Other income

Other income is a catch-all line below operating income that captures gains and losses arising outside the normal course of business. Items that are real and affect the bottom line but do not belong in operating profit because they are not recurring, not operational, or not related to the core business model.

Common items include foreign exchange gains and losses, gains or losses on the sale of assets or investments, fair value movements on financial instruments, income from equity-method investments, government grants, and one-time settlements.

Because it is a residual category its composition varies significantly from company to company and from period to period. This makes it one of the least predictable lines on the income statement and one of the first places analysts strip out when building a normalised earnings picture.

A large positive other income figure can flatter net income in ways that obscure underlying operational weakness. A company selling assets to book a gain while its core business deteriorates is a classic example. Equally, a large other expense charge can depress net income in a period where operating performance was strong, which is why operating income and EBITDA are calculated above this line.