February 2012

FASB Issues ASU No. 2011-12 to Defer the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income

On December 23, 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-12, Comprehensive Income (Topic 220):  Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. 

Earlier in 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.  The Update was intended to increase the prominence of other comprehensive income in financial statements and assist financial statement users in having a better understanding of the cause of a company’s change in financial position and results of operations.  The Update prohibited the presentation of components of comprehensive income in the statement of stockholders’ equity and instead would require reporting entities to present either a statement of comprehensive income, which reports both net income and other comprehensive income or separate, but consecutive, statements of income and other comprehensive income.   

Update 2011-12, defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately within their respective components of net income and other comprehensive income.  The deferral comes after stakeholders recently raised concerns that the new presentation requirements about the reclassification of items out of accumulated other comprehensive income would be costly for preparers and add unnecessary complexity to financial statements.  As a result of the concerns, the FASB decided to reconsider whether it is necessary to require companies to present reclassification adjustments, by component, in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements.  The FASB did not defer the requirement to report comprehensive income either in a single continuous statement or in two separate, but consecutive, financial statements.

To defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the amendments in this Update supersede only those paragraphs that pertain to how and where reclassification adjustments are presented.  Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05.

The amendments are effective at the same time as the amendments in Update 2011-05.  Therefore, the amendments in this Update are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011.  For nonpublic companies and nonprofit organizations, the amendments in this Update are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter.

Accounting Standards Update No. 2011-12

Please contact your client service partner or the following member of the ParenteBeard Manufacturing, Distribution and Technology Practice Group for more information about this communication and to discuss the services we offer.

Jeffrey J. Vrabel, Partner
Manufacturing, Distribution and Technology Practice Leader
Jeffrey.Vrabel@ParenteBeard.com
717.236.1100