Statement of Total Recognized Gains and Losses (Statement of Comprehensive Income)

Definition

The Statement of Total Recognized Gains and Losses (commonly termed the Statement of Comprehensive Income) is a financial statement that shows the degree to which shareholders’ equity has increased or decreased from various gains and losses recognized during the period. The statement includes profits and losses, alongside other comprehensive income such as changes in asset revaluation or actuarial gains and losses.

Key Components

• Profit or Loss for the Period: Derived from the income statement, representing the company’s primary operational performance.
• Other Comprehensive Income (OCI): Gains and losses not included in net income, often involving changes in the value of items recorded on the balance sheet.
• Exclusions: Transactions with shareholders, such as dividend payments, which are covered in a separate statement detailing changes in equity.

Examples

1. Profit for the Period: If Company X reports a net profit of $100,000 for the financial year, this amount is included in the statement of comprehensive income.
2. Revaluation Surplus: If land owned by Company Y is revalued upwards by $50,000, this gain is recorded in OCI, increasing the shareholders’ equity.

Frequently Asked Questions (FAQs)

Q1: What distinguishes the statement of comprehensive income from the income statement?

• A1: The statement of comprehensive income encompasses all recognized gains and losses, including other comprehensive income, whereas the income statement includes only operational results (profits and losses).

Q2: Why is other comprehensive income important?

• A2: OCI provides a fuller picture of the company’s financial stability by including gains and losses not realized through normal operations, which can significantly impact equity.

Q3: What types of items are included in other comprehensive income?

• A3: Examples include foreign currency translation adjustments, available-for-sale financial instruments, actuarial gains and losses on defined benefit plans, and changes in the valuation of assets.

Q4: How often is the statement of comprehensive income prepared?

• A4: It typically accompanies annual and quarterly financial reporting as provided to shareholders and regulatory bodies.

Q5: Are transactions with shareholders reported in the statement of comprehensive income?

• A5: No, such transactions are captured separately in the statement of changes in equity.

Related Terms

• Shareholders’ Equity: Represents the ownership interest of shareholders in a company’s assets.
• Income Statement: A financial statement detailing revenues and expenses to showcase profit or loss.
• Balance Sheet: A financial statement that summarizes a company’s assets, liabilities, and equity.
• Other Comprehensive Income (OCI): Consists of gains and losses excluded from net income in accordance with financial accounting standards.
• International Accounting Standards (IAS): Standards issued by the IASB to ensure transparency, accountability, and efficiency in financial markets.

Online References

1. International Accounting Standards Board (IASB) - Official Website
2. Journal of Accountancy - Comprehensive Income Reporting
3. Financial Reporting Council (FRC) - UK Standards

Suggested Books for Further Studies

1. Financial Accounting: An Introduction by Pauline Weetman
2. Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
3. International Financial Reporting: A Practical Guide by Alan Melville
4. The Essentials of Financial Analysis by Samuel Weaver

Accounting Basics: “Statement of Comprehensive Income” Fundamentals Quiz

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