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Profit, loss and OCI - Coggle Diagram

- - - - US GAAP will require value changes in all equity investments to go through profit or loss.
      - An assumption that an unrealised loss has little effect on the business is an incorrect one.
- - - - recycled amounts add to the complexity of financial reporting
      - may lead to earnings management
      - the reclassification adjustments may not meet the definitions of income or expense in the period as the change in the asset or liability may have occurred in a previous period
- - - - prohibits reclassification
    - - allows recognition in OCI
        
        bridging items
        
        arises where the Board determines that the statement of comprehensive income would communicate more relevant information about financial performance if profit or loss reflected a different measurement basis from that reflected in the statement of financial position
        
        For example, if a debt instrument is measured at fair value in the statement of financial position, but is recognised in profit or loss using amortised cost, then amounts previously reported in OCI should be reclassified into profit or loss on impairment or disposal of the debt instrument
        
        consistent with the amounts that would be recognised in profit or loss if the debt instrument were to be measured at amortised cost.
        
        mismatched remeasurements
        
        arises where an item of income or expense represents an economic phenomenon so incompletely that, in the opinion of the Board, presenting that item in profit or loss would provide information that has little relevance in assessing the entity’s financial performance.
        
        An example of this is when a derivative is used to hedge a forecast transaction; changes in the fair value of the derivative may arise before the income or expense resulting from the forecast transaction.
        
        before the results of the derivative and the hedged item can be matched together, any gains or losses resulting from the remeasurement of the derivative, to the extent that the hedge is effective and qualifies for hedge accounting, should be reported in OCI.
        
        Subsequently, those gains or losses are reclassified into profit or loss when the forecast transaction affects profit or loss.
        
        This allows users to see the results of the hedging relationship.
      - significantly restricts the types of items that would be eligible to be presented in OCI
      - gives the Board little discretion when developing or amending IFRS standards.
    - - an additional category of ‘transitory measurements’
      - for example
        
        remeasurement of a defined benefit obligation
        
        which would allow the Board greater flexibility