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Understanding Comprehensive Income Statements

Understanding Comprehensive Income Statements
Susan Guillory
Susan GuilloryUpdated September 8, 2023
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While there are plenty of traditional financial statements a business can use to analyze its income and expenses, sometimes those don’t exactly fit the needs of the business.Take, for example, a multinational company that operates in different countries and in different currencies. A simple income statement might not accurately depict the company’s income and expenses, especially if the company also has investment tools like hedge funds that generate profits.That’s where a statement of comprehensive income can be incredibly useful.

What Is Comprehensive Income?

Before we dive into what the comprehensive income statement is and why you might consider using one for your business, let’s first explore comprehensive income.Comprehensive income includes both net income as well as unrealized income or expenses from other sources, such as foreign currency exchange adjustments, gains or losses on assets, or gains or losses on benefit plans.Typically, these forms of income won’t appear on a traditional income statement, though it may be useful to account for them because these unrealized gains and losses will impact the business’ finances in the future.

What Is a Statement of Comprehensive Income?

A traditional income statement looks at net income, whereas a statement of comprehensive income also factors in that comprehensive income you now understand.Larger corporations that are active in multiple countries may choose to use a comprehensive income statement to better paint the picture of their income in all its forms, as might a company that has investments that it regularly buys and sells.

Reading and Understanding Comprehensive Income Statements

If you’re familiar with a traditional income statement, you know it only recognizes realized gains or losses in income. But sometimes a company has unrealized gains or losses, such as if it has investment tools like hedge funds, derivative instruments, or debt securities. It’s still important to account for these gains or losses, though a traditional income statement isn’t ideal for doing so.A comprehensive income statement looks nearly identical to a traditional one, with one exception: below the line items used to calculate net income, you will find a line item for comprehensive income. The company may choose to provide additional line items to break down the comprehensive income or just one line as a lump sum.How comprehensive income was calculated can be listed in the footnotes of the comprehensive income statement.Recommended: Single-Step and Multi-Step Income Statements

Uses of Comprehensive Income Statements

So when should you consider using a comprehensive income statement for your business? There are a couple of scenarios where it’s useful.

Detailed Revenue Analysis

While a traditional income statement provides information about a company’s income and expenses, sometimes there are gains or losses that weren’t realized when that statement was generated or that didn’t fit in anywhere on the income statement. That’s a good opportunity to use a comprehensive income statement — to provide more granular and up-to-date details on revenue and expenses.

Informing Investors and Lenders

If your company is considering different types of business loans or wants to bring on investors, they’ll want as much detail on your company’s finances as possible. If you have gains or losses that are important in telling the story of your business’ finances, they can be expressed in a comprehensive income statement.If you’re exploring different options for funding startups, realize that you need to paint your startup in a positive light financially so it will be appealing to investors. The more financial statements you can provide, the better potential investors or lenders will understand the potential for profit on their investment.However, the statement of comprehensive income may not be sufficient to give investors or lenders the full picture, so provide other financial statements as part of the due diligence package you give them, as well.

Pros and Cons of Using Statements of Comprehensive Income

Before creating a statement of comprehensive income, weigh the pros and cons.
Can provide a more accurate and up-to-date snapshot of financesHighlights future income or expenses, which may not come to fruition 
Gives investors and lenders a solid understanding of financesDoesn’t provide the entire picture of finances
If a company has unrealized gains or losses since the last income statement was generated, the statement of comprehensive income can be helpful in providing more up-to-date information. This is useful to potential investors or lenders. However, because those gains or losses are unrealized, they are in a sense theoretical and subject to change. The statement of comprehensive income doesn’t provide all the details of a company’s finances.

Statement of Comprehensive Income vs Income Statement

When it comes to a statement of comprehensive income vs an income statement, the key difference is that the former includes comprehensive income. That could include:
  • Unrealized gains or losses from the sale of derivatives
  • Unrealized gains or losses from pension or retirement plans
  • Adjustments from foreign currency transactions
  • Unrealized gains or losses from debt securities
Recommended: How to Apply for Small Business Loans

Comprehensive Income Statement Example

In this statement of comprehensive income example, you can see that it includes unrealized gains and losses from comprehensive income sources.
Net income$1,500,000
Comprehensive income
    Foreign currency adjustment   $100,000
    Sale of derivatives     $(25,000)
    Retirement plan adjustment      $30,000
Total comprehensive income $105,000
Total income$1,605,000

The Takeaway

Using a statement of comprehensive income can provide more clarity on your business both for you and potential investors or lenders. Keep in mind that this statement won’t provide a full picture of your company’s finances, so use other types of financial statements like a balance sheet and financial projections to make informed strategic decisions.

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Frequently Asked Questions

What is included in a statement of comprehensive income?
What is the other name for a statement of comprehensive income?
How are income statements and comprehensive income statements different?
Photo credit: iStock/AsiaVision

About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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