Definition:

Comprehensive Income is the total change in equity for a reporting period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Formula:

Comprehensive Income = Net Income + Other Comprehensive Income

How to use the metric:

Comprehensive Income is used to provide a more complete picture of a company's financial performance by including all gains and losses that affect shareholders' equity but are not captured in net income. It is useful for investors and analysts to assess the overall financial health and performance of a company.

Limitations:

One limitation of Comprehensive Income is that it can include volatile items that may not be realized, such as unrealized gains or losses on investments. This can make it difficult to assess the true economic performance of a company. Additionally, it may include items that are subject to significant estimation and judgment, which can affect comparability across companies.

Applies to:

Comprehensive Income is applicable across various industries, particularly those with significant investment portfolios or foreign operations, such as financial services, multinational corporations, and industries with substantial pension plan obligations.

Doesn't apply to:

There are no specific industries where Comprehensive Income does not apply, but it may be less relevant for industries with minimal exposure to items typically included in Other Comprehensive Income, such as small, domestic-focused companies with limited investment activities.

Summary:

Comprehensive Income provides a broader view of a company's financial performance by including all changes in equity from non-owner sources. While it offers valuable insights into the overall financial health of a company, its inclusion of unrealized and volatile items can complicate the assessment of a company's economic performance. It is widely applicable across industries, especially those with significant foreign operations or investment portfolios.