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عنوان فارسی مقاله:
گزارش موقعیت مکانی و سنجش ارتباط اطلاعات حسابداری: مورد دیگری از سود جامع
عنوان انگلیسی مقاله:
Reporting location and the value relevance of accounting information: The case of other comprehensive income
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مقدمه انگلیسی مقاله:
1. Introduction
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05 “Presentation of Comprehensive Income”. The objective of this Update is to “[…] improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income […]” (ASU 2011-05, p. 1). Under Statement of Financial Reporting Standard (SFAS) 130 “Reporting Comprehensive Income”, firms could choose to report the components of other comprehensive income (OCI) in the statement of equity or in a performance statement. ASU 2011-05 eliminated the option of reporting OCI only in the statement of equity in lieu of requiring OCI to be reported in a performance statement. A performance statement can take one of the following two formats: a single statement of comprehensive income with the components of OCI below the components of net income (singlestatement option); or a second separate statement of comprehensive income (two-statement format) that begins with total net income. Based on the initial 1996 FASB exposure draft regarding performance reporting for other comprehensive income (FASB, 1996), Yen, Hirst, and Hopkins (2007) conducted a content analysis of the comment letters which indicated that the overall tenor of comment letters was in opposition to the proposed change. This finding suggests that respondents (i.e., reporting firms, major public accounting firms and professional organizations) also believe that reporting location matters despite the fact that ASU 2011-05 (as implemented) does not change what items have to be included in OCI. This Update only affects firms' options for OCI reporting location. That is, the values of comprehensive income, net income, and OCI are not affected, and as a result there is no impact on items such as debt covenant compliance and management compensation. Nevertheless, current research provides convincing evidence that standard setters, investors, and managers believe that the reporting location of OCI influences its usefulness to investors (Black, 2014). Further, many comment letters indicated that respondents had a preference for the two-statement option over the one statement option due to the concern that reporting net income and OCI as two subtotals in a single statement of comprehensive income would “inappropriately deemphasize net income, causing confusion in the capital markets” (ASU 2011-05, BC8). Several respondents indicated a belief that the proposed change would impact investors' perceptions of their firm's operating results and risk level. On the other hand, a recent study conducted by the Certified Financial Analysts (CFA) Institute argues that OCI information is underutilized by investors and suggests that investors should increase their use of this information when making valuation decisions. As a result, the CFA proposes to enhance the presentation of OCI items by financial statement preparers and standard setters (Papa, Peters, Schacht, & Lu, 2015).3 Prior evidence suggests that management believes that the reporting location of OCI influences its usefulness. Lee, Petroni, and Shen (2006) provide archival evidence based on firms in the propertyliability insurance industry in which a relatively large percentage of firms chose to report OCI in a performance statement instead of the statement of shareholder's equity. They find that managers who manage earnings through sales of AFS securities and firms with low disclosure quality are more likely to report the components of OCI in the statement of shareholder's equity. The purpose of this study is two-fold. First, it aims to provide additional insight as to whether the financial statement reporting location of OCI matters to investors as evidenced by differences in the value relevance of OCI.4 Second, it examines whether mandatory performance reporting is more value relevant than the more frequently used equity statement reporting prior to ASU 2011-05. In addition to the comment letters that suggest there is a perceived importance of reporting location, Rees and Shane (2012) note that whether the reporting location of OCI is of actual importance to capital market participants remains an unanswered question due to mixed findings across experimental studies (Hirst & Hopkins, 1998; Maines & McDaniel, 2000) and archival studies (Chambers, Linsmeier, Shakespeare, & Sougiannis, 2007). Given the recent implementation of ASU 2011-05, this study is not only timely but speaks directly to the usefulness of the mandated reporting location change of OCI and thus should be of interest to standard setters. Research examining firm's OCI reporting choices suggests a perceived importance of OCI reporting location. Prior to the implementation of ASU 2011-05, a majority of firms chose to report OCI in the statement of equity (e.g., Bamber, Jiang, Petroni, & Wang, 2010; Chambers et al., 2007). In our sample, 65% of firms report OCI only in the statement of equity before the implementation of ASU 2011-05. Approximately 83% (85%) of firms that report OCI in a performance statement use the two-performance statement option in the pre-ASU (post-ASU) period. Consequently, the implementation of this update required numerous firms to change the reporting location of OCI from the previous location in the statement of equity. Consistent with comment letters, the finding that a majority of firms chose not to report OCI and net income in one statement suggests that firms are concerned about the possibility of investors confusing the two amounts.5 For the first setting, the pre-ASU period — when management was still able to choose the reporting location of OCI — we find mixed evidence that the value relevance of OCI differs across management's choice of OCI reporting location, with OCI being the most value relevant when reported in the statement of equity. This finding is contrary to the FASB's expectation and prior experimental evidence which suggests that performance reporting leads to more transparency and therefore higher value relevance. Our results are largely consistent with the findings presented by Chambers et al. (2007) who find that OCI is more value relevant when reported in the predominant reporting location during the sample period, (i.e., the statement of equity).6 For the second setting, the pre/post-ASU period, we find that the implementation of ASU 2011-05 led to a decrease in the value relevance of OCI for those firms which changed the reporting location of OCI from the statement of equity in the pre-ASU period to a performance statement in the post-ASU period. This result holds after we include a “control group” consisting of firms that did not change the OCI reporting location between the pre-ASU and post-ASU period. Overall, our results suggest that although reporting OCI components in a performance statement might be perceived as the more transparent and therefore preferable approach, a mandated change in reporting location to a performance statement had an adverse impact on the value relevance of OCI. Together with prior evidence, our findings indicate that the value relevance of OCI is higher when a firm's reporting location of OCI is consistent with its reporting history.
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کلمات کلیدی:
Focus on Finance and Accounting Research https://books.google.com/books?isbn=1600213804 Michael H. Neelan - 2007 - Business & Economics Meaning and Measure of Value Relevance of Accounting Information Earnings is considered to be useful if it causes a change in the receiver's probability ... Value Relevance of Accounting Information in Capital Markets https://books.google.com/books?isbn=1522519017 Ojo, Marianne, Van Akkeren, Jeanette - 2016 - Business & Economics Chapter Five, Value Relevance of Accounting Information in the Emerging Chinese Stock Market (Re Visited), accentuates on why value relevance of ... Theory of Conservatism and Value Relevance of Accounting Information https://www.omicsgroup.org/.../theory-of-conservatism-and-value-relevance-of-accou... Ali and Hwang [10] examined the value relevance of accounting information to five ..... which objective it is to provide information about the financial position and ... Value Relevance of Accounting Information in Capital Markets - Target www.target.com/p/value-relevance-of-accounting-information-in.../-/A-52027536 Find product information, ratings and reviews for Value Relevance of Accounting Information in Capital Markets (Hardcover) online on Target.com. Searches related to location and the value relevance of accounting information value relevance of accounting information definition value relevance of accounting information pdf value relevance theory value relevance definition sociology value relevance research value relevance of earnings value relevance weber value relevance wiki
