Describe items appearing in accumulated other comprehensive income. What is comprehensive income and what does the shareholders' equity section of the balance sheet report?

Answer 1

ACCUMULATED OTHER COMPREHENSIVE INCOME

Unrealized Gains and Losses on Marketable Securities

Firms measure marketable equity securities classified as available for sale at fair value
and record the unrealized changes in fair value as an element of other comprehensive income.

Cash Flow Hedges

Firms remeasure derivatives designated as cash flow hedges to fair value at the end of each period and report the unrealized gain or loss in other comprehensive income.

Foreign Currency Translation

Firms translate the reported results of their foreign operations from local currencies into U.S. dollars in order to prepare consolidated financial statements.

Pension Liability

Firms must include gains and losses from changes in actuarial assumptions, actuarial performance, and prior service cost in other comprehensive income prior to their amortization as an adjustment to pension expense.

COMPREHENSIVE INCOME

Comprehensive income equals net income as reported on the income statement plus (minus)
the increase (decrease) in other comprehensive income for the year.

The shareholders' equity section of the balance sheet reports the sources of financing provided by preferred and common shareholders and their claims on the net assets of the firm.The equity of the preferred shareholders usually approximates the liquidation value of the preferred shares. The remaining shareholders' equity accounts relate to the equity of the common shareholders. The equity of the common shareholders equals the sum of the amounts appearing in the Common Stock, Additional Paid-In Capital, Retained Earnings, Accumulated Other Comprehensive Income, Treasury Stock, and other common-share equity accounts. The user of the financial statements gains insight into capital contributions, net income, other comprehensive income, dividends, and treasury stock transactions only by studying changes in the individual accounts.