The Relationship of Net Income to Comprehensive Income: An Analysis of Fortune 500 Companies

The Financial Accounting Standards Board (FASB) has recently issued Statement of Financial Accounting Standards, (SFAS) No. 130, Reporting Comprehensive Income. That Statement requires companies to report a comprehensive income measure, which includes net income and net-of-tax adjustments for changes in unrealized gains/losses on securities, foreign currency gain/loss adjustments, and minimum pension liability adjustments. These latter adjustments were previously reported directly in the stockholdersÕ equity section of the statement of financial position. This paper analyzes the effects of comprehensive income disclosures for 100 randomly selected Fortune 500 companies. Comprehensive income was computed for these companies and compared with reported net income to determine the number and significance of these other comprehensive income adjustments. The results indicate that a large number of firms may report a comprehensive income amount different from reported net income. Although these differences may be significant for some firms, the majority of these adjustments will not cause comprehensive income to be materially different from reported net income for most firms.