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.