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.

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 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.

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 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.

Bridge over troubled water: Is it possible to define other comprehensive income?

2021 ◽  
pp. 61-87
Author(s):  
Thomas Ryttersgaard
Keyword(s):  
Conceptual Framework ◽  
Balance Sheet ◽  
Accounting Standards ◽  
The Core ◽  
Comprehensive Income ◽  
Accounting Principles ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
Definition Of ◽  
Gains And Losses

Although other comprehensive income did not exist in the conceptual framework until 2018, it has been a part of IFRS for many years, and it has not been defined based on accounting theory. This paper considers arguments for the current use of other comprehensive income under IFRS and finds that matching and prudence are at the core of other comprehensive income in IFRS despite not being elements of the conceptual framework. This suggests that the concept of other comprehensive income exists because the IFRS standards are founded on a mix of balance sheet-based and income statement-based accounting principles. Based on the characteristics of other comprehensive income and the IASB's arguments for the recognition of gains and losses in other comprehensive income, this paper proposes a definition of other comprehensive income that can be used to ensure a uniform application of the concept across accounting standards and to reduce risks of inconsistency.

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.

Comprehensive Income: Components and IFRS Reporting

Auditor ◽  
2017 ◽  
Vol 3 (3) ◽  
pp. 36-40
Author(s):  
������� ◽  
L. Shmarova
Keyword(s):  
Reporting Standards ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Income Reporting ◽  
A Company

This paper gives an overview of the international fi nancial reporting standards requirements for companies� comprehensive income reporting, examines the existing approaches to the interpretation of the �comprehensive income� term, analyzes possible options of the comprehensive income reporting, as well as gives attention to discussions in relation to the possible reclassifi cation of other comprehensive income components to profi t or loss statement of a company.

scholarly journals Corporate Reporting of Other Comprehensive Income

2018 ◽  
Vol 8 (2) ◽  
pp. 212
Author(s):  
Charles Mulford ◽  
Anna Babinets
Keyword(s):  
Financial Performance ◽  
Annual Report ◽  
Financial Statements ◽  
Net Income ◽  
Income Loss ◽  
Future Earnings ◽  
Corporate Reporting ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Gains And Losses

In this study, we examine the annual report filings of S&P 100 companies that report other comprehensive income/(loss) over the three-year period of 2013-2015. We seek to gain a deeper understanding of the components of other comprehensive income and to determine if there is a systematic tendency for companies to include more gains or losses in other comprehensive income. Further, we seek to determine which components of other comprehensive income show more unexpected losses than gains and what impact other comprehensive income gains and losses may have on future earnings.We find a systematic tendency for firms to report more losses than gains in other comprehensive income, both in frequency and amount. This result is especially true for investment-related gains and losses, where managements have more discretion in the timing of gain and loss recognition.In terms of their impact on future earnings, we find that 43 companies in the S&P 100 reclassified some component of accumulated other comprehensive income gains and losses to net income over the period 2013- 2015, highlighting the observation that other comprehensive income gains and losses are, in effect, future elements of net income. These results remind analysts and investors that net income does not tell the entire story of a firm’s financial performance. Beyond users of financial statements, regulators, such as the FASB and SEC, may want to reconsider whether items of other comprehensive income should be included in net income.

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