Other comprehensive income
Gains and losses recognised in equity without passing through net income, such as currency translation differences, some pension remeasurements and fair value changes on certain investments.
Where you will meet it
Other comprehensive income appears in 9 learning outcomes on the CFA syllabus. A few of them:
- Explain how marketable securities are classified and measured
“Securities available for sale, or measured at fair value through other comprehensive income, are carried at fair value with unrealised gains and losses in equity rather than income.”
- Set out the accounting problems that arise when residual income models are applied
“The clean surplus relation requires all gains and losses to pass through net income, but items reported in other comprehensive income, such as currency translation differences or certain pension remeasurements, bypass it, so forecast earnings may need adjusting.”
- Set out how IFRS classifies, measures and requires disclosure of: (1) financial asset investments; (2) associates; (3) joint ventures; (4) business combinations; (5) special purpose entities and variable interest entities
“Passive holdings follow IFRS 9: amortised cost for debt held to collect contractual cash flows of principal and interest, fair value through OCI for debt held to collect and sell (gains recycled to profit on sale) or for equities by irrevocable election (never recycled), and fair value through profit or loss otherwise.”
- Explain the revaluation model and how assets are derecognised
“An increase is normally recognised in other comprehensive income and accumulated in a revaluation surplus, except to the extent it reverses a previous decrease charged to income, in which case it goes to income.”
See also
Practise it
Practise other comprehensive income until it is automatic: questions that explain every wrong option.
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