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What is other comprehensive income (OCI)?

Other comprehensive income (“OCI”) is part of stockholders equity on the balance sheet and is not part of the income statement. OCI represents the current year activity that is used to calculated accumulated other comprehensive income (“AOCI”) at the end of the year.

Either gains or losses are recorded to OCI. These gains or losses are excluded from the income statement as they are seen as temporary and expected to reverse in future periods. A gain to OCI will result in an increase to equity (credit to OCI), while a loss will decrease equity (debit to OCI).

The whole point of the other comprehensive income account is to capture other gain or loss items that should not be recognized in the income statement. The main reason is that the gains and losses are seen as temporary and are expected to reverse in future periods. The visual below illustrates items that are commonly recorded to OCI:

OCI is often confused with total comprehensive income. OCI is added to net income from the income statement to calculate total comprehensive income. The combination of net income and OCI gives financial statements users a complete of increases (gains) or decreases (losses) of shareholder equity.


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