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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:

  1. Revenue (Sales)
  2. Cost of Goods Sold (COGS)
  3. Gross Profit

Operating Expenses

  • Selling, General and Administrative (SG&A)
  • Depreciation and Amortization
  • Other operating expenses
  1. Operating Income

Other Income/Expenses

  • Interest Income
  • Interest Expense
  • Other non-operating income or expenses
  1. Pretax Income
  2. Income Tax Expense
  3. Net Income (Profit or Loss)

Other Comprehensive Income

  • Unrealized gains/losses on available-for-sale securities
  • Foreign currency translation adjustments
  • Pension plan adjustments
  1. 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

  1. Performance Assessment: Helps in assessing how well a company is performing.
  2. Strategic Planning: Used by management to guide future decision-making.
  3. Investment Decision: Investors use it to determine whether or not to invest in a company.
  4. 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

  1. Non-Cash Items: Includes non-cash expenses like depreciation, which may not reflect actual cash flow.
  2. Accrual Accounting: Does not necessarily reflect cash transactions.
  3. Exclusions: May not capture all financial activities (e.g., off-balance-sheet financing).
  4. Manipulation: Subject to creative accounting and manipulation.
  5. 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:

  • Income Statement – what is an Income Statement?
  • Income Statement Example
  • Multi Step Income Statement
  • Income Statement Format
  • Common Size Income Statement
  • Income Statement Template
  • Income Statement Accounts
  • Pro Forma Income Statement
  • Income Statement Formula
  • Contributuon Format Income Statement
  • Single Step Income Statement
  • Contributuon Margin Income Statement
  • Statement of Comprehensive Income
  • How to Prepare Income Statement?

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