Comprehensive income is a specific term used in companies' financial reporting from the company-whole point of view. Because that use excludes the effects of changing ownership interest, an economic measure of comprehensive income is necessary for financial analysis from the shareholders' point of view (All changes in Equity except those resulting from investment by or distribution to owners.)

Accounting

Comprehensive income is defined by the Financial Accounting Standards Board

Financial Accounting Standards Board

The Financial Accounting Standards Board is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles within the United States in the public's interest...

, or FASB, as “the change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.”

Comprehensive income is the sum of net income

Net income

Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings...

 and other items that must bypass the income statement

Income statement

Income statement is a company's financial statement that indicates how the revenue Income statement (also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) is a company's financial statement that...

 because they have not been realized, including items like an unrealized holding gain

Holding gains

Holding gains are generally defined as increases in the replacement costs of the assets held during a given period...

 or loss from available for sale

Available for sale

Available for sale is an accounting term used to classify financial assets.AFS is one of the three general classifications, along with held for trading and held to maturity, under the U.S. Generally Accepted Accounting Principles , specifically, the FASB 115...

 securities

Security (finance)

A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

 and foreign currency

Currency

In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 translation gains or losses. These items are not part of net income, yet are important enough to be included in comprehensive income, giving the user a bigger, more comprehensive picture of the organization as a whole.

Items included in comprehensive income, but not net income

Net income

Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings...

 are reported under the accumulated other comprehensive income

Accumulated other comprehensive income

Note: Reference cited below, FAS130, remains the most current accounting literature in the United States on this topic.In 1997 the United States Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 130 entitled “Reporting Comprehensive Income”...

 section of shareholder's equity.

Financial Analysis

Comprehensive income attempts to measure the sum total of all operating and financial events that have changed the value of an owner's interest in a business. It is measured on a per-share basis to capture the effects of dilution and options. It cancels out the effects of equity transactions for which the owner would be indifferent; dividend payments, share buy-backs and share issues at market value.

It is calculated by reconciling the book value per-share from the start of the period to the end of the period. This is conceptually the same as measuring a child's growth by finding the difference between his height on each birthday. All other line items are calculated, and the equation solved for comprehensive earnings.

Shareholders' Equity, beg. of period (per share)
- Dividends paid (per share)
+ Shares issued (premium over book value per share)
- Share buy-backs (premium over book value per share)
+ Comprehensive Income (per share)
------------------------------------------
= Shareholders' Equity, end of period (per share)

See also

• Net income
  Net income
  Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings...
  
  
• Accumulated other comprehensive income
  Accumulated other comprehensive income
  Note: Reference cited below, FAS130, remains the most current accounting literature in the United States on this topic.In 1997 the United States Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 130 entitled “Reporting Comprehensive Income”...
  
  
• Income statement
  Income statement
  Income statement is a company's financial statement that indicates how the revenue Income statement (also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) is a company's financial statement that...
  
  
• Statement of comprehensive income

• Statement of changes in equity (statement of retained earnings
  Statement of retained earnings
  The Statement of Retained Earnings are basic financial statements.The statements explain the changes in a company's retained earnings over the reporting...
  
  )
• International Financial Reporting Standards
  International Financial Reporting Standards
  International Financial Reporting Standards are principles-based standards, interpretations and the framework adopted by the International Accounting Standards Board ....
  
  
• U.S. Generally Accepted Accounting Principles