The Accounting Guru, Statement of Comprehensive Income

What is a Statement of a Comprehensive Income?

In addition to an income statement, a statement of comprehensive income is prepared by accountants in order to show the total comprehensive income of an entity.

Although, not considered as a primary component of a complete set of financial statement, the statement of comprehensive income is vital in showing the actual cash inflow/outflow of an entity.

What is the difference between a Statement of Comprehensive Income as compared to an ordinary Income Statement?

An income statement records income and expenses that were part of the ordinary course of an entity's operation. It includes sales, selling expenses and other directly attributable cost of conducting business in arriving at the period's net income.

On the other hand, a statement of comprehensive income, starts where an income statement begins. It starts with the net income plus or minus gains or loss which are not recognized in the income statement but are directly presented in the entity's equity section.

What are the common items present in a Statement of Comprehensive Income?

• Foreign Currency Translation Gain/Loss -- some business entities especially multi-national firms are often paid in several currencies. Therefore, fluctuations in exchange rates results in significant changes in cash flows.

• Unrealized Gain/Loss on Marketable Securities -- entities often invest in securities. These securities are traded on the stock market which makes it vulnerable to price movement.

• Gains/Loses on Derivatives --derivatives are agreement, in a sense that an entity exchanges a financial liability/asset with another company. Financial liability/asset are also vulnerable to constant price movement which results in big gains to a company while big losses to the other.