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Statement of Financial Accounting Standards No. 130 - page 36 / 57





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income and its components in a statement of changes in equity, the Board

thought that a net-of-tax display of the components of other comprehensive

income would be more practical in that statement because other items in

that statement are displayed net of related tax effects.

104. The Board concluded that regardless of whether a before-tax or net-of-

tax display was used, adequate disclosure of the amount of income tax

expense or benefit separately allocated to individual components of other

comprehensive income should be provided.  Furthermore, the Board concluded

that the tax disclosure provisions should be an integral part of the

comprehensive income standard.

105. The Board decided that an enterprise should be permitted a choice of

whether to display components of other comprehensive income on a before-tax

basis or on a net-of-tax basis. Both display formats provide adequate

information as long as disclosures of the related tax effects are provided.

Conclusions on Other Issues

Including Prior-Period Adjustments in Comprehensive Income

106. The Board considered whether items accounted for as prior-period

adjustments should be included in comprehensive income of the current

period. Opinion 9,  as amended by FASB Statement No. 16, Prior Period

Adjustments, requires that prior-period adjustments be reflected as

retroactive restatements of the amounts of net income (and the components

thereof) and retained earnings balances (as well as other affected

balances) for all financial statements presented for comparative purposes.

In single-period financial statements, prior-period adjustments are

reflected as adjustments of the opening balance of retained earnings.  The

Board decided that because of the requirement for retroactive restatement

of earlier period financial statements, items accounted for as prior-period

adjustments are effectively included in comprehensive income of earlier

periods and, therefore, should not be displayed in comprehensive income of

the current period.

Statement of Cash Flows Reporting

107. The Board considered whether the operating section of an indirect-

method statement of cash flows or the reconciliation provided with the

operating section of a direct-method statement of cash flows should begin

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