Total Comprehensive Income
- Other Comprehensive Income (OCI) reflects the changes in a company's equity during the accounting period which does not represent contributions by or distributions to the company's owners.
Total Comprehensive Income = Net Income + / - Other Comprehensive Income
OCI = Ending Shareholders' Equity - Beginning Shareholders' Equity - Net Income + Declared Dividends
- Reporting Comprehensive Income: firms can report comprehensive income below net income on the income statement, as an extra column on the statement of changes in shareholders' equity, or through a statement of comprehensive income.
Items Under OCI Category
U.S. GAAP has four items that fall under the OCI category:
Unrealized Gains/Losses on Certain Investment Securities: these are gains or losses from intercorporate investments classified as available for sale (AFS). The unrealized gain/loss in the accounting period does not affect net income for the period, but does impact shareholders equity as part of OCI.
Unrealized Gains/Losses on Hedging Derivatives: a change in the fair value of derivatives contracts used for hedging is not part of net income, but is applied to equity through OCI.
Foreign Currency Translation Adjustments: when a company consolidates foreign subsidiaries using the current rate method, the gain or loss resulting from the foreign exchange adjustments is reported as part of OCI.
Pension Liability Adjustments: actuarial gains and losses related to defined benefit retirement plans are recorded as part of OCI.
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- CFA Level 2: Financial Reporting Part 3 – Introduction
- Various Definitions of Earnings
- Total Comprehensive Income
- Earnings and Cash Flows
- Derivatives Hedging and Financial Reporting
- Cash Basis Accounting vs. Accrual Basis Accounting
- Management Motivations for Financial Statement Manipulation
- Measures of Earnings Quality
- Analyzing Earnings Quality - the Accruals Ratio
- Financial Reporting Problems and Warning Signs
- Financial Statement Analysis - Ratio Analysis
- Adjusting a Company's Reported Financial Statements