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Comprehensive Income Definition

Definition

The word comprehensive income means the entire shift in the equity of a company from transactions and other events and circumstances by non-owner origins. Comprehensive income comprises the earnings and unrealized profits and losses that a provider incurs from the present phase.

Calculation

Comprehensive Income = Net Income Other Comprehensive Income

Where:

  • Other Comprehensive Income = unrealized losses and gains on available for purchase securities, forex rates, and changes into retirement benefit obligations.

Explanation

Also called comprehensive earnings, the Statement of Financial Accounting Standards No. 130 defines comprehensive income as the change in equity of an organization leading to transactions and other events out of non-owner sources in a particular time period.

Comprehensive cash flow carries the organizations net gain and contributes to it what’s called additional income. This would consist of unrealized losses and gains on securities which are designed on the market, foreign exchange adjustments, in addition to changes to particular retirement benefit obligations.

Companies will often times report this advice about a consolidated statement of income. That program will begin with net gain removed by the revenue statement and also enhance it other comprehensive losses and gains, which can be on average shown net of taxation, to derive the business ‘s income.

The net profit or (loss) for additional comprehensive income isn’t reported to the earnings statement; rather, it’s recorded as accumulated other comprehensive earnings and can be displayed as an adjustment to stockholders’ equity on the balance sheet. This value provides investors with insights into all of the financial events that change the value of a stockholder’s ownership in the company.

Example

The following illustrates how comprehensive income may be reported in a company’s financial statements:

Consolidated Statement of Comprehensive Income Year 1 Year 2 Year 3
Net Income $625 $519 $431
Unrealized Gain or (Loss) on Available for Sale Securities $16 ($43) $25
Unrealized Gain or (Loss) on Currency Exchange Rates ($8) ($21) $17
Adjustment to Pension Benefit Obligation $24 $15 $36
Other Comprehensive Income (Loss), Net of Taxes $32 ($49) $78
Comprehensive Income $657 $470 $509