Question
Emberline Retail presents net income and other comprehensive income in a single continuous statement, one of the two formats ASC 220 allows. Data for the year ended December 31, 2026:
| Item | Amount |
|---|
| Sales revenue | $900,000 |
| Cost of goods sold | 540,000 |
| Operating expenses | 210,000 |
| Gain on sale of available-for-sale debt securities | 10,000 |
| Interest expense | 16,000 |
Additional information (the tax rate is 25% on every item):
- The available-for-sale debt securities still held rose in fair value by $24,000 (pre-tax) during the year.
- The $10,000 gain on securities sold had been recognized in other comprehensive income as an unrealized gain in earlier years. It must be reclassified out of OCI now that it is included in net income.
- Translating a foreign subsidiary's statements produced a translation loss of $8,000 (pre-tax).
Required: Prepare the statement of income and comprehensive income for 2026. Show each OCI item net of tax, then total other comprehensive income and comprehensive income. Show reductions of OCI as negative amounts.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IFRS 9 — Financial Instruments
Classification drives the accounting, so settle it first: amortised cost, fair value through profit or loss, or fair value through other comprehensive income. Only then decide where remeasurement gains and losses land, because the same price movement is reported in different places under different classifications.
Common mistakes
- Routing a fair value movement through profit or loss when the instrument is measured at FVOCI, or the reverse.
- Capitalising transaction costs on an instrument held at fair value through profit or loss, where they are expensed.
- Forgetting to remove the cumulative gain or loss from equity on the disposal of an FVOCI investment.
Further readingIFRS 9: measuring financial instruments