Explanation of Accumulated Other Comprehensive Income (OCI)

The explanation for Accumulated Other Comprehensive Income (OCI) is – Accumulated Other Comprehensive Income (OCI) is an advanced topic (consumption of seniors). But gpp I mention briefly. Calm down, it’s really simple

Basically, the OCI bag from Shareholder’s Equity contains income & expenses (profit & loss) that are not usually presented in the Income Statement (P&L). not presented in P&L coz it does not come from the main activity of prshn, the tax term is “income & expenses outside of business” (extraordinary items)

It’s like a business with fried bananas and cheese. The main income is from cooking & selling fried bananas. One week of frying, you get 10 liters of used oil which you then sell for 100 thousand. Sales of used oil is not the main business commodity but is still subject to income tax, so it is presented at OCI

Why is it separated from the income statement? Inward, so that management knows this is not the result of the main business strategy; not included in the Key Performance Indicators (KPI). Go outside, so that existing shareholders & potential shareholders are not confused to read it.

In SME, extraordinary items are rarely found (even if there are rare and insignificant values) thus it is rare to present OCI in Shareholder’s Equity. But in a large corporate environment the value is significant thus OCI is presented.

Explanation of Accumulated Other Comprehensive Income (OCI)

Common items that fall into OCI:

*Unrealized Gains and Loses from available-for-sale Investments

*Gains & Loses from Cash Flow Hedging activities

*Currency Gains & Loses

Gains & Loses on items at OCI occur due to fluctuations in the value of their investment instruments, and debt securities being transferred from ‘available-for-sale’ to ‘held-to-maturity. Gains & Loses can also be made from adjustments to the translated foreign currency….

Another common cause that forms unrealized gains & losses (included in OCI) is the Pension Allowance whose value can be appreciated or depreciated.

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