Definition of Comprehensive Income
Comprehensive income encompasses both profit or loss and other comprehensive income. It represents the total change in equity during a specific period, including items not recognized in the profit and loss account [1].
Key Facts
- Definition: Comprehensive income includes both profit or loss and other comprehensive income. It represents the total change in equity during a period, including items that are not recognized in the profit and loss account.
- Components of comprehensive income: Comprehensive income consists of two main components:
a. Profit or loss: This includes revenues, expenses, gains, and losses that arise from the ordinary activities of the entity.
b. Other comprehensive income: This includes items of income and expenses that are not recognized in the profit and loss account. Examples of other comprehensive income include unrealized gains or losses on investments, foreign currency translation gains or losses, and pension plan gains or losses[2]. - Reporting: Comprehensive income is reported in the financial statements of an entity. It can be presented as a separate statement or as part of the statement of changes in equity.
- Importance: Comprehensive income provides a more comprehensive view of an entity’s financial performance and changes in equity. It helps stakeholders understand the impact of non-operating items and other comprehensive income on the overall financial position of the entity.
Components of Comprehensive Income
Comprehensive income consists of two primary components:
Profit or Loss:
Profit or loss includes revenues, expenses, gains, and losses arising from the entity’s ordinary activities.
Other Comprehensive Income:
Other comprehensive income includes items of income and expenses not recognized in the profit and loss account. Examples include unrealized gains or losses on investments, foreign currency translation gains or losses, and pension plan gains or losses [2].
Reporting Comprehensive Income
Comprehensive income is reported in an entity’s financial statements. It can be presented as a separate statement or as part of the statement of changes in equity [3].
Importance of Comprehensive Income
Comprehensive income provides a more comprehensive view of an entity’s financial performance and changes in equity. It helps stakeholders understand the impact of non-operating items and other comprehensive income on the entity’s overall financial position [4].
Conclusion
Comprehensive income offers a holistic perspective of an entity’s financial performance by incorporating both profit or loss and other comprehensive income. This information is crucial for stakeholders to assess the entity’s overall financial health and make informed decisions.
References
[1] Ministry of Corporate Affairs, Government of India. (2015). Indian Accounting Standard (Ind AS) 1 – Presentation of Financial Statements. Retrieved from https://www.mca.gov.in/Ministry/pdf/INDAS1.pdf
[2] ClearTax. (2021). Other Comprehensive Income – Meaning & Applicability. Retrieved from https://cleartax.in/s/other-comprehensive-income
[3] Investopedia. (2023). Other Comprehensive Income: What It Means, With Examples. Retrieved from https://www.investopedia.com/ask/answers/071415/what-are-some-examples-items-count-comprehensive-income.asp
FAQs
What is comprehensive income under Ind AS?
Comprehensive income under Ind AS is a measure of an entity’s financial performance that includes both profit or loss and other comprehensive income. It represents the total change in equity during a period, including items not recognized in the profit and loss account.
What are the components of comprehensive income as per Ind AS?
Comprehensive income consists of two main components:
– Profit or loss: This includes revenues, expenses, gains, and losses arising from the ordinary activities of the entity.
– Other comprehensive income: This includes items of income and expenses not recognized in the profit and loss account, such as unrealized gains or losses on investments, foreign currency translation gains or losses, and pension plan gains or losses.
How is comprehensive income reported under Ind AS?
Comprehensive income is reported in an entity’s financial statements. It can be presented as a separate statement or as part of the statement of changes in equity.
What is the importance of comprehensive income under Ind AS?
Comprehensive income provides a more comprehensive view of an entity’s financial performance and changes in equity. It helps stakeholders understand the impact of non-operating items and other comprehensive income on the overall financial position of the entity.
What are some examples of other comprehensive income under Ind AS?
Examples of other comprehensive income under Ind AS include:
– Unrealized gains or losses on available-for-sale investments
– Foreign currency translation gains or losses
– Pension plan gains or losses
– Actuarial gains or losses on defined benefit plans
– Gains or losses on disposal of property, plant, and equipment classified as held for sale
How does comprehensive income differ from profit or loss under Ind AS?
Comprehensive income is a broader measure of financial performance than profit or loss. Profit or loss only includes revenues, expenses, gains, and losses arising from the ordinary activities of the entity, while comprehensive income also includes other comprehensive income items.
Why is comprehensive income important for stakeholders under Ind AS?
Comprehensive income is important for stakeholders because it provides a more complete picture of an entity’s financial performance and changes in equity. This information is crucial for stakeholders to assess the entity’s overall financial health and make informed decisions.
How can comprehensive income be used to evaluate an entity’s financial performance under Ind AS?
Comprehensive income can be used to evaluate an entity’s financial performance by comparing it to prior periods, to the performance of other entities in the same industry, and to the entity’s budget or forecast. This analysis can help stakeholders identify trends, strengths, and weaknesses in the entity’s financial performance.