Total Comprehensive Income Research Articles

Earnings less risk-free interest charge (ERIC) and stock returns: ERIC’s relative and incremental information content in a European sample

This study tests the information content of earnings less risk-free interest charge (ERIC) and analyses its ability to explain fluctuations in market-adjusted stock returns. Following Biddle et al. (1997) study design, we perform relative and incremental information content tests. Relative information content tests reveal that mandatory reporting metrics — such as earnings before extraordinary items (EBEI), cash flow from operations (CFO), and total comprehensive income (TCI) — are more highly associated with stock returns and firm values than ERIC or residual income (RI). A number of sensitivity analyses support our findings. To test incremental information content, we split ERIC into five components. Primary results indicated that components specific to ERIC — changes of net assets, after-tax interest expenses, and capital charge — do not add relative information content. Yet, sensitivity tests suggest that some ERIC components add incremental information, especially when accounting for market expectations. However, these findings are not economically substantial compared to CFO and EBEI. Overall, we conclude that mandatory metrics generally outperform ERIC and residual income. Our unique contribution lies in applying the established methodology of measuring economic value added (EVA’s) relative and incremental information content to ERIC

Naknadno merenje stalne imovine - uticaj izbora koncepta fer vrednosti na ukupan sveobuhvatni rezultat listiranih kompanija u Republici Srbiji

In response to investor demands, with the introduction of the fair value (FV) concept, other comprehensive income (OCI) has become a significant indicator of changes in the current values of certain financial statement items in successive periods. Although it deviates from the traditional concept of historical cost (HC) and its prudence principle, on which reliability rests, the use of fair value contributes to the relevance of the presented information. The total comprehensive income (TCI), as a summary of realized and unrealized gains and losses recognized in the income statement, i.e. OCI, represents a valuable base of relevant information for investors and other users of financial statements. The paper focuses on a sample of listed entities on the Regulated Capital Market of Serbia for the period 2016-2020 and finds that the FV concept is predominantly used for the subsequent measurement of property, plant and equipment (PP&E). In addition, we analyze the impact of changes in the fair value of certain non-current assets' items (i.e.: PP&E, intangible assets and long-term investments) on TCI. Our research shows that some OCI items have a divergent impact on TCI, and, thus, different information power, which can increase uncertainty, i.e. make it harder for analysts to predict net income.

Audit Aset Tetap pada PT. ABC

This paper is about the calculation of depreciation of fixed assets by PT ABC and kap kh auditors in the period 2019, which aims to explain the audit procedures on fixed assets of PT ABC by kap kh auditors, explain the findings of the audit of fixed assets of PT ABC, mention adjustments to the findings of the audit of permanent assets of PT ABC, and explain the impact of the audit findings on the financial statements on PT ABC period 2019. The data source used is secondary data. The data collection technique used is a documentation method. The data analysis method used is the quantitative analysis method. At the time of the audit of PT ABC's fixed assets by implementing audit procedures, there was a difference in depreciation calculation between PT ABC and kap kh auditors. Based on that, adjustment / journal correction is carried out. The difference and adjustment will have an impact on the financial statements, namely the increase in the total financial position statement and the total comprehensive income statement on the income statement of PT ABC for the period 2019.

Analysis of The Influence of Islamic Income Ratio, Total Comprehensive Income, and NPF on Company Value with Profitability as Moderating Variables in Sharia Commercial Banks in Indonesia 2015-2019

<em>Economic Value Added </em>is an approach to assessing company performance, with the aim that the company's ability to create added value can influence investors who will invest in the company. The concept used in this approach is to pay attention to the funders in terms of expectations, interests, and degrees of justice as measured by weighted measures and the existing initial capital structure. The population in this study are Islamic Commercial Banks registered with the Financial Services Authority, totaling 11 Islamic Banks. In selecting the sample the method used is purposive sampling with the criteria that the author has set. The collection method in this study was carried out by looking at the annual financial statements of each Islamic bank registered with the Financial Services Authority. Based on the results of the moderation regression test, the results showed that IIR, TCI, NPF had no significant positive effect on EVA. ROA is not able to moderate IIR against EVA. ROA is not able to moderate TCI against EVA. ROA is not able to moderate NPF against EVA.

Risk relevance and volatility of other comprehensive income in the banking sector: Evidence from European countries

The aim of this study is to examine the relationship between the risk measures and the volatility of total comprehensive income (TCI), other comprehensive income (OCI), and single OCI components in the European context. Previous studies only cover reporting jurisdictions such as the United States and Canada but never the EU. Based on these premises, this research uses a sample of 166 listed banks, selected from 15 European countries. The results show that there is a significant positive association between the stock return volatility and the volatility of TCI, of OCI, and some of the single OCI components. This study contributes to the international debate on the risk relevance of TCI and its components, observing, in addition to previous research, the association not only between the risk measures and the volatility of TCI and OCI but also between the risk measures and the volatility of single OCI components.

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

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, 2 4 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.

The Relative Value Relevance of Total Comprehensive Income and Net Income －Focus on Consolidated Financial Statements－

The Relative Value Relevance of Total Comprehensive Income and Net Income －Focus on Consolidated Financial Statements－

Comprehensive Income and Net Income, Which is more powerful in predicting Future Performance

The aim of this research is to compare the ability of comprehensive income and net income to predict companies' future performance in emerging markets by studying industrial companies in Jordan, and to achieve the purpose of the study a sample of (29) companies listed in Amman Stock Exchange from industrial sector has been selected with (146) observation for the time period of (2011-2015), a multiregression testing technique has been used using (SPSS), to find out the usefulness of both net income and comprehensive income to the financial information users and to confirm which one of them is more powerful in predicting of the future performance. The results show that the current net income has more predictive power for future income and future comprehensive income than current comprehensive income. Also the results show that even thought that total comprehensive income possesses more informative content and gives further information, but still the net income is more powerful in predicting future performance.

The Value Relevance of the Difference for the Accounting Income and the Taxable Income and the Difference for the Total Comprehensive Income and the Taxable Income

The Value Relevance of the Difference for the Accounting Income and the Taxable Income and the Difference for the Total Comprehensive Income and the Taxable Income

Components of Comprehensive Income and Statement of Changes in Equity: An Analysis of Public Companies’ Reporting Practices in Poland and Germany

Purpose: Identification of methods for presenting the components of other comprehensive income in the statement of changes in equity in the reporting practices of public companies in Poland and Germany. Methodology: A study of domestic and foreign literature was conducted with analysis of annual reports of public companies. The study followed the method of induction and to analyse the results, the structure similarity index was used. Results: The results of the study supported conclusions that the companies under study had not developed a uniform presentation of the components of comprehensive income in their statements of changes in equity. Five options of presenting the components of other comprehensive income in the statement of changes in equity were identified. Companies both from the WIG 30 and DAX indices most frequently presented the statement of changes in equity in option 1, which consisted of presenting the total comprehensive income item in a row and detailed items of equity in columns in which capital gains and losses were recognized. The differentiated forms of presenting the components of comprehensive income made it difficult to compare financial statements. Scope of research: The survey examined the annual reports of the largest Polish and German public companies respectively from the WIG 30 and DAX indices. The components of other comprehensive income presented in the statements of changes in equity were the main subject of the study. Originality: Comparative studies on the presentation of the components of other comprehensive income in the statement of changes in equity by public companies in Poland and Germany have not yet been conducted. This was therefore the research gap addressed in this study.

Peculiarities of the fair value taxation regime for financial instruments

The enactment of s24JB represents a significant change in the taxation of financial instruments. The traditional approach of including amounts in gross income on the earlier of receipt or accrual is superseded by a fair value regime grounded in International Financial Reporting Standards. Initially, this approach appears logical, resulting in an alignment of the determination of taxable income and total comprehensive income for financial reporting purposes. A closer examination, however, reveals a number of tensions between the relevant International Financial Reporting Standards and s24JB. This confirms the position in the prior corporate governance and tax literature that seldom are new laws and regulations free from dysfunctional consequences.

The Value Relevance of Total Comprehensive Income and other Comprehensive Income in the KOSDAQ Market

The Value Relevance of Total Comprehensive Income and other Comprehensive Income in the KOSDAQ Market

Is the total comprehensive income or the net income better for the evaluation of company’s financial performance?

The aim of the paper is to compare the utility of the net income and the total comprehensive income for the evaluation of goodness in connection with companies’ investments. For the research, we use the data of the consolidated financial statements for 2010, 2011 and 2012 published online by companies listed on the Prime Market of the Czech Republic Stock Exchange. In the last part of the work, we show the results of empirical research on the income statement of the Czech companies, which have adopted IAS/IFRS principles. The results show that the Czech companies’ financial statements have no propensity to separate the income statement section into two statements rather than integrating it into a single one, while the reclassification of the income statements privileges the reclassification by nature. The results show that the total comprehensive income possesses informative content and gives further information for the evaluation of financial performance.

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

Roe in Turbulent Time

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.

Quality of Net Income vs. Total Comprehensive Income in the Context of IAS/IFRS Regulation

Research in accounting has thus far attempted to provide fair and useful financial performance measures for a wide range of users. Academics and professionals have also established income as the key performance measures in making economic decisions. The purpose of this study is to investigate the quality of total comprehensive income (TCI) relative to net income (NI), prepared in accordance with International Financial Reporting Standards (IAS/IFRS). Using a data set covering 2,273 firms from 22 countries in Europe, Asia and Australia between 2006 and 2010, we provided evidence that net income always dominates comprehensive income as a valuation metric. The findings indicated that NI is more value relevant than TCI in predicting the future operating cash flows and income. In addition, NI is more persistent and timely, and explains the actual operating cash flows more precise than TCI. Accruals linked to NI have also better quality than those related to TCI. However, we found that TCI is less smoothing and more conservative than NI. These results do not support the claim that income measured on a comprehensive basis is a better measure of firm performance than NI. These results raise the questions about the usefulness of mandating TCI in IAS/IFRS regulation. Our findings, therefore, should be of interest to IASB, as they provide evidence of fewer quality of the TCI. Perhaps it is time for the IASB to reconsider other comprehensive income components and focus on items included in other comprehensive income to improve the quality of the TCI metric. These results also provide evidence of net income as a primary decision-relevant metric.

How Do Malaysian ACE Market Companies Report Comprehensive Income

In Nov 2009, the Malaysian Accounting Standards Board (MASB) released FRS 101, Presentation of Financial Statements, effective for fiscal years beginning on or after 1 January, 2010. This statement established certain standards for reporting and presenting comprehensive income in the general-purpose financial statements. In accordance with the definition provided by FRS 101, total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. Data were collected from 84 non-financial companies of the ACE market listed on the Bursa Malaysia (Malaysian Stock Exchange). The study showed that 82 companies used a first format which combined the statement of net income and comprehensive income (using a single statement of comprehensive income), while only 2 companies used the second format which separated the income statement from the statement of comprehensive income. Only 51 companies reported items that fall under the Other Comprehensive Income (OCI) category. Foreign currency translation adjustment was the most prominent item in the OCI, followed by gains and losses on re-measuring available-for-sale financial assets. Almost half of the companies that reported OCI were negatively affected by the foreign currency translation adjustment. Further, the paper also discusses some ancillary findings pertaining to the presentation of the details of comprehensive income.

Assessing the value relevance of total comprehensive income under IFRS: an empirical evidence from European stock exchanges

This paper compares the value relevance of the net income and the total comprehensive income reported under IFRSs. The total comprehensive income represents a key measure of the overall company performance, and it is extremely topical after the revision of the IAS 1. The paper aims at verifying whether the total comprehensive income is more value relevant than the net income. To this purpose, accounting and market data regarding companies listed on the UK, French, German, Spanish and Italian stock exchanges have been collected for the years 2005–2007. Valuation models have been used to assess the differences in value relevance by using total comprehensive income or net income. Findings show that total comprehensive income has not resulted in an unquestionable increase in value relevance compared with net income. This research contributes to defining the relevance of the total comprehensive income and to the international debate about which overall company performance should be reported in the IFRS financial statement.

Properties of net income and total comprehensive income: New Zealand evidence

PurposeThe purpose of this paper is to investigate the properties of net income (NI) and total comprehensive income (TCI) of listed companies in New Zealand (NZ). Four properties of TCI and NI are examined: persistence, variability, predictive ability, and value relevance. Whether the value relevance of TCI depends on its reporting location is also investigated.Design/methodology/approachA cross‐sectional research design is used with data on TCI reported by NZ listed companies in 2010 under the new disclosure requirement in IAS 1. Ordinary least squares (OLS) regressions are used with a sample of 86 firms to test for persistence, variability, and predictive ability, and 81 firms to test for value relevance of NI and TCI.FindingsThe study finds: NI is potentially more persistent than TCI and potentially explains contemporaneous stock returns better than TCI; no significant difference in the variability and predictive ability of NI and TCI; little evidence that the value relevance of TCI depends on its reporting location; other comprehensive income (OCI) has incremental ability to predict one‐year‐ahead CFO, although the incremental ability of OCI to predict one‐year‐ahead NI is not statistically significant; and OCI is not incrementally value relevant.Practical implicationsThe findings would be of interest to securities analysts and other users in valuing firms and when earnings are used in contractual settings (e.g. management compensation). Further, the results would also be of potential interest to standard‐setters.Originality/valueThe literature on comprehensive income is growing. However, the authors are not aware of any study that investigates the properties of NI and TCI in accordance with the new requirement to report comprehensive income in the amended IAS 1 which came into effect in NZ on January 1, 2009. The paper adds current evidence on the properties of NI and TCI under IFRS to the international literature.

Properties of Net Income and Total Comprehensive Income -- New Zealand Evidence

Purpose – The purpose of this paper is to investigate the properties of net income (NI) and total comprehensive income (TCI) of listed companies in New Zealand (NZ). Four properties of TCI and NI are examined: persistence, variability, predictive ability, and value relevance. Whether the value relevance of TCI depends on its reporting location is also investigated. Design/methodology/approach – A cross-sectional research design is used with data on TCI reported by NZ listed companies in 2010 under the new disclosure requirement in IAS 1. Ordinary least squares (OLS) regressions are used with a sample of 86 firms to test for persistence, variability, and predictive ability, and 81 firms to test for value relevance of NI and TCI. Findings – The study finds: NI is potentially more persistent than TCI and potentially explains contemporaneous stock returns better than TCI; no significant difference in the variability and predictive ability of NI and TCI; little evidence that the value relevance of TCI depends on its reporting location; other comprehensive income (OCI) has incremental ability to predict one-year-ahead CFO, although the incremental ability of OCI to predict one-year-ahead NI is not statistically significant; and OCI is not incrementally value relevant. Practical implications – The findings would be of interest to securities analysts and other users in valuing firms and when earnings are used in contractual settings (e.g. management compensation). Further, the results would also be of potential interest to standard-setters. Originality/value – The literature on comprehensive income is growing. However, the authors are not aware of any study that investigates the properties of NI and TCI in accordance with the new requirement to report comprehensive income in the amended IAS 1 which came into effect in NZ on January 1, 2009. The paper adds current evidence on the properties of NI and TCI under IFRS to the international literature.