The IASB and ASBJ Conceptual Frameworks: Same Objective, Different Financial Performance Concepts

Mourik, Carien van; Katsuo, Yuko

doi:10.2308/acch-50902

Cited by 11 publications

(5 citation statements)

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“…Yet, any conceptual fresh start to income reporting, as explored by Barker (2003Barker ( , 2004, is complicated by practical factors, such as the IASB's focus on IFRS adoption in Japan, where a strong attachment to net income and recycling, and an equally strong aversion to comprehensive income, prevails (e.g. Van Mourik and Katsuo 2015).…”

Section: Concluding Discussionmentioning

confidence: 99%

From compromise to concept? – a review of ‘other comprehensive income’

Detzen

2016

Accounting and Business Research

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This paper reviews how 'other comprehensive income' (OCI) entered financial reporting by tracing major Financial Accounting Standard Board (FASB) and International Accounting Standards Board (IASB) projects that required direct entries to equity and describing recent efforts to make sense of the practice. It was the fixation on net income that brought about departures from all-inclusive income, which were repeatedly made over the years without decidedly devoting attention to developing a conceptual basis. OCI was used as a compromise to incorporate current values in the balance sheet, while retaining historical cost principles in the income statement. When the practice was labeled as OCI, it became institutionalized without a clear meaning. A sense-making of the practice then replaced the debates on the adequacy of using OCI and standard setters have realized that additional layers of theory became necessary to explain, for example, reclassification adjustments. Yet, the IASB has made clear in its recent Exposure Draft of a revised conceptual framework that it does not intend to pursue a fresh start in performance reporting that appears to be needed conceptually. Instead, practical considerations, primarily on International Financial Reporting Standards adoption in Japan, seem to lead to another ex-post rationalization of OCI, this time around a conceptually vacuous use of the relevance characteristic.

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Section: Concluding Discussionmentioning

confidence: 99%

From compromise to concept? – a review of ‘other comprehensive income’

Detzen

2016

Accounting and Business Research

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“…In other words, there is a timing difference between net income and CI in terms of performance recognition (Noguchi, 2014;Tsujiyama, 2007). CI allows for a clear articulation among the income statement, balance sheet, and cash flow statement (Linsmeier et al, 1997;van Mourik and Katsuo, 2015).…”

Section: Background and Literature Review 21 Oci Recyclingmentioning

confidence: 99%

Does recycling improve information usefulness of income? The case of Japan

Frendy

Semba

2017

ARA

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Purpose The Accounting Standards Board of Japan (ASBJ) proposed a new set of endorsed International Financial Reporting Standards in June 2015. ASBJ claims that non-recycling of other comprehensive income (OCI) items decreases the information usefulness of earnings in a proposed comprehensive income standard. There has been no existing empirical evidence which supports the ASBJ’s statement and the purpose of the study is to test whether OCI recycling improves information usefulness of net income from six perspectives: relative and incremental value relevance, persistence, variability, operating cash flow and net income predictive power. Design/methodology/approach This paper is an empirical work using a listed Japanese firms sample of 5,385 firm-years from fiscal year 2012-2014. Findings The results challenge the ASBJ’s claim that recycling improves the general information usefulness characteristics of net income. The empirical results show that OCI recycling improves net income’s relative value relevance characteristic of financial firms. However, recycling information by itself does not improve the incremental value relevance, and the predictive power of operating cash flow and net income. The authors also find that the inclusion of recycling decreases the persistence and increases the variability of net income. Research limitations/implications This paper has two research limitations. First, this study is constrained to analyze a limited OCI recycling data that is recently disclosed by listed Japanese firms. Second, the results of this study have limited external validity to capital markets with OCI reclassification standards that deviate from Japanese GAAP. Originality/value This study provides initial empirical evidence that examines information usefulness of OCI recycling in Japan. The findings of this study are relevant for accounting standards setters aiming to increase the information usefulness of earnings for capital market investors.

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“…However, the mandatory adoption, here, does not necessarily mean the adoption of the exact standards issued by the IASB. Rather, as the previous research indicates, many economies carve out specific elements of IFRS in the local context (Nobes, 2015;Nobes and Zeff, 2016;Tsunogaya et al, 2015;van Mourik and Katsuo, 2014;Walker, 2010). Furthermore, the largest three world economies (the USA, China and Japan) have not requested the mandatory adoption of IFRS (Nobes and Zeff, 2016).…”

Section: Introductionmentioning

confidence: 98%

“…International Financial Reporting Standards (IFRS) has been adopted in many countries (Cascino and Gassen, 2015). However, the degree of adoption has varied to a great extent (Nobes, 2015;Nobes and Zeff, 2016;Tsunogaya et al, 2015;van Mourik and Katsuo, 2014;Walker, 2010). That is, some major economies including the USA, China, Japan and Switzerland have not required mandatory adoption.…”

Section: Introductionmentioning

confidence: 99%