The Usefulness Of Other Comprehensive Income

The reform about income statement makes the decision usefulness of comprehensive income(CI)and other comprehensive income(OCI)become a problem concern to the users of financial statements.The definitions of CI and OCI are one that is generally consistent with asset and liability view,however they enlarge the reporting scope of traditional income statement.With the expanding role of fair-value measures,accounting income increasingly reflects a blend of different categories such as unrealized gain or loss and accrual income.One of the major arguments against requiring firms to report CI is that OCI is more volatile than net income and would increase investors' assessments of firm risk.Discussions about the investor or contracting usefulness of CI,OCI and OCI components can provide evidence on the reform of income statement to standard setters,and are likely to be useful to the decision of investors and creditors.Managers are the accounting information supplier,their entrenchment behavior is considered to be one of the highest cost of agency problem.In the meanwhile,the enterprises facing different impact from the market and the government,hence accounting quality provided by managers will be different,and thereby will affect the usefulness of accounting information of enterprises.The research takes the listed companies as samples,focusing on the following three questions:1.Is OCI beyond net income incremental useful?2,How management entrenchment influence the usefulness of OCI information?3.How does the institutional environment affect the usefulness of OCI information?On the above issues,based on the rational decision-making theory,the efficient market theory and the decision useful theory,the research set to discuss three attributes of investor usefulness:value relevance?risk relevance and analysts earning forecast relevance,and also discuss research examining compensation and debt contracting usefulness.The paper used inductive logic analysis to analyze the above questions,and the research results show that OCI is incremental decision-useful and contracting-useful.Second,the paper analyzes the impact of management entrenchment on the usefulness of OCI information of listed companies.Based on "economic man hypothesis",incomplete contracting theory,residual rights of control theory and upper echelons theory,the paper uses inductive logic to analyze the adjusting effect of the management entrenchment to the usefulness of OCI information.Then the research construct the index system of management entrenchment and uses principal component analysis to comprehensive evaluation.On this basis,the research results show that there are regulating effect of management entrenchment on the decision usefulness and contracting usefulness of OCI information.At last,the regulating effect of the institutional environment is studied.According to the "consequences hypothesis" and the "alternative mechanism hypothesis" about institutional environment,the paper analyzes the regulating effect of the regional institutional environment on the usefulness of OCI information.Using the data from listed companies,the paper makes an empirical analysis.Results show that the difference of regional institutional environment has regulating effect on the decision usefulness and contracting usefulness of OCI information.Finally,according to the empirical analysis conclusion,the paper puts forward suggestions for standard setters,accounting information users and listed companies.Those provide references to promote the reform of performance report and the development of comprehensive income report,and to improve the usefulness of OCI information of enterprises.Decision usefulness of CI and OCI information is the goal of the reform of income statement,also an important problem to improve the quality of enterprise surplus information.In a word,the paper takes listed companies as the research object,using the opening data,is the development of the existing research.Research on risk-relevance?analyst earning forecast?compensation and debt contracting usefulness of OCI information enrich studies about value relevance of OCI.Theoretical analysis and empirical research on the regulating effect of management entrenchment and the institutional environment on usefulness of OCI information enrich the theory of macroscopic policy influence to the microscopic behavior,and also provide the experiential basis for the effectiveness on reform of performance report.