Other Comprehensive Income

It is a component of accountants' calculations for determining a company's comprehensive income

Christy Grimste

Reviewed by

Christy Grimste

Expertise: Real Estate | Investment Property Sales


September 25, 2023

What Is Other Comprehensive Income?

Financial statements provide information about a company's financial and economic health. Accumulated other comprehensive income, which discloses facts about a company's gains and losses, is one part of these statements.

A company's comprehensive income is an amount that indicates the sum of its net income and other comprehensive income. In addition, it measures non-owner changes in a company's net assets over a given period or the total non-owner changes in equity. 

Comprehensive income combines net and unrealized income to provide a complete picture of a company's overall value by accounting for unrealized earnings and losses.

Comprehensive income is a technique of providing more information to firm stakeholders about the overall financial prospects of their investment. 

This figure is shown separately from net income to provide more information about potential revenue from investments and the sale of financial assets such as stocks.

Comprehensive income comprises a company's whole sales revenue (net income) as well as data for other comprehensive income.

It's easy to mix up CI with other types of comprehensive revenue. For example, other comprehensive income, or OCI, often known as comprehensive earnings, is a component of accountants' calculations for determining a company's comprehensive income.

Because net income relates to a company's entire sales revenue, other CI does not qualify to be recognized as net income because it contains profits and losses not realized by the company.

Understanding other comprehensive income

OCI, or accumulated other comprehensive income, is a financial analytical technique that refers to predicted gains or losses on a company's or individual's balance sheet. These profits and losses impact a company's net income, although they are often not reported on an income statement

Because OCI does not affect an organization's total earnings, experts record these transactions after net income on a financial statement. 

Improving the uniformity and transparency of reports by including OCI on a financial statement can help analysts grasp the company's entire financial situation.

OCI stands for "Other Comprehensive Income" and refers to earnings and losses that are not 

shown in the income statement. 

Unrealized profits or losses on available-for-sale investments, foreign currency translation gains or losses, and pension plan gains or losses are examples of OCI.

Unrealized gains or losses included in this category are:

  • Financial derivatives
  • Hedging of cash flows
  • Transactions in foreign currency
  • Portfolio performance of an investment portfolio
  • Debt instruments
  • Payments from pensions and other retirement plans
  • Fair value decreases and increases for available-for-sale securities

Other comprehensive income refers to revenues, expenses, gains, and losses excluded from net income on the income statement under both Generally Accepted Accounting Principles and International Financial Reporting Standards, meaning that they appear on the income statement after net income.

OCI includes revenues, expenses, gains, and losses that have not yet been realized. When an underlying transaction, such as the sale of an investment, is completed, profit/loss is realized. 

If your company has invested in bonds and their value changes, the difference is recognized as a gain or loss in other comprehensive income.

You will have realized the gain or loss associated with the bonds once you sell them. You can then shift the profit or loss out of other comprehensive income and into a line item higher on the income statement, which is part of net income.

OCI is intended to provide the reader of a company's financial statements with a more comprehensive view of the entity's economic situation. However, it may add too much complexity to the income statement. 

The line items included in this section of the financial statements are unlikely to be understood by a non-accountant.

comprehensive Vs other comprehensive income Vs net income

It's easy to mix up CI with other types of comprehensive revenue. For example, OCI, often known as comprehensive earnings, is a component of accountants' calculations for determining a company's comprehensive revenue.

Because net income relates to a company's entire sales revenue, other comprehensive income does not qualify as net income because it contains profits and losses not realized by the company.

Because the sum of comprehensive income includes both other comprehensive income and net income, it's essential to look at the differences between the three:

1. Comprehensive Income

The following are the distinctions between comprehensive income and other types of income:

  • It serves as a statement that covers a lot.
  • It provides fewer specifics.
  • It also takes into account net income.
  • It contains both realized and unrealized gains.

2. Other Comprehensive Income

Here are some specifics on various sources of comprehensive income:

  • It can be used to compute comprehensive income by adding it to net income.
  • It is distinct from a traditional income statement.
  • It is reported after taxes.
  • It can be registered before taxes, with a single line for income tax expense at the bottom of the statement.
  • It falls under the category of shareholder equity.
  • When an asset is sold, it must be converted to income; OCI depicts the financial impact.

3. Profit After Taxes or Net Income

  • It indicates the profit of the company after all expenses have been paid.
  • On an income statement, it's usually the last line.
  • It's calculated by subtracting sales revenue from costs.
  • It's also known as net earnings or net profit.
  • It is used to determine the net profit margin.
  • It does not represent the cash flow of a business.

What’s included in Other Comprehensive Income?

The Financial Accounting Standards Board published Statement of Financial Accounting Standards No. 220, titled "Comprehensive Income," which establishes the accounting treatment of comprehensive income.

Some of the components are shown below:

1. The foreign currency translation adjustment

If your business deals in many currencies, the balance of your accounts may fluctuate when the values of foreign currencies fluctuate. Furthermore, the rate of exchange for specific currencies may have an impact on a company's assets.

Consider a company established in the United States that mostly does business in the United Kingdom. They receive British pounds (GBP) as payment from clients in the United Kingdom.

2. Pension Plans

These post-retirement rewards may include unrealized gains and losses when a corporation pays employees a pension. In addition, while each pension plan is different, depending on the assets invested, a company's pension liabilities may increase or decrease. 

The influence of pension plans on a company's OCI varies depending on the plan used and the average contribution made by employees.

3. Investments

Investments with unrealized gains or losses are another sort of OCI. These OCI investments are usually available for purchase. When the value of an investment rises, so does the company's OCI. The OCI becomes a realized gain if the company sells.

Incorporating these investments into a financial statement can help a company demonstrate the value of its assets to potential investors.

Where do businesses keep track of their total revenue?

Companies keep track of their total revenue in a variety of ways:

1. Comprehensive Income Statement

A statement of comprehensive income is typically used to report comprehensive income. Retained earnings, which include a company's net income, are disclosed separately. Stakeholder equity is presented instead of comprehensive income.

There are two elements to the statement of comprehensive income: net income and OCI (or financial hedges). The comprehensive income total is calculated by adding net income and OCI to arrive at the entire sum of comprehensive income.

2. Profit and loss statement

An income statement also shows comprehensive income. An income statement indicates a company's total revenue and costs. In addition, it contains a company's net income, including profits and losses incurred. 

It considers future investment gains and expected losses from payments such as employee retirement and pension plans.

3. Income Statement

Unrealized gains and losses are other methods to look at comprehensive income. Depending on how the gain or loss is realized, they are reported differently for tax purposes. 

When a corporation liquidates and closes, for example, OCI in the form of a stock loss might be realized and moved to the category of capital loss.

This stock investment is now a loss for the corporation. Instead of being included in OCI, it will be classified as a revenue loss.

Because it is a relative figure that fluctuates depending on market trends, economic events, and stock performance, it is not recorded as part of net income for tax reasons. 

When an asset is sold, and the value is recognized, it can be converted to regular income and reported under net income. If a corporation meets requirements that characterize the income as comprehensive, it must file a statement with OCI.

Why do businesses keep track of their total income?

Companies keep track of CI to illustrate how their equity has changed due to recognized transactions. They also report it to represent other economic events unrelated to the owner during a particular financial period. 

Accounting standards require businesses to report these transactions in a separate financial statement. Other comprehensive income tells investors the actual value of a company's assets and potential future earnings if the assets are sold and profits are realized. 

In other words, it provides financial statement readers with a complete picture of a company's financial situation. Another benefit of realized gains or losses is that it allows investors to see if there are any potential future losses and how a company manages its investments.

OCI has also been used as a "bridging mechanism" to manage accounting mismatches, such as mismatches in recognition and measurement. 

Cash flow hedges, for example, recognized on the OCI statement, address financial statement recognition mismatches between hedging instruments and financial reports.

When the primary purpose of OCI is to serve as an accounting "bridging mechanism," it deals with measurement challenges and contributes to stakeholders taking the OCI statement into account.

It can be less economically significant than the income statement. However, without a solid conceptual foundation, there is a widespread perception that standard setters have primarily required the use of OCI to reduce net income volatility and as a parking lot for difficult-to-resolve accounting issues.

Older studies relied on inferred OCI subtotals and line items rather than directly reported ones. These studies also based their empirical evidence on "as if" rather than "as reported" OCI amounts.

OCI was derived from the following formula based on inputs from the equity statement:



  • BV = Change in equity book value
  • NI = Net income is available to common stockholders
  • DIV= Dividend paid
  • NET CAP = Net capital contributions
Venture Capital Course

Everything You Need To Break into Venture Capital

Sign Up to The Insider's Guide by Elite Venture Capitalists with Proven Track Records.

Learn More

Research and authored by Khadeeja C Abbas | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: