What is comprehensive income

Personal Finance. Your Practice. Popular Courses. What Is Comprehensive Income? Key Takeaways Comprehensive income represents the changes to owners' equity that originate from non-owner sources and traditional income. Comprehensive income and how it is accounted for will usually appear in the footnotes to a company's financial statements. Comprehensive income may report amounts per month, quarter, or year. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Accumulated other comprehensive income includes unrealized gains and losses reported in the equity section of the balance sheet. Available-for-Sale Security Definition An available-for-sale security is a security procured with the plan to sell before maturity or to hold it for a long period if there is no maturity date.

Unrealized Loss An unrealized loss occurs if the value of a transaction that has yet to be completed falls below its initial price. How the Current Rate Method Works The current rate method is a method of foreign currency translation where most financial statement items are translated at the current exchange rate.

What Are Considered Business Activities? Business activities are activities a business engages in for profit-making purposes, such as operations, investing, and financing activities. Remeasurement Remeasurement is the re-evaluation of the value of a long-term asset or foreign currency on a company's financial statements. Partner Links. Related Articles. Financial Analysis Comprehensive Income vs. Other Comprehensive Income: What's the difference?

Investopedia is part of the Dotdash publishing family. Your Privacy Rights. In this article, we explain the accounting term comprehensive income and share examples of how this can impact the overall financial picture of a company.

Comprehensive income is a figure that represents the combined net income and other comprehensive income of a company. It is a measure of the changes in a company's net assets during a specified period that comes from non-owner sources or the total non-owner changes in equity.

Comprehensive income includes both net and unrealized income to give a bigger view of a company's overall worth through unrealized profits and losses. Comprehensive income is a way to give company stakeholders more information about the overall financial outlook of their investment. This figure is depicted as a separate amount from net income to give more details about possible income from investments and the sale of financial assets like stocks.

It does not include changes in equity based on investments made by owners or distributed to owners. Related: What is Stockholder's Equity? Definition and Examples. Comprehensive income is made up of a company's overall sales revenue net income and figures for other comprehensive income which are combined to form comprehensive income.

Other comprehensive income is made up of unrealized gains or losses from the following:. Comprehensive income can be confused with other comprehensive income.

Other comprehensive income, or comprehensive earnings, is part of the calculations accountants use to determine a company's comprehensive income. Other comprehensive income includes gains and losses not realized by the company, so it is not eligible to be counted as net income because net income refers to a company's total sales revenue.

Since the sum of comprehensive income is made up of both other comprehensive income and net income, it's helpful to examine the differences between all three:.

Here are specific details about other comprehensive income:. Companies record comprehensive income in several ways:. Comprehensive income is usually reported on a statement of comprehensive income. It is reported separately from retained earnings, which includes the net income of a company.

Instead, comprehensive income is reported as stakeholder equity. The statement of comprehensive income includes two parts: the net income and other comprehensive income or financial hedges.

The statement gives a comprehensive income total, which combines the net income and other comprehensive income to create the total sum of comprehensive income. Comprehensive income is also reported on an income statement. An income statement defines the overall revenue and expenses of a company. It includes the sum of a businesses' net income, which is made up of incurred profit and losses. A figure for comprehensive income factors in potential gains from investments and anticipated losses from payments like employee retirement and pension plans.

Another way to look at comprehensive income is as unrealized gains and losses. These are reported differently for tax purposes depending on how the gain or loss is realized.

However, the Board may also provide exceptional circumstances where income or expenses arising from the change in the carrying amount of an asset or liability should be included in OCI. Whilst this may be an improvement on the absence of general principles, it might be argued that it does not provide the clarity and certainty users crave. Recycling is the process where gains or losses are reclassified from equity to SOPL as an accounting adjustment.

In this way the gain or loss is reported in the total comprehensive income of two accounting periods and in colloquial terms is said to be recycled as it is recognised twice. At present it is down to individual accounting standards to direct when gains and losses are to be reclassified from equity to SOPL as a reclassification adjustment.

So rather than have a clear principles based approach on recycling what we currently have is a rules based approach to this issue. Back to top. The no reclassification rule in both IAS 16 PPE and IFRS 9 means that such gains on those assets are only ever reported once in the statement of profit or loss and other comprehensive income — ie are only included once in total comprehensive income. These users then find it strange that gains that have become realised from transactions in the accounting period are not fully reported in the SOPL of the accounting period.

As such we can see the argument in favour of reclassification. The following extract from the statement of comprehensive income summarises the current accounting treatment for which gains and losses are required to be included in OCI and, as required, discloses which gains and losses can and cannot be reclassified back to profit and loss.

Extract from the statement of profit or loss and other comprehensive income. There are three different approaches to reclassification: ignore all possible reclassifications; permit only a few reclassifications narrow approach or permit all reclassifications if they provide useful information broad approach.

It can be argued that reclassification should simply be prohibited. This would free the statement of profit or loss and other comprehensive income from the need to formally to classify gains and losses between SOPL and OCI.

This would reduce complexity and gains and losses could only ever be recognised once. However, there would still remain the issue of how to define the earnings in earnings per share, a very important ratio for investors, as clearly total comprehensive income would contain too many gains and losses that were non-operational, unrealised, outside the control of management and not relating to the accounting period.