The performance of a company is reported in the statement of profit or loss and other comprehensive income
The statement of profit or loss is the primary source of information about an entity’s financial performance
Therefore, all income and expenses are, in principle, included in that statement.
However, in developing Standards, the Board may decide in exceptional circumstances that income or expenses are to be included in OCI
(when doing so would result in the statement of profit or loss providing more relevant information, or providing a more faithful representation of financial performance)
What gets recycled?
In principle, OCI items are reclassified into the statement of profit or loss in a future period
(Again when doing so results in the statement of profit or loss providing more relevant information, or providing a more faithful representation of financial performance)
However, if there is no clear basis for identifying the period (or amount) in which reclassification would have that result the Board may, in developing Standards, decide that no reclassification is allowed
Recycled means - gains or losses are first recognised in the OCI and then in a later accounting period also recognised in the P/L.
What gets recycled currently:
The re-translation of a Sub’s goodwill and net assets. (IAS 21)
First - exchange differences are recognised in OCI (and OCE reserve)
Then - when the sub is disposed of - The OCE reserve is emptied and reclassified to P&L - to form part of the profit on disposal.
The effective portion of gains and losses on hedging instruments in a cash flow hedge under IFRS 9
What doesn't get re-cycled currently?
Revaluations' gains and losses (IAS 16) - these go the OCI (and OCE reserve)
On disposal - they are not re-cycled to the P/L - instead there's a transfer in the SO`CIE, from the OCE into RE.
FVTOCI items (IFRS 9) - Gains/losses on these go to OCI (and OCE reserve) but again on disposal no re-cycling to P/L just a reserves transfer
Note: With no reclassification the earnings per share will never fully include the gains on the sale of PPE and FVTOCI investments.
Remeasurements of a net defined benefit liability or asset recognised in accordance with IAS 19