Understanding Income

Statements
Comprehensive Income
 Accounting Equation
Contributed Retained
Assets = Liabilities + +
Capital Earnings

Liabilities
Lenders

Assets

Owners’ Equity
Contributed
Capital

Beginning
Retained Shareholders
Retained
Earnings
Earnings
NetIncome
Net Income
- Div

Dividend Payout

Comprehensive Income
 Contributed Retained
Assets = Liabilities + +
Capital Earnings

Liabilities
Lenders

Assets

Owners’ Equity
Contributed
Capital
Dividend Payout

Beginning
Retained Shareholders
Retained
Earnings
Earnings
Net Income - Div

Comprehensive Income
 Beginning
Retained
Earnings
Contributed +
Assets = Liabilities + + Net income
Capital -
Dividend

Liabilities
Lenders

Assets

Owners’ Equity
Contributed
Capital
Dividend Payout

Beginning
Retained Shareholders
Retained
Earnings
Earnings
Change in retained Not always
Net Income - Div Net Income - Div
earnings for the period the case!
???

Comprehensive Income
 Beginning
Retained
Earnings
Contributed +
Assets = Liabilities + + Net income
Capital -
Dividend
+
OCI
Liabilities
Lenders

Assets
Contributed

Owners’ Equity
Capital
Dividend Payout

Beginning
Retained Shareholders
Retained
Earnings
Earnings
Net Income - Div Net Income - Div
Change in retained
These revenue and expense items that are Other Comprehensive earnings for the period
???
Income
excluded from the income statement

Comprehensive Income
 Comprehensive Income

Contributed
Capital

Owners’ Equity
Beginning
Retained
Items considered as Other Earnings
Comprehensive Income Net Income - Div
Change in retained
earnings for the period = Net Income - Div + OCI
These revenue and expense items that are Other Comprehensive
excluded from the income statement Income

Comprehensive Income
 Comprehensive Income
Items considered as Other Comprehensive Income
๏ Foreign currency translation gains and losses.

๏ Adjustments for minimum pension liability.

๏ Unrealised gains and losses from cash flow hedging derivatives.
๏ Unrealised gains and losses from available-for-sale securities.

Available-for-sale Securities
๏ not expected to be held to maturity or sold in the near term

๏ reported on the balance sheet at fair value

๏ Unrealised gains and losses not in income statement, but OCI
๏ Classification not allowed from 2018
๏ However, allowed "financial assets measured at fair value through other comprehensive income.”
Comprehensive Income
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