising from the derecognition of financial asset measured at amortized
cost
3. Insurance service expenses from contracts issued within the scope of IFRS 17.
4. Income or expenses from reinsurance contracts held (IFRS 17).
5. Finance costs
6. Impairment losses
7. Insurance finance income or expenses from contracts issued within the scope of IFRS 17.
8. Share of the profit or loss of associates or joint ventures accounted for using the equity
method.
9. Gains or losses arising from reclassification from debt instruments measured at amortized
costs or FVOCI to FVPL, any difference between the previous amortized cost or any
cumulative UGUL recognized in OCI shall be reclassified to profit or loss.
10. Tax expense
11. Single amount for the total of discontinued operations.
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

Components of Expense
1. Cost of goods sold
2. Selling costs
3. Administrative expenses
4. Income tax expense
5. Insurance expense
6. Finance costs
7. Other expenses

Functional Presentation
The functional presentation is the most common form of income statement. This type of
presentation will include the line item “cost of goods sold” in the financial statements.

Expenses are classified as:

1. Cost of Goods Sold
2. Distribution expenses / Selling costs
3. General and Administrative expenses
4. Other Expenses

An entity that classifies according to function shall disclose additional information on the nature
of expenses: depreciation, amortization, rent expenses, salaries and wages, etc.

The pro-forma statement for costs of goods sold are as follows:

Merchandising entity
Beginning inventory xx
Add: Net Purchases xx
Cost of goods available for sale xx
Less: Ending Inventory xx
Cost of goods available for sale xx
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

Manufacturing entity
Raw materials, beginning xx
Add: Raw materials, purchases xx
Raw materials available for use xx
Less: Raw materials, ending (xx)
Raw materials used xx
Direct labor xx
Factory overhead xx
Total manufacturing costs xx
Add: WIP, Beginning xx
Total goods put into process xx
Less: WIP, Ending (xx)
Cost of goods manufactured xx
Add: FG, Beginning xx
Cost of goods available for sale xx
Less: FG, Ending (xx)
Cost of goods sold xx

ABC Company
Income Statement
For the year ended December 31, 2021

Net Sales xx
Cost of goods sold (xx)
Gross profit xx
Other operating income xx
Selling expenses (xx)
General and administrative expenses (xx)
Other operating expenses (xx)
Income from operations xx
Finance costs (xx)
Share in profit from associates xx
Income before tax xx
Income tax expense (xx)
Net Income xx
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

Natural of Expense Presentation

This presentation classifies expenses according to their nature: purchases, salaries, depreciation,
insurance, etc. Expenses are not anymore classified according to their function, but rather items
of the same nature are aggregated and presented as one line item in the face of the financial
statements.

Sources of Income
1. Sales of merchandise
2. Rendering of services
3. Use of entity resources
4. Disposal of resources other than products

ABC Company
Income Statement
For the year ended December 31, 2021

Net Sales xx
Other operating income xx
Net purchases (xx)
Change in merchandise inventory xx
Freight-out (xx)
Salaries and wages (xx)
Depreciation (xx)
Rent Expense (xx)
Bad debts expense (xx)
Income from operations xx
Finance costs (xx)
Share in profit from associates xx
Income before tax xx
Income tax expense (xx)
Net Income xx

Classification of Expenses
Distribution costs are costs that are directly related to selling, advertising and delivery of goods
to customers.

Examples are:
1. Salesmen’s salaries
2. Sales commissions
3. Travelling and marketing costs
4. Advertising costs
5. Freight-out
6. Depreciation of delivery equipment.
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

General and Administrative expenses are costs of administering and managing the business.
These are all the operating expenses not related to selling nor cost of goods sold.

Examples include:
1. Bad debts expense
2. Office salaries
3. Office supplies expense
4. Professional fees
5. Amortization and depreciation of office buildings

Other expenses theses are all the costs not directly related to the production, selling, and
administrative function of the entity. This usually pertains to incidental transactions of the entity.

1. Losses from sale of investments

2. Losses from sale of PPE
3. Casualty losses incurred due to fortuitous events / force majeure.
4. Expropriation loss

Extraordinary Items
PAS 1, par. 87, provides that an entity shall not present any items of income or expense as
extraordinary items, in the statement of comprehensive income.

Thus, casualty losses and expropriation losses are still presented as expenses under income from
continuing operations, even though they happen infrequently.

Items of Income and Expense Requiring Disclosure

Par. 97, provides that when items of income or expense are material, an entity shall disclose their
nature and amount separately.

Par. 98, provides for examples requiring separate disclosure:

1. Write-downs of inventories to NRV or of PPE to recoverable amounts, including reversals
of such write-downs.
2. Restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring.
3. Disposals of items of PPE
4. Disposals of investments
5. Discontinued operations
6. Litigation settlements
7. Other reversals of provisions
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

Revenue Recognition under PFRS 15

PFRS 15 superseded IAS 18 in terms of revenue recognition. The new revenue recognition uses a
five-step process:

1. Identify contracts with customers.

2. Identify the performance obligation in the contract.
3. Determining the transaction price.
4. Allocating the transaction price to the performance obligations in the contract.
5. Recognizing the revenue when or as the entity satisfies an obligation.

There is a contract if there is an agreement between two parties that creates enforceable rights
and obligations. It may be written, oral or implied.

A performance obligation is a promise to deliver to a customer a distinct good or service or a

series of distinct goods or service that are substantially the same and that have the same pattern
of transfer to the customer.

PFRS 15, par. 47, the transaction price is the amount of consideration to which an entity expects
to be entitled in exchange for transferring promised goods or services transferred.

Revenue is recognized either of the following:

1. At a point in time – the related revenue is recognized when control is passed at that
point in time. Indications include but are not limited to (PFRS 15, par. 38):
a. The entity has a present right to payment
b. The customer has legal title to the asset
c. The entity has transferred physical possession of the asset
d. The customer has the significant risk and rewards of the ownership of the asset.
e. The customer has accepted the asset.

2. Over time – An entity recognizes revenue over time if one of the following criteria is met:
a. The customer simultaneously receives and consumes all of the benefits provided
by the entity as the entity performs;

b. The entity’s performance creates or enhances an asset that the customer

controls as the asset is created; and

c. The entity’s performance does not create an asset with an alternative use to the
entity and the entity has an enforceable right to payment for performance to
completed to date.
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

Two-statement Approach

ABC Company
Income Statement
For the year ended December 31, 2021

Net Sales xx
Cost of goods sold (xx)
Gross profit xx
Other operating income xx
Selling expenses (xx)
General and administrative expenses (xx)
Other operating expenses (xx)
Income from operations xx
Finance costs (xx)
Share in profit from associates xx
Income before tax xx
Income tax expense (xx)
Net Income xx

ABC Company
Statement of Comprehensive Income
For the year ended December 31, 2021

Net Income xx
OCI to be reclassified to profit or loss:
UG/UL on debt instruments xx
Foreign currency gains or losses on translation xx
Comprehensive Income xx
Statement of Comprehensive Income JOR
(Summarized from Valix, PAS 1 and PFRS 15)

One-statement Approach

ABC Company
Statement of Comprehensive Income
For the year ended December 31, 2021

Net Sales xx
Cost of goods sold (xx)
Gross profit xx
Other operating income xx
Selling expenses (xx)
General and administrative expenses (xx)
Other operating expenses (xx)
Income from operations xx
Finance costs (xx)
Share in profit from associates xx
Income before tax xx
Income tax expense (xx)
Net Income xx
OCI to be reclassified to profit or loss:
UG/UL on debt instruments xx
Foreign currency gains or losses on translation xx
Comprehensive Income xx