Else here.

And in this video, we'll be exploring the statement

of comprehensive income IFRS.

Remember in our last video, we covered the income statement,

which provides users with a measure of profitability.

The profit or loss at the bottom of the income statement

is used as an opening number in the statement

of comprehensive income.

This statement then adds or deducts more complex items,

which are, as yet, unrealized.

This includes gains and losses from foreign currency

and adjustments to value of other assets and liabilities

at fair value, rather than historical cost, as well as

other items, which are left for more advanced accounting

courses.

The statement of comprehensive income

provides a broader definition of profit or loss,

one that includes both realized and unrealized amounts.

In order to understand unrealized,

we'll compare it to the concept of realized.

When you sell a service, the sale is in the past.

Your company has provided the service to the customer

already.

Revenue from that sale would go on the income statement,

because it's realized.

It's in the past.

What if a company bought shares in another company?

The value of the shares when they were purchased

was $950,000.

And that would go on the statement of financial position

as an asset, because it has future economic benefit

to the company.

What if by the end of the year, those shares

had declined in value and were only worth $800,000?

That would be a loss of $150,000.

But because you still hold the shares, the loss is unrealized.

It's a paper loss, not a realized loss,

because you have not sold the shares as yet.

That unrealized loss, net of taxes,

would be recorded on the statement

of comprehensive income.

Unrealized gains or losses are amounts

that have not been realized, because we still own or control

the item that has caused the gain or the loss.

Now, let's look at the structure of the statement

of comprehensive income.

Again, the statement starts with a heading, which must always

include the company name, the title

of the financial statement, and the time period covered.

The statement of comprehensive income

than lists the profit or loss, if the company's expenses

are greater than the revenues, from the income statement

first, followed by any other comprehensive income items.

Here, I've used the example of foreign currency

and fair-valuing investments.

All the other comprehensive income items

must be listed net of tax.

This means that any applicable tax amounts have already

been deducted.

Here, the other comprehensive income items

are an overall gain, but they could have just as easily

been an overall loss.

These amounts, added or deducted from the beginning profit

or loss amount, are equal to total comprehensive income.

Again, remember that other comprehensive income amounts

are unrealized gains or losses.

Pause the video to answer this check your understanding

question.

IFRS requires the statement of comprehensive income to be--

the correct answer is C. A corporation may decide

to combine comprehensive income and income in one statement

or have two separate statements, as I've shown in this video.

Why does IFRS require a statement

of comprehensive income?

The developers of IFRS felt that unrealized gains and losses

of a corporation could have enormous impact on user

decisions.

And by ignoring these amounts, user confusion would result.

By adding or deducting these unrealized amounts

from the more traditional definition of profit,

users would have a more comprehensive representation

of income, in order to make decisions

about possible future outcomes.

Remember that profit or loss from the income statement

is the opening balance in the statement

of comprehensive income.

The income statement is, therefore,

connected to the statement of comprehensive income.

How is this statement of comprehensive income

connected to the other financial statements?

The amount or amounts of other comprehensive income

is used in the statement of changes in equity,

as part of the accumulated other comprehensive income.

So again, the order of the statements

is the income statement first, the statement

of comprehensive income next, and then

the statement of changes in equity, which we'll be covering

in an upcoming video.