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Financial Statements - Lecture 5 - Statement of Comprehensive Income - IFRS - YouTube
Channel: Else Grech Accounting
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hi else here and in this video we'll be
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exploring the statement of comprehensive
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income under IFRS remember in our last
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video we covered the income statement
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which provides users with a measure of
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profitability the profit or loss at the
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bottom of the income statement is used
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as an opening number in the statement of
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comprehensive income this statement then
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adds or deduct more complex items which
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are as yet unrealized this includes
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gains and losses from foreign currency
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and adjustments to value other assets
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and liabilities at fair value rather
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than historical cost as well as other
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items which are left for more advanced
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accounting courses the statement of
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comprehensive income provides a broader
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definition of profit or loss one that
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includes both realized and unrealized
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amounts in order to understand
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unrealized we'll compare it to the
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concept of realized when you sell a
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service the sale is in the past your
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company has provided the service to the
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customer already revenue from that sale
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would go on the income statement because
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it's realized it's in the past what if a
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company bought shares in another company
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the value of the shares when they were
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purchased was nine hundred and fifty
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thousand dollars and that would go on
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the statement of financial position as
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an asset because it has future economic
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benefit to the company what if by the
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end of the year those shares had
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declined in value and were only worth
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$800,000 that would be a loss of a
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hundred and fifty thousand dollars but
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because you still hold the shares the
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loss is unrealized it's a paper loss not
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a realize loss because you have not sold
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the shares as yet that unrealized loss
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net of taxes would be recorded on the
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statement of comprehensive income
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unrealized gains or losses are amounts
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that have not been realized because we
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still own or control the item that has
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caused the gain or the lost now let's
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look at the structure of the statement
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of comprehensive income again this
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statement starts with a heading which
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must always include the company name the
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title of the financial statement and the
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time period covered the statement of
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comprehensive income then lists the
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profit or loss if the company's expenses
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are greater than the revenue
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use from the income statement first
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followed by any other comprehensive
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income items here have used the example
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of foreign currency and fair valuing
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investments all the other comprehensive
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income items must be listed net of tax
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this means that any applicable tax
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amounts have already been deducted here
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the other comprehensive income items are
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an overall gain but they could have just
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as easily been an overall loss these
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amounts added or deducted from the
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beginning profit or loss amount are
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equal to total comprehensive income
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again remember that other comprehensive
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income amounts are unrealized gains or
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losses pause the video to answer this
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check your understanding question IFRS
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requires the statement of comprehensive
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income to be the correct answer is C a
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corporation may decide to combine
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comprehensive income and income in one
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statement or have two separate
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statements as I've shown in this video
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why does IFRS require a statement of
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comprehensive income the developers of
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IFRS felt that unrealized gains and
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losses of a corporation could have
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enormous impact on user decisions and by
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ignoring these amounts user confusion
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would result by adding or deducting
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these unrealized amounts from the more
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traditional definition of profit users
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would have a more comprehensive
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representation of income in order to
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make decisions about possible future
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outcomes
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remember that profit or loss from the
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income statement is the opening balance
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in the statement of comprehensive income
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the income statement is therefore
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connected to the statement of
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comprehensive income how is the
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statement of comprehensive income
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connected to the other financial
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statements the amount or amounts of
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other comprehensive income is used in
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the statement of changes in equity as
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part of the accumulated other
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comprehensive income so again the order
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of the statements is the income
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statement first the statement of
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comprehensive income next and then the
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statement of changes in equity which
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we'll be covering in an upcoming video
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