Difference Between the Statement of Income and the Statement of Comprehensive Income

Background

Financial statements are crucial for assessing the financial performance of business entities by providing detailed information that helps investors and stakeholders make informed decisions. Among these financial statements, the Statement of Income and the Statement of Comprehensive Income stand out as essential tools that showcase different dimensions of a business entity’s financial performance. The following sections highlight the differences between these two statements and their significance under the framework of International Financial Reporting Standards (IFRS).

1. Statement of Income

   Also known as the profit or loss Statement, the Statement of Income focuses on the operating and non-operating activities of a company over a specific financial period, ultimately concluding the net profit or loss.

   1. Primary Purpose

      • Measure the financial performance of a company over a specific period (quarterly, semi-annually, or annually).
      • Present revenues, expenses, operating profit, and net profit or loss.

   2. Key Line Items

      • Revenues: Examples include sales or operating income.
      • Cost of Sales: The cost of producing or acquiring goods sold.
      • Operating Expenses: Such as salaries and rent.
      • Other Income and Expenses: These include non-operating gains or losses.
      • Net Profit or Loss: The bottom line after deducting all expenses.

   3. Key Benefits

      • Assesses a company’s ability to generate profit from its core and non-core activities.
      • Enables investors to compare performance across different periods.

2. Statement of Comprehensive Income

   The Statement of Comprehensive Income includes all line items presented in the traditional Statement of Income, along with Other Comprehensive Income (OCI), which comprises financial elements that impact shareholders’ equity but are not directly included in profit or loss.

   1. Primary Purpose

      • Provide a broader view of financial performance by including net income alongside other comprehensive income items that could have an impact on the company’s financial position over the long term.

   2. Key Line Items

      • Net Income: Derived from the Statement of Income.
      • Other Comprehensive Income (OCI):
        1. Changes in investments at fair value through OCI.
        2. Foreign currency translation differences.
        3. Gains or losses on revaluation of fixed assets.
      • Total Comprehensive Income: calculated as net income + other comprehensive income.

   3. Key Benefits

      • Offers a more extensive view of financial performance, incorporating line items that affect shareholders’ equity without being reflected directly in profit or loss.
      • Assists management and investors in understanding long-term factors impacting financial performance and in planning investment or financing strategies.

Summary of Differences

• Statement of Income: Focuses on short-term financial performance by presenting revenues, expenses, and net profit or loss.
• Statement of Comprehensive Income: Expands the perspective to include non-operating items that impact shareholders’ equity and the entity’s long-term financial position.

Conclusion

The statement of income and the statement of comprehensive income are integral components of financial reporting for business entities. While the statement of income provides a clear picture of immediate financial performance, the statement of comprehensive income offers a deeper and more comprehensive perspective, reflecting long-term financial implications. In line with IFRS requirements, the inclusion of the statement of comprehensive income enhances the transparency of financial reporting and improves users’ ability to assess an entity’s financial performance holistically and accurately.

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