In some circumstances, companies combine the income statement and statement of comprehensive income into one statement. However, a company with other comprehensive income will typically file this form separately.
This statement is not required if a company does not meet the criteria to classify income as comprehensive income.
Consider an example in which a co-worker wins the lottery. 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 work or occupation, but still must be accounted for. Another example would be a stock investment that company A makes in company B. This transaction is recorded on company A's balance sheet at the purchase price and is carried forward at this price until the stock is sold. However, if the stock price were to appreciate then the balance sheet entry would be erroneous.
Comprehensive income would rectify this by adjusting it to the prevailing market value of that stock and stating the difference gain in this instance in the equity section of the balance sheet.
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Personal Finance. Your Practice. Popular Courses. What Is Comprehensive Income? Examples of Other Comprehensive income are:. Other comprehensive income can be reported either net of related tax effects or before related tax effects with a single aggregate income tax expense.
Indian Accounting standard 16 , prescribes the accounting treatment for Property, Plant and Equipment. When the cost incurred for acquiring a property, plant or equipment is determined as an asset cost then the company must determine the carrying amount.
In order to determine the carrying amount the company can use cost model or revaluation model. If revaluation model is chosen the assets must be revalued on a said date. Revalued amount will be the fair value as on revaluation date less any subsequent accumulated depreciation and subsequent accumulated impairment loss When the asset is revalued the amount can be more or less than the carrying amount.
Hence this gain or loss on revaluation will be included in Other Comprehensive Income. Let us simplify the above-mentioned treatment for movement in asset value through these illustrations:. Micro Ltd purchases a machinery for Rs. It opts for the revaluation method. The company will reflect that gain in the line item other comprehensive income to show the true value of the investment.
If the company later sells the investment for S1. The other aspect of realized gains or losses is that it enables investors to see is if there are any potential losses in the future and how a company is managing its investments.
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