Question

If components of OCI are reported net of tax, the amount of income tax expense or benefit allocated to each component of OCI must be _____________.

Answer 1

If components of OCI are reported net of tax, the amount of income tax expense or benefit allocated to each component of OCI must be adjusted for tax.

Step-by-step explanation:

If components of OCI (Other Comprehensive Income) are reported net of tax, the amount of income tax expense or benefit allocated to each component of OCI must be adjusted for tax.

For example, if a component of OCI is a gain of $10,000 and the tax rate is 20%, the income tax expense or benefit allocated to that component would be $2,000 ($10,000 x 20%).

This adjustment is necessary to reflect the tax impact of the components of OCI, ensuring that the financial statements provide a complete and accurate representation of the company's financial position.