Other Comprehensive Income
Also written OCI · Other Comprehensive Income (OCI)
Gains and losses that Ind AS requires or permits to bypass the profit and loss account — they change shareholders' equity and never touch earnings per share.
In plain language
Not everything that changes the value of a company passes through profit. A bank's bond portfolio falls in value when rates rise; a foreign subsidiary is worth fewer rupees when the currency moves; an actuary revises the gratuity liability. These are real changes in wealth, and Ind AS deliberately keeps them out of profit or loss because they are not the result of trading.
They are collected instead in other comprehensive income, which sits inside the statement of profit and loss but below the profit line, and flows straight into equity.
How it works
Ind AS 1 requires the statement of profit and loss to include OCI. The workbook lists what goes in:
- Changes in revaluation surplus on assets carried at revalued amounts.
- Re-measurement gain or loss on defined benefit plans — the actuarial swings on gratuity and pension obligations.
- Gains or losses on translating the financial statements of foreign operations into the reporting currency.
- Changes in the fair value of financial assets or liabilities accounted through OCI.
- Gains or losses on derivative contracts that effectively hedge risk.
The common thread the workbook gives is that these are mostly changes in the value of assets and liabilities on account of non-operating factors.
One consolidation rule matters: where a subsidiary generates OCI, the portion belonging to its external shareholders is allocated to non-controlling (minority) interest, exactly as its profit would be.
Profit plus OCI is total comprehensive income — the figure that reconciles to the movement in shareholders' equity before capital transactions and dividends.
The formula
Total comprehensive income = Profit or loss for the period
+ Other comprehensive income
EPS is computed on profit or loss only — OCI is excluded.
A worked example
A private sector bank reports profit after tax of Rs 1,240 crore for the year. Its OCI:
| Item | Rs crore |
|---|---|
| Mark-to-market loss on government securities held at fair value through OCI | (310) |
| Re-measurement loss on the defined benefit gratuity plan | (46) |
| Gain on translation of an overseas branch | 28 |
| Effective portion of cash flow hedges | 15 |
| Other comprehensive income | (313) |
Total comprehensive income = 1,240 − 313 = Rs 927 crore
On 200 crore shares, reported EPS is Rs 6.20 — computed on the Rs 1,240 crore, because OCI never enters EPS.
But net worth grew by only Rs 927 crore before dividends. On average equity of Rs 9,000 crore:
ROE on profit after tax = 1,240 ÷ 9,000 = 13.8%
ROE on total comprehensive income = 927 ÷ 9,000 = 10.3%
Three and a half percentage points of return disappeared below the profit line. For a bank in a rising rate year that is not an accounting curiosity — it is the single largest thing that happened to the balance sheet, and an analyst reading only EPS would miss all of it.
Why NISM asks about it
Chapter 8 (Company Analysis – Financial Analysis) introduces OCI twice: in section 8.1 as part of the Ind AS 1 set of statements, and in section 8.4.1 with the full list of items alongside basic and diluted EPS. Expect a question asking which items fall into OCI, and the point that OCI bypasses the profit and loss account.
Common exam traps
- OCI is excluded from EPS, basic and diluted. It changes equity, not earnings per share — which is exactly why a reader who stops at EPS can miss the year's biggest movement.
- It sits inside the statement of profit and loss, not in a separate statement. Ind AS 1 also treats the statement of changes in shareholders' equity as part of the balance sheet (Chapter 8.1).
- "Other comprehensive income" is not "other income". Other income is operating or non-operating revenue inside profit; OCI is outside profit altogether.
- A subsidiary's OCI is split with non-controlling interest, just as its profit is. Consolidated OCI attributable to owners is not the whole figure.
- Large negative OCI is not an operating failure. It is usually revaluation from rates, currency or actuarial assumptions — but for banks, insurers and any company with a big bond book it is material and must be read.
- The workbook lists the items without teaching which of them are later recycled into profit and which never are. Answer from its list.
Check yourself
1.The three criteria used to evaluate companies under the ESG framework are:
- a)Earnings, Solvency and Growth
- b)Efficiency, Scale and Governance
- c)Environment, Social and Corporate Governance
- d)Equity, Sustainability and Growth
Show the answer
Answer: (c) Environment, Social and Corporate Governance
ESG stands for Environment, Social and Corporate Governance. Under environment, companies with low carbon emission and low contribution to pollution rank better. Under social, activities around human rights, gender equality and similar factors. The third criterion is the corporate governance standard followed by the company.
The other three options are plausible-sounding financial expansions of the same letters, which is exactly why they are offered. ESG is not a financial acronym at all — it started with a handful of "impact" investors before gaining wider traction.
2.Unhealthy practice in the securities markets includes which of the following?
- a)Disclosure
- b)Transparency
- c)Insider trading
- d)Surveillance
Show the answer
Answer: (c) Insider trading
Insider trading. It is expressly prohibited — prohibit insider trading in securities is among the main functions of SEBI, and Regulation 4 of the SEBI (Prohibition of Insider Trading) Regulations, 2015 provides that no insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information.
The other three options are the market's defences against unhealthy practices, not examples of them.
Disclosure is the mechanism the Research Analyst Regulations rely on throughout — a research analyst or research entity shall disclose all material information about itself including its business activity, disciplinary history, the terms and conditions on which it offers research report, details of associates.
Transparency is the object of the whole framework: the regulations set forth requirements to foster objectivity and transparency in security research and provide investors with more reliable and useful information to make investment decisions.
Surveillance is how the market is policed — in order to enhance the integrity of the market and to protect investor interest, SEBI along with the exchanges implement several surveillance mechanisms, namely GSM and ASM.
And note the presumption that attaches to insider trading: when a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession.
3.Which AIF category covers funds that use complex investment strategies including leverage and derivatives?
- a)Category I
- b)Category II
- c)Category III
- d)None — AIFs cannot use leverage
Show the answer
Answer: (c) Category III
Category III AIF: These refer to those that use complex investment strategies including use of leverage and derivatives. Hedge funds, PIPE Funds, etc. are registered as Category III AIFs.
Category I AIF: These refer to AIFs which invest in start-up or early-stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. These include venture capital funds (including angel funds), SME Funds, social venture funds, infrastructure funds, etc.
Category II AIF: AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing (other than to meet day-to-day operational requirements) are categorized under Category II AIFs. Various types of funds such as real estate funds, private equity funds, funds for distressed assets, etc. are registered as Category II AIFs.
So Category II is defined negatively — it is what is left over, provided there is no leverage.
What an AIF is: any privately pooled investment fund, whether from Indian or foreign sources, in the form of a trust or a company or a body corporate or a Limited Liability Partnership, which are not presently covered by any Regulation of SEBI governing fund management... nor coming under the direct regulation of any other sectoral regulators in India — IRDAI, PFRDA, RBI etc.
They are defined in Regulation 2(1)(b) of the SEBI (Alternative Investment Funds) Regulations, 2012.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Diluted EPSEarnings per share recalculated as if every instrument that can convert into equity had already converted — the pessimistic, and usually the more honest, share count.
- EBITDAProfit from running the business, measured before interest, tax, depreciation and amortisation — so before how the company is funded and how it accounts for its assets.
- Price to Book ValueShare price divided by book value per share — how many times the accounting net worth of a company the market is willing to pay.
- Return on EquityProfit after tax as a percentage of shareholders' net worth — what the company earned on the money its owners have left in it.