Question

What is included in other comprehensive income? Why are items included in other comprehensive income, but not included in net income? Should these items be included in net income or not included at all? Explain your answer.

Answer 1

Answer:-

Comprehensive income is the variation in a company's net assets from non-owner sources during a specific period. Comprehensive income includes net income and unrealized income, such as unrealized gains or losses on hedge/derivative financial instruments and foreign currency transaction gains or losses.

  comprehensive income is computed by adding the net income which is found by summing up the recognized revenues. The types of revenue that business records on its accounts depend on the types of activities carried out by the business.

Other comprehensive income are:   

• Gains or losses on derivatives held as cash flow hedges.

• Foreign currency translation gains or losses

• Pension plan gains or losses

• Pension prior service costs or credits

Other comprehensive income is a catch-all for all of the items that cannot be included in typical profit and loss calculations.

Other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized.

net income is operating income less any other non-operating expenses, such as interest and taxes. Operating income includes expenses such as selling, general & administrative expenses (SG&A), and depreciation and amortization.

net earnings and net profit are commonly found as synonyms for net income.

Items of other comprehensive income are not included in the computation of net income. These items of revenue and expense are not reported on the statement of net income, but rather are considered part of other comprehensive income.