Comprehensive Income in Financial Statements

The income statement is one of the most essential financial statements. It summarizes income
and costs, including taxes and interest. Net income appears at the bottom of the income
statement; however, net income only acknowledges incurred or earned income and costs.
Companies, particularly big organizations, may experience profits or losses as a result of
variations in the value of specific assets. The effects of these occurrences are shown in the cash
flow statement; however, the net impact on profits is reported in the income statement under
"comprehensive" or "other comprehensive income."
Aside from the income statement, the statement of comprehensive income includes
comprehensive income. Both cover the same time period, but the comprehensive income
statement is divided into two sections: net income (derived from the income statement) and other
comprehensive income (e.g., hedges).

Comprehensive Income Examples

The comprehensive income total, which is the sum of net income and other comprehensive
income, appears at the conclusion of the statement. In some cases, businesses combine the
income statement and the statement of comprehensive income into a single statement. A
corporation with additional comprehensive income, on the other hand, will usually file this form
separately. If a corporation does not fulfill the requirements for classifying income as
comprehensive income, this declaration is not needed.
Consider the case of a coworker who wins the jackpot. Lottery wins are included in their taxable
or comprehensive income, but not in their normal earned income. This is due to the fact that their
lottery wins are unconnected to their employment or occupation, but they must still be accounted
for.
Another example is a stock investment made by firm A in business B. This transaction is
recorded on the balance sheet of business A at the acquisition price and is carried forward until
the stock is sold. However, if the stock price rises, the balance sheet entry will be incorrect.
Comprehensive income would correct this by adjusting it to the current market value of that
stock and recording the difference (profit in this case) in the equity column of the balance sheet.