Statement of Comprehensive Income
Comprehensive income is the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The statement of comprehensive income illustrates the financial performance and results of operations of a particular company or entity for a period of time.
Any equity changes that are not the consequence of transactions with shareholders are included in comprehensive income. It is comprised of two main components: net income and other comprehensive income.
According to International Financial Reporting Standards since 1 January 2009 an entities make:
- a Statement of comprehensive income (see the table below) or
- two separate statements comprising:
- an Income statement displaying components of profit or loss and
- a Statement of comprehensive income that begins with profit or loss (bottom line of the income statement) and displays the items of other comprehensive income for the reporting period (IAS 1 p.81)
So the statement of comprehensive income aggregates income statement (profit and loss statement) and other comprehensive income which isn't reflected in profits and losses. "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." (IAS 1 p.7)
The statement of comprehensive income is one of the major financial statements used by accountants and business owners (the other major financial statements are the balance sheet (statement of financial position), statement of changes in equity and statement of cash flows).
Net income is the traditional measure of a company's profitability and is calculated as revenues minus expenses. Other comprehensive income includes gains and losses that bypass the income statement and are instead recorded directly in equity. These gains and losses may include items such as unrealized gains or losses on available-for-sale securities, foreign currency translation adjustments, and gains or losses from cash flow hedging activities.
Comprehensive income is a broader measure of a company's financial performance than net income alone, as it takes into account a wider range of factors that can impact a company's equity position.
IFRS do not prescribe the exact format of the Statement of comprehensive income but it can be obtained from IFRS Taxonomy. Just that official format is built into the ReadyRatios analytical software.
Statement of Comprehensive Income
|
Reference IAS (IFRS), p. |
COMPREHENSIVE INCOME |
1p106a 1p82i |
PROFIT (LOSS) | 1p82f |
Profit (loss) from continuing operations | 1p82f |
Profit (loss) before tax | IFRS 8p23, 8p28b |
Gross profit | 1p103 |
Revenue | 1p82a, 18p35b, IFRS, 8p28a |
Cost of sales | 1p99 |
Other income | 1p103, 1p102 |
Distribution costs | 1p99 |
Administrative expense | 1p99 |
Other expense | 1p99 |
Other gains (losses) | 1p103, 1p102 |
Profit (loss) from operating activities | |
Difference between carrying amount of dividends payable and carrying amount of non-cash assets distributed |
IFRIC 17p5 |
Gains (losses) on net monetary position | 9p29 |
Gain (loss) arising from derecognition of financial assets measured at amortised cost | 1p82 aa |
Difference between carrying amount of non-cash assets distributed and carrying amount of dividends payable | IFRIC 17p5 |
Finance income | IFRS 7 IG13 |
Finance costs | 1p82b |
Share of profit (loss) of associates and joint ventures accounted for using equity method | 1p82c |
Gains (losses) arising from difference between previous carrying amount and fair value of financial assets reclassified as measured at fair value | Effective 2013-01-01 IAS 1.82 ca |
Income tax expense (from continuing operations) | 1p82d, 7p20 |
Profit (loss) from discontinued operations | 1p82e-i |
OTHER COMPREHENSIVE INCOME | 1p91а |
Other comprehensive income, net of tax, exchange differences on translation | 1p91а, 1p82g |
Other comprehensive income, net of tax, available-for-sale financial assets | 1p91а, 1p82g |
Other comprehensive income, net of tax, cash flow hedges | 1p91а, 1p82g |
Other comprehensive income, net of tax, hedges of net investments in foreign operations | 1p91а, 1p82g |
Other comprehensive income, net of tax, gains (losses) from investments in equity instruments | 1p7d |
Other comprehensive income, net of tax, gains (losses) on revaluation | 1p91а, 1p82g |
Other comprehensive income, net of tax, actuarial gains (losses) on defined benefit plans | 19p120h, 1p91а, 1p82g |
Income (expense) recognised in other comprehensive income relating to non-current assets or disposal group classified as held for sale | IFRS 5p38 |
Here you can see the exact presentation of the statement of comprehensive income and all other reporting statements required by IFRS.
Historical Reference
Comprehensive income has been included in IFRS standards since the publication of IAS 1 (International Accounting Standard 1) in 1997. IAS 1 Presentation of Financial Statements requires companies to present a statement of comprehensive income, which includes all items of income and expense recognized in a period, both in profit or loss and in other comprehensive income.
In 2007, the IASB (International Accounting Standards Board) published a revised version of IAS 1 that included some changes to the presentation of comprehensive income. One of the key changes was to require companies to present a single statement of comprehensive income, rather than separate statements for profit or loss and other comprehensive income.
Since then, comprehensive income has been an important part of IFRS financial reporting, and is included in a number of other IFRS standards, including IAS 16 Property, Plant and Equipment, IAS 19 Employee Benefits, and IAS 36 Impairment of Assets. Companies that report under IFRS are required to provide a statement of comprehensive income in their financial statements to provide a more complete picture of their financial performance.Comprehensive Income under US GAAP
US GAAP also has the concept of comprehensive income, which is defined similarly to IFRS.
According to US GAAP, comprehensive income comprises both net income and other comprehensive income, as well as all changes in equity that arise from non-owner sources during the course of a period. Items include foreign currency translation adjustments, unrealized gains and losses on securities that are available for sale, gains and losses from cash flow hedges, and adjustments for pension and other postretirement benefit schemes are included under other comprehensive income.
Like IFRS, US GAAP requires companies to report comprehensive income in a statement that is separate from the traditional income statement. This statement is called the statement of comprehensive income under IFRS, and the statement of comprehensive income or statement of other comprehensive income under US GAAP.
Although the notion of comprehensive income is shared by both IFRS and US GAAP, there are some changes in how it is computed and reported under each set of standards. To guarantee that their financial statements meet the criteria of both IFRS and US GAAP, companies who operate under both standards may need to make modifications.