Comprehensive Income

Comprehensive income is a term used in the financial reports of a company and is used to calculate the total profits a company gains. Analysis of comprehensive income is necessary from the point of view of the shareholders and it does not take into consideration any change of ownership. It includes unfulfilled gains or losses on particular investments which a company makes in pension liability adjustments, foreign currency items and securities. This form of income is not listed in the income statement of a company, but is used only when it comes to business financial reporting.

Defining Comprehensive Income

The Financial Accounting Standard Board defines comprehensive income as "the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners."

Comprehensive income can be defined as a change in the net profit of a company due to events which the owners can't control. There may be some events during the course of a financial year like sudden change in operating costs which were unforeseen, which affects the total profits of a company. It's important to keep a track of comprehensive income as it helps to understand the overall financial stability of a company. While calculating it, things like changes in foreign currency transactions are also taken into consideration. This type of income is quite volatile and it keeps changing every year, in some financial years, it may far exceed the net income while in other years it can be well below the net income.

Getting details through this model is one of the best ways of assessing the value of the shares of an owner during that particular financial year. Each event and transaction is broken down and their impact on the shares of the owner is measured while preparing the report. Thus, it helps to get a clear idea of the present status of the business.

A decrease in this type of income in a financial year may not necessarily mean that the organization is in financial trouble. However, if it persists for several years on a stretch, then there may be a need for better financial management and financial planning.

Formula for Calculating Comprehensive Income

Comprehensive income tries to measure the total operating costs which have made a difference to the value of the interest of an owner in a company. It takes into account the adverse or positive effects of options and dilution and is calculated on the basis of per-share. It does not take into account any transaction in which the owner remains indifferent such as those related to issues of shares at market value and dividend payment.
The period of the income statement; Profit/Loss from income and expenses which are determined in equity shares (it includes positive or negative gain or loss from revaluation and profit or loss from fluctuations in exchange rate) (+/-) Loss/profit due to change in accountancy policy (+/-) loss or profit due to corrections in fundamental errors. The amount which remains is the comprehensive income.

Example of Comprehensive Income Statement

In the table below, we give you a sample of a financial statement which you can use. It also includes the comprehensive income of a company. The sections mentioned may not be accurate but is an attempt to give you an idea of how the income is calculated in a financial statement of a company.

(Name of the Company)
Income and Comprehensive Statement For the Year (Financial Year) Heading
Revenue from Sales (Figures for that Financial Year) Section for details of Revenue
Selling Price of Goods (Total Amount of Revenue from Goods Sold)
Gross Profit (Total)

Expenses for Operating:
Administrative & General Expenses (Total expense in that Financial Year) Expenses for Operating: NB: Expenditure should be mentioned on the left while the total should be mentioned on the right.
Expenses for Selling (Total expense in that financial year)
Intangible assets amortization (whatever amount, if applicable)
Goodwill Write off (Amount, if applicable)
Cost of Restructuring (Amount, if applicable)
Loss incurred from Writing-down Inventory (Amount, if applicable)
Total (Total amount of Operating Expense)
Income Generated from Operations (Mention the amount)

Other Expenditure: Other Income: This includes other income sources, but these sources are not related to the day-to-day operations of the business. NB: Single items are placed on the right, while multiple items should be placed on the left and the total on the right.
Income Generated from Interest (Amount)
Expenses Related to Interest (Amount)
Revenue Generated from Sale of Operating Assets (Amount)
Loss (if any) on Sale of Operating Assets (Amount)
Total (Amount)
Income From Operations (Before Tax) (Amount)
Tax Expense @ (Rate of Tax) (Total Amount) A separate line is shown for Tax that need to be paid from continuing operations.
Income before Extraordinary Items (Amount)

Discontinued Operations:
Loss (If any) from Discontinued Operation (Amount) There are two components of Discontinued Operations. The first part is the gain/loss from part year operations and
Loss/Gain on Discontinued Operations Assets Sale (Amount as applicable) The other part is the gain/loss which comes from selling assets.
Loss/Gain which is incurred as a result of Discontinued Operations (Amount as applicable) Both these items are the net of Income Tax.
Income which comes Before Extraordinary Items (Amount)

Extraordinary Items:
Profits from selling Bonds Early Net of Tax (%) Amount Those things which do not happen frequently, but have a great impact on the current years operations are listed under Extraordinary Items. Items are report net of income tax
Loss (If Any) due to Floods or any other Natural Calamity; Net of 40% Tax (Amount)
Extraordinary Operations (Gain/Loss) (Amount)
Net Nncome (Amount)

Comprehensive Income (Profit/Loss): Non-owner Transaction Comprehensive Income. These losses or gains are beyond the control of the owner. These Items are filed as net of income tax.
Loss from Foreign currency translation, net of (Rate of Income Tax) (Amount)
Profits from Unrealized investment on securities, net of (rate of income tax) (Amount as applicable)
Total (Including Other Comprehensive Income) (Amount)
Comprehensive Income (Total Amount)

Earnings from each Share (no. of shares Outstanding and issued) Earnings generated from each share are calculated on every element of income and show the investor the result of items which are outside the income (loss) from continuing operations on shareholder equity.
Revenue Generated (Gain/loss) From Continuing Operations (Amount)
Profit/Loss due to Discontinued Operations (Amount)
Extraordinary Operations (Profit/Loss (Amount)
Other Comprehensive Income (Profit/Loss) (Amount)
Per Share Comprehensive Income (Amount)

Thus, comprehensive income constitutes an important part of the financial report of a company. It gives an indication of the financial health of a business and a prolonged slump or increase in it may mean that there is a need for changing the business policies of a company.
By Madhurjya Bhattacharyya
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