Q: What are examples of other comprehensive income?
A: Foreign currency translation adjustments, unrealized gains and losses on available-for-sale debt securities, cash flow hedge gains and losses, and pension and postretirement plan remeasurements.
Other Comprehensive Income (OCI)
OCI
Metadata
- Category
- Income Statement
- Units
- Currency
- US-GAAP elements
OtherComprehensiveIncomeLossNetOfTaxOtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParentReclassificationFromAccumulatedOtherComprehensiveIncomeCurrentPeriodNetOfTax- Reference
- ASC 220, Income Statement—Reporting Comprehensive Income
- Source
- Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)
Definition
Other comprehensive income (OCI) is the set of gains and losses that accounting standards require to bypass net income and be recorded directly in equity. It is reported after tax for each period and, added to net income, makes up comprehensive income.
The usual components are foreign currency translation adjustments, unrealized gains and losses on available-for-sale debt securities, gains and losses on derivatives designated as cash flow hedges, and remeasurements of defined benefit pension and other postretirement plans.
Details
Items go to OCI rather than net income because they are unrealized and can reverse before they are ever settled. A currency translation adjustment, for example, reflects the changing dollar value of a foreign subsidiary's net assets, not a cash gain or loss. Each period's OCI is added to accumulated other comprehensive income (AOCI), a separate component of shareholders' equity on the balance sheet.
When an item is realized, such as when an available-for-sale security is sold or a hedged transaction affects earnings, the amount is moved out of AOCI and into net income. This reclassification adjustment, sometimes called recycling, is reported so the same gain is not counted twice in comprehensive income. In XBRL filings total OCI after tax is tagged OtherComprehensiveIncomeLossNetOfTax, with reclassifications tagged ReclassificationFromAccumulatedOtherComprehensiveIncomeCurrentPeriodNetOfTax.
Changes in the fair value of equity securities are not OCI for most companies: since ASU 2016-01 they generally run through net income. That leaves debt securities, hedges, pensions, and currency as the main sources, which is why OCI is largest at banks, insurers, and companies with big foreign operations or pension plans.
FAQ
Q: Why doesn't other comprehensive income go through net income?
A: The gains and losses are mostly unrealized and can reverse. Keeping them out of net income stops temporary value swings from distorting reported earnings, while still recording them in equity.
Q: What happens to OCI when a gain is realized?
A: The amount is reclassified out of accumulated other comprehensive income into net income, a step known as a reclassification adjustment or recycling.
Related Terms
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