The comprehensive income statement, includes the items of income and expenses that have not been carried out. This accompanies the income statement of a company and provides more complete information on financial results.
It is usually presented after the income statement within the financial statements process and is sometimes reflected within the income statement itself.
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In this article you will find:
Main characteristics of a comprehensive income statement
The comprehensive income statement shows a series of important characteristics such as those shown below:
1. Comprehensive items
The comprehensive income statement determines the net income, expenses and profitsTherefore, it can be said that this section shows the income from different operations.
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2. Total comprehensive income
Total comprehensive income can be calculated by adding income from operations with other comprehensive income.
3. Other games
The other comprehensive income section may show other income, which has been originated during the normal process of the activities.
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4. Performance of the period
The comprehensive income statement has the ability to show period performance, which can be annual or quarterly. It is necessary to take into account that the legal accounts are prepared annually, but despite this the administration can prepare a monthly account in the same way.
Composition of a comprehensive income statement
One of the major components importance of the comprehensive income statement It is the income statement, since it groups together all sources of income and expenses, including taxes and interest.
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Sometimes companies accumulate gains or losses that come from fluctuations in the value of their assets that are not recognized in net income, as is the case of:
- The adjustments made in foreign currency transactions.
- Gains or losses from pensions and various retirement programs.
- Derivative instrument gains or losses.
- Gains or losses that are not realized from the securities that represent the debts or those that are available for sale.
Given this information, the comprehensive income statement can be calculated by adding the net income found in the least expense income and other income comprehensive income found in unrealized gains or losses on the balance sheet of income excluded.
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What is a comprehensive income statement used for?
Among the comprehensive income statements that focus on the financial development of companies, the following uses can be determined:
Provide detailed income information
Its main objective is to provide information on how the company increases its income and the value of doing it.
By highlighting these details, it can be said that it is a well complete state, as it can provide the cost of the products sold that are linked to operational activities and include other costs such as taxes.
It is an analysis tool for investors
It is a financial report that investors are interested in previously analyzing to make the decision to invest in a company.
The statements detail the net income and earnings per share, as well as their distribution that circulates between the shares.
Classification of the comprehensive income statement
The comprehensive income statement shows two formats that are classified as follows:
The one-step income statement
This format reports and provides the income and expenses in different sections regardless of whether it has been carried out or not, which indicates that all types of income that come from sales, revaluation gains and interest income gains are records found within the sections of the income.
In the expenses section, the value of the products sold, the loss according to the exchange rate and the various expenses of the operations, are recorded within the same sections.
The multi-step income statement
In this format the statement is classified into operating profits and non-operating profits.
In this sense, operating profit results from operating income minus operating expenses and non-operating profit results from non-operating income minus non-operating expenses.
Advantages and disadvantages of the comprehensive income statement
Between the advantages of comprehensive income statement they find each other:
- Provides more detailed information on business income.
- Net income does not provide a complete picture on its own, but by including the comprehensive income statement companies can get the details in full.
- Investors can be aware of where and how the company derives the revenue and value it generates during development.
- It gives investors the opportunity to do analysis and view financial reports before deciding to invest in the company.
- It allows financial statements to detail earnings per share and net earnings, allowing investors to know what their profit could be.
Disadvantages
The comprehensive income statement It also has some limitations or disadvantages that are:
- You have the ability to show unrealized gains and losses that are linked to income, however you cannot list them if they are related to assets and liabilities.
- When the result statement is shown alone, an appropriate financial evaluation of the company is not guaranteed.
- There may be many projects that generate large profits in development, but the reality of the profits can be known.
In the comprehensive income statement, the record of gains and losses from operations and other comprehensive results that come from the various normal operating activities, it also reports changes in the net capital that commercial companies comprise in a given weather. We invite you to see our website.
Sources and references:
- Malone L. (January 2021) Statement of Comprehensive Income: Definition | Types | Explanation.
Louise. M. (2019) Accounting - Statement of Comprehensive Income: Why it is Important to Your Business.
