Final answer:
Comprehensive income is the change in equity of a company during a specific period, excluding transactions with owners. It consists of net income and other comprehensive income.
Step-by-step explanation:
Comprehensive income refers to the change in equity of a company during a specific period, excluding transactions with owners. It includes both net income and other comprehensive income, such as gains and losses from foreign currency translation, changes in the value of certain investments, and adjustments to pension liabilities.
Comprehensive income has two components:
- Net Income: This is the primary component of comprehensive income and represents the profit or loss of the company from its regular business operations. It includes revenues, expenses, gains, and losses.
- Other Comprehensive Income: This component includes gains and losses that are not included in net income, such as currency translation adjustments, unrealized gains or losses on certain investments, and changes in the value of pension liabilities.
Overall, comprehensive income provides a more comprehensive measure of a company's financial performance, taking into account both the primary income from business operations and other items that may affect the value of the company.