ACCA Financial Reporting (F7) Practice Exam 2026 – Complete Prep Guide

Comprehensive income encompasses all changes in equity during a period except those resulting from investments by and distributions to owners. This means that comprehensive income includes both net income and other comprehensive income, which consists of gains and losses that are not realized through normal operations, such as foreign currency adjustments and certain investment gains.

The inclusion of net income is fundamental, as it represents the profit or loss from the regular business operations and is a key part of the total comprehensive income. Similarly, adjustments resulting from foreign currency transactions can result in gains or losses that affect equity and are classified under other comprehensive income.

However, cash distributions to stockholders, which include dividends, are not included in the comprehensive income calculation. These distributions are a reduction of equity rather than a component of comprehensive income, as they reflect transactions between the company and its owners rather than operational performance or external economic events impacting the company’s equity. Therefore, cash distributions to stockholders are correctly identified as not part of comprehensive income.