The Empirical Research On The Value Relevance Of Comprehensive Income

The macro-economic and accounting environment in which enterprises are located has changed obviously,and the income reporting model adopted in the past has been challenged greatly.The traditional income reporting can not completely reveal the various risks may be hidden in the capital market,and can not truly reflect the operating results of enterprises.Inherent drawbacks of traditional income reporting model surfaced gradually,the financial statements innovate fall into place,comprehensive income arises at the historic moment.In 2006,Chinese Ministry of Finance issued a new accounting standards for enterprises with 1 basic principles and 38 specific criteria,the new accounting standards introduced "gains" and "losses",and introduced the owners' equity changes into the financial reporting system.Although there is no clear introduction of the concept of comprehensive income,this carries a foreshadowing of the official reports of other comprehensive income.In 2009," Interpretation No.third" formally introduced the concept of the "other comprehensive income" and "comprehensive income".In 2014,the revised "Accounting Standards for Enterprises No.Thirtieth Presentation of Financial Statements" further improve and standardize the reporting and disclosure of comprehensive income,the beginning and ending balances of other comprehensive income and its adjustment is required to be disclosed in the notes.At the same time,the contents of the report of the profit statement in the annual report of Listed Companies has undergone major changes,the other comprehensive income components are included in the profit statement.The introduction of comprehensive income is a major reform of accounting standards,which complies with the current reform trend of accounting standards,and reflects the need of the convergence of accounting standards and international accounting standards.The reporting and disclosure of comprehensive income whether can compensate for the lack of traditional accounting income,whether can provide a more complete income information,whether can improve the value relevance of accounting information,these problems need our further discussion.This paper is taking advantage of this opportunity,starts from the contradiction between the demands for accounting information and the traditional accounting information supply in the context of the current economic environment and the current situation of domestic and foreign income reform,and makes a further study on the value relevance of comprehensive income by using the revised price model based on the experience of predecessors.The ultimate purpose of this study is to hope that through tests the value relevance of comprehensive income,to help investors more rational and effective use of accounting information,but also provide some empirical support and suggestions for improvement of our country's reform of comprehensive income.This paper selects the comprehensive income data by Shanghai A shares of Listed Companies from 2010 to 2015,verifies the value relevance of total comprehensive income and its components.Firstly,this paper makes a comparative study on the value relevance of comprehensive income and net profit from the point of view of relative relation,and references the method of introducing interaction terms used by other scholars to verify the effectiveness of the implementation of " Interpretation No.third" to verifies the effectiveness of the implementation of the revised financial statement presentation.Secondly,this paper makes an empirical analysis on whether other comprehensive income can provide incremental accounting information from the point of view of incremental connection.And this paper manually collected the other comprehensive income components data by Shanghai A shares of Listed Companies from 2010 to 2015,verified that whether the other comprehensive income components can provide incremental information.Compared with the previous research,the research content of this paper is more systematic,and this paper uses direct data from 6 years since the disclosure of comprehensive income related information,there is no data difference due to subjective factors such as conversion and substitution,the data are more direct and objective.The final results show:(1)The total comprehensive income has value relevance,and its value relevance has been improved after the revision of "Accounting Standards for Enterprises No.Thirtieth" in 2014;(2)There is a significant positive correlation between net profit and stock price,it consistent with the test results of scholars at home and abroad.By comparing with the total comprehensive income,we find that although the net profit has some defects as a traditional income index,it has an advantage in explaining the stock price still;(3)The other comprehensive income has a positive explanatory ability to stock price,which can provide incremental information,which has incremental value relevance;(4)Other comprehensive income split into its components has a stronger value relevance than other comprehensive income,and the correlation between each component and the stock price is not consistent.As far as the components selected in this paper is concerned,the unrealized losses and gains of fair value variable of financial asset is positively related to the stock price,it has a significant positive explanatory ability to the stock price.And the converted difference in foreign currency statements is negatively related to the stock price.