Where Does Other Income Go on the Income Statement?

On a multi-step income statement, other income appears in its own non-operating section directly below operating income and above income before taxes. That placement separates the earnings a company generates from its core business from the gains and losses it picks up on the side, such as interest, dividends, and profits on asset sales. For public companies, SEC Regulation S-X Rule 5-03 fixes this ordering by designating non-operating income as a distinct line item that follows all operating revenues and expenses.¹

The Exact Spot in a Multi-Step Income Statement

A multi-step income statement builds toward net income in layers. Other income sits in the sixth layer, after operating results are already tallied:

Net sales and gross revenues from selling goods or services
Cost of goods sold, the direct costs of what was sold
Gross profit, meaning revenue minus cost of goods sold
Operating expenses, including selling costs and administrative overhead
Operating income, the profit from core operations alone
Other income and expenses, the non-operating section
Income before taxes
Net income, after income tax expense

SEC Regulation S-X Rule 5-03 spells out this ordering for public company filings. It lists non-operating income as line item 7, interest expense on debt as line item 8, and non-operating expenses as line item 9.¹ Private companies following GAAP use the same general structure without the SEC mandate. The layered format lets anyone reading the statement judge operating performance first, then see how non-operating items shifted the final result.

What Goes in the Other Income Section

Other income captures anything the company earns outside its main line of business. The common items are:

Interest income on bank deposits, certificates of deposit, or short-term investments
Dividend income from equity holdings in other companies
Gains on asset sales, when the sale price of equipment, vehicles, or property exceeds the asset’s book value
Rental income from tenants using unused company space, for businesses not primarily in real estate
Foreign exchange gains from favorable currency movements on international transactions

Regulation S-X requires public companies to state dividends, interest on securities, and profits on securities separately within the non-operating income section, and to break out any material miscellaneous amounts with a clear description of the source.¹

Companies that own a significant stake in another business, typically 20 to 50 percent, report their share of that investee’s earnings under the equity method. The investor’s portion of the investee’s profit or loss appears as a single line item on the income statement.² For most companies, that line sits in the non-operating section unless the investment is central to the primary operations.

The Expense Side of the Same Section

The non-operating section usually nets gains against losses to produce a single subtotal that adjusts operating income. On the expense side, the most common items are:

Interest expense on corporate debt, bonds, or lines of credit
Losses on asset dispositions, when a sale price falls below book value
Foreign exchange losses on international receivables or payables
Write-downs, meaning reductions in an asset’s carrying value when market value drops significantly

That net subtotal gets added to or subtracted from operating income to reach income before taxes.

Why Other Income Is Kept Separate from Operating Income

The separation exists because operating income is the clearest indicator of whether the core business is healthy. A retailer could report strong net income because it sold a warehouse at a profit while same-store sales actually declined. Without the split, that one-time windfall would mask the deterioration. Analysts calculate operating margins using only the lines above the non-operating section for exactly this reason.

Non-operating items also tend to be irregular. A gain on selling equipment might show up once in five years. Foreign exchange swings depend on macroeconomic forces no company controls. Interest income moves with cash balances and prevailing rates. Grouping these into operating results would make period-to-period comparisons unreliable. The categorization turns on the source of the funds, not the dollar amount.

Other Income Is Not Other Comprehensive Income

Terminology trips people up here. Other income on the income statement and other comprehensive income (OCI) are different concepts despite sounding nearly identical. Other income flows through net income and affects earnings per share. OCI bypasses net income entirely and goes to a separate section of the financial statements.

FASB Topic 220 defines comprehensive income as the total of net income plus OCI, and explicitly states it does not change the classifications within net income itself.³ The items that land in OCI rather than on the income statement include:

Unrealized gains and losses on available-for-sale debt securities
Foreign currency translation adjustments
Gains and losses on cash flow hedging derivatives
Certain pension and post-retirement benefit plan adjustments

These items accumulate in a balance sheet account called accumulated other comprehensive income.⁴ If you see “other income” in the non-operating section of an income statement, that number is already inside net income. If you see “other comprehensive income” on a statement of comprehensive income, those items are not part of net income and are not in the other income section.

How Unusual or Infrequent Items Fit In

Before 2016, GAAP had a separate category called extraordinary items for events that were both unusual and infrequent, such as a natural disaster destroying a factory. These sat on their own line below income from continuing operations with special disclosure. The FASB eliminated that concept entirely with ASU 2015-01, effective for fiscal years beginning after December 15, 2015.⁵

Under current rules, items that are unusual in nature, infrequent in occurrence, or both must be reported as a separate component of income from continuing operations rather than broken out below it.⁵ A one-time legal settlement or a rare asset impairment still gets its own line and disclosure, but it stays within the main body of the income statement.

When an Item Needs Its Own Line

Not every non-operating item needs to be broken out. FASB’s conceptual framework says materiality depends on both the size and nature of an item, judged against the specific circumstances of the reporting company. There is no fixed dollar threshold or percentage cutoff. The standard is whether omitting or misstating the item would probably change the judgment of a reasonable person reading the report.⁶

A $50,000 gain on an equipment sale might be immaterial for a Fortune 500 company and fine to lump into a miscellaneous line. The same gain for a small public company with $2 million in operating income could require separate disclosure. SEC rules reinforce this: material amounts included under miscellaneous non-operating income must be separately stated with a clear description of the underlying transaction.¹

1
GovInfo. Securities and Exchange Commission Regulation S-X Rule 5-03
2
FASB. APB 18 – The Equity Method of Accounting for Investments in Common Stock
3
Financial Accounting Standards Board. Accounting Standards Update 2011-05 – Presentation of Comprehensive Income
4
FASB. Taxonomy Implementation Guide on Modeling Other Comprehensive Income
5
Financial Accounting Standards Board. Accounting Standards Update 2015-01 – Simplifying Income Statement Presentation
6
Financial Accounting Standards Board. Amendments to Conceptual Framework for Financial Reporting Chapter 3