What is defined as comprehensive income?

Comprehensive income is defined as the change in equity from nonowner sources. This concept encompasses all changes in equity that are not a result of transactions with the owners. Comprehensive income includes net income as well as other comprehensive income items, which may be components like unrealized gains or losses from investments, foreign currency translation adjustments, and pension liability adjustments.

This definition is crucial because it expands the traditional view of income. Net income is often derived solely from revenues minus expenses, but comprehensive income provides a broader view by including all sources of change in equity not directly tied to owner transactions. Thus, it gives stakeholders a more complete understanding of a company’s overall financial performance during a specific period.