Question

Titan Networking became a public company through an IPO (initial public offering) two weeks ago. You are looking forward to the challenges of being assistant controller for a publicly owned corporation. One such challenge came in the form of a memo in this morning's in-box. “We need to start reporting comprehensive income in our financials,” the message from your boss said. “Do some research on that, will you? That concept didn't exist when I went to school.” In response, you sought out the financial statements of Cisco Systems, the networking industry leader. The following are excerpts from disclosure notes from Cisco's 2009 annual report:

Other-Than-Temporary Impairments (in part). Effective April 26, 2009, the Company adopted FSP 115-2, which amends other than-temporary impairment guidance relating to debt securities.. Upon the adoption of FSP 115-2, the Company recorded a cumulative effect adjustment of $49 million, which resulted in an increase to the balance of retained earnings with a corresponding decrease to OCI.

Required:
1. Locate the financial statements of Cisco at www.sec.gov or Cisco's website. Search the 2009 annual report for information about how Cisco accounts for comprehensive income. What does Cisco report in its balance sheet regarding comprehensive income?
2. Obtain the relevant authoritative literature on reporting comprehensive income using the FASB's Codification Research System. You might gain access from the FASB website (www.fasb.org), from your school library, or some other source. Identify the specific citation from the authoritative literature that describes the three alternative formats for reporting comprehensive income.
3. What is comprehensive income? How does it differ from net income? Where is it reported in a balance sheet? Why does Cisco's 2009 other comprehensive income not reconcile with the beginning ($728 million) and ending ($435 million) balances of accumulated OCI? Explain.
4. One component of other comprehensive income for Cisco is “Change in net unrealized gains on investments.” What does this mean? From the information Cisco's financial statements provide, determine how the company calculated the $435 million accumulated other comprehensive income at the end of fiscal 2009.
5. What might be possible causes for the “Other” component of Cisco's Other comprehensive income?



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  • CreatedJuly 05, 2013
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