On the IASB comprehensive income project: an analysis of the case for dual income display

The IASB is presently involved in a project on reporting comprehensive income. Since the IASB accounting model mixes two income determination systems, namely, historical cost accounting and fair value accounting, an interesting question pertains to whether the display of comprehensive income should reflect the existence of these two paradigms. This article scrutinizes, from both the points of view of accounting theory and a valuation perspective, the typical arguments made by proponents of historical cost net income and comprehensive fair value income. It finds that claims for exclusive reliance on a single concept of income are untenable. The analysis provides arguments in defence of an income display that explicitly features both income concepts. Such a dual income display would correspond to a categorization of comprehensive income that is currently investigated in the IASB performance reporting project. However, given the importance of summarization in financial analysis, as is most extremely reflected in the focus on the earnings per share (EPS) number, the case for a dual income display should also be considered 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.