Income and expenses included in OCI and reclassification:
- General Principle:
- OCI items are generally intended to be reclassified to profit or loss in future periods.
- This enhances the relevance and faithful representation of financial performance.
- Only the IASB can determine if an item should be included in OCI and whether it will be reclassified.
- Importance of Reclassification:
- Excluding operating expenses from profit or loss would misrepresent cash flows and distort the true picture of financial performance.
- Non-Reclassifiable Items:
- Revaluation gains/losses on PPE, intangible assets, and defined benefit plans.
- Certain fair value gains/losses on equity investments and credit risk changes.
- Reclassifiable Items:
- Effective portions of hedging gains/losses (cash flow hedges).
- Gains/losses on disposals arising from foreign currency translation.
Key Takeaways:
- Reclassification of OCI items is crucial for accurate reflection of financial performance.
- Understanding which items are reclassified and which are not is essential for proper financial statement analysis.
- Refer to specific IFRS Standards for details on reclassification criteria for different types of OCI items.
Disclaimer: These are simplified notes for exam revision. Refer to the official IASB publications and IFRS Standards for comprehensive and authoritative guidance.
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