The Statement of Comprehensive Income

The income statement

The statement of comprehensive income

This is simply an extension of the income statement. The reason for this is that some gains the business makes during the year are not realised gains. The main example is the revaluation of tangible assets. The gain is not realised until the asset is sold and converted into cash. The revaluation represents a hypothetical gain (i.e. what gain would a company make if the asset was sold).

For this reason it should not be included in net profit for the period, which represents the profit earned from realised sales. Instead the unrealised gains are added onto the end of the income statement, as follows:

Items requiring separate disclosure

Certain items need to be separately disclosed on the face of the income statement so that they are clearly visible to the users of the financial statements. The main items requiring such treatment are significant, one-off transactions or events. They need to be disclosed because they are not part of the normal trading activity of the business and could significantly distort the reported profits or losses for the year. They include:

• restructuring or reorganisation of the company
• profits or losses on disposal of property, plant and equipment (or investments), and
• impairments of inventory, property, plant and equipment.

All such items should be included on their own, separate line in the income statement/statement of comprehensive income.

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