The location of comprehensive income reporting – does it pass the financial analyst revision test?

2018 ◽  
Vol 31 (4) ◽  
pp. 531-550
Author(s):  
Louis Banks ◽  
Allan Hodgson ◽  
Mark Russell
Keyword(s):  
Financial Reporting ◽  
Stock Prices ◽  
Value Relevance ◽  
Financial Analysts ◽  
Net Income ◽  
Financial Analyst ◽  
Content Type ◽  
Forecast Revisions ◽  
Comprehensive Income ◽  
Other Comprehensive Income

Purpose This paper aims to test whether a change in the reporting location of income, and other comprehensive income (OCI) components, in a statement of comprehensive income (SoCI) under International Financial Reporting Standards affects their value-relevance and use by financial analysts. Design/methodology/approach The study tests the associations between CI, OCI, share returns and financial analyst forecast revisions. Findings Results show that comprehensive income is less value-relevant than net income, regardless of reporting location. Changing the reporting location of OCI components to the SoCI does not provide incremental improvement for financial analysts or stock prices. Finally, the paper finds that analysts use OCI components to revise forecasts. Originality/value The paper addresses the question of which OCI components should be reported, and the importance of reporting location. The paper extends the examination of OCI components to financial analysts as expert financial report users.

scholarly journals THE VALUE RELEVANCE OF INTERNATIONAL ACCOUNTING STANDARD IMPLEMENTATION AND AUDIT QUALITY

2015 ◽  
Vol 3 (3) ◽  
pp. 801
Author(s):  
Hanifa Zulhaimi ◽  
R. Nelly R. Nelly Nur Apandi
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Audit Quality ◽  
Value Relevance ◽  
Balance Sheet ◽  
Fair Value ◽  
International Accounting ◽  
Net Income ◽  
Comprehensive Income ◽  
Other Comprehensive Income

The implementation of international accounting standards in Indonesia has significantly affected financial reporting. It increases information relevance for the investors because a fair value comprehensively represents assets and liabilities of an entity as of the balance sheet date. However, this triggers polemics over the value relevance of International Financial Reporting Standard (IFRS). This can be seen from stock price decline. This study aims to find out the effect of net income and other comprehensive income on stock price and to observe the effect of other comprehensive income moderated by audit quality. Furthermore this study also aims to find out the effect of  the subjectivity of OCI components. Using a sample of 79 companies, the writer analyzes 2014 financial statements derived from Indonesia Stock Exchange. Based on the result, the predetermined hypotheses are unable to prove. Net income is the only variable that affects stock return. Thus it can be concluded that net income has a value relevance for the investors in making economic decisions.

Value Relevance of Earnings Component in the Financial Industry

2021 ◽  
Vol 1 (3) ◽  
pp. 358-364
Author(s):  
Retno Yulianti ◽  
Zuhrohtun Zuhrohtun
Keyword(s):  
Stock Prices ◽  
Value Relevance ◽  
Stock Exchange ◽  
Net Income ◽  
Financial Industry ◽  
Operating Income ◽  
Comprehensive Income ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
Negative Effect

PSAK No. 1 of 2009 is enforced from 2011 onwards. The presentation of the income statement changes to a comprehensive income statement consisting of operating income, non-operating income, net income, other comprehensive income (OCI). The purpose of this study was to test the value relevance of OCI and other components of earnings that were tested based on the relationship between OCI and stock prices in the financial industry. The population in this study are all companies listed on the Indonesia Stock Exchange which are included in the financial industry in 2016-2019. Based on the determination of the sample using the purposive sampling method, the research sample obtained was 335 firm years. The data is processed using OLS regression. This study indicates that OCI, non-operating income, and comprehensive income have value relevance which is indicated by the negative effect of OCI on stock prices and the positive effect of non-operating income and comprehensive income on stock prices. However, operating income and net income have no effect on stock prices.

scholarly journals Is Comprehensive Income Superior To Net Income In Equity Valuation? Evidence From The Capital Market Of Kuwait

2019 ◽  
Vol 35 (4) ◽  
pp. 97-108 ◽  
Author(s):  
Mostafa Elshamy ◽  
Husain Y. Alyousef ◽  
Jassem Al-Mudhaf
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Equity Valuation ◽  
Net Income ◽  
Comprehensive Income ◽  
Valuation Model ◽  
Other Comprehensive Income ◽  
Gains And Losses

The study examines whether comprehensive income numbers reported under International Financial Reporting Standards (IFRS) have value relevance over net income in equity valuation. We use a sample of firms that are listed in Kuwait Stock Exchange from banking, investment, real estate, industrial, basic materials, telecommunications, consumer services, oil & gas and health care sectors during the years 2012-2015.The study applies a methodology used by Collins, Maydew and Weiss (1997) that is based on Ohlson (1995) equity valuation model and Theil (1971) technique to measure and compare the relative and the incremental explanatory power of comprehensive income and net income. The study provides evidence that comprehensive income is not superior to net income in equity valuation. Reporting other comprehensive income gains and losses as elements of the income statement produces a measure of earnings that decreases the explanatory power of the valuation model; decreases the incremental information content of earnings. Other comprehensive income gains and losses when added as an explanatory variable to the valuation model did not enhance significantly its explanatory power.The results we obtained supports the current requirement by the IFRS and US GAAP of deferring other comprehensive gains and losses and contributes to the literature on the value relevance of other comprehensive income gains and losses in emerging capital markets.

DİĞER KAPSAMLI GELİR KALEMLERİ İLE İŞLETMENİN PİYASA DEĞERİ ARASINDAKİ İLİŞKİ

2014 ◽  
Vol 1 (3) ◽  
pp. 269
Author(s):  
Serhan Gürkan ◽  
Yasemin Köse
Keyword(s):  
Financial Performance ◽  
Value Relevance ◽  
Net Income ◽  
Comprehensive Income ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
The Difference ◽  
Gains And Losses

Other comprehensive income is the difference between net income as in the Income Statement and comprehensive income, and represents the certain gains and losses of the enterprise not recognized in the Profit or Loss Account. Value relevance of other comprehensive income is under discussion and considering other comprehensive income items all together might be misleading for financial performance. In the view of such information, discussing the value relevance of each other comprehensive income item, judgements are made.

scholarly journals Value Relevance of net income, other comprehensive income, and comprehensive income in Brazil

2020 ◽  
Vol 21 ◽  
pp. 1-22
Author(s):  
Cassiana Bortoli ◽  
Alcido Manuel Juaniha ◽  
Jorge Eduardo Scarpin ◽  
Nayane Thais Krespi Musial ◽  
Claudio Marcelo Edwards Barros
Keyword(s):  
Stock Returns ◽  
Regression Models ◽  
Value Relevance ◽  
Standard Errors ◽  
Positive Contribution ◽  
Net Income ◽  
Control Variables ◽  
Gross Domestic Product Growth ◽  
Comprehensive Income ◽  
Other Comprehensive Income

This paper uses the Ohlson Model to analyze whether Net Income (NI), Other Comprehensive Income (OCI), and Comprehensive Income (CI) are value relevant for market value and the return of shares of publicy-traded Brazilian companies. To maximize the robustness of the results, we inserted the following control variables for each model: equity per Share (EqPS), Size (S), Industry (I), EBITDA per Share (EbPS), Revenue per Share (RePS), Liquidity (L), and Gross Domestic Product Growth (GDPG). The control variables S, RePS, and GDPG were significant for the three models related to the value of the company. The control variables EqPS, EbPS, RePS, and L, on the other hand, were only significant for the three models related to stock returns. Our main variables (NI, OCI, and CI) were found to be statistically significant in five of the six regression models after data analysis in a fixed effect panel using robust standard errors. However, only the variables NI and CI were considered to be relevant in the expected direction, meaning that they offered a positive contribution in explaining the value of the company.

The Value Relevance of Components of Other Comprehensive Income When Net Income Is Disaggregated

2016 ◽  
Vol 19 (04) ◽  
pp. 1650027 ◽  
Author(s):  
Taisier A. Zoubi ◽  
Feras Salama ◽  
Mahmud Hossain ◽  
Yass A. Alkafaji
Keyword(s):  
Stock Returns ◽  
Value Relevance ◽  
Net Income ◽  
Comprehensive Income ◽  
Equity Pricing ◽  
Other Comprehensive Income

The purpose of this study is to examine the equity pricing of other comprehensive income when earnings are disaggregated into several components. Our findings indicate that other comprehensive income can better explain variation in stock returns when net income is reported in a disaggregated form. Additionally, we find that disaggregating both net income and other comprehensive income can explain more of the variation in the stock returns than the two summary components of comprehensive income. Our results survive a series of robustness checks.

The effect of financial analysts on the economic implications of disclosed lease information – a note

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Su-Jane Hsieh ◽  
Yuli Su
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Stock Prices ◽  
Predictive Value ◽  
Financial Analysts ◽  
Financial Analyst ◽  
Analyst Following ◽  
Analyst Coverage ◽  
Content Type ◽  
The Impact

PurposeThe purpose of this paper is to investigate whether financial analyst coverage affects the dissemination of disclosed operating lease information into cash flow predictions and stock prices.Design/methodology/approachThe difference in lease expense between capital/finance lease and operating lease reporting is estimated based on the approach in Hsieh and Su (2015). This difference is referred to as the earnings impact from operating lease capitalization and is only available from footnotes. The authors then include the level of financial analyst following in a cash flow model to study its impact on the cash flow predictive value of the earnings impact. Similarly, the level of financial analyst following is inserted in an earnings-return model to assess the effect of analyst coverage on the association between contemporaneous stock returns and earnings impact.FindingsThe authors find that the cash flow predictive value of the earnings impact shifts to the interaction between analyst coverage and the earnings impact, suggesting that the decision-usefulness of the earnings impact is conditioned on the level of analyst following. Nevertheless, the authors find that the earnings impact continues to have explanatory value for the contemporaneous stock returns, while the interaction between analyst coverage and the earnings impact does not. This finding suggests that the earnings impact is already fully reflected in stock prices regardless of analyst following.Research limitations/implicationsSince the estimation of the earnings impact from reporting operating leases as capital leases is based on the method developed by Imhoff et al. (1991), the results and inferences are thus constrained by the validity of the method.Practical implicationsThe authors find that financial analyst activities accelerate the incorporation of the earnings impact from operating lease capitalization in cash flow predictions, but it does not promote the impounding of the earnings impact into stock prices. This finding suggests that financial analysts' influence on the dissemination of the earnings impact hinges on the type of economic activity, and failing to consider the financial analyst following in studying the cash flow predictive value of the earnings impact would obscure the findings.Originality/valueThe authors extend the findings of prior research that financial analysts' activities promote the incorporation of firm-specific information into stock prices by investigating the impact of financial analysts on the dissemination of disclosed operating lease information.

scholarly journals PENGARUH RELEVANSI NILAI INFORMASI OTHER COMPREHENSIVE INCOME DAN NET INCOME TERHADAP RETURN SAHAM

2017 ◽  
Vol 17 (1) ◽  
pp. 53
Author(s):  
Titik Aryati ◽  
Natasya Nadia Wibowo
Keyword(s):  
Stock Return ◽  
Value Relevance ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Secondary Data ◽  
Net Income ◽  
Manufacturing Companies ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Size Growth

<p><em>This research has a purpose to analyze the influence value relevance of information Other Comprehensive Income and Net Income in explaining Stock Return by using control variables, namely Firm Size, Growth, Debt to Total Assets, and Return on Assets. </em></p><p><em>The sample used in this research are manufacturing companies which is listed in Indonesian Stock Exchange from 2011 to 2015. Obtained by 53 manufacturing companies the research sample. Data used in this research are secondary data obtained from the form of the annual audited financial statements derived from the Indonesia Stock Exchange (IDX) the period of 2011-2015 and the Indonesian Capital Market Directory (ICMD) in the period 2011-2015. The statistic method used to test on the research hypothesis is panel data analysis. The research results found that variables of the research model which are Other Comprehensive Income has a negative and significant effect on stock return, whereas Net Income has a positive and significant effect on stock return.</em></p>

scholarly journals FINANCIAL REPORTING ON COMPREHENSIVE INCOME – THE CASE OF INSURANCE COMPANIES FROM THE REPUBLIC OF SERBIA

TEME ◽  
2021 ◽  
pp. 1481
Author(s):  
Nemanja Karapavlović ◽  
Vladimir Stančić ◽  
Evica Petrović
Keyword(s):  
Financial Reporting ◽  
Life Insurance ◽  
Insurance Companies ◽  
Real Sector ◽  
Net Income ◽  
The Real ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
The Republic ◽  
Over Time

The objective of the paper is to research if the specificities of insurance business influence the fact that in insurance companies more components of other comprehensive income occur, as well as if in insurance companies different components of other comprehensive income are represented compared to the companies from the real sector. Furthermore, the paper should show if net income and net comprehensive income of insurance companies are significantly different, and which one of them is more volatile over time. The results of the research suggest that in the insurance companies more components of other comprehensive income are represented than in the companies from the real sector, as well as that that the most represented components of other comprehensive income in insurance companies are not different from the real sector companies, but that their frequency of appearance is higher. Statistical analysis conducted at the level of population has shown that net income and net comprehensive income are not significantly different. Also, it was established that net comprehensive income of insurance companies was more volatile over time than net income. However, by segmentation of total population according to types of insurance dealt with by insurance companies to life insurance companies, non-life insurance companies and those doing activities of both life and non-life insurance, it was established that in certain cases net income and net comprehensive income are statistically significantly different, as well as that net income was more volatile than net comprehensive income.

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