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Reporting location and the value relevance of accounting information: The case of other comprehensive income

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  • Schaberl, Philipp D.
  • Victoravich, Lisa M.

Abstract

This paper examines the influence of reporting location on the value relevance of other comprehensive income (OCI). Accounting Standards Update (ASU) 2011-05 “Presentation of Comprehensive Income” requires firms to report OCI in a performance statement (i.e., either below net income in a single statement of comprehensive income or in a second statement of comprehensive income that begins with net income). ASU 2011-05 eliminated the option of reporting OCI in the statement of equity, based on the argument that performance reporting would improve the transparency of OCI in the financial statements. We find mixed evidence that the value relevance of OCI differs across management's choices of OCI reporting location prior to the implementation of ASU 2011-05. However, we do find a decline in the value relevance of OCI for firms that were required to change the reporting location of OCI from the statement of equity to a performance statement in response to ASU 2011-05. This result holds after we include a control group consisting of firms that did not change the reporting location of OCI. Overall, our findings suggest that the value relevance of OCI is determined by whether its reporting location is consistent with the firm's reporting history.

Suggested Citation

  • Schaberl, Philipp D. & Victoravich, Lisa M., 2015. "Reporting location and the value relevance of accounting information: The case of other comprehensive income," Advances in accounting, Elsevier, vol. 31(2), pages 239-246.
    • Handle: RePEc:eee:advacc:v:31:y:2015:i:2:p:239-246
    DOI: 10.1016/j.adiac.2015.09.006
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    Cited by:

    1. Burke, Qing L. & Wieland, Matthew M., 2017. "Value relevance of banks' cash flows from operations," Advances in accounting, Elsevier, vol. 39(C), pages 60-78.
    2. HeeJin Park, 2018. "Market Reaction to Other Comprehensive Income," Sustainability, MDPI, vol. 10(6), pages 1-14, June.
    3. Murad Harasheh & Federica Doni & Maria Vittoria Franceschelli & Andrea Amaduzzi, 2021. "The value relevance of Other Comprehensive Income: Extensive evidence from Europe," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3835-3851, July.
    4. Yiting Cao & Qi (Flora) Dong, 2020. "Does reporting position affect the pricing of the volatility of comprehensive income?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(9-10), pages 1113-1150, October.
    5. Thomas Ryttersgaard, 2021. "Bridge over troubled water: Is it possible to define other comprehensive income?," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2021(1), pages 61-87.

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