Accumulated Other Comprehensive Income

AAA

DEFINITION of 'Accumulated Other Comprehensive Income'

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.

INVESTOPEDIA EXPLAINS '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. Income

    Money that an individual or business receives in exchange for ...
  2. All-Purpose Financial Statement

    A record of financial activity that is suitable for a variety ...
  3. Unrealized Gain

    A profit that exists on paper, resulting from any type of investment. ...
  4. Unrealized Loss

    A loss that results from holding onto an asset after it has decreased ...
  5. Income Statement

    A financial statement that measures a company's financial performance ...
  6. Equity

    1. A stock or any other security representing an ownership interest. ...
Related Articles
  1. Fundamental Analysis

    Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
  2. Forex Education

    An Introduction To Complementary Currencies

    There are alternatives to national currencies. Discover complementary currencies and how they work.
  3. Options & Futures

    Find Investment Quality In The Income Statement

    Use these key attributes to uncover top-level investments.
  4. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  5. Personal Finance

    Detecting Financial Statement Fraud

    Find out how to tell if a company is manipulating its financial data, so you don't invest in the next Enron.
  6. 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.
  7. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  8. Markets

    Financial Statement Manipulation An Ever-Present Problem For Investors

    The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors.
  9. Retirement

    Common Clues Of Financial Statement Manipulation

    Search for the "bloody" fingerprints in accounting crimes.
  10. Active Trading

    Introduction To Stationary And Non-Stationary Processes

    What to know about stationary and non-stationary processes before you try to model or forecast.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center