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.

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.

Effects of Comprehensive-Income Characteristics on Nonprofessional Investors' Judgments: The Role of Financial-Statement Presentation Format

2000 ◽  
Vol 75 (2) ◽  
pp. 179-207 ◽  
Author(s):  
Laureen A. Maines ◽  
Linda S. McDaniel
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Statement ◽  
Presentation Format ◽  
Financial Accounting Standards Board ◽  
Management Performance ◽  
Nonprofessional Investors ◽  
Comprehensive Income ◽  
Presentation Formats

Statement of Financial Accounting Standards (SFAS) No. 130 requires companies to report comprehensive income in a primary financial statement, but allows its presentation in either a statement of comprehensive income or a statement of stockholders' equity (Financial Accounting Standards Board [FASB] 1997). In an experiment, we examine whether and how alternative presentation formats affect nonprofessional investors' processing of comprehensive-income information, specifically, information disclosing the volatility of unrealized gains on available-for-sale marketable securities. The results show that nonprofessional investors' judgments of corporate and management performance reflect the volatility of comprehensive income only when it is presented in a statement of comprehensive income. We provide evidence consistent with our psychology-based framework that these findings occur because format affects how nonprofessional investors weight comprehensive-income information and not whether they acquire this information or how they evaluate it.

The Contrast Research of Presentation and Disclosure about other Comprehensive Income

2014 ◽  
Vol 687-691 ◽  
pp. 5080-5084
Author(s):  
Xing Wei
Keyword(s):  
United States ◽  
Accounting Standards ◽  
The United States ◽  
Financial Accounting ◽  
International Accounting ◽  
International Accounting Standards ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Income Reporting

This article compares and analyzes the distinguish between the accounting standards for enterprises in our country about other comprehensive income reporting and disclosure of financial accounting standards from the IAS (International Accounting Standards) and the FASB in the United States, through four aspects as the meaning of other comprehensive income, the concrete content and accounting, presentation and disclosure.

scholarly journals Properties of Accounting Income in Indonesia: Net Income and Total Comprehensive Income

2018 ◽  
Vol 7 (3.21) ◽  
pp. 261
Author(s):  
Dwi Fitri Puspa ◽  
Listiana Srimulatsih ◽  
Zaitul .
Keyword(s):  
Value Relevance ◽  
Stock Exchange ◽  
Accounting Standards ◽  
Sampling Technique ◽  
Financial Accounting ◽  
Net Income ◽  
Manufacturing Companies ◽  
Comprehensive Income ◽  
Significant Difference

Introduction- This study aims to investigate the quality of net income and total comprehensive earnings from four properties or characteristics. The characteristics in question are persistence, variability, predictability and value relevance. The samples of the research are manufacturing companies listed in Indonesian Stock Exchange in 2012. By employing sampling technique based on the criteria, 24 companies were selected as samples with period of data collection from2012 to 2014. There are six hypotheses tested by using regression technique. The results of the research show some findings, namely that net income is more persistent than total comprehensive income, there is no significant difference in the variability between total comprehensive income and net income, net income has the ability to predict cash flow and net income for the upcoming year is better than the total comprehensive income and the relevance of net income is different from the total comprehensive income both by applying price and return model. IFRS convergence financial accounting standards require companies that have public accountability in Indonesia to present a comprehensive income statement that includes the presentation of net income, other comprehensive income and total comprehensive income. The results of the research on the characteristics of net income and total comprehensiveness benefit for various parties such as investors, financial analysts and creditors concerned with the quality of profit that is characterized from 4 perspectives mentioned before.. For the financial accounting standards setter, results of this study provide information about the quality of comprehensive earnings. 

Capital Market Response to SFAS Nos. 8 and 52

1993 ◽  
Vol 8 (3) ◽  
pp. 313-329 ◽  
Author(s):  
Zabihollah Rezaee ◽  
R. Phil Malone ◽  
Russell F. Briner
Keyword(s):  
Capital Market ◽  
Foreign Currency ◽  
Market Reaction ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Market Response ◽  
Financial Accounting Standards Board ◽  
Managerial Decisions ◽  
New Information ◽  
The Capital Market

This study investigates the capital market response to Financial Accounting Standards Board (FASB) policy deliberations on foreign currency translations (FCT) by concentrating on five specific events associated with such deliberations. Examining the possible effects of these events, we argue that a market response to FASB policy deliberations on FCT could result from the effects of new information or from the effects of expected changes in managerial decisions. The tests utilized in this paper are designed to detect effects of both types. Generally, no apparent significant market reaction to three of the five events was observed. We found an apparent weak but significant reaction to one event and inconclusive results for a fifth.

scholarly journals Accounting standards for employee stock option disclosure: The current debate

2007 ◽  
Vol 4 (3) ◽  
pp. 87-95
Author(s):  
Geoffrey Poitras
Keyword(s):  
Accounting Standards ◽  
Financial Statements ◽  
Fair Value ◽  
Stock Option ◽  
Financial Accounting ◽  
Current Debate ◽  
Employee Stock Options ◽  
Net Income ◽  
Financial Accounting Standards Board ◽  
Employee Stock Option

The paper examines the implications of recent changes to accounting standards for employee stock based compensation with contingent features. The Dec. 2005 implementation of FAS 123R by the Financial Accounting Standards Board requires the fair value of such expenses to be recorded in net income. The change is now impacting the reported financial statements of firms that have been substantial users of employee stock options. This provides an opportunity to directly assess the actual impact of FAS 123R on such firms. Arguments for and against mandatory expensing are reviewed and an assessment of the contrasting positions provided. Significant limitations of current reporting requirements are identified

The Volatility of Other Comprehensive Income and Audit Fees

2015 ◽  
Vol 30 (2) ◽  
pp. 195-210 ◽  
Author(s):  
Hua-Wei Huang ◽  
Steve Lin ◽  
K. Raghunandan
Keyword(s):  
Explanatory Power ◽  
Accounting Standards ◽  
Audit Fees ◽  
International Accounting Standards ◽  
Net Income ◽  
Future Earnings ◽  
Inherent Risk ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Equity Price

SYNOPSIS The volatility in other comprehensive income (OCI) reflects how market-related price movements, such as exchange rate and equity price changes, affect a firm's future profits. Hence, firms with higher volatility of OCI are likely to have higher inherent risk. Using hand-collected data from 2002–2006, we find that the volatility of OCI is positively associated with audit fees and provides significant incremental explanatory power for audit fees over and above the level of OCI and the volatility of net income. We also find that the effect of the volatility of each component of OCI on audit fees is consistent with the prediction of how it might affect a firm's future profits. Our results support recent efforts by the International Accounting Standards Board (IASB) to require firms to present separately OCI components that may affect future earnings from those that may not affect future earnings.

scholarly journals RISK RELEVANCE OF COMPREHENSIVE INCOME: EVIDENCE FROM NON-FINANCIAL INDONESIA COMPANIES

2020 ◽  
Vol 8 (3) ◽  
pp. 371-380
Author(s):  
Amrie Firmansyah ◽  
Wiwik Utami ◽  
Haryono Umar ◽  
Susi Dwi Mulyani
Keyword(s):  
Standard Deviation ◽  
Stock Return ◽  
Accounting Standards ◽  
Developed Countries ◽  
Financial Accounting ◽  
Return Volatility ◽  
Net Income ◽  
Income Volatility ◽  
Stock Return Volatility ◽  
Comprehensive Income

Purpose of the study: This study aims to examine the effects of net income volatility, other comprehensive income volatility, and comprehensive income volatility on stock return volatility. Methodology: This study employed a quantitative method with multiple linear regression. The sample is all non-financial companies listed on the Indonesia Stock Exchange from 2012 to 2017. Data used in this study are panel data sourced from www.idx.co.id and www.finance.yahoo.com. The sample selection in this study used a purposive sampling method with a total sample of 246 observations. Results: This study suggests that net income volatility is not associated with stock return volatility. However, other income volatility and comprehensive income volatility are positively associated with stock return volatility. Implications: Future studies can employ data from other developing country companies and developed countries to be able to compare the results of this study. Based on the result findings, the existing and potential investors must improve their ability and understanding of IFRS-based financial accounting standards. The Accounting Standard Board, especially in Indonesia, is expected to be able to improve the rules of financial accounting standards as well as the access to the availability of financial accounting standards for financial statements users, primarily related to the disclosure policies. Novelty: This study calculates risk-relevant, which is different from the previous studies, namely annual stock return volatility and annual comprehensive income components volatility. Annual stock return volatility is calculated based on the standard deviation of monthly stock return volatility, which is multiplied by √12. Besides, the annual comprehensive income components volatility is generated from the standard deviation of comprehensive income components generated every three months divided by the market value of equity at the beginning of the period, and multiplied by √4.

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