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statement of comprehensive income

It provides a detailed summary of its revenue, expense, tax, interest, etc. In addition, it calculates the company’s overall profitability for a specified period. The net income section provides information derived from the income statement about a company’s total revenues and expenses. Though this statement has some predictive value, it makes no indication of the timing for when revenue and expense items will be realized in the future.

statement of comprehensive income


This Statement establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This Statement does not require a specific format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period in that financial statement. This Statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required.

SIC-8 — First-time Application of IASs as the Primary Basis of Accounting

When condensed formats are used, they are supplemented by extensive disclosures in the notes to the financial statements and cross-referenced to the respective line items in the statement of income. As a straightforward explanation, the account (other comprehensive income) is used to adjust the increase or decrease in fair value of certain investments. A company can have a balance of either other comprehensive income or loss, depending on if the value of the investments increases or decreases. It’s important to note that other comprehensive income is NOT included in the calculation of net income but is included in the calculation of comprehensive income (see the Wellbourn financial statements above). Recall that net income is ultimately closed to retained earnings. Since other comprehensive income is not included in the calculation of net income, other comprehensive income is closed to accumulated other comprehensive income.

The displays both net income details and other comprehensive income details. It is appreciated for its more comprehensive view of a company’s profitability picture for a particular period of time. Contrary to net income, other comprehensive income is income (gains and losses) not yet realized. It reflects income that cannot be accounted for by the income statement. Some examples of other comprehensive income are foreign currency hedge gains and losses, cash flow hedge gains and losses, and unrealized gains and losses for securities that are available for sale. State separately the components of and the total for other comprehensive income.

Comprehensive Income: Statement, Purpose, and Definition

This document provides a detailed breakdown of all income and expenses for a given period of time, allowing you to see exactly where each dollar is going. This can be invaluable information when it comes to making procurement decisions, as you can quickly identify areas where you may be able to save money. It should also be noted that since the assets are discontinued, no depreciation is taken on the assets since they are not actively used in generating income.

Expenses by nature relate to the type of expense or the source of expense such as salaries, insurance, advertising, travel and entertainment, supplies expense, depreciation and amortization, and utilities expense, to name a few. The statement for Toulon Ltd. is an example of reporting expenses by nature. Single-step, multiple-step, or any condensed formats used in a statement of income are not specified GAAP requirements. Companies can choose whichever format best suits their reporting needs. Smaller privately held companies tend to use the simpler single- step format, while publicly traded companies tend to use the multiple-step format.

SIC-27 — Evaluating the Substance of Transactions in the Legal Form of a Lease

Accounting entries related to income tax will be covered in the next accounting course (Intermediate Accounting 2). For companies, comprehensive income sheds light on changes in equity. Since it includes net income as well as unrealized income and losses, it provides the big picture of a company’s value. Similarly, it highlights both the present and accrued expenses – expenses that the company is yet to pay. But if there’s a large unrealized gain or loss embedded in the assets or liabilities of a company, it could affect the future viability of the company drastically. State separately any material amounts not included under caption 2 above.

  • The purpose of comprehensive income is to show all operating and financial events that affect non-owners’ interests in a business.
  • The net income is the result obtained by preparing an income statement.
  • Also, this statement introduces complexity to the financial reporting package that can be annoying for the accounting department producing it, and provides information that some users have complained is excessively esoteric to be overly useful.
  • Discontinued operations are presented separately on the statement of income or comprehensive income and also on the statement of cash flows.
  • If the total of sales and revenues reported under this caption includes excise taxes in an amount equal to 1 percent or more of such total, the amount of such excise taxes shall be shown on the face of the statement parenthetically or otherwise.

As previously stated, net income is a measure of return on capital and, hence, of performance. This means that investors and creditors can often estimate the company’s future earnings and profitability based on an evaluation of its past performance as reported in net income. Comparing a company’s current performance with its past performance creates trends that can have a predictive, though not guaranteed, value about future earnings performance. Additionally, comparing a company’s performance with industry standards helps to assess the risks of not achieving goals compared to competitor companies in the same industry sector. These items are not part of net income, yet are important enough to be included in comprehensive income, giving the user a bigger, more comprehensive picture of the organization as a whole. The amounts of these other comprehensive income adjustments (positive or negative) are not included in the corporation’s net income, income statement, or retained earnings.


The statement of income ends at net income (highlighted in yellow). A second statement, called the statement of comprehensive income, would start with net income and include any other comprehensive income (OCI) items. The Wellbourn financial statement (shown in section 3.3 of this chapter) is an example of separating net income and total comprehensive income into two statements. Sometimes companies will sell or shut down certain business components or operations because the operating segment or component is no longer profitable, or they may wish to focus their resources on other business components. If the discontinued operation has not yet been sold, there must be a formal plan in place to dispose of the component within one year and to report it as a discontinued operation.

What are the two statements of comprehensive income?

(b) two statements: a statement displaying components of profit or loss (an income statement), and a second statement beginning with profit or loss and displaying the components of OCI (a statement of other comprehensive income).

The lottery winnings are considered part of their taxable or comprehensive income but not regular earned income. This is because the lottery winnings are unrelated to their employment. Further, since net income is unaffected by OCI, neither is the retained earnings account on the balance sheet. On the other hand, it’s also important to understand limitations of the statement of comprehensive income. The SCI can be difficult to understand if you are not familiar with financial statements.

Items in Statement of Comprehensive Income

These topics will be revisited in the Investments chapter later in this book however, the basics should be considered. At the end of the statement is the comprehensive income total, which is the sum of net income bookkeeping for startups and other comprehensive income. Comprehensive income is the total of a company’s net income and other comprehensive income. This statement is also known as the Statement of other comprehensive income.

statement of comprehensive income