Question

The following is from the 2018 annual report of Kaufman Chemicals, Inc.:

Statements of Comprehensive Income
Years Ended December 31	2018				2017				2016
Net income	$	790			$	620			$	475
Other comprehensive income:
Change in net unrealized gains on investments, net of tax of $12, ($10), and $10 in 2018, 2017, and 2016, respectively		24				(17	)			18
Other		(1	)			(1	)			2
Total comprehensive income	$	813			$	602			$	495

Kaufman reports accumulated other comprehensive income in its balance sheet as a component of shareholders' equity as follows:

	($ in millions)
	2018			2017
Shareholders’ equity:
Common stock		300			300
Additional paid-in capital		7,565			7,565
Retained earnings		6,645			6,089
Accumulated other comprehensive income		83			60
Total shareholders’ equity	$	14,593		$	14,014

Required:
4. From the information provided, determine how Kaufman calculated the $83 million accumulated other comprehensive income in 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

Comprehensive income is the total non-owner change in equity for a given reporting period. It encompasses all changes in equity other than from transactions with owners. The majority of the non-owner transactions are reported in the income statement. However, there are items that are specifically required to be reported in other comprehensive income as opposed to net income such as the net unrealized gain/loss from investments in available-for-sale securities.

Comprehensive income has two separate components: (1) those created during the reporting period; and (2) the comprehensive income accumulated over the current and prior periods.

The second item, i.e., the comprehensive income accumulated over the current and prior periods is reported in the balance sheet as a separate component of shareholders’ equity, as is shown in this exercise.

Beginning balance – accumulated other comprehensive income............. $ 60

Add: Change in net unrealized gain.......................................................... $24

Deduct: Other............................................................................................($1)

Ending balance – accumulated other comprehensive income .............. $83