{"id":3765,"date":"2019-10-08T13:33:00","date_gmt":"2019-10-08T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=3765"},"modified":"2026-03-30T18:53:39","modified_gmt":"2026-03-30T18:53:39","slug":"comprehensive-income-calculation","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/comprehensive-income-calculation\/","title":{"rendered":"Comprehensive Income"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Which of the following best describes comprehensive income?\",\n      \"answerCount\": 3,\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The correct answer is C. Comprehensive income includes all changes in shareholders\u2019 equity during a period except those resulting from investments by owners and distributions to owners. A is incorrect because revenue refers only to income generated by a company. B is incorrect because comprehensive income includes both net income and other comprehensive income.\"\n      }\n    }\n  ]\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Understanding Income Statements (2025 Level I CFA\u00ae Exam \u2013 FRA \u2013 Module 3)\",\n  \"description\": \"This video lesson covers understanding income statements, including revenue and expense recognition principles, non-recurring items, and financial reporting standards. It explains earnings per share calculations, contrasts operating and non-operating components, and demonstrates common-size income statements and financial ratios for evaluating company performance.\",\n  \"uploadDate\": \"2022-04-22T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/hNscz8Hx_Jg\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/youtu.be\/hNscz8Hx_Jg\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/hNscz8Hx_Jg\",\n  \"duration\": \"PT50M21S\"\n}\n<\/script>\n\n\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/hNscz8Hx_Jg\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>\u2018Comprehensive income\u2019 and \u2018other comprehensive income\u2019 are two components of the income statement that can have a material effect on the profitability of a company. It is therefore very important to understand the difference between these two items and the impact they may have on financial ratio analysis.<\/p>\n<p>IFRS describes \u2018total comprehensive income as \u201cthe change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.\u201d<\/p>\n<p>US GAAP describes \u2018comprehensive income\u2019 as \u201cthe change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.\u201d<\/p>\n<p>Even though these definitions are slightly different, comprehensive income includes similar items under both IFRS and US GAAP. These similar items include both net income and other revenue and expense items that are excluded from the net income calculation, i.e., \u2018other comprehensive income.\u2019<\/p>\n<h2><strong>Comprehensive Income Calculation<\/strong><\/h2>\n<p>The best way to demonstrate the computation of comprehensive income is the use of an an example.<\/p>\n<h3><strong>Example of Comprehensive Income Calculation<\/strong><\/h3>\n<p>A company\u2019s beginning shareholders\u2019 equity is $500 million, its net income for the year is $50 million, its cash dividends for the year is $5 million, and the company did not issue or repurchase any of its stock. If the company\u2019s actual ending shareholders\u2019 equity is $570 million, what is its comprehensive income?<\/p>\n<p><strong>Solution<\/strong><\/p>\n<p>Since the ending shareholders\u2019 equity is $570 million, then [$570 \u2013($500 + $50 &#8211; $5)] million = $25 million has bypassed the net income calculation and is classified as \u2018other comprehensive income.\u2019\u00a0 Total comprehensive income is therefore equal to net income + other comprehensive income = $50 million + $25 million = $75 million.<\/p>\n<blockquote>\n<h3><strong>Question<\/strong><\/h3>\n<p>Which of the following <em>best<\/em> describes comprehensive income?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">Comprehensive income is another term for revenue.<\/li>\n<li data-tadv-p=\"keep\">Comprehensive income includes only revenue and expense items that are excluded from the net income calculation.<\/li>\n<li data-tadv-p=\"keep\">Comprehensive income includes all changes in shareholders\u2019 equity during a period except those resulting from investments by owners and distributions to owners.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>C<\/strong>.<\/p>\n<p>Comprehensive income describes all changes in shareholders\u2019 equity except those resulting from investments by owners and distributions to owners.<\/p>\n<p><strong>A is incorrect<\/strong> because revenue describes all the income generated by a company, while comprehensive income describes all the changes in shareholders\u2019 equity during a period except those which result from investments by owners and distributions to owners.<\/p>\n<p><strong>B is incorrect<\/strong> because comprehensive income includes not only revenue and expense items that are excluded from the net income calculation (other comprehensive income), but also net income.<\/p>\n<\/p>\n<\/blockquote>","protected":false},"excerpt":{"rendered":"<p>\u2018Comprehensive income\u2019 and \u2018other comprehensive income\u2019 are two components of the income statement that can have a material effect on the profitability of a company. It is therefore very important to understand the difference between these two items and the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-3765","post","type-post","status-publish","format-standard","hentry","category-financial-reporting-and-analysis","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Comprehensive Income Calculation | CFA Level 1 - AnalystPrep<\/title>\n<meta name=\"description\" content=\"Learn how comprehensive income and other comprehensive income impact financial statements and profitability analysis.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/comprehensive-income-calculation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Comprehensive Income Calculation | CFA Level 1 - 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