Comprehensive Income
Comprehensive income includes all changes in equity during a period except those from owner transactions, encompassing net income plus other comprehensive income (OCI) items.
Explanation
Other comprehensive income includes items that bypass the income statement: unrealized gains/losses on available-for-sale debt securities, foreign currency translation adjustments, pension and postretirement benefit adjustments, and effective portions of cash flow hedges. These items are reported net of tax.
Comprehensive income can be presented in a single continuous statement combining the income statement and OCI, or in two separate consecutive statements. Accumulated other comprehensive income (AOCI) is a component of stockholders' equity on the balance sheet, representing the cumulative total of all OCI items.
Key Points
- •Comprehensive income = net income + other comprehensive income (OCI)
- •Common OCI items: unrealized gains on AFS securities, foreign currency translation, pension adjustments
- •OCI items are reported net of tax
- •AOCI is a separate component of stockholders' equity
Exam Tip
Memorize the four main OCI components. A common exam question asks which items go through OCI versus the income statement.
Frequently Asked Questions
Related Topics
Income Statement
The income statement reports an entity's revenues, expenses, gains, and losses over a period of time, resulting in net income or net loss.
Pensions and Postretirement Benefits
Pension accounting under ASC 715 requires employers to recognize the funded status of defined benefit pension plans on the balance sheet and allocate pension cost across service cost, interest cost, return on assets, and amortization components.
Financial Instruments
Financial instruments include cash, equity investments, debt investments, derivatives, and other contracts that give rise to financial assets and financial liabilities.
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