Which component is typically included in comprehensive income?

Comprehensive income encompasses all changes in equity during a period, except those resulting from investments by owners or distributions to owners. This includes net income from operations but also extends to other comprehensive income items, which are not included in net income. Gains and losses arising from the translation of foreign operations are recognized as part of other comprehensive income.

When a company operates internationally, it may have subsidiaries in different countries whose financial statements are denominated in foreign currencies. The process of translating these financial statements to the reporting currency can result in gains or losses due to fluctuations in exchange rates. These translation adjustments reflect unrealized gains or losses and are included in comprehensive income, showcasing the overall financial health of the entity beyond just operational performance.

In contrast, investments in new projects and distributions to owners do not impact comprehensive income directly. Investments in new projects affect future performance and asset valuations, while distributions to owners represent a transfer of wealth rather than a reflection of the company’s comprehensive earnings in a period. Net income from operations is certainly a significant part of comprehensive income, but it does not encompass the full range of other gains and losses that constitute comprehensive income as indicated in the correct answer.