Question

1. OCI is presented net of tax—show me an example of how the taxes impact the amount shown and state why “net of tax” makes sense.
2. What are the components of a complete set of financial statements (use their complete, proper names).
3. How would you describe the difference between an annual report and a complete set of financial statements?

Answer 1

1. Here is an example. one item in OCI could be Foreign currency Translation gains or loss. In case of loss, there would be no taxes, however in case of gains, there would be taxes. Now we know that OCI is presented as a part of balance sheet. If we do not deduct tax, balance sheet will be over valued and would not provide a true and fair view.So because of this reason, net of taxes makes sense.

2. Components of complete set of financial statements is made up of :

an Income Statement,

a Statement of Changes in Equity,

a Balance Sheet,

a Statement of Cash Flows, and

Notes to Financial Statements.

3. Annual report is much wider term as it includes financial statements. so the components of financial statements are just part of annual report. you can search for an annual report to get a better understanding.