Quick answer
Other comprehensive income (OCI) contains specified income and expense items that the applicable IFRS Standard requires or permits outside profit or loss. Profit or loss plus OCI equals total comprehensive income. The cumulative OCI balance normally sits in a separate component of equity rather than retained earnings.
A business can earn a profit while also recording gains or losses that IFRS requires it to report separately. For example, certain investment gains increase equity without increasing profit for the year. Other comprehensive income shows those separate amounts; adding them to profit gives total comprehensive income.
Profit or loss, other comprehensive income, and comprehensive income
- Profit or loss is income less expenses for the period, excluding the items that IFRS assigns to OCI. A positive result is profit; a negative result is a loss.
- Other comprehensive income contains only items assigned to OCI by another applicable Standard.
- Total comprehensive income is profit or loss plus OCI for the period.
Management cannot move an unfavourable expense to OCI merely to alter profit. The Standard governing the underlying item determines the presentation.
Connect OCI to comprehensive income and equity
Summit Equipment holds a qualifying IFRS debt investment measured at fair value through OCI. Its interest income is included in profit or loss. Its fair-value gain is $8,000. At an assumed 25% tax rate, the related tax effect is $2,000, leaving $6,000 after-tax OCI. Summit reports $90,000 profit for the year, including the interest but excluding that OCI amount.
Scroll horizontally to see all columns.
| Line item | Amount |
|---|---|
| Profit for the year | 90,000 |
| Other comprehensive income | 6,000 |
| Total comprehensive income | 96,000 |
Total comprehensive income is $90,000 profit + $6,000 OCI = $96,000. Before other changes, the same $96,000 is the period’s total non-owner increase in equity.
Financial-statement effect
Scroll horizontally to see all columns.
| Statement | Account | Effect |
|---|---|---|
| Income statement | Profit | Remains $90,000 |
| Comprehensive income | OCI | Adds $6,000 outside profit or loss |
| Statement of changes in equity | Accumulated OCI | Increases by $6,000 |
| Balance sheet | Total equity | Increases by the $96,000 total non-owner change, before other events |
- Income statement
- AccountProfit
- EffectRemains $90,000
- Comprehensive income
- AccountOCI
- EffectAdds $6,000 outside profit or loss
- Statement of changes in equity
- AccountAccumulated OCI
- EffectIncreases by $6,000
- Balance sheet
- AccountTotal equity
- EffectIncreases by the $96,000 total non-owner change, before other events
From current-period OCI to accumulated equity
Current-period OCI reports the separate income and expenses for one period. Its cumulative effect is tracked in the related accumulated equity component and reconciled through the statement of changes in equity. That cumulative balance is commonly described as accumulated other comprehensive income (AOCI), although an entity may present separate labels for the underlying components. It does not become retained earnings simply because both are within equity.
Reclassification of OCI items
Reclassification moves a previously recognized amount from accumulated OCI into profit or loss when the underlying Standard requires it. The current-period OCI presentation includes an offsetting reclassification adjustment, so the gain is not counted twice in total comprehensive income.
Whether an item is later reclassified depends on the Standard that placed it in OCI:
Scroll horizontally to see all columns.
| OCI item | Later reclassified to profit or loss? |
|---|---|
| Fair-value changes on FVOCI debt investments | Yes, when the investment is derecognized |
| Fair-value changes on equity investments with the OCI election | No; may be transferred within equity |
| Revaluation surplus on PP&E and intangibles | No; may be transferred to retained earnings |
| Remeasurements of defined benefit pension plans | No |
| Translation differences on foreign operations | On disposal; partial disposals and amounts attributed to non-controlling interests have specific rules |
| Effective portion of cash flow hedges | Often when the hedged cash flows affect profit. A qualifying non-financial asset or liability instead receives the amount directly in its initial cost or carrying amount |
A transfer from the cash flow hedge reserve into an asset’s cost is a basis adjustment, not a reclassification through OCI. An unrecoverable hedge loss, or cash flows no longer expected to occur, can require immediate recognition in profit or loss under IFRS 9.6.5.11–6.5.12.
The non-recycling rules for revaluation surpluses are in IAS 16.39–41 and IAS 38.85–87; pension remeasurements follow IAS 19.120(c) and 122. Foreign-operation disposals follow IAS 21.48–49.
Sell Summit’s debt investment
Suppose Summit sells the investment from the earlier example with no further fair-value change and no change in the related tax effect. Reclassifying the accumulated gain increases after-tax profit by $6,000 and reduces current-period after-tax OCI by $6,000. The reclassification adds zero to total comprehensive income; it moves the gain already recognized into the profit result.
ASPE equity presentation without the IFRS OCI model
ASPE Section 3251 requires specified equity components and changes to be presented separately and keeps gains and losses recorded directly in equity separate by nature. That does not create an ASPE category called OCI or make IFRS recycling rules applicable. The Part II section governing the underlying item decides whether a change enters net income or equity and how that equity category moves later.
Common errors
- Treating OCI as an optional place for unusual items.
- Adding accumulated OCI to retained earnings.
- Assuming every OCI item is recycled later.
- Using comprehensive income and cash flow as synonyms.