Comprehensive Income

Ability-To-Pay Taxation

What is the overall result?

Comprehensive income is the change in a company’s net assets from non-owner sources over a specific period. Comprehensive income includes net income and unrealized income, such as unrealized gains or losses on hedging / derivative financial instruments and gains or losses on foreign exchange transactions. The overall result provides a global view of the income of a company which is not fully entered in the income statement.


Overall income

Understanding the overall result

The result excluded from the income statement is presented in the section “cumulation of other comprehensive income” in the equity section. The overall result is intended to include a total of all operational and financial events that affect the interests of owners in a business. Comprehensive income may report amounts by month, quarter or year.

Comprehensive income in the financial statements

One of the most important financial statements is the income statement. It provides an overview of income and expenses, including taxes and interest. At the end of the income statement is the net result; however, net income only recognizes income and expenses incurred or earned. Sometimes companies, especially large companies, realize gains or losses due to fluctuations in the value of certain assets. The results of these events are entered in the cash flow table; however, the net impact on the result can be found in the “global” or “other elements of comprehensive income” section of the income statement.

In addition to the income statement, comprehensive income is also included in the statement of comprehensive income. Both cover the same period, but the statement of comprehensive income has two main sections: net income (derived from the income statement) and other elements of comprehensive income (for example, hedges). At the end of the statement is the total comprehensive income, which is the sum of the net income and the other comprehensive income. In certain circumstances, companies combine the income statement and the statement of comprehensive income into one complete statement. However, a company with another comprehensive income will generally file this form separately. This declaration is not required if a company does not meet the criteria for classifying the result as an overall result.

Example of overall result

Let’s take an example in which a colleague wins the lottery. Lottery winnings are considered part of his taxable or aggregate income, but not regular earned income. In business, comprehensive income includes unrealized gains and losses on available-for-sale investments. Comprehensive income also includes cash flow hedges, the value of which may vary depending on the market value of the securities, and debt securities transferred from available for sale to held to maturity, which may also result in unrealized gains or losses. Gains or losses may also result from foreign currency translation adjustments and from pension plans and / or post-retirement benefits.

Comprehensive income excludes changes in equity caused by the owner, such as the sale of shares or the purchase of own shares. Generally, a standard comprehensive income statement (IC) is attached under a separate heading at the bottom of the income statement. The net income from the income statement is transferred to the CI report and adjusted to take into account the activities of non-owners. The final figure is transferred to the balance sheet under “cumulation of other comprehensive income”.

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