Table of Contents
Table of Contents

Other Comprehensive Income

What Is Other Comprehensive Income?

In business accounting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized and are excluded from net income on an income statement. OCI represents the balance between net income and comprehensive income.

A common example of OCI is a portfolio of bonds that have not yet matured and consequently haven't been redeemed. Gains or losses from the changing value of the bonds cannot be fully determined until the time of their sale; the interim adjustments are thus recognized in other comprehensive income.

Key Takeaways

  • In business accounting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized.
  • The accounting treatment of comprehensive income is established in the Statement of Financial Accounting Standards No. 220, entitled "Comprehensive Income," which was published by the Financial Accounting Standards Board.
  • A bond portfolio is a prime example of an asset that may be considered OCI, as long as the business does not classify the underlying bonds as held-to-maturity.
  • OCI is an important measure of larger corporations' value.

Understanding Other Comprehensive Income

Corporate income can be broken down in a multitude of ways. To compensate for this, the Financial Accounting Standards Board (FASB) requires companies to use universal measurements to help provide investors and analysts with clear, easily accessible information on a company's financial standing.

The Statement of Financial Accounting Standards No. 220, published by the FASB and entitled "Comprehensive Income," reads that an entity shall report comprehensive income in a single continuous financial statement and present its components in two sections: net income and other comprehensive income.

Not to be confused wit it, accumulated other comprehensive income records changes in unrealized gains and losses in OCI and is found on a companies balance sheet.

Other comprehensive income is also not the same as "comprehensive income", though they do sound very similar. Comprehensive income adds together the standard net income with other comprehensive income.

Common Examples of Other Comprehensive Income

Any held investment classified as available for sale, which is a non-derivative asset not intended to be held until maturity and isn't a loan or a receivable, may be recognized as comprehensive income.

Other examples of OCI include:

  • The previously mentioned bond portfolio is such an asset, as long as the business does not classify the bonds as held-to-maturity. Any change in the value of the available-for-sale asset may be included.
  • Foreign currency transactions can create gains or losses if the balance of a company's currency holdings fluctuates, which they frequently do. But the only companies which truly need to pay attention to foreign currency-derived comprehensive income are large firms that deal in many different currencies.
  • Pension plans can also create comprehensive income. If the value of the plan increases, the difference between the old value and new value can be recognized as comprehensive, minus any distributions to pension recipients.
  • Gains and losses (effective portion) on derivatives instruments that are designated as, and qualify as, cash flow hedges.

Is Other Comprehensive Income Part of Retained Earnings?

No. Retained earnings are the funds leftover from corporate profits after all expenses and dividends have been paid. OCI is not part of this figure.

What Are the Components of Other Comprehensive Income?

OCI consists of revenues, expenses, gains, and losses that a firm recognizes but which are excluded from net income.

Where Does Other Comprehensive Income Appear on Financial Statements?

Comprehensive income and OCI both appear on the income statement. Accumulated other comprehensive income (AOCI) instead appears on the balance sheet as part of owners' equity.

Article Sources
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  1. U.S. Treasury. “Summary of the FASB’s IASC/US GAAP Comparison Project,” Page 2.

  2. Financial Accounting Standards Board. “Statement of Financial Accounting Standards No. 220 Comprehensive Income,”

  3. Deloitte. “Foreign Exchange Gains or Losses in the Financial Statement.”

  4. Deloitte. “Pension Accounting Considerations.”