Module I· Three-Statement Mechanics & LinkagesIntermediate
Question
What is the difference between retained earnings and OCI?
Answer
Retained earnings
cumulative net income minus cumulative dividends since inception. Fed by realized income-statement results. Other comprehensive income (OCI): value changes that under IFRS are booked directly in equity without running through the income statement. Typical OCI items:
- Pension remeasurements (actuarial gains/losses, IAS 19).
- Cash-flow-hedge value changes (effective portion).
- FX translation differences from subsidiaries.
- FVOCI value changes on certain financial instruments.
Deep diveShow more details
Consequence
Total comprehensive income = net income + OCI. Change in equity per period = net income + OCI − dividends ± capital transactions.
Pitch tip
At pension-heavy large-cap industrials (e.g. Volkswagen, Bayer, Continental), OCI can amount to $1–3bn in a year of interest-rate moves — relevant for equity analysis and covenant checks.