Comprehensive Income Reporting Research Articles

Comprehensive Income Reporting: Current Practices and Future Research Prospects

Comprehensive Income Reporting: Current Practices and Future Research Prospects

Development of Website-Based Accounting Information Systems of Comprehensive Income Reports for Citizen Water Management

The current management of community water businesses still uses a manual or conventional system. The conventional system that occurs is that the officer manually records the use of water made in a recap, and then the financial section has no accounting information system, so it still uses Google Spreadsheets and accounting processes that refer to the accounting standards designed. Based on existing problems, a website-based accounting information system for comprehensive income reports for citizen water management is needed. The research objective is to build a website-based Citizen Water Management Comprehensive Income Report Accounting Information System. The research method used was descriptive survey research, in which the author describes a situation or phenomenon systematically in a clear and detailed manner, including processes and components that occur, to find solutions to the problems found. The population in the study is the financial details of the water fund in 2022, and the sample is the financial details of the water report for October 2020. The types of data collection methods are interviews, observation, and library research. In research, the type of design used is descriptive analysis with primary data. One of the system methods is the waterfall method. The result of his research was the design of a comprehensive income reporting accounting information system for web-based community water management so that it facilitates the process of recording transactions and producing accurate financial reports for citizen water management.

International Determinants of Comprehensive Income Reporting by Groups – An Analytical and Comparative Study of Poland and Germany

The mainstream theoretical and empirical research presented in the study is a comparative analysis of comprehensive income reporting by groups listed in the Polish and German capital markets. The theoretical part of the article is dedicated to a scientific discussion on the determinants of the capital market and corporate governance in continental Europe and the so‑called ‘new governance’, related to the convergence of financial reporting standards, including IFRSs, that oblige groups of entities to prepare consolidated statements of comprehensive income. It also assesses the relevance of comprehensive income to capital market players. The empirical part contains the results of comparative research on the format and structure of consolidated statements and the nomenclature of their components, as well as the findings from studies of the value relevance of comprehensive income for the WIG30 and DAX groups in 2009–2019.

The Effect Of Corporate Governance Mechanisms On The Valuation Of Comprehensive Income Reporting In Nigeria

This study investigates the influence of corporate governance mechanisms on the valuation of other comprehensive income in Nigeria. The sample of this study consists of 327 firm-year observations comprising of 117 firms listed on the Nigerian Stock Exchange for the period of 2010 to 2014. The findings reveal that there is a positive influence of corporate governance mechanism on the investors’ pricing of other comprehensive income. Findings show that for firms with weak governance mechanisms, other comprehensive income is value relevant, but is more significantly priced for strong governance firms. This study finds a similar result when other comprehensive income interact with individual elements of corporate governance factor. Therefore, corporate governance mitigates reliability concerns associated with fair value earnings, agency cost will be minimised and investors are more likely to view other comprehensive income as more value relevant. It is therefore recommended that reporting entities should pursue best corporate governance practices in order to enhance investors’ confidence in the reliability of other comprehensive income.

Comprehensive Income Reporting and Earnings Management

<p>Purpose. This paper aims to identify the association between comprehensive income reporting and earnings management. More specifically, this study examines whether the implementation of comprehensive income reporting regulations, namely SFAS 130 and ASU 2011-05 is associated with a decrease in earnings management.<br />Design/ methodology. Data for all variables is retrieved from Compustat Global for a nine-year sample of 7962 US firms reporting under International Financial Reporting Standards (IFRS) that provide all the necessary data to conduct the study. The Modified Jones Model is used as a proxy to measure earnings management. Comprehensive income figures are retrieved from Compustat. Recalculated (as-if) numbers are used for firm years prior to the implementation of SFAS 130. While as-reported amounts are used for the years where SFAS 130 has been implemented and also the years during the implementation of ASU 2011-05.<br />Findings. Comprehensive income is found to be significantly negatively associated with earnings management through discretionary accruals. Furthermore, the interaction effects indicate that, after the implementation of SFAS 130 and ASU 2011-05, comprehensive income becomesmore negatively associated with discretionary accruals.<br />Relevance. Other than contributing to the growing literature regarding the usefulness of comprehensive income reporting, this research has implications for the FASB in assessing whether they achieved the target of better comprehensive income reporting.</p><p><br />Key words: Comprehensive Income, Earnings management, Interaction effect, Reporting Regulations, SFAS 130, ASU 2011-05.</p>

Comprehensive Income Reporting: Empirical Evidence from the Warsaw Stock Exchange

Since 2009, the companies listed on regulated markets in the European Union have been required to present total comprehensive income (CI) and its components in the consolidated financial statements prepared under International Financial Reporting Standards (IFRS). CI is a measure of company income from investor’s perspective - it reflects the enhancement of the entity owners’ wealth. CI includes the net income (NI) and other comprehensive income (OCI). The change of perspective from which the performance is presented may have an impact on its evaluation and decisions taken by financial information users. This raises the questions of how much CI differs from net income (NI) and what problems are connected with presenting OCI in financial statements of public companies in Poland, for which CI reporting is still a new requirement. The paper has been based on literature review, analysis and interpretation of International Accounting Standard 1 (IAS 1), and a review of consolidated financial statements for the years 2010-2011 of 140 companies, listed on the Warsaw Stock Exchange (WSE). The conducted analysis has been the basis for the main conclusion that the usefulness of the statements of CI of the companies, listed on the WSE, for explaining changes in entities’ shareholder wealth is very limited because the majority of the companies do not present material OCI and its components. DOI: http://dx.doi.org/10.5755/j01.ss.82.4.6603

The Decision Usefulness of Comprehensive Income Reporting in Canada

In this study, we empirically investigate the decision usefulness of mandatory reporting of comprehensive income in Canada. Drawing upon Ohlson’s (1999) discussion of the attributes of transitory earnings, we used a sample of 324 firms listed on the Toronto Stock Exchange for the study period to test whether OCI and its individual components (namely, unrealized gains and losses on cash flow hedges, unrealized gains and losses on available for sale investments, and foreign currency translation adjustment on foreign subsidiaries) possess forecasting relevance, predictability and value relevance. We found that aggregate OCI and some of its individual components are relevant in forecasting future abnormal earnings. We also found that OCI is predictable, and incrementally value relevant to net income. The results of our study suggest that Ohlson’s description of transitory earnings might not apply to OCI, and that the reporting of comprehensive income in Canada did enhance the decision usefulness of accounting numbers.

Applying Reporting of Comprehensive Income in China

This paper discusses the characteristics of comprehensive income and how to apply reporting of comprehensive incomein China. Through a detailed analysis, we summarize the situation of current performance reporting type, and give some advices on how to apply comprehensive income reporting in China, to provide investors and creditors morecomprehensive and relevant performance information. There are two steps advised to be applied in China to update thecurrent income reporting to comprehensive income reporting.

Cherry Picking, Disclosure Quality, and Comprehensive Income Reporting Choices: The Case of Property‐Liability Insurers*

AbstractStatement of Financial Accounting Standards No. 130: Reporting Comprehensive Income encourages enterprises to report comprehensive income on a performance statement rather than on a statement of equity. We investigate the reporting decisions of 82 publicly traded property‐liability insurers that are fairly evenly split in their choice. Our results demonstrate that insurers with a tendency to manage earnings through realized securities' gains and losses (that is, cherry pickers), as well as insurers with a reputation for poor disclosure quality, are more likely to report comprehensive income in a statement of equity. Apparently, these insurers face the highest cost of transparency. We do not find a relation between the reporting decision and the volatility of comprehensive income relative to the volatility of net income. Our findings that insurers' comprehensive income reporting choices are a reflection of their proclivity toward cherry picking as well as their level of disclosure quality should be of interest to standard‐setters because of the controversy over standard‐setters' preference for mandating all firms to report comprehensive income in a performance statement.

Discussion of “Cherry Picking, Disclosure Quality, and Comprehensive Income Reporting Choices: The Case of Property‐Liability Insurers”*

Discussion of “Cherry Picking, Disclosure Quality, and Comprehensive Income Reporting Choices: The Case of Property‐Liability Insurers”*

Usefulness of Comprehensive Income Reporting in Canada

In March 2003, the Canadian Accounting Standard Board (AcSB) issued an Exposure Draft (ED) proposing a new Handbook Section 1530, COMPREHENSIVE INCOME(along with two other related new standards on FINANCIAL INSTRUMENTS-RECOGNITION AND MEASUREMENT, and HEDGES). These proposed standards are partly motivated partially by the need to recognize the change in the fair value of certain financial instruments as other comprehensive income and partially to harmonize the accounting standards between the US and Canada. The objective of this paper is to examine the incremental information content of the components of the other comprehensive income over net income and the relative predictive power of comprehensive income vis-a-vis net income, using a sample of crosslisted Canadian firms in the period of 1998 to 2003 (listed in the U.S.), which already report other comprehensive items in accordance with SFAS 130. Since the exposure draft on comprehensive income issued by the AcSB states that it aims to harmonize the accounting standards between the US and Canada, we expand our sample to include the entire sample of US firms to investigate the usefulness of disclosing components of other comprehensive income in the post-adoption periods of the SFAS130 (1998 - 2003) and compare it with the pre adoption period (1994-1997), using the COMPUSTAT database. In addition, we re-examine the association between market returns and the components of other comprehensive income for a sub-sample of firms obtained from the Mergent Online database, to examine the change in the fair value of cash flow hedges for the period from 1999 to 2003. In contrast to the results documented by Dhaliwal et al. (1999) of no significant association between the components other comprehensive income and stock returns, we provide evidence that each of the components of other comprehensive income are associated with market returns. This association is stronger for the post-adoption period of SFAS 130 than for the pre-adoption period. The results also hold for non-financial institutions. We observe, however, that net income is a better predictor of future net income/comprehensive income/cash flows from operations than comprehensive income. The results for the reduced sample using the Mergent database with cash flow hedges indicate that the market reacts positively for firms' cash flow hedges. These results also hold (except for foreign currency translation adjustment) for a sub-sample of Canadian cross-listed firms. Overall, our findings suggest that requiring Canadian firms to disclose other comprehensive income components is likely to improve the usefulness of accounting information. These findings, therefore, are of interest to the accounting standard setters in Canada.

Cherry Picking, Financial Reporting Quality, and Comprehensive Income Reporting Choices: The Case of Property-Liability Insurers

Financial Accounting Standard No. 130 Reporting Comprehensive Income encourages enterprises to report comprehensive income on a performance statement rather than on a statement of equity. We investigate the reporting decisions of 82 publicly traded property-liability insurers, which are fairly evenly split in their choice. We find that insurers with a tendency to manage earnings through realized securities' gains and losses (i.e., cherry pickers), as well as insurers with a reputation for poor financial reporting quality, are more likely to bury comprehensive income in a statement of equity. Apparently, these insurers face the highest cost of transparency. Our findings that insurers' comprehensive income reporting choices are a reflection of their proclivity toward cherry picking as well as their level of financial reporting quality should be of interest to standard setters because of the controversy over standard setters' preference for mandating all firms to report comprehensive income in a performance statement.

Fair Values, Comprehensive Income Reporting, and Bank Analysts' Risk and Valuation Judgments

We investigate whether the measurement and reporting of comprehensive income in financial statements systematically affects commercial bank equity analysts' investment risk assessments and valuation judgments. In an experiment in which 80 buy side analysts specializing in banking and financial institutions participated, we vary whether a bank is exposed to or hedged against interest rate risk across three different comprehensive income accounting regimes - piecemeal fair value accounting with comprehensive income reported in the statement of changes in equity, piecemeal fair value accounting with comprehensive income reported in a separate statement of performance, and full fair value accounting with comprehensive income reported in a separate statement of performance. When fair value changes are measured and reported on a piecemeal basis, we find no investment risk or valuation judgment differences across CI reporting regimes. Although we find that the analysts' investment risk judgments are influenced by the banks' risk management strategies, their valuation judgments are not. Only when fair value changes are measured completely and reported transparently (i.e., full fair value accounting) do analysts' valuation judgments distinguish between banks with different levels of risk. The study contributes to three avenues of literature concerned with financial-reporting transparency, risk, and fair value accounting. First, our ex ante evidence informs accounting standard setters as they evaluate whether to move to full fair value accounting for all financial instruments, and assess the degree to which differences in comprehensive income measurement and reporting affect the information analysts obtain from financial statements. Second, the study adds to the experimental accounting literature that examines comprehensive income reporting format effects and valuation judgments. Third, we add to archival accounting research on the information in comprehensive income by testing market participants' judgments under different comprehensive income reporting regimes, which cannot be directly investigated with archival data.

Comprehensive Income Reporting and Analysts' Valuation Judgments

This paper investigates whether clear reporting of comprehensive income (CI) and its components facilitates detection of earnings management by buy-side financial analysts and predictably affects their common stock price judgments. Financial reporting standards allow companies considerable flexibility in determining which accounts are aggregated into the individual line items in the primary financial statements. Because of the difficulty inherent in assessing the relevance and persistence of these amounts, users of financial accounting information often

Discussion of Comprehensive Income Reporting and Analysts' Valuation Judgments

Hirst and Hopkins [1998] show that judgments of financial statement users may be affected by the calculation and display of comprehensive income in the presence of earnings management. Comprehensive income includes the firm's net income, foreign currency items (e.g., translation adjustments), the unrecognized pension liability, and unrealized holding gains and losses on certain debt and equity securities (e.g., available-for-sale [AFS] marketable securities).1 Earnings can be managed through the timing of sales of AFS securities, allowing holding gains and losses to become realized; such management affects net income but does not affect comprehensive income. This is the earnings management activity considered by Hirst and Hopkins. The authors compare stock price judgments of buy-side financial analysts faced with pre-SFAS No. 130 financial statements with those of analysts faced with income statement display of comprehensive income (CI). For both groups, the statements viewed by some subjects included earnings management (i.e., realizing holding gains on AFS securities), while others did not. Although pre-SFAS No. 130 financial statements contained the information necessary to calculate CI, it did not provide such calculations explicitly and, in fact, scattered the requisite information throughout statements and footnotes. The main issue investigated by Hirst and Hopkins is whether judgments will differ when users are provided with pre-SFAS No. 130 financial statements with scattered CI information (i.e., No-Cl statements)