Accumulated Other Comprehensive Income

Loading the player...

What is 'Accumulated Other Comprehensive Income'

Accumulated other comprehensive income is an entry that is generally found in the shareholders' equity section of the balance sheet. Accumulated other comprehensive income is used to sum up unrealized gains and losses because those items have not been settled. This account can include unrealized gains and losses from investments held by the firm, company pension funds and foreign currency transactions.

BREAKING DOWN 'Accumulated Other Comprehensive Income'

Companies use accumulated other comprehensive income to take into account the fair value of investments that have not yet been bought or sold. For example, securities held by a company that have increased in value but have not yet been sold haven’t given the company profit. To record the increase in an unrealized item is to indicate the potential gain if the security is sold. Companies also use accumulated other comprehensive income to record unrealized gains or losses in a pension plan. Once the gain or loss has been realized, it will be shifted from accumulated other comprehensive income to net income.

Investors reviewing a company’s balance sheet can use the accumulated other comprehensive income account as a barometer for upcoming threats or windfalls to net income. For example, a large unrealized loss from bond holdings today could spell trouble if the bonds are nearing maturity. A multinational company that must deal with different currencies may require a company to hedge against currency fluctuations, with the unrealized value of those holdings also appearing in accumulated other comprehensive income.

RELATED TERMS
  1. Unrealized Gain

    A profit that exists on paper, resulting from any type of investment. ...
  2. Accumulated Income

    The portion of net income that is retained by a corporation instead ...
  3. Unrealized Loss

    A loss that results from holding onto an asset after it has decreased ...
  4. Realized Gain

    A gain resulting from selling an asset at a price higher than ...
  5. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  6. Protective Put

    A risk-management strategy that investors can use to guard against ...
Related Articles
  1. Term

    What's Accumulated Other Comprehensive Income?

    Accumulated other comprehensive income lists gains and losses a firm has yet to settle.
  2. Investing Basics

    Explaining Unrealized Gain

    An unrealized gain occurs when the current price of a security exceeds the price an investor paid for the security.
  3. Investing Basics

    What Are Unrealized Gains And Losses?

    Gains or losses become “realized” when the stock is sold.
  4. Investing

    What is Comprehensive Income?

    Comprehensive income is a part of the owners’ equity section of the balance sheet.
  5. Markets

    Cleaning Up Dirty Surplus Items On The Income Statement

    Dirty surplus items can skew net income. Knowing how to account for them will give you a cleaner picture.
  6. Fundamental Analysis

    Analyzing Owners' Equity

    Analyzing owners’ equity is an important exercise for any shareholder.
  7. Economics

    Is Net Income The Same As Profit?

    Net income and profit both deal with positive cash flow, but there are important differences between the two concepts.
  8. Savings

    All About Income

    Income is the money you or a business earns by providing goods or services, or through investments.
  9. Forex Education

    Accounting Basics: Financial Statements

    By Bob Schneider Financial statements present the results of operations and the financial position of the company. Four statements are commonly prepared by publicly-traded companies: balance ...
  10. Investing

    Top Tips for Deducting Stock Losses

    Investors who know the rules can turn their losing picks into tax savings. Here's how to deduct your stock losses.
RELATED FAQS
  1. What are the differences between comprehensive income and other comprehensive income?

    Learn what the accounting terms "comprehensive income" and "other comprehensive income" can tell an investor's financial ... Read Answer >>
  2. What is the difference between comprehensive income and gross income?

    Learn the specifics of both comprehensive income and gross income, how they are legally defined, and the primary difference ... Read Answer >>
  3. What are some examples of items that count as comprehensive income?

    Take a look at some of the more common examples of other comprehensive income, or OCI, and learn how OCI differs from standard ... Read Answer >>
  4. What are unrealized gains and losses?

    An unrealized loss occurs when a stock decreases after an investor buys it, but he or she has yet to sell it. If a large ... Read Answer >>
  5. How does accumulated depreciation affect net income?

    Learn why accumulated depreciation does not directly affect a company's net income; understand where a company accounts for ... Read Answer >>
  6. How does comprehensive income get reported on my 1040?

    Find out how comprehensive, or total, income is reported on IRS Form 1040, including some examples of the many types of income ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center