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

Abstract

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.

Value relevance of accounting data and financial crisis in Europe: an empirical analysis

“…These results are consistent with previous literature (e.g. Devalle et al (2010Devalle et al ( , 2012. For the 2006-2009 period France, Spain, Germany and Italy report that comprehensive income is more value relevant than the net income, but opposite findings arise from the model estimation that consider only data collected before the financial crisis: the data collected referring to the financial statements of the years before financial crisis show that comprehensive income is not so value relevant as in the post-crisis scenario.…”

“…In order to assess whether comprehensive income is more meaningful for investors than net income, a value relevance approach has been used in this study in compliance with Devalle et al (2012). Commonly, value relevance studies on comprehensive income use various versions of the Price Regression Model (Kanagaretnam et al, 2009;Barth et al, 2008;Dastgir and Velashani, 2008;Pinto, 2005;Cahan et al, 2000).…”

Value Relevance Of Other Comprehensive Income

“…Huang et al (2014) also found that the lack of accounting standards requirement for comprehensive income reporting in China affect value relevance of comprehensive income. Moreover, Devalle and Magarini (2012) and Zülch and Pronobis (2010) also found no evidence on value relevance of comprehensive income. Devalle and Magarini (2012) Zülch and Pronobis (2010) found no evidence on value relevance of comprehensive income.…”

“…Prior to the introduction of the statement of comprehensive income, serious concerns have been raised about income items that are undisclosed in the income statement which in turn reduce the transparency of financial statements and consequently decrease the value relevance of financial information to investors and other users (Devalle & Magarini 2012;Kanagaretnam, Mathieu & Shehata 2009;Smith 2017). The income statement presents only the consequences of the ordinary and regular operations for the current period while non-operating or non-recurring items are excluded from net income.…”

A utilidade do resultado integral: caso Euronext Lisbon

“…Os resultados líquido e integral têm sido objeto de estudos que se debruçam sobre o seu poder explicativo (Chambers, Linsmeier, Shakespeare & Sougiannis, 2007;Cheng, Cheung & Gopalakrishnan, 1993;Devalle & Magarini, 2012;Dhaliwal, Stibramanyam & Trezevant, 1999). O interesse pelas componentes do ori, designadamente as resultantes de revalorizações de ativos (Aboody, Barth & Kasznik, 1999;Barth & Clinch, 1998;O'Hanlon & Pope, 1999) e das reservas resultantes da conversão cambial (Dhaliwal et al, 1999;O'Hanlon & Pope, 1999) estiveram, desde cedo, presentes, contudo numa abordagem em que a sua relevância é analisada por item, e não de forma conjunta.…”