Advanced Search
MyIDEAS: Login

On the IASB Comprehensive Income Project, Neutrality of Display and the Case for Two EPS Numbers

Contents:

Author Info

  • P. VAN CAUWENBERGE

    ()

  • I. DE BEELDE

    ()

Registered author(s):

    Abstract

    The IASB is presently involved in a project on reporting comprehensive income. Since the IASB accounting system is a mixture of two income determination methods, to wit historical cost accounting and fair value accounting, an interesting question pertains to whether the display of comprehensive income should be neutral with regard to these two competing paradigms. This paper scrutinizes, with a valuation perspective in mind, the typical arguments made by proponents of historical cost net income and comprehensive fair value income and finds that claims for exclusive reliance on a single concept of earnings are untenable. This means that a case could be made for advancing neutral income display as a policy objective. The matrix format of comprehensive income that is proposed under the IASB performance project certainly allows for such a neutral interpretation. However, given the importance of summarization in financial analysis, as is most extremely reflected in the focus on the earnings per share (EPS) number, if neutrality is to prevail, then it should also be reflected at the highest level of summarization of financial performance reporting. In other words, mandatory publication of two EPS numbers, one for net income and one for comprehensive income, should be considered. Possible effects on perception and actual use of financial reports that should enter such a consideration are suggested as topics for experimental research.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_05_305.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 05/305.

    as in new window
    Length: 33 pages
    Date of creation: Apr 2005
    Date of revision:
    Handle: RePEc:rug:rugwps:05/305

    Contact details of provider:
    Postal: Hoveniersberg 4, B-9000 Gent
    Phone: ++ 32 (0) 9 264 34 61
    Fax: ++ 32 (0) 9 264 35 92
    Web page: http://www.ugent.be/eb
    More information through EDIRC

    Related research

    Keywords: Comprehensive income; Neutrality of income display; Double EPS reporting;

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:rug:rugwps:05/305. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nathalie Verhaeghe).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.