What is Other Comprehensive Income?

Other comprehensive income represents a company’s change in equity during a specific period, from transactions and events which are typically non-cash gains and losses. When the gains and losses crystallize into cash, they are usually reflected in the income statement and removed from other comprehensive income. Other comprehensive income provides additional detail to the balance sheet’s equity section, which identifies the change in stockholder’s equity beyond the net income listed on an income statement.

Some of the transactions included in other comprehensive income are revenue, expenses, losses and gains not realized in the income statement. The reason a company has not realized those transactions is that they have not yet been completed, such as a sale of an investment (and you won’t be able to pay dividends to your own shareholders using the gains), but its value has changed since acquisition.

A company recognizes the interim adjustments in other comprehensive income, which is a line item on a company’s balance sheet or in the consolidated statement of equity. Once a company has completed the transaction, it will move the gain or loss out of other comprehensive income and will report it in the income statement.

Key Learning Points

  • Other comprehensive income or OCI represents a company’s gains or losses that have yet to be realized during a specific period
  • Gains or losses are reflected in the income statement once they crystalize into cash and then removed from other comprehensive income
  • Other comprehensive income often includes transactions that have not been realized because they are incomplete, such as a sale of an investment
  • As potential income (or losses) are reported in this section and not reflected in the income statement, it provides investors with more information about future earnings of the company which are yet to be reported

Transactions Reported in Other Comprehensive Income

  • Foreign currency translation gains or losses.
  • Pension plan gains or losses (note that under IFRS these gains and losses don’t go through the income statement).
  • Unrealized holding gains or losses of investments classified as available for sale.
  • Pension before credits or service costs.
  • Unrealized gains or losses on available for sale securities.
  • Unrealized gains or losses on retirement benefit plans.

Examples of what is not included are dividends paid to shareholders, sale of stock or purchase of treasury shares. This is because these stem from a contribution of the company’s owners.


Investment purchases that a company make should reflect the historical cost and not the actual value of the asset on the balance sheet. Comprehensive income adjusts the asset to its fair market value by listing the gains or losses as accumulated other comprehensive income in the balance sheet, under the equity section.

If a company bought an investment for $1 million at the beginning of 2019, it would reflect that purchase price on its balance sheet. At the end of 2019, that investment is worth $1.2 million. The figure on the balance sheet at the end of 2019 is misleading since the investment has increased by $200,000.0. The company will reflect that gain in the line item other comprehensive income to show the true value of the investment.

If the company later sells the investment for S1.2 million, the $200,000 gain in other comprehensive income will be deducted from OCI and recorded on the income statement.

All figures are reported in ($) thousands

The Importance of Other Comprehensive Income

Other comprehensive income provides investors with the true value of a company’s assets and potential future earnings if the company’s assets are sold and gains are realized.  In other words, it gives financial statement readers a more comprehensive view of a company’s financial status. The other aspect of realized gains or losses is that it enables investors to see is if there are any potential losses in the future and how a company is managing its investments.