Question

Asphalt Corporation became a public company through an IPO (initial public offering) three weeks ago. You are looking forward to the challenges of being assistant controller for a publicly owned corporation. One such challenge came in the form of a memo in this afternoon’s inbox. “We need to start reporting comprehensive income in our financial statements,” the message from your boss said. “Do some research on that, will you? That concept didn’t exist when I went to college.” In response, you sought out the Codification for assistance.

Required:

1. Access the FASB Accounting Standards Codification and identify the specific citation that describes the three alternative formats for reporting comprehensive income.

2. What is comprehensive income? How does it differ from net income? Where is it reported in a balance sheet?

3. One component of “Other Comprehensive Income” is usually the “net unrealized gains on investments.” What does this mean?  

4. How does Comprehensive Income impact net income?

Answer 1

Comprehensive income is the variation in a company's net assets from non owner sources during a specific period .is includes net income and unrealized income and foreign currency transaction gains or losses. Net income is the financial gain or loss that a business has made in one single time period while comprehensive income isthe change nin equity in that same time period originating in non owners sources. Other comprehensive income include unrealizes gain inthe equity section of the balance sheet that are netted below - retained earnings .can consist of gains and losses certain types of investments pension plans etc