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Statement of Financial Accounting Standards No. 130 - page 20 / 57





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cost-based measures.

47. The use of fair values to measure financial instruments necessarily

raises questions about how the resulting gains and losses should be

reported.  Certain constituents expressed concern that using fair values

will (a) cause more gains and losses to be recognized than currently are

recognized and (b) increase the volatility of reported net income.

48. While measuring financial instruments at fair value results in

recognizing gains and losses on those instruments, it does not necessarily

follow that those gains and losses must be reported in the income statement

as part of net income.  The Board believes that it is appropriate and

consistent with the definition of comprehensive income provided in the

Concepts Statements to include some gains and losses in net income and to

exclude others from net income and report them as part of comprehensive

income outside net income.  Furthermore, reporting separately gains and

losses in a financial statement would make those gains and losses more

transparent than if they were only included within the equity section of a

statement of financial position.

49. In response to the concerns discussed in paragraphs 40-48, the Board

added a project on reporting comprehensive income to its agenda in

September 1995.  The Board's objective was to issue a Statement that

requires that an enterprise report all components of comprehensive income

in a financial statement that is displayed with the same prominence as

other financial statements that constitute a full set.

50. An FASB Exposure Draft, Reporting Comprehensive Income, was issued in

June 1996.  The Board received 281 comment letters on the Exposure Draft,

and 22 individuals and organizations presented their views at a public

hearing held in November 1996.\9/  In addition, the Board discussed the

Exposure Draft in meetings with constituents, the Financial Instruments

Task Force, and the Financial Accounting Standards Advisory Council.  The

comments from those groups, comment letters, and public hearing testimony

were considered by the Board during its redeliberations of the issues

addressed by the Exposure Draft at public meetings held in 1997. This

Statement is a result of those Board meetings and redeliberations.


\9/  The public hearings on the comprehensive income Exposure Draft and the

    June 1996 FASB Exposure Draft, Accounting for Derivative and Similar

    Financial Instruments and for Hedging Activities, were held jointly.

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