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Statement of Financial Accounting Standard No. 130 (SFAS 130) was released in 1997 which required publicly traded companies to separately report comprehensive income in the financial statements. SFAS 130 prescribed three alternative formats for the presentation without mandating any one specific format. SFAS 130 also required certain details of comprehensive income to be displayed prominently in the financial statements. The current study examined the presentation of comprehensive income by a sample of companies traded on the NASDAQ market to determine the predominant method of presentation among these companies, five years after SFAS 130 became effective. Results of the examination of one hundred annual reports showed that a majority of the sampled companies used the third approach, which was to present comprehensive income as part of the Statement of Stockholders’ Equity, as against the first two approaches that favored presentation of comprehensive income on the face of the Income Statement or in a separate statement. Further, the paper also discusses some ancillary findings pertaining to the presentation of the details of comprehensive income.

This study uses an equity valuation model to investigate the extent to which SFAS No. 52 unrealized foreign currency translation gains and losses are reflected in levels of equity security prices. Equity security price is used as the dependent variable in our selected model. Book value of equity (adjusted for the cumulative translation gain or loss), earnings, and cumulative translation gains and losses are used as independent variables. Our results indicate that, generally, translation gains and losses are valued, but losses have a greater impact than gains and the value seems to change over time in setting the levels of equity share prices of USbased MNCs. On a pooled basis, the results are clearly statistically significant, although the statistical significance of the results appears to vary with the annual time period examined. Our results are consistent with the SFAS No. 52 intention that these gains and losses be treated as unrealized as the net exposure is considered long‐term in nature for foreign currency functional currency subsidiaries. Our results appear consistent with extant literature suggesting that unrealized foreign currency translation gains and losses are directly valued ‐ although not dollar for dollar ‐ in a manner similar to earnings (i.e., unrealized gains are associated with positive equity returns and unrealized losses are associated with negative equity returns).

Auditors nowadays must be aggressive and involved in risk assessment and analysis. This paper identifies, analyzes, and recommends a solution to a current problem in accounting for foreign‐currency hedges. This is accomplished by an examination of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivatives Instruments and Hedging Activities, as issued in June 1998. Multi‐currency accounting is recommended as an alternative to functional‐currency accounting. The information generated by the multi‐currency versus the functional currency (as advocated in the SFAS 133) accounting methods for using options as hedging instruments is illustrated. Multi‐currency accounting excels in its transparency. It more clearly provides information on the respective exposure positions of the hedged items and the hedging instruments as well as the notional amounts. Auditors’ risk assessment and analysis can now be effectively performed under this system.

The purpose of this study is to evaluate the impact of ASU 2016–01 on the predictive value, the confirmatory value and the value relevance of earnings. One of the key provisions of ASU 2016–01 is the requirement that all changes in unrealized gains and losses on all equity securities are recognized in income instead of other comprehensive income (OCI) as under prior guidance (SFAS 115). Because many companies in the insurance industry are large holders of equity securities, the sample for this study consists of firms from the insurance industry.

The author compares the change in earnings volatility and analysts’ forecast error for the periods before and after adoption of ASU 2016–01, and the relationship between the percentages of assets invested in equity securities for both earnings volatility and analysts’ forecast error. Further, the author tests the price reaction at the time of the release of earnings using an event study. The author also tests the value reliance of earnings measured by the correlation of earnings and stock prices, as well as the change in earnings and stock returns. The association between investment gain/loss components of earnings, and OCI, with stock prices and returns is tested for value relevance.

The findings of this study show that earnings volatility and analysts’ forecast errors increased in the period after adopting ASU 2016–01 and an initial overreaction to earnings releases. Further, the investment gain/loss components of earnings and OCI are not value-relevant in this study and including unrealized gains/losses on equity securities in income decreased value relevance of earnings in the post-adoption period, particularly for firms with large equity investment portfolios.

This study is limited to one industry and only represents the impact of ASU 2016–01 on that industry. Thus, there are opportunities to extend the research to other industries. Furthermore, the time-period of study since adopting ASU 2016–01 is limited to only two years and with the passage of time, a greater sample of post-ASU 2016–01 will be available for testing.

Standard setters considering recognizing fair value changes on all investment securities in income should consider the findings of this study. Further, industry participants affected by ASU 2016–01 should consider improving explanation of earnings to mitigate the initial misunderstanding of earning announcements found in this study.

To the best of the author’s knowledge, this is the first study on the effects of ASU 2016–01 on volatility of earnings, earnings forecast errors, market reactions to earnings releases and the value relevance of earnings. This paper fills a gap in prior research by studying the effects of fair value on reported earnings, which is limited in prior research. This study contributes to the growing field of research on fair value accounting.

The Financial Accounting Standards Board (FASB) has recently issued Statement of Financial Accounting Standards, (SFAS) No. 130, Reporting Comprehensive Income. That Statement requires companies to report a comprehensive income measure, which includes net income and net‐of‐tax adjustments for changes in unrealized gains/losses on securities, foreign currency gain/loss adjustments, and minimum pension liability adjustments.These latter adjustments were previously reported directly in the stockholders’ equity section of the statement of financial position. This paper analyzes the effects of comprehensive income disclosures for 100 randomly selected Fortune 500 companies. Comprehensive income was computed for these companies and compared with re‐ported net income to determine the number and significance of these other comprehensive income adjustments.The results indicate that a large number of firms may report a comprehensive income amount different from reported net income. Although these differences may be significant for some firms, the majority of these adjustments will not cause comprehensive income to be materially different from reported net income for most firms.

This paper aims to understand the effects of different presentation formats on nonprofessional investors’ judgments. Both International Financial Reporting Standards and US Generally Accepted Accounting Principles require an entity to present items of net income and other comprehensive income (OCI) either in one continuous or in two separate, but consecutive, statements but limited understanding exists about their differential effects on evaluation of company performance.

To investigate this research question, we used a two (Financial Position) x two (Format) randomized between-subjects experiment. Ninety-four graduate students assumed the role of investor and participated in this study.

Results of the experiment suggest that participants are more likely to incorporate OCI information presented in the one-statement format than in the two-statement format. Further analysis suggests that participants both assign more weight to OCI and perceive OCI to be relatively more important in the one-statement format than in the two-statement format, especially when the entity suffers an economic loss.

Results from this study provide evidence to the Financial Accounting Standards Board and International Accounting Standards Board that should be useful in evaluating the effectiveness of alternative comprehensive income reporting formats and should be of interest to accounting rule-making bodies, investors, publicly traded entities and financial analysts, among others.

This paper aims to test whether a change in the reporting location of income, and other comprehensive income (OCI) components, in a statement of comprehensive income (SoCI) under International Financial Reporting Standards affects their value-relevance and use by financial analysts.

The study tests the associations between CI, OCI, share returns and financial analyst forecast revisions.

Results show that comprehensive income is less value-relevant than net income, regardless of reporting location. Changing the reporting location of OCI components to the SoCI does not provide incremental improvement for financial analysts or stock prices. Finally, the paper finds that analysts use OCI components to revise forecasts.

The paper addresses the question of which OCI components should be reported, and the importance of reporting location. The paper extends the examination of OCI components to financial analysts as expert financial report users.

The purpose of this study is twofold. On the one hand, it studies the impact of IFRS 9 adoption on the firm value; and on the other hand, it investigates the impact of the classification of financial assets on the firm value.

The study covers a sample of 55 listed banks in the Middle Eastern and North African (MENA) region. Data is collected for three years (2017–2019).

The findings show that banks’ value is not impacted by IFRS 9 adoption but by financial assets’ classification. Firm value is positively affected by fair value through other comprehensive income assets, while it is negatively affected by amortized cost and fair value through profit or loss assets. The results of the additional analysis show consistent outcomes.

This research reveals important managerial implications. Priority should be given to the financial assets’ classification strategy following the adoption of IFRS 9 to boost the market valuation of banks. It may be useful for investors, managers and regulators in their decision-making.

This study enriches previous research as IFRS 9 is a new standard, and its adoption consequences need to be investigated. A few recent studies have focused on IFRS 9 as a whole or on other parts of IFRS 9, namely, the impairment regime and hedge accounting and concern developed contexts. However, this research adds to the knowledge of capital market studies by investigating the application of IFRS 9 in terms of classification in the MENA region.

Since 1995, the financial reports of New Zealand entities have been legally required to disclose a measure of comprehensive income known as Total Recognised Revenues and Expenses (TRRE). Financial analysts and members of the Institute of Chartered Accountants of New Zealand were surveyed between 1994 and 1996 to investigate their views on whether TRRE is useful for financial analysis, making economic decisions, and whether it is a useful addition to the financial reports. The findings provided a reasonable level of support for the view that TRRE is useful for financial analysis, such as assessing return on investment. However, there were strong reservations over whether it is useful to use TRRE as a basis for determining remuneration packages for top management, or for predicting cash flows. Overall, there was strong support for the view that TRRE provides information that assists with making economic decisions, and that it is a useful addition to the financial reports.

The purpose of this paper is to investigate the properties of net income (NI) and total comprehensive income (TCI) of listed companies in New Zealand (NZ). Four properties of TCI and NI are examined: persistence, variability, predictive ability, and value relevance. Whether the value relevance of TCI depends on its reporting location is also investigated.

A cross‐sectional research design is used with data on TCI reported by NZ listed companies in 2010 under the new disclosure requirement in IAS 1. Ordinary least squares (OLS) regressions are used with a sample of 86 firms to test for persistence, variability, and predictive ability, and 81 firms to test for value relevance of NI and TCI.

The study finds: NI is potentially more persistent than TCI and potentially explains contemporaneous stock returns better than TCI; no significant difference in the variability and predictive ability of NI and TCI; little evidence that the value relevance of TCI depends on its reporting location; other comprehensive income (OCI) has incremental ability to predict one‐year‐ahead CFO, although the incremental ability of OCI to predict one‐year‐ahead NI is not statistically significant; and OCI is not incrementally value relevant.

The findings would be of interest to securities analysts and other users in valuing firms and when earnings are used in contractual settings (e.g. management compensation). Further, the results would also be of potential interest to standard‐setters.

The literature on comprehensive income is growing. However, the authors are not aware of any study that investigates the properties of NI and TCI in accordance with the new requirement to report comprehensive income in the amended IAS 1 which came into effect in NZ on January 1, 2009. The paper adds current evidence on the properties of NI and TCI under IFRS to the international literature.