Statement of Comprehensive Income

What is a Statement of Comprehensive Income?

The Statement of Comprehensive Income is a financial statement that provides a summary of an organization’s revenue, expenses, gains, and losses over a specific period, often a year or a quarter. It includes both the Income Statement (Profit and Loss Statement) and other comprehensive income, which accounts for gains and losses that are not realized and thus not included in the Income Statement.

Structure

The Statement of Comprehensive Income usually follows this general structure:

Revenue (Sales)
Cost of Goods Sold (COGS)
Gross Profit

Operating Expenses

Selling, General and Administrative (SG&A)
Depreciation and Amortization
Other operating expenses

Operating Income

Other Income/Expenses

Interest Income
Interest Expense
Other non-operating income or expenses

Pretax Income
Income Tax Expense
Net Income (Profit or Loss)

Other Comprehensive Income

Unrealized gains/losses on available-for-sale securities
Foreign currency translation adjustments
Pension plan adjustments

Total Comprehensive Income

Usage in Practice

In practice, the Statement of Comprehensive Income is used by a variety of stakeholders:

Investors and Analysts: To assess profitability and predict future financial performance.
Management: For decision-making and performance evaluation.
Creditors: To evaluate the creditworthiness of a business.

Importance

Performance Assessment: Helps in assessing how well a company is performing.
Strategic Planning: Used by management to guide future decision-making.
Investment Decision: Investors use it to determine whether or not to invest in a company.
Taxation: Used to calculate tax obligations.

Example in Table Format

Item	Amount ($)
Revenue	500,000
Cost of Goods Sold	-300,000
Gross Profit	200,000
Operating Expenses
– SG&A	-50,000
– Depreciation	-10,000
Operating Income	140,000
Other Income/Expenses
– Interest Income	2,000
Pretax Income	142,000
Income Tax Expense	-28,400
Net Income	113,600
Other Comprehensive Income
– Unrealized gains on securities	5,000
Total Comprehensive Income	118,600

Issues and Limitations

Non-Cash Items: Includes non-cash expenses like depreciation, which may not reflect actual cash flow.
Accrual Accounting: Does not necessarily reflect cash transactions.
Exclusions: May not capture all financial activities (e.g., off-balance-sheet financing).
Manipulation: Subject to creative accounting and manipulation.
Historical Data: Provides past data, not future predictions.

Understanding the Statement of Comprehensive Income is essential for financial analysis but should be used in conjunction with other financial statements for a complete view of an organization’s financial health.

All topics to explore on Income Statement: