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

Abstract

This paper links academic accounting research on comprehensive income reporting with the accounting standard-setting efforts of the FASB and the 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.