13.02 other comprehensive income 0

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CR Common PracticesOther comprehensive income under IFRS

1 www.companyreporting.comMonitors Common Practices Emerging Issues Alerts Benchmarking Reports

Company Reporting, HMS President, Victoria Embankment, London, EC4Y 0HJ, UK

Published on 18 February 2013. For more information, please email [email protected]

Introduction

Under International Financial Reporting Standards (IFRS), the disclosure of other comprehensive income is governedby IAS 1 Presentation of financial statements. Under IAS 1 companies have a choice of whether to present other comprehensive income information in a single statement in tandem with profit and loss information or in a separatestatement (para 81). In our recent common practice on income statement format we found that 87% of companiesfavour the two statement approach. Whichever presentation format a company opts for, as part of a primary incomestatement, it shall disclose each component of other comprehensive income classified by nature (para 82(g))excluding its share of other comprehensive income from associates and joint ventures accounted for using the equitymethod which shall be disclosed in a separate line (para 82h)). Components of other comprehensive income maybepresented net of related tax effects or before related tax effects with one amount shown for the aggregate amount of income tax relating to those components (para 91). In addition, as part of a primary statement, a company shalldisclose total comprehensive income for the period attributable to owners of the parent and non-controlling interests(para 83(b)).

IAS 1 in addition requires the disclosure of the amount of income tax relating to each component of other comprehensive income (para 90) and reclassification adjustments relating to components of other comprehensiveincome (para 92) with the option existing for both pieces of information to be presented either in the statement of comprehensive income or the notes. A further disclosure required is a reconciliation of each component of equityshowing the carrying amount at the beginning and end of the period separately identifying changes resulting fromeach item of other comprehensive income (para 106A). A final issue considered will be the early adoption of a revisionto IAS 1 which states that other comprehensive income items be grouped into those that will be reclassifiedsubsequently to the profit and loss when specific conditions are met and those that will not. This revision is mandatoryfor annual periods beginning on or after 1 July 2012 although earlier application is permitted.

Key observations include the following. All other comprehensive income components are analysed separately bynature on the face of the statement of comprehensive income by 93% of companies. Of those companies withevidence of tax on other comprehensive income, in the current year, 92% disclose amounts relating to individualcomponents. Of those companies with evidence of reclassification of other comprehensive income amounts to profitand loss 100% identify such reclassification amounts separately. An allocation of total comprehensive incomebetween that which relates to owners of the parent company and to non-controlling interests is presented by 87% of companies. A reconciliation of each component of equity showing changes resulting from each item of other comprehensive income is presented by 50% of companies. Of the companies with evidence of tax relating to other comprehensive income, in the current year, 67% opt to present components of other comprehensive income net of taxwith the remaining 33% presenting components before tax.


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Companies under examination

Our sample consists of 30 large global listed companies that prepare IFRS financial statements with period endsbetween 31 December 2011 and 30 September 2012. The sample is drawn from a globally diverse range of countriesand includes an array of companies from different industries. The companies of which the accounts have beenanalysed are as follows:

Company Period End Auditors Country Industry Classification

African Rainbow Minerals 30 June 2012 Ernst & Young South Africa Mining

AGL Energy 30 June 2012 Deloitte Touche Tohmatsu Australia Multiutilities

Air China 31 December 2011 Ernst & Young China Airline

Americana Latina Logistica 31 December 2011 Ernst & Young Brazil Transportation ServicesAmvig Holdings 31 December 2011 RSM Nelson Wheeler Hong Kong Containers & Packaging

Anglo American Platinum 31 December 2011 Deloitte & Touche South Africa Mining

Arcelor Mittal South Africa 31 December 2011 Deloitte & Touche South Africa Iron & Steel

Aspen Pharmacare Holdings 30 June 2012 Pricewaterhouse Coopers South Africa Pharmaceuticals

Associated British Foods 15 September 2012 KPMG UK Food Products

Axiata Group Berhad 31 December 2011 PricewaterhouseCoopers Malaysia Mobile Telecommunications

B2W Compnhia Global do Varejo 31 December 2011 PricewaterhouseCoopers Brazil Broadline Retailers

Bombardier 31 December 2011 Ernst & Young Canada Aerospace

Brazil Foods 31 December 2011 KPMG Brazil Food Products

British Sky Broadcasting 30 June 2012 Deloitte UK Broadcasting & Entertainment

CGI Group 30 September 2012 Ernst & Young Canada Computer Services

Genting Malaysia Berhad 31 December 2011 PricewaterhouseCoopers Malaysia Hotels

Imperial Tobacco 30 September 2012 PricewaterhouseCoopers UK Tobacco

Infineon Technologies 30 September 2012 KPMG Germany Semiconductors

JBS 31 December 2011 KPMG Brazil Food Products

Nexen 31 December 2011 Deloitte & Touche Canada Exploration & Production

Orica 30 September 2012 KPMG Australia Specialty Chemicals

Pernod Ricard 30 June 2012 Deloitte, Mazars France Distillers & Vintners

Shaw Communications 31 August 2012 Ernst & Young Canada Broadcasting & Entertainment

Siemens 30 September 2012 Ernst & Young Germany Electronic Equipment

Sky City 30 June 2012 PricewaterhouseCoopers New Zealand Hotels

Sky Network Television 30 June 2012 PricewaterhouseCoopers New Zealand Broadcasting & Entertainment

Smiths 31 July 2012 PricewaterhouseCoopers UK Diversified Industrial

Sodexo 31 August 2012 PricewaterhouseCoopers, KPMG France Restaurants & Bars

ThyssenKrupp 30 September 2012 KPMG Germany Iron & Steel

Wolseley 31 July 2012 PricewaterhouseCoopers UK Industrial Supplier


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Analysis

Other Comprehensive Income presentation: A benchmark

Our analysis shows that, 93% of companies including Wolseley (Extract 1) separately classify by nature all other comprehensive income components, on the face of the statement of comprehensive income. The only companies notto do so are Air China and Siemens. Air China includes an other classification w ithout giving any explanation.Siemens (Extract 2) does not include equity accounted investments as a separate line making reference to such onlyin a note.

Of those 24 sample companies with evidence of income tax on other comprehensive income, in the current year, 92%including Smiths (Extract 3) disclose amounts relating to individual components. The only companies not to do so are

Air China and Genting Malaysia . In the case of the former, despite not identifying an income tax amount in respect of

an exchange realignment component of other comprehensive income, there is evidence of an unrealised exchangegain in its deferred tax note. In respect of the latter, there is a general statement in its taxation note as to the incometax effect on other comprehensive income components but this lacks clarity as to the impact on individualcomponents. Of those 14 sample companies with evidence of reclassification of other comprehensive incomeamounts to profit and loss 100% including AGL Energy (Extract 4) identify such reclassification amounts separately.British Sky Broadcasting (Extract 5), CGI Group , Orica , Shaw Communications and Siemens identify separately thetax impact on amounts reclassified either on the face of the statement of other comprehensive income or in a note tothe accounts.

Of the sample companies 87% show an allocation of total comprehensive income between that which relates toowners of the parent company and to non-controlling interests including Sky Network Television (Extract 6).Companies which do not do so are African Rainbow Minerals , Nexen , CGI Group and B2W Companhia Global doVarejo . Of the sample, 50% of companies including Imperial Tobacco (Extract 7) present a reconciliation of eachcomponent of equity showing changes resulting from each item of other comprehensive income. All UK companies inthe sample do so with a majority of the Brazilian and Asian companies doing so also. In contrast, none of the samplecompanies from continental Europe present such a reconciliation.

The following table is ordered in such a way that those companies that according to our analysis are performing bestare placed at the top.

CompanyAll Components

by NatureIncome tax by

Component

ReclassificationAdjustment to

Profit/Loss

TotalComprehensive

IncomeControlling/Non-

Controlling

OtherComprehensiveIncome Items by

EquityComponent

British Sky

BroadcastingWolseleySky CitySky NetworkTelevisionSmithsImperial Tobacco N/AAssociatedBritish Foods N/AAmericana LatinaLogistica N/AJBS N/A N/A


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Amvig Holdings N/A N/AAxiata N/A N/APernod RicardAGL EnergyBombardier OricaShawCommunicationsSodexoThyssenKrupp

InfineonTechnologies N/ABrazil Foods N/AAspenPharmacare N/A N/AArcelor MittalSouth Africa N/A N/AAnglo AmericanPlatinum N/A N/AAfrican RainbowMinerals N/ANexen N/AB2W Compnhiaglobal do Varejo N/ACGI GroupGenting Malaysia N/ASiemensAir-China N/AN/A = A non applicable item of which the company has no evidence.

Other Comprehensive Income: presentation choices

Of those 24 sample companies with evidence of tax relating to other comprehensive income in the current year 67%including Bombardier (Extract 8) employ the option to present components of other comprehensive income net of tax.Such an approach is adopted by all Canadian sample companies and 4 out of 5 from the UK. In contrast, 3 out of the4 Australasian companies including Orica (Extract 9) are among the 33% to present components before tax.

Companies are faced with a choice of whether to present income tax by other comprehensive income component,reclassification adjustments and a reconciliation of equity components showing changes relating to other comprehensive income items either as part of a primary statement or in a note to the accounts. Of those 22 samplecompanies which identify income tax by component 45% including Smiths (Extract 3) identify tax amounts on the faceof the statement of comprehensive income with the remaining 55% including Shaw Communications (Extract 10)instead giving such information in a note. Based on the sample selected UK companies are more likely to present tax

amounts on the face of the statement of comprehensive income with 4 out of 5 opting for such an approach. In


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contrast, 4 out of 5 continental European companies and all Australasian companies choose to disclose suchinformation in a note.

In relation to reclassification adjustments, of those 14 companies with evidence, 71% including AGL Energy (Extract4) elect to disclose on the face of the statement of comprehensive income with the remaining 29% including CGIGroup (Extract 11) instead disclosing in a note. Of the 15 companies presenting a reconciliation of equity componentsshowing changes relating to other comprehensive income items 87% including Imperial Tobacco (Extract 7) do so onthe face of the statement of changes in equity with the remaining 13% including Wolseley (Extract 12) disclosing in anote.

Of the sample companies, Siemens and Sodexo ( Extract 13) have elected to adopt the revision to IAS 1 early andnow present items that could be reclassified to profit and loss separately from those that are not allowed to be.Bombardier although it does not adopt early states that on implementation there will be no impact as it already

employs such a presentation. Anglo American Platinum although not adopting early makes reference to items that willbe reclassified subsequently to profit and loss.

In a presentation format that falls short of IAS 1 Brazilian company Americana Latina Logistica includes its statementof other comprehensive income in a note to the accounts rather than as a primary statement (para 10).

CompanyOther ComprehensiveIncome Components

Income tax byComponent

ReclassificationAdjustments

Items by EquityComponent

Net of taxBefore

tax Primary Note Primary NoteChanges in

Equity NoteBritish Sky

Broadcasting Smiths AssociatedBritish Foods N/A N/A ThyssenKrupp Bombardier Brazil Foods N/A N/AImperialTobacco N/A N/A Nexen N/A N/A InfineonTechnologies N/A N/ASky NetworkTelevision ShawCommunications Siemens CGI Group AmericanaLatina Logistica N/A N/A Genting

Malaysia N/A N/AAir-China N/A N/A


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African RainbowMinerals N/A N/A B2W Compnhiaglobal do Varejo N/A N/AWolseleySky CityPernod RicardAGL EnergyOricaSodexo

Amvig Holdings N/A N/A N/A N/A N/A N/A Anglo AmericanPlatinum N/A N/A N/A N/A N/A N/AArcelor MittalSouth Africa N/A N/A N/A N/A N/A N/AAspenPharmacare N/A N/A N/A N/A N/A N/AAxiata N/A N/A N/A N/A N/A N/A JBS N/A N/A N/A N/A N/A N/A N/A = A non applicable item of which the company has no evidence.

Summary - Conclusion

Our principal conclusions are that:

All other comprehensive income components are analysed separately by nature on the face of the statementof comprehensive income by 28 (93%) companies.

Of those 24 companies with evidence of tax on other comprehensive income, in the current year, 22 (92%)disclose amounts relating to individual components.

Of those 14 companies with evidence of reclassification of other comprehensive income amounts to profit andloss 14 (100%) identify such reclassification amounts separately.

An allocation of total comprehensive income between that which relates to owners of the parent company andto non-controlling interests is presented by 26 (87%) companies.

A reconciliation of each component of equity showing changes resulting from each item of other comprehensive income is presented by 15 (50%) companies.

Of the 24 companies with evidence of tax relating to other comprehensive income components, in the currentyear, 16 (67%) opt to present components of other comprehensive income net of tax with the remaining 8(33%) presenting components before tax.


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Extracts

Wolseley : All other comprehensive income components separately identified (Extract 1).


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Siemens : Equity accounted investments not included as a separate line item on the face of the statement of comprehensive income (Extract 2).


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Smi ths : Income tax amounts are presented for individual components of other comprehensive income on theface of the statement of comprehensive income (Extract 3).


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AGL Energy: Other comprehensive income statement amounts reclassified to profit and loss separatelyidentified on the face of the statement of comprehensive income (Extract 4).


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Bri t i sh Sky Broadcas t ing: The tax impact of amounts reclassified from other comprehensive income to profitand loss identified separately (Extract 5).


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Sky Network Televis ion : An allocation of total comprehensive income is presented showing that which isattributable to equity holders of the company and non-controlling interests (Extract 6).


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Imperial Tobacc o : A reconciliation of each component of equity showing changes resulting from each item of other comprehensive income (Extract 7).


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Bombardier : Components of other comprehensive income presented net of tax (Extract 8).


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Orica : Components of other comprehensive income presented before tax (Extract 9).


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Shaw Comm unicat ions : The income tax impact on other comprehensive income components is shown in anote (Extract 10).


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CGI Group : Amounts reclassified from other comprehensive income to profit and loss disclosed in a note tothe accounts (Extract 11).


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Wolseley : A reconciliation of each component of equity showing changes resulting from each item of other comprehensive income is presented in a note (Extract 12).


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Sodexo : A consolidated statement of comprehensive income showing separately components to bereclassified to profit or loss and those that will not be (Extract 13).

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