Accumulated other comprehensive income

From Wikipedia, the free encyclopedia

Image:Question book-3.svg

This article does not cite any references or sources. (March 2007) Please help improve this article by adding citations to reliable sources. Unverifiable material may be challenged and removed.

In 1997 the United States Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 130 entitled “Reporting Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement or a special item as other comprehensive income.

Comprehensive income is the total nonowner change in equity for a reporting period. This change encompasses all changes in equity other than transactions from owners. Most of these changes appear in the income statement. A few special types of gains and losses are not shown in the income statement but as special items in shareholder equity section of the balance sheet.

Since these comprehensive income items are not closed to retained earnings each period they accumulate as shareholder equity items and thus are entitled “Accumulated Other Comprehensive Income”.

Accumulated other comprehensive income is a subsection in equity where "other comprehensive income" is accumulated (summed).

Other comprehensive income is the difference between net income and comprehensive income and represents the unrealized gains and losses of the enterprise. In practice, it comprises four general items:

1. Gains and losses on available for sale securities as required by Statement of Financial Accounting Standards No. 115 - "Accounting for Certain Investments in Debt and Equity Securities"
2. Gains and losses on derivatives held as cash flow hedges as required by Statement of Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments and Hedging Activities".
3. Gains and losses resulting from converting foreign currency subsidiaries to the parent currency as required by Statement of Financial Accounting Standards No. 52 - "Foreign Currency Translation", and
4. Minimum pension liability adjustments, as required by Statement of Financial Accounting Standards No. 87 - "Employers' Accounting for Pensions".
5. Unrealized gains and losses from a foreign currency hedge of a net investment in a foreign operation as required by Statement of Financial Accounting Standards No. 133.