Q12RQ - Horngren'S Financial And Managerial Accounting

Question

What is comprehensive income, and what does it include?

Step-by-Step Solution

Answer

The total of unrealized income and the net income generated by the business entity is known as comprehensive income. Such income includes unrealized holding gains/losses, gains/losses from foreign currency translation and deferred gains/losses. 

Definition of Currency Translation Gains/Losses

The gain and losses that arise because of differences in the currency’s value when one currency is exchanged for another are known as current translation gains/losses.

Comprehensive Income

Comprehensive income can be defined as the changes taking place in the stockholder’s equity without considering the owner's additional investment made and the dividend distributed by the owner. 

Items included in comprehensive income:

1. Unrealized holding gains or loss from the available for sale investment.
2. Adjustments in respect of the foreign currency translation.
3. Gains and losses are about the post-retirement benefits plan.
4. Deferred gains and losses are about derivatives.