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Statement of Financial Accounting Standards No. 130 - page 30 / 57





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79. The Board considered the definition of comprehensive income in Concepts

Statement 5, which states that "comprehensive income is a broad measure of

the effects of transactions and other events on an entity, comprising all

recognized changes in equity (net assets) of the entity during a period . .

. except those resulting from investments by owners and distributions to

owners" (paragraph 39; footnote reference omitted; emphasis added).

Concepts Statement 5 further indicates that comprehensive income includes

cumulative accounting adjustments. The Board continues to support that

definition and, therefore, decided to include cumulative accounting

adjustments as part of comprehensive income.

80. The Board considered two alternatives for displaying cumulative

accounting adjustments in financial statements:  (a) include cumulative

accounting adjustments in comprehensive income by displaying them as part

of other comprehensive income and (b) include cumulative accounting

adjustments in comprehensive income by continuing to display them as part

of net income.

81. The first alternative, display cumulative accounting adjustments as

part of other comprehensive income, would have allowed the Board to begin

to implement the concept of earnings as described in Concepts Statement 5,

because cumulative accounting adjustments would no longer be included in

net income.  Concepts Statement 5 describes earnings as "a measure of

performance for a period and to the extent feasible excludes items that are

extraneous to that period¡items that belong primarily to other periods"

(paragraph 34, footnote reference omitted).  Earnings, so defined, excludes

cumulative effects of changes in accounting principle.  Nonetheless,

earnings have been included in net income since Opinion 20.  As a result,

earnings is similar to, but not necessarily the same as, net income in

current practice.

82. The Board committed at the outset to limit the project's scope to

display of comprehensive income.  The Board's decision to continue to

display cumulative accounting adjustments as part of net income resulted

more from adherence to that scope commitment than to the merits of the

arguments for either alternative.

Display of Components of Comprehensive Income

83. The Board considered two issues related to the display of components of

comprehensive income:  (a) whether comprehensive income should be divided

into two broad display classifications, net income and other comprehensive

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