There are numerous financial reports that a company can prepare. Each presents different financial information and serves a different purpose. Financial analysts, for instance, rely on financial reporting data to measure performance and predict future changes in a company’s stock price. They are also crucial for the management itself. One of the most important resources for reliable and audited financial statements is the annual reporting documents, which contain the main financial statements of the company.
One of such documents is the Statement of Comprehensive Income. It might seem that a simple Income Statement is sufficient, however, this document is necessary to see information that was not typically included in the other document because it is yet to be realized. This allows the company to present its true income. To stay consistent, it is compiled for a period of time as well.
The Statement of Comprehensive Income is prepared with a goal to show the financial results of the company in a way that is useful to a wide range of interested parties and in a way that allows them to try to estimate the future net cash inflows of the company. In the report, they should be classified and combined in such a way as to make them understandable and comparable.
Income is any economic benefits, including the income generated from the sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. It causes increases in equity, other than those relating to contributions from equity participants. Accordingly, the document presenting comprehensive income also reflects this change in equity without taking into account changes that are due to owners withdrawing money and doing any other transactions as owners.
When it comes to the format of this financial report, it is really simple. You are going to take the net income derived from the Income Statement and add other comprehensive income to it to get your comprehensive income. What is other comprehensive income? You would include the following items for OCI:
There are two ways to present all of this information: a single statement approach and a two statement approach. With the first approach, you have just one report called Statement of Income and Comprehensive Income. This is simply translated into the accounting of comprehensive income within the familiar to most report on profit and loss.
As you can see, the statement first lays out the usual line items of the Profit and Loss Statement. You will first list the revenue and gains that a business earned as a result of its day-to-day activities. Business activity is not possible with associated costs. Thus, they are listed next. Next, you will see other income sources and expenses for the business. Incurred.
Then, the report takes that net income and adds or subtracts the items of the comprehensive income that are applicable to a particular company described above. The last item here would be any other comprehensive income and, of course, the total for this section of the report. If this is a publicly traded company, the report will also include information on shares, including earnings per share.
If contrasting this approach with the second approach, we can note that in the last case, the company presents two separate documents. Besides the Income Statement in the format that you would typically see companies officially publishing, you would also see another document titled the Statement of Comprehensive Income, such as the one you can see below.
As you can see, the company took net profit for the year from its Statement of Operations, as you might also see the Income Statement be referred to, and added foreign currency translation items as well as other items we listed earlier, including losses for the year it is preparing the report for. As a result, it shows a total for the year 2010, which is a loss, and income for the year 2011.