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Other comprehensive income (OCI) classification assists users in understanding the magnitude of these charges and the...

Other comprehensive income (OCI) classification assists users in understanding the magnitude of these charges and the future impact on earnings.

  • Explain how OCI disclosures provide information about the future impact on earnings.
  • Give a real-world or hypothetical example to tie this concept to business practices.
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Answer #1

Other comprehensive income consists of revenues, expenses, gains, and losses that have not been realized yet. It includes the items that have an effect on the balance sheet amounts, but the effect is not reported on the company's income statement and is not part of the income statement.

For example, Gains or Losses due to change in market value of investment held for sale will be reported in the statement of comprehensive income, because it has not been realized yet. Once the investment is sold, the gain or losses will be realized and will be part of the income. Thus it gives the user an idea of how the future income may be impacted.

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