Other comprehensive income accounting
Classify OCI items, apply tax and reclassification effects, and practice the AOCI rollforward with free FAR questions.
The decision that earns the point
Classify the item before measuring it
Other comprehensive income contains only items that an applicable accounting standard specifically excludes from net income and includes in OCI. Accumulated OCI is the related cumulative equity balance after tax allocation, reclassifications, and any required attribution.
Exam use
FAR can test whether a specified item belongs in net income or OCI, its tax effect, a reclassification adjustment, and the accumulated-OCI rollforward.
Your scratch-paper plan
Solve it in three moves
- 1
Identify the underlying item
Name the exact security, hedge, translation, or benefit-plan item and use its governing standard instead of an unrealized-gain shortcut.
FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17 - 2
Apply tax and attribution
Use the stated tax effect and any ownership or noncontrolling-interest facts to measure the entity-attributable OCI amount.
FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17 - 3
Reconcile accumulated OCI
Add current OCI and reflect reclassification adjustments or other removals in the appropriate accumulated component.
FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17
Worked problem
Work the facts before choosing the answer
CPAPass illustration assumptions: an item already qualifies for OCI, belongs entirely to the reporting entity, has a $20,000 pretax gain and $5,000 related tax expense, and has no noncontrolling-interest allocation or reclassification.
CPAPass original exam illustration using stated assumptions
Show the work
The after-tax OCI gain is $15,000 under the closed assumptions.
Rule source: FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17Answer
Increase current OCI and accumulated OCI by $15,000 before any later reclassification or other change.
Rule source: FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17Do it now
Test the same decision with a fresh question
Start with free FAR practice. Create an account only when you want the 5-day no-card CPAPass trial and continued section practice.
The trap and the repair
Common trap
Sending an operating or investment gain to OCI merely because it is unrealized ignores the item-specific accounting standard.
Repair
Classify the underlying item first, then calculate tax, attribution, and any reclassification.
OCI classification grid
Classification comes before the after-tax arithmetic
The same gain amount can enter earnings, OCI, or neither depending on the item-specific standard and reporting-period facts.
| Question | Evidence boundary | Output | Authority |
|---|---|---|---|
| Does the item qualify? | Applicable accounting standard specifically places the item in OCI | Net-income or OCI classification | FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17 |
| What is the tax effect? | Tax expense or benefit related to the individual OCI component | After-tax OCI component | FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17 |
| What changes AOCI? | Current OCI, reclassification adjustments, and other specified removals | Component and total AOCI rollforward | FASB ASC 220-10-45-1A, 45-10A, 45-12, 45-14, 45-14A, and 45-17 |
After a miss
Repair an OCI classification miss
- 1
Write the underlying item and its governing accounting model before using the words realized or unrealized.
- 2
Rework the illustration once with a tax benefit and once with a stated reclassification to earnings.
- 3
Answer a fresh FAR OCI question and reconcile current OCI to the correct accumulated-equity component.
Your exam workflow
- Step 1Read the requirementIdentify what the task asks you to decide about other comprehensive income accounting.
- Step 2Sort the factsName the exact security, hedge, translation, or benefit-plan item and use its governing standard instead of an unrealized-gain shortcut.
- Step 3Apply the ruleUse the stated tax effect and any ownership or noncontrolling-interest facts to measure the entity-attributable OCI amount.
- Step 4Check the outputAdd current OCI and reflect reclassification adjustments or other removals in the appropriate accumulated component.
Keep the next step narrow
Quick questions
What is the shortest useful answer for other comprehensive income accounting?
Other comprehensive income contains only items that an applicable accounting standard specifically excludes from net income and includes in OCI. Accumulated OCI is the related cumulative equity balance after tax allocation, reclassifications, and any required attribution.
How can other comprehensive income accounting appear on the CPA Exam?
FAR can test whether a specified item belongs in net income or OCI, its tax effect, a reclassification adjustment, and the accumulated-OCI rollforward. The exact task can change, so identify the governing facts before applying the rule.
What is the most common mistake with other comprehensive income accounting?
Sending an operating or investment gain to OCI merely because it is unrealized ignores the item-specific accounting standard. Classify the underlying item first, then calculate tax, attribution, and any reclassification.
Where should I practice other comprehensive income accounting?
After the worked example, use FAR practice for a fresh question that requires the same decision. If the miss depends on statement of changes in equity, review that handoff before trying another set.
How should I review other comprehensive income accounting after a missed question?
Write the underlying item and its governing accounting model before using the words realized or unrealized. Rework the illustration once with a tax benefit and once with a stated reclassification to earnings. Answer a fresh FAR OCI question and reconcile current OCI to the correct accumulated-equity component.