Part Income Statement - AASB 130 - Disclosure in the Financial Statements of Banks and Similar Financial Institutions - July 2004 - Income Statement

Income Statement

A bank shall present an income statement which groups income and expenses by nature and discloses the amounts of the principal types of income and expenses.
In addition to the requirements of other Australian Accounting Standards, the disclosures in the income statement or the notes shall include, but are not limited to, the following items of income and expenses:

Interest and similar income;

Interest expense and similar charges;

Dividend income;

Fee and commission income;

Fee and commission expense;

Gains less losses arising from dealing securities;

Gains less losses arising from investment securities;

Gains less losses arising from dealing in foreign currencies;

Other operating income;

Impairment losses on loans and advances;

General administrative expenses; and

Other operating expenses.

The principal types of income arising from the operations of a bank include interest, fees for services, commissions and dealing results. Each type of income is separately disclosed in order that users can assess the performance of a bank. Such disclosures are in addition to those of the source of income required by AASB 114 Segment Reporting.
The principal types of expenses arising from the operations of a bank include interest, commissions, losses on loans and advances, charges relating to the reduction in the carrying amount of investments and general administrative expenses. Each type of expense is separately disclosed in order that users can assess the performance of a bank.
Income and expense items shall not be offset except for those relating to hedges and to assets and liabilities that have been offset in accordance with AASB 132 Financial Instruments: Disclosure and Presentation.
Offsetting in cases other than those relating to hedges and to assets and liabilities that have been offset as described in AASB 132 prevents users from assessing the performance of the separate activities of a bank and the return that it obtains on particular classes of assets.
Gains and losses arising from each of the following are normally reported on a net basis:

(a) disposals and changes in the carrying amount of dealing securities;

(b) disposals of investment securities; and

Interest income and interest expense are disclosed separately in order to give a better understanding of the composition of, and reasons for changes in, net interest.
Net interest is a product of both interest rates and the amounts of borrowing and lending. It is desirable for management to provide a commentary about average interest rates, average interest earning assets and average interest-bearing liabilities for the period. In some countries, governments provide assistance to banks by making deposits and other credit facilities available at interest rates which are substantially below market rates. In these cases, management’s commentary often discloses the extent of these deposits and facilities and their effect on net income.