scholarly journals Roe in Turbulent Time

2014 ◽  
Vol 62 (2) ◽  
pp. 347-353 ◽  
Author(s):  
Patrizia Gazzola ◽  
Stefano Amelio
Keyword(s):  
Financial Reporting ◽  
Financial Analysis ◽  
Free Market ◽  
Analysis Tool ◽  
Net Income ◽  
Financial Accounting Standards Board ◽  
Comprehensive Income ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
New Research

The aim of the paper is to compare the utility of the net income (NI) and of the comprehensive income for the evaluation of financial performance of the company and to verify whether the total comprehensive income (TCI) is more value relevant than the net income especially in times of crisis (IAS 1, par. 5).The Financial Accounting Standards Board (FASB) has continued to emphasize a financial measure called other comprehensive income (OCI) as a valuable financial analysis tool. The FASB’s goal is to issue guidance to improve the comparability, the consistency and the transparency of financial reporting. Especially in the period of financial crises, OCI measure is also quite helpful to understand the company’s situation. The methodology in the elaboration of this article comes from the author’s previous research, which formed the main part of the overall research. The new research was based on the previous one but we have increased the number of financial statements analyzed by including companies of the free market for the year 2011. In the last part of the paper we show the results of empirical research on the income statement of the Czech companies, which adopted IAS/IFRS principles.

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.

Academic Research and Standard-Setting: The Case of Other Comprehensive Income

2012 ◽  
Vol 26 (4) ◽  
pp. 789-815 ◽  
Author(s):  
Lynn L. Rees ◽  
Philip B. Shane
Keyword(s):  
Academic Research ◽  
Accounting Standards ◽  
Standard Setting ◽  
Net Income ◽  
Financial Accounting Standards Board ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Income Reporting ◽  
Definition Of ◽  
Accounting Standard Setting

SYNOPSIS: This paper links academic accounting research on comprehensive income reporting with the accounting standard-setting efforts of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). We begin by discussing the development of reporting other comprehensive income, and we identify a significant weakness in the FASB's Conceptual Framework, in the lack of a cohesive definition of any subcategory of comprehensive income, including earnings. We identify several attributes that could help allocate comprehensive income between net income, other comprehensive income, and other subcategories. We then review academic research related to remaining standard-setting issues, and identify gaps in academic research where hypotheses could be developed and tested. Our objectives are to (1) stimulate standard-setters to better conceptualize what is meant by other comprehensive income and to distinguish it from earnings, and (2) stimulate researchers to develop and test hypotheses that might help in that process.

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.

scholarly journals Measurement of Return on Asset (ROA) based on Comprehensive Income and its Ability to Predict Investment Returns: an Empirical Evidence on Go Public Companies in Indonesia before and during the Covid-19 Pandemic

2021 ◽  
Vol 16 (1) ◽  
pp. 94
Author(s):  
Marhaendra Kusuma
Keyword(s):  
Financial Performance ◽  
Cash Flows ◽  
Net Income ◽  
Public Companies ◽  
Comprehensive Income ◽  
Industrial Sectors ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
Investment Returns ◽  
Future Cash Flows

Purpose - The concept of recognizing all inclusive income, which is used by IFRS and Indonesian SAK, is the basis for presenting other comprehensive income in the income statement. This change in format became the idea of developing a financial performance measurement.Methodology - Testing the effect of attributable comprehensive income ROA and attributable ROA net income on future cash flows and net income, as a proxy for the ability to provide future returns, and applying them in measuring performance before and during the Covid-19 pandemic.Findings - ROA net income is better able to predict future investment returns. ROA comprehensive income has more relevance value, when only other items of comprehensive income that have the potential to be realized are included. In assessing performance, users are advised to keep using the ROA of the net income version, and when using the ROA of the comprehensive income version, it is advisable to include only OCI which will be reclassified. The financial performance of companies in many industrial sectors experienced a decline during the Covid 19 pandemic using two ROA measures.Novelty - Development of ROA formulation by including other comprehensive income and profit attribution, so far ROA is only based on net income.

scholarly journals Comprehensive Income Options: A Detriment To Transparency

2010 ◽  
Vol 9 (8) ◽  
Author(s):  
Brian D. Fitzpatrick ◽  
Sudhakar S. Raju ◽  
Anthony L. Tocco
Keyword(s):  
Performance Studies ◽  
Foreign Currency ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Net Income ◽  
Financial Accounting Standards Board ◽  
Corporate Managers ◽  
Nonprofessional Investors ◽  
Comprehensive Income ◽  
Other Comprehensive Income

The Financial Accounting Standards Board (FASB) in 1997 compromised its belief that comprehensive income (CI) should be listed either in a combined statement of net income and CI or in a separate statement of CI and allowed corporations to choose using the statement of changes in stockholders’ equity (SCSE).  Of course, the latter option implies just as Jordan and Clark (2002) suggest, that CI is not a measure of financial performance.  Studies incorporating professional analysts by Hirst and Hopkins (1998) and a study of nonprofessional investors by Maines and McDaniel (2000) both conclude that format presentation matters and behaviors can be affected.  We believe that FASB should revisit the format structure of CI and eliminate the SCSE option, which was their initial intent before they compromised with corporate managers in 1997.  In addition, we believe that all items of other comprehensive income (OCI) – foreign currency translation adjustment, pension value adjustments and adjustment to securities-for-sale should be presented on an after-tax basis only in order to prevent investors from being forced to comb through the footnotes.

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.

Comprehensive Income: Who's Afraid of Performance Reporting?

2010 ◽  
Vol 85 (1) ◽  
pp. 97-126 ◽  
Author(s):  
Linda Smith Bamber ◽  
John (Xuefeng) Jiang ◽  
Kathy R. Petroni ◽  
Isabel Yanyan Wang
Keyword(s):  
Location Choice ◽  
Job Security ◽  
Net Income ◽  
Comprehensive Income ◽  
Performance Reporting ◽  
Income Statement ◽  
Two Factors ◽  
Other Comprehensive Income ◽  
Income Reporting ◽  
Broad Cross Section

ABSTRACT: Firms can report comprehensive income in either an income-statement-like performance statement or the statement of equity. Traditional theories of contracting incentives cannot explain this reporting location choice that only affects where comprehensive income data appear, because the contractible values of net income, other comprehensive income items, and comprehensive income are exactly the same regardless of the location where the firm reports comprehensive income. Drawing on theory, analysis of comment letters, and results of survey-based and behavioral research, we identify two factors—equity-based incentives and concerns over job security—that help explain why most firms do not follow policymakers' preference to report comprehensive income in a performance statement. Our empirical evidence on a broad cross-section of firms shows that managers with stronger equity-based incentives and less job security are significantly less likely to use performance reporting. Overall, our study suggests that even though the reporting location choice is inconsequential in a traditional rational markets view, managers act as if they believe that comprehensive income reporting location matters.

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.

scholarly journals Mandatory ESG Reporting and XBRL Taxonomies Combination: ESG Ratings and Income Statement, a Sustainable Value-Added Disclosure

2021 ◽  
Vol 13 (16) ◽  
pp. 8876
Author(s):  
Alessio Faccia ◽  
Francesco Manni ◽  
Fabian Capitanio
Keyword(s):  
Financial Reporting ◽  
Value Added ◽  
Financial Statements ◽  
Added Value ◽  
Financial Reporting Standards ◽  
Comprehensive Income ◽  
Income Statement ◽  
Sustainability Disclosure ◽  
Sustainable Value ◽  
Other Comprehensive Income

Corporate financial statements address multiple stakeholders’ needs. International Financial Reporting Standards (IFRSs), among others, allow two different classifications, “by function of expense” and “by nature of expense”, for the statement of profit and loss and other comprehensive income for the period (from now on, also identified in short as “Income Statement”, or “IS”). XBRL standards ensure compliance and consistency in financial statements’ drafting and filing. XBRL taxonomies reflect the Income Statement IFRS disclosure requirement in the {310000} and {320000} codifications, respectively. Given the recent EU enhanced regulations that proposed extend mandatory ESG reporting to SMEs, this study aims to design and recommend an additional Income Statement to embed structured Environmental, Social, and Governance (ESG) disclosure. A restatement of the IS is organised following an adjusted Value-Added perspective to fit the purpose of sustainability disclosure. The above-mentioned Income Statement should be suitable and adaptable for entities of any size and operating in any industry. This goal can be achieved through customised input weighting. Therefore, this applied research can fill a current financial ESG disclosure gap, ensuring financial statements’ comparability and encouraging additional mandatory disclosures through standardisation. Two more items in the XBRL (IFRS-based) structure are suggested, leading to the introduction of one fully structured statement “{330000}—Statement of comprehensive income, profit or loss, by Added Value, ESG based” and a semi-structured “{814000}—Notes—ESG Ratings and Reporting” to better discuss and disclose the assumptions and results of the ESG Statement.

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