What is included in other comprehensive income?

Other Comprehensive Income (OCI): A Comprehensive Overview

Definition

Other comprehensive income (OCI) refers to unrealized revenues, expenses, gains, and losses that have not yet been realized. These items are not recognized on the income statement and do not impact net income per GAAP reporting standards (Investopedia, 2015).

Recognition and Recording

OCI is recorded on the shareholders’ equity section of the balance sheet. Unlike net income, OCI does not affect the retained earnings account (Wall Street Prep, 2023).

Components of OCI

The components of OCI include (PwC, 2019):

Key Facts

  1. Definition: Other comprehensive income (OCI) consists of unrealized revenues, expenses, gains, and losses that have not been realized yet.
  2. Recognition: Items included in OCI are not recognized on the income statement and do not impact net income.
  3. Balance Sheet: OCI is recorded on the shareholders’ equity section of the balance sheet.
  4. Impact on Retained Earnings: OCI does not affect the retained earnings account on the balance sheet.
  5. Examples of Items Included in OCI:
    • Unrealized gains and losses from financial instruments such as bonds, derivatives, and hedges.
    • Foreign exchange (FX) currency adjustments.
    • Unrealized gains and losses on pension plans, such as employee post-retirement plans.
  • Unrealized gains and losses from financial instruments (e.g., bonds, derivatives, hedges)
  • Foreign exchange (FX) currency adjustments
  • Unrealized gains and losses on pension plans (e.g., employee post-retirement plans)

Examples

Examples of items included in OCI are:

  • Unrealized gains on a portfolio of bonds
  • Foreign currency translation adjustments
  • Gains on employee post-retirement plans

Conclusion

Other comprehensive income is an important measure of a company’s value, particularly for larger corporations. By understanding the components and recognition criteria of OCI, investors and analysts can gain a more comprehensive view of a company’s financial performance.

References

FAQs

What is OCI?

OCI refers to unrealized revenues, expenses, gains, and losses that have not yet been realized and are excluded from net income on an income statement.

Where is OCI reported on the financial statements?

OCI is reported on the shareholders’ equity section of the balance sheet.

What are some examples of items included in OCI?

Examples include unrealized gains and losses from financial instruments, foreign exchange currency adjustments, and unrealized gains and losses on pension plans.

How does OCI differ from net income?

OCI is not recognized on the income statement and does not impact net income, while net income represents the company’s profit or loss over a specific period.

Does OCI affect retained earnings?

No, OCI does not affect the retained earnings account on the balance sheet.

Why is OCI important for investors and analysts?

OCI provides a more comprehensive view of a company’s financial performance, particularly for larger corporations.

How can I calculate OCI?

OCI is calculated by adding up the unrealized gains and losses from all eligible components, such as financial instruments, foreign currency, and pension plans.