Other Comprehensive Income
IntermediateOther comprehensive income is a category of gains and losses that are recognised directly in equity rather than in net income, because they are considered unrealized or outside normal operating performance.
Some changes in a company's value are not included in the income statement's net income. Instead, accounting standards require them to be reported as other comprehensive income, often shortened to OCI.
Common items include gains or losses from translating the accounts of foreign subsidiaries into the parent company's currency; certain changes in the fair value of investments; some gains and losses on hedging instruments; and remeasurements of defined benefit pension plans.
For example, a company with a subsidiary in another country might see the subsidiary's net assets fall in value by 400,000 when converted into the parent's currency because of exchange rate movements. That loss is recorded in OCI rather than reducing net income.
Net income plus OCI equals total comprehensive income, shown in the statement of comprehensive income. Accumulated OCI builds up in a separate reserve within equity on the balance sheet.
Some OCI items are later reclassified into net income when they are realized, such as when a foreign subsidiary is sold. Others are never reclassified. Investors look at OCI to see significant value changes that net income alone might not reveal.
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