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Which capital maintenance concept is applied to currently reported net income, and which is applied to comprehensive income under the conceptual framework of FASB?

Which capital maintenance concept is applied to currently reported net income, and which is applied to comprehensive income under the conceptual framework of FASB?

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A. Currently Reported Net Income= Financial Capital - Comprehensive Income = Financial Capital
B. Currently Reported Net Income= Physical Capital - Comprehensive Income = Physical Capital
C. Currently Reported Net Income= Physical Capital - Comprehensive Income = Financial Capital
D. Currently Reported Net Income= Financial Capital - Comprehensive Income = Physical Capital
Asked by Avery, Last updated: Mar 21, 2018

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John Smith

John Smith

Answered on Sep 08, 2016

Currently reported net income= financial capital - comprehensive income = financial capital-the financial capital maintenance concept is the traditional basis of financial statements as well as the full set of financial statements, including comprehensive income, discussed in the conceptual framework. under this concept, a return on investment (defined in terms of financial capital) results only if the financial amount of net assets at the end of the period exceeds the amount at the beginning after excluding the effects of transactions with owners. under a physical capital concept, a return on investment (in terms of physical capital) results only if the physical productive capacity (or the resources needed to achieve that capacity) at the end of the period exceeds the capacity at the beginning after excluding the effects of transactions with owners. the latter concept requires many assets to be measured at current (replacement) cost.
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