Research On Other Comprehensive Income

CAS firstly proposed other comprehensive income (OCI) and specified its presentation requirements in 2009. "Enterprise Accounting Standards No.30 draft" was released in 2012, which defined other comprehensive income and its classification, basically completing international accounting standards convergence. In 2014 "Enterprise Accounting Standards No.30-presentation of Financial Statements" was revised and published, and the concept of OCI and its presentation requirement firstly was listed on the standards. CAS and IASB completed convergence on the definition, reclassification and disclosure of OCI, while neither of them solved the most essential problem, which is its exclusive definition which can clearly distinguished it from "benefit", as well as the basic principle of its recognition, measurement and reclassification. In July,2013, IASB released "A Review of the Conceptual Framework for Financial Reporting", in which consolidated income was studied thoroughly. With the widely use of the fair value and the booming of financial instruments and related derivatives, the traditional concept of gains and losses (net profit) could hardly provide proper reflection of the business situation. As the bridge of economic benefits and the traditional concept of proceeds, consolidated income adds other comprehensive income into earnings, providing a complementary information to fully reflect a company’s current operating situation compared to net income, confirming the concept of decision-useful expression. Consolidated income reflects the decision usefulness accounting objective in financial reporting, and is an integral part of the current international financial reporting system reformation. In addition, after China’s latest financial standard was issued, there was no standards to guide the way of using other comprehensive income.In this context, this paper studied other comprehensive income by using specification analysis, document analysis, comparative analysis and other analytical methods, with the conceptual framework of IASB and recently released CAS. At the same time, the paper gives guidelines on how to make better use of other comprehensive income. Chapter 1 discusses the research achievements both in China and abroad, as well as the background and significance of the paper. Chapter 2 describes the theoretical basis of other comprehensive income. Chapter 3 is a comparative study about the confirmation, measurement and disclosure regulations and guidelines of other comprehensive income by contrast with GAAP, IFRS and CAS, so as to confirm similarities and differences among GAAP, IFRS and CAS, and then to analyze the reasons and noting the current problems and future improvement direction. Chapter 4 is to study the use of other comprehensive income information, from the perspective of corporate financial assessment indicators and accounting information users. After then, the paper puts forward additional proposals for the current financial appraisal index system, and studies on the accounting information users including enterprise management Investors, creditors and regulators, aiming at helping accounting information users to understand and apply the disclosure information and increase risk management awareness of managements, credit rating analysis capacity of creditors, risk analysis awareness of investors and comprehensive monitoring capacity of regulators. Chapter 5 is the revelation for the accounting treatment of other comprehensive income and use of information, pointing out the problems in the accounting treatment of other comprehensive income and putting out ways to fully use OCI information. Chapter 6 gives a whole summary and points out future research directions.The main conclusions are:1.CAS and IASB completed convergence on the definition, reclassification and disclosure of OCI, while neither of them solved the most essential problem, which is its exclusive definition which can clearly distinguished it from "benefit", as well as the basic principle of its recognition, measurement and reclassification.2. China should make a clear distinction in the future between "gains and losses" and "other comprehensive income". Based on the discussion paper of financial reporting conceptual framework, there are three options available. One is definition based on the three categories (Bridging Items, Mismatched Re-Measurements, Transitory Re-measurements). The second is definition based on the perspective of the duration or the perspective of measurement. The third is definition based on distinguishing attributes.3. To make full use of OCI information, we should enhance the promotion and the attention of accounting personnel in other comprehensive income, improve the current financial evaluation index system, and strengthen the guidance of other comprehensive income information users. At the same time, we should encourage academic studies on OCI, so as to improve international recognition of China’s accounting standards.