What is Reclassification adjustment?
In short
A reclassification adjustment moves an amount out of accumulated other comprehensive income into net income when it is realized, such as on the sale of an available-for-sale debt security, so it isn't counted twice in comprehensive income.
Key takeaways
- Other examples are settled cash flow hedges and the amortization of pension amounts.
- Equity securities have none, because their fair value changes already go to net income.
- Reclassifications are shown on the face of the statements or in the notes.
Where it's tested
FAR: Balance Sheet & Income Statement Preparation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company disposes of a product line that represented 40% of revenue and a distinct major line of business. How should the results be presented?