How should tax effects of each component included in OCI be reported?

The correct approach to reporting the tax effects of each component included in Other Comprehensive Income (OCI) is to calculate and present them in the comprehensive income statement. This aligns with the requirements set by accounting standards, which dictate that the tax effects of OCI components must be recognized directly within the statement of comprehensive income, ensuring that the users of financial statements have a complete view of the tax implications alongside the OCI items.

In practice, this means that for each item presented in OCI, the corresponding tax effects should be calculated and reflected in the overall comprehensive income statement. This provides a clearer understanding of how these components impact overall profitability after considering tax implications.

While other options might suggest alternative treatments, they do not adhere to the current standards governing reporting practices. Omitting the tax effects from the comprehensive income statement would lead to an incomplete representation of financial performance. Disclosing these effects in the notes, while helpful for additional context, does not satisfy the requirement for presentation within the primary financial statements. Including tax effects as part of retained earnings would also misstate the nature of those items, as OCI is intended to keep certain income or loss components separate from regular operating income, which is ultimately reflected in retained earnings.