Comprehensive Income And Its Decision Relevance Research

AS international economic booming and interconnecting, we accelate the international accounting standard harmonization, through 2006 published accounting standard in China. We asked for useful and relevant information for all users based asset/liability view, fair value measurement and extention to comprehensive income through Statement of Changes in Equity.To disclose comprehensive income is the need for international accounting standard harmonization. However, we are not sure about how to recognize, measure and disclose the contents, even if each countries has their own way to dislose. This dissertation uses the deduction/ induction methods, makes comparations to comprehensive contents and disclosure in each western country which is domesticated, and uses empirical study methods, such as Wilcoxon Methods, Stock price prediction models and Principal Components Factor Analysis, to research the comprehensive income and its relevance.This dissertation has four parts. The first part is Chapter 2, which summaries and discusses the home and abroad literatures. Foreign researchers focus on the unrealized income, disclosure of comprehensive income and its cotents'decisions relevances based on SFAs. No.130. They like to use stock return model or stock price model to research comprehensive income, based on domestic capital datas, especially the unrealized income. The results show that traditional "net income" index contents more information for decision making than "comprehensive income". Domestic researchers study later than foreigners, limite to stock return model or stock price model and focus on qualitative analysis.The second part is chapter 3, which overviews of comprehensive income relative theories and relativity. First two sections anylse the contents and discloure of comprehsive income through make differences among American, English, and international accounting standards through extended income statement, integrated income statement and statement of changes in equity, to establish theory basis for chapter 5 which design the comprehensive income statement. The third section discusses the choice between reliability and relativity for accounting information qualtity and analyses the three components of relevance, predictivity value, confirmatory value and timeliness, which are designed to empirical study in next chapter.The third part is the major part with chapter 4, which designs three empirical studies with financial reports interim to research timeness, events study and stock price model to discuss the predictivity vaule. I propose five hypotheses to research comprehensive income's decision relevance. I choose price and financial reports information in listed company in Shanghai Stock Exchange, first to use fractal market hypothesis to calculate the Hurst Exponent with Rescaled Range Analysis, V Statistic, Detrended Fluctuation Average and Detrended Fluctuation Average to seek for long-term memory in Shanghai Stock Exchange and find three months memory interval wich is similar with quarter financial report in listed companies's interval, therefore, I consider the report interval affects the stock price in capital market and performance index analysis, meantime, the three months interval establishs the basis for next two researches in average stock price calculation. Secondly, I use event study to find the Cumulative Abnormal Returns during the financial reports time window which is statistical significant in 2008, when happed to financial crisis. However, I find income indexs, especially the unrealized income, do not cause the Cumulative Abnormal Returns in 2008, although it affects the significance of tranditional income index "Earnings per Share". Last, I use cross sectional data to analyse the stock price and accounting information in financial reports in listed companies with total amount and individual income two aspects, find unrealized income information from the statement of changes in equity and income statement have different effection to average stock price fluctuation, especially the "impairment" and "fair value changes". All the findings in this chapter provide the base data for chapter 5 and show the necessity of reforming the income statement to comprehensive income statement.The last part contains chapter 5, which reconstructs the income contents and designs the comprehensive income in China. Firstly, I analysis the necessarities and limitations for disclosing comprehensive income, where more and more users need more integrate informations, the patern of income statement need to be reformed, measurement attributes need to be standared and earning management need to be controlled, meanwhile, the standard making games between theory circle and pratical circle. No matter how difficult to reform the income statement, we have had basis and conditions. Secondly, I recognize the basic income elements. I enlager the "income" and "expense" with unrealized profits and losses and design inner logistical connections among assets, incomes and cash articulation through block diagram. At last, I cite "core earnings" from operational assets and investmental assets, then, reconstruct the net earnings and reorganize the disclosure of unrealized incomes to design comprenhensive income statements which contain realized income and unrealized income at stages whitin one table when disclosed.This dissertation has three creative points. First, I use report time interval to research the accounting information's timeness, which is especially reflected by performance index, and find three months cycle to show the importantce to disclose the comprehensive income information in quarter financial reports and the necessity to reform the income statement. Secondly, I use contiguous two years accounting information to do empirical reaserch, and overcome lacking reliability and referral with only one year data. Meantime, I describe the unrealized income individuals and their decision relevance in details. At last, I research for the extense income elements definition, citing core earning concept, reconstructiong the income, designing the inner logistical financial reporting block diagram and an ideal consolidation comprehensive statement.However, this dissertation exits two limitations. One is the sample size is not enough, and no analysis for datas in 2009 because of the time limited. Another is maybe I didn't considerate all unrealized income items because of the diversification operations forms and discuss the indexs for analyzing the comprehensive income statement, which will be my future research aspects.In all, this dissertation wishs to provide reference vaule to accounting standard innovation in China and harmonization from researching comprehensive income and its decision relevance, and offers more research thread.