Abstract
Value relevance studies have thus far provided mixed evidence. Studies also found that fair value reporting has a significant impact on the value relevance of other comprehensive income. Additionally, most studies on value relevance of other comprehensive income focused on developed countries where the capital market is more efficient. In these settings due to the existence of active market, fair valuation of assets may not pose a major problem. In Malaysia the mandatory reporting of comprehensive income by all listed firms based on the requirement of FRS101, coincides with the adoption of FRS139 the standard for financial instrument and could be an interesting setting to investigate. This study hypothesized that other comprehensive income and its components are associated with share price. The results indicate that other comprehensive income and its components are value relevant. The results indicate that the move towards a more comprehensive income reporting through the preparation of the Statement of Comprehensive Income results in more informative financial reporting.
Highlights
One of important concept related to other comprehensive income reporting is the concept of fair value
Among components of other comprehensive income this study examines the value relevance of unrealized changes on available-for-sale financial instruments (AFS) and revaluation surplus of Property, Plant and Equipment (REV)
An assessment of the literature shows that the value relevance of comprehensive income, other comprehensive income and its components varies across countries and industries, and has changed over time
Summary
One of important concept related to other comprehensive income reporting is the concept of fair value In great majority of countries, the market are less efficient to provide the necessary and reliable data for fair value measurement Firms in these countries would have to use price of similar assets and liabilities or use projection of future benefits, and combine it in a model with all reasonable assumptions that are available in the market [3]; [4]. Most studies on value relevance of comprehensive income, are done in developed countries such as the USA [5] and Europe [6], where the market is efficient and fair valuation of assets is reliable. This study provides the empirical evidence on value relevance of two components of other comprehensive income which are affected from asset market, namely unrealized changes on available-for-sale financial instruments (AFS) and revaluation surplus of PPE (REV). This study addresses the concept of value relevance which is of interest to standard setters and policy makers of countries with developing economics that try to grab attention of investors to make more investment, and accelerate economic growth
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