What Is Accumulated Other Comprehensive Income?

Accumulated other comprehensive income (OCI) includes all unrealized gains and losses reported in the equity section of the 澳洲幸运5开奖号码历史查询:balance sheet that are netted below 澳洲幸运5开奖号码历史查询:retained earnings.

Other comprehensive income can consist of gai༒ns and losses on certain types of investmen🀅ts, pension plans, and hedging transactions. It is excluded from net income because the gains and losses have not yet been realized.

Investors reviewing a company's balance sheet can use the accumulated OCI account as a barometer for upcoming threats or windfalls to net income.

Other Comprehensive Income vs. Realized Income

An investment must have a buy transaction and a sell transaction to realize a gain or loss. If, for example, an investor buys IBM common stock at $20 per share and later sells the shares at $50, the owner has a realized gain per share of $30. Realized gains and losses are reported on the 澳洲幸运5开奖号码历史查询:income statement.

An unrealized gain or loss means that no sell transaction has occurred. Other comprehensive income reports unrealized gains and losses for certain investments based on the 澳洲幸运5开奖号码历史查询:fair value of the security as of the balance sheet date. If, for example, the stock was purchased at $20 per share,♉ and the fair market v𒐪alue is now $35 per share, the unrealized gain is $15 per share.

Companies can designate investments as 澳洲幸运5开奖号码历史查询:available for sale, 澳洲幸运5开奖号码历史查询:held to maturity, or 澳洲幸运5开奖号码历史查询:trading securities. Unrealized gains and losses are reported in OCI for some of these securities, so the financial statement re൩ader is aware of the potential for a realized gain or loss on the income statement down the road.

Types of Accumulated Other Comprehensive Income

Unrealized gains and losses relating to a company's pension plan are commonly presented in𒉰 accumulated other comprehensive i🌊ncome (OCI). Companies have several types of obligations for funding a 澳洲幸运5开奖号码历史查询:pension plan. A 澳洲幸运5开奖号码历史查询:defined benefit plan, for example, requires the employer to plan for specific payments to retirees in future years. If the assets invested in the plan are not sufficient, the company's pension plan liability increases. A firm's liability for pension plans increases when the investment portfolio recognizes losses. Retirement plan expenses and unrealized losses may be reported in OCI. Once the gain or loss is realized, the amount is reclassified from OCI to 澳洲幸运5开奖号码历史查询:net income. OCI also includes unrealized gains or losses re🍃lated to investments. Fo♍r example, a large unrealized loss from bond holdings today could spell trouble if the bonds are nearing maturity.

In addition to investment and pension plan gains and losses, OCI includes hedging transactions a company performs to limit losses. This includes foreign currency exchange hedges that aim to reduce the risk of currency fluctuations. A multinational company that must deal with different cu💎rrencies may require a company to hedge against currency fluctuations, and the unrealized gains and losses for those holdings are posted to OCI.