What Is Comprehensive Loss in Accounting?

Comprehensive loss is a form of comprehensive income.

Business accountants use a variety of methods and figures when calculating company income, profits, equity value and more. Nearly every financial aspect of a company appears on its income/balance sheet, which details all of the expenditures and profits of a business. The idea of comprehensive loss arises from an attempt in the world of business accounting to include what few losses or profits don't usually appear on an income sheet as a single line item on such a document.

Accumulated Other Comprehensive Income

"Accumulated other comprehensive income" constitutes a business accounting term that refers to the net income of all items not generally included on an income sheet. Accountants calculate accumulated other comprehensive income by adding gains and subtracting losses earned through marginalized revenue streams. Accumulated other comprehensive income usually appears on a balance sheet as a single line item. Accountants list the individual components of this income in a separate area of the company's books, including only the sum of all gains and losses on the income sheet.

Types of Accumulated Other Comprehensive Income

Various types of accumulated other comprehensive income exist, most notably unrealized gains on derivative and securities. If a company purchases stock in another company --- securities --- or invests in a hedge fund --- derivatives --- profits or losses made from such an investment constitute unrealized gains. Losses equal negative gain values; profits equal positive gain values. Accumulated other comprehensive income values also include capital gained or lost by translating foreign currency values into domestic currency for companies that invest in firms based in foreign countries.

Comprehensive Loss

The term "comprehensive loss" arises from accumulated other comprehensive income. When a company posts a negative value through this method of accounting, that value constitutes the company's comprehensive loss, or accumulated other comprehensive loss. For instance, if a company earns $5,000 through unrealized gains on derivatives but loses $3,500 through unrealized loses on securities and $1,800 on foreign currency translation, its accumulated other comprehensive income equals 5,000 + (-3,500) + (-1,800) = -300. This company posts a comprehensive loss of $300.

Comprehensive Income on an Income Sheet

Accumulated other comprehensive income appears as a single line item on a company income sheet under the "Stockholders' Equity" heading. Accountants place this information under this heading because any capital gained through comprehensive income increases a company's equity, or stock, value. Similarly, any capital lost through this method lowers the value of a company's equity. Negative values appear on balance sheets as parenthetical figures. For instance, a comprehensive loss of $5,000 appears on a balance sheet not as -5,000 but as (5,000).

References

• Principles of Accounting; Chapter 9 --- Long-Term Investments; Larry Walther; 2010
• "Intermediate Accounting"; Loren A. Nikolai, et al.; 2010
• "Financial Accounting: Tools for Business Decision Making"; Paul D. Kimmel, et al.; 2010
• AccountingCoach; Treasury Stock and Accumulated Other Comprehensive Income; Harold Averkamp