Companies must report both net income and comprehensive income and reconcile the difference between the two. The following items are part of comprehensive income: Changes in the market value of securities available for sale (described in Chapter 12). | The Income Statement and Statement of Cash Flows 4 Chapter 4: The Income Statement and Statement of Cash Flows Learning Objectives Explain the difference between net income and comprehensive income and how we report components of the difference. LO1 Our first learning objective in Chapter 4 is to explain the difference between net income and comprehensive income and how we report components of the difference. Comprehensive Income An expanded version of income that includes four types of gains and losses that traditionally have not been included in income statements. Comprehensive income is the total change in equity for a reporting period other than from transactions with owners. Comprehensive income includes net income as well as other gains and losses that change shareholders’ equity but are not included in traditional net income. Other Comprehensive Income Statement of Financial Accounting Standards No. 130 Comprehensive income includes traditional net income and changes in equity | The Income Statement and Statement of Cash Flows 4 Chapter 4: The Income Statement and Statement of Cash Flows Learning Objectives Explain the difference between net income and comprehensive income and how we report components of the difference. LO1 Our first learning objective in Chapter 4 is to explain the difference between net income and comprehensive income and how we report components of the difference. Comprehensive Income An expanded version of income that includes four types of gains and losses that traditionally have not been included in income statements. Comprehensive income is the total change in equity for a reporting period other than from transactions with owners. Comprehensive income includes net income as well as other gains and losses that change shareholders’ equity but are not included in traditional net income. Other Comprehensive Income Statement of Financial Accounting Standards No. 130 Comprehensive income includes traditional net income and changes in equity from nonowner transactions. Changes in the market value of securities available for sale (described in Chapter 12). Reporting a pension liability sometimes requires a reduction in shareholders’ equity (described in Chapter 17). When a derivative is designated as a cash flow hedge is adjusted to fair value, the gain or loss is deferred as a component of comprehensive income and included in earnings later, at the same time as earnings are affected by the hedged transaction (described in Chapter 14). Gains or losses from changes in foreign currency exchange rates (discussed elsewhere in your accounting curriculum). Companies must report both net income and comprehensive income and reconcile the difference between the two. The following items are part of comprehensive income: Changes in the market value of securities available for sale (described in Chapter 12). Reporting a pension liability sometimes requires a reduction in shareholders’ equity (described in Chapter 17). When a .
