Accumulated Other Comprehensive Income (AOCI) is a component of shareholders’ equity that includes unrealized gains and losses that have not yet been realized in the income statement. AOCI accounts for certain financial items that are excluded from the net income on the income statement but are recognized in the comprehensive income statement.

Components of Other Comprehensive Income (OCI) include items such as:

1. **Unrealized gains and losses on available-for-sale securities:** Changes in the fair value of securities that a company holds as investments.

2. **Foreign currency translation adjustments:** Changes in the value of foreign currency-denominated assets and liabilities.

3. **Unrealized gains and losses on certain derivative instruments:** Changes in the fair value of certain hedging instruments.

4. **Pension adjustments:** Actuarial gains and losses related to pension plans.

While these items impact a company’s overall financial position, they are not immediately reflected in net income. Instead, they are initially reported in OCI and later moved to net income when certain events occur, such as the sale of securities or the settlement of derivative contracts.

The “accumulated” part of Accumulated Other Comprehensive Income represents the cumulative total of these unrealized gains and losses that have not yet been realized. The balance of AOCI is reported on the equity section of the balance sheet, typically as a separate line item beneath retained earnings.

The formula for calculating shareholders’ equity, including AOCI, is:

\[ \text{Shareholders’ Equity} = \text{Common Stock} + \text{Retained Earnings} + \text{AOCI} + \ldots \]

It’s important to note that AOCI can fluctuate over time as the value of the various items within OCI changes. AOCI provides investors and analysts with additional information about a company’s financial health and the impact of certain market fluctuations on its overall equity.