CFA Level I · CFA Level I Exam · Analyzing Income Statements
An analyst compares two firms with identical net income of 600. Firm X has OCI of +90 from fair value gains on FVOCI equity investments and Firm Y has OCI of -70 from pension remeasurement losses. Total comprehensive income is 690 for X and 530 for Y. Starting equity is 5,000 for both, with no owner transactions. Ending equity is closest to which of the following?
Ending equity equals opening equity plus total comprehensive income when there are no owner transactions. Firm X ends at 5,690 and Firm Y at 5,530. Using net income only would wrongly give 5,600 for both firms.
- AX: 5,600; Y: 5,600
- BX: 5,690; Y: 5,530Correct
- CX: 5,690; Y: 5,670
Explanation
With no owner transactions, ending equity = beginning equity + total comprehensive income. X: 5,000 + 690 = 5,690. Y: 5,000 + 530 = 5,530. Using net income alone gives 5,600 for both, and adding the absolute value of Y's OCI loss gives 5,670.
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