Other Comprehensive Income: What It Means, With Examples

What Is Other Comprehensive Income?

In accounting for business, the term “other” complete income (OCI) comprises income, expenses, gains and losses that are still to come into effect, and are not included in the net earnings on the income statement. OCI represents the difference between the net earnings and the comprehensive portion of income.

An example of OCI is the portfolio of bonds which aren’t yet mature and, consequently, have not yet been redeemed. Losses or gains due to the fluctuation in value of bonds can’t be accurately assessed until the moment of their disposal; changes in the interim are therefore reflected in other forms of income.

Understanding Other Comprehensive Income

Corporate income is broken down in a variety of ways. To account for this in a way, it is the Financial Accounting Standards Board (FASB) obliges businesses to employ universal measures to give analysts and investors transparent, readily accessible data on the financial position of a business. 1

The Statement of Financial Accounting Standards No. 220, issued by the FASB and titled “Comprehensive Income,” reads that an entity must be able to report its comprehensive income in an unidirectional financial statement and report the components of that income in two parts that are the net profit and any other income that is comprehensive. 2

It is not to be confused with this, the accumulated income of other companies shows adjustments in gains and losses OCI and appears on a balance sheet of the company.

Common Examples of Other Comprehensive Income

Any investment held that is being sold, and which is a non-derivative asset that’s not designed to be kept until maturity, and isn’t a loan , or a receivable, can be regarded as income that is comprehensive.

Some other examples of OCI are:

• This previously discussed bonds portfolio is an asset, so it does not categorize the bonds as held-to maturity. Any changes in the value of the asset that is available for sale could be considered an asset. 2
• The foreign currency transactions could result in either losses or gains if the balance of an organization’s currencies fluctuates, and is often the case. 3 But the only firms that should be paying attention to global income from foreign currencies are the large companies that trade in a variety of currencies.
• pension plans can also generate complete income. In the event that the benefit of the pension plan rises by more than the previous value and the new value is able to be considered as comprehensive, less any distributions made to pension beneficiaries. 4
• Losses and gains (effective part) on derivative instruments which are designated as, and count as Cash flow hedges. 2

Is Other Comprehensive Income Part of Retained Earnings?

No. Reserved profits are the leftover funds from the corporate profit after all dividends and expenses were paid. OCI is not included in this number.

What Are the Components of Other Comprehensive Income?

OCI comprises of revenue and expenses, gains or losses that a business recognizes but is not counted in net earnings.

Where Does Other Comprehensive Income Appear on Financial Statements?

Compulsory income, as well as OCI each appear in the financial statement. The accumulated other income (AOCI) is listed in the balance sheet and is a part of equity owned by owners.