Other comprehensive income includes which item?

Other comprehensive income includes which item?

• A. Net income
• B. Dividends
• C. Foreign currency translation adjustments
• D. Interest income

Answer: (C)

Other comprehensive income consists of items that are recorded directly in equity rather than through the income statement. Foreign currency translation adjustments are a classic example: when a company has foreign subsidiaries, the process of translating their financial statements into the reporting currency creates gains or losses that accumulate in OCI instead of affecting net income. Net income belongs to the income statement and flows into retained earnings; dividends reduce equity but are not part of OCI; interest income is typically reported in net income. So the item that belongs in OCI is foreign currency translation adjustments.

Other comprehensive income consists of items that are recorded directly in equity rather than through the income statement. Foreign currency translation adjustments are a classic example: when a company has foreign subsidiaries, the process of translating their financial statements into the reporting currency creates gains or losses that accumulate in OCI instead of affecting net income. Net income belongs to the income statement and flows into retained earnings; dividends reduce equity but are not part of OCI; interest income is typically reported in net income. So the item that belongs in OCI is foreign currency translation adjustments.