Meaning and definition of Comprehensive Income
According to IAS 1 "Presentation of financial statements", total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.
Comprehensive income is generally defined as a change in a company’s net assets which can be accredited to the events which are not under the owners’ control. Calculating comprehensive income can present a corporation with valuable info about the all round financial stability of the business. Besides, using the basic formula of determining comprehensive income presents an easily understandable snapshot of how the company has performed since the previous analysis.
Comprehensive income is the total of net income and other items (other comprehensive income) which must find a way around the comprehensive income statement since they have not been realized, counting items like an unrealized holding profit or loss from on hand sale securities and foreign currency translation profits and losses. These items are, however, not a part of net income but are still important enough to be counted in comprehensive income, providing a user with a bigger and more comprehensive picture of the entity as a whole.
Financial Analysis of Comprehensive Income
The key attempt of comprehensive income is to evaluate the sum total of all financial and operating events which have changed the value of an owner’s interest in a business. It is evaluated on a per-share basis to incarcerate the effects of dilution and options. Moreover, it cancels out the equity transactions’ effects for which the owner would be uninterested, like share buy-backs, dividend payments, and share issues at market value.
It is estimated by the reconciliation of book-value per share from the commencement of the time period to the closing stages of that period. This is abstractly the same as measuring the growth of a child by finding the difference between his heights on every birthday. All other line items are estimated, and the equation is then solved for comprehensive income.