In business accounting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized. A traditional example of an OCI is a portfolio of bonds that have not yet matured and consequently haven't been redeemed. Gains or losses from the changing value of the bonds cannot be fully determined until the time of their sale, therefore, the interim adjustments are recognized in other comprehensive income.

How Is Comprehensive Income Defined?

The accounting treatment of comprehensive income is established in the Statement of Financial Accounting Standards No. 130, entitled "Reporting Comprehensive Income." The website of the Financial Accounting Standards Board (FASB), which published the statement, says the following:

"This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This Statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position."

OCI can be found as a line item on a company's balance sheet, located under the equity section of the document. OCI may also be listed under a related statement called the "consolidated statement of equity." (For related reading, see "The Importance of Other Comprehensive Income")

Key Takeaways

  • In business accounting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized.
  • The accounting treatment of comprehensive income is established in the Statement of Financial Accounting Standards No. 130, entitled "Reporting Comprehensive Income," which was published by the Financial Accounting Standards Board.
  • bond portfolio is a prime example of an asset that may be considered OCI, as long as the business does not classify the underlying bonds as held-to-maturity. 

Common Examples of Other Comprehensive Income

Any held investment classified as available for sale, which is a non-derivative asset not intended to be held until maturity and isn't a loan or a receivable, may be recognized as comprehensive income.

The previously mentioned bond portfolio is such an asset, as long as the business does not classify the bonds as held-to-maturity. Any change in the value of the available-for-sale asset may be included.

Foreign currency transactions can create gains or losses if the balance of a company's currency holdings fluctuates, which they frequently do. But the only companies which truly need to pay attention to foreign currency-derived comprehensive income are large firms that deal in many different currencies.

Pension plans can also create comprehensive income. If the value of the plan increases, the difference between the old value and new value can be recognized as comprehensive, minus any distributions to pension recipients.