There is a line on Balance Sheet: Accumulated other comprehensive earnings. Does that go to the cash flow statement?
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Don't think so, no.
accumulated other comprehensive earnings is like accumulated depreciation. It's an accounting convention so there is no cash exchanged
does the change go to the cash flow statement? since the change in accum dpreciation is added back in the cash flow statement? thanks!
No AOCI does not go to the cash flow statement. Transactions that could lead to AOCI can go into the CF statement, such as the purchase of marketable securities, derivatives, etc. Those items can eventually be sold and then go to the CF statement. There can be transactions that can affect the income statement as well but that's usually when you have some loss or impairment that has to be expensed.
how about the increase in AOCI? when using the indirect approach to calculate cash flow, should i add back the difference between prior year and this year?
The change just affects the owner's equity. Depreciation is only similar to AOCI in that it's an accounting rule. They are two different things. You need to read the notes for the AOCI. There should be a statement going over the four items that comprise the AOCI. AOCI is a long explanation.
Hello guys I would like to ask how we confront OCI in the balance sheet. More specifically If I want to calculate the cash flows to share holders do I count the OCI??
Genereally what I should do when I face a account like this???
Thank you.
Accumulated other comprehensive income in FCF? (Originally Posted: 07/31/2009)
Should I include the changes in the AOCI account in my FCF calculation?
Will doing this undo foreign exchange effects?
Thank you guys for the help
if you look at SFAS 130 u'll see that other comprehensive income is part of total comprehensive income but is generally exluded from net income. Accumulated comprehesive income is the amount(s) in comprehensive income either increase of decrease shareholder's equity but not derived from the income statement or through any company transactions in its own equity shares.
Generally, other comprehesive income includes the following items: foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains or losses on available-for-sale investments and derivative instruments.
Hope this helps
Since AOCI is non cash AND doesn't flow through the income statement, you should not adjust for it in your FCF calculations. If it flows through the income statement, it would be in your retained earnings account and not AOCI. I am also not familiar with all the accounts in AOCI but the most common ones like unrealized gains/losses on available for sale securities are non-cash.
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