Research On The System Reform Of Other Comprehensive Income Presentation And Its Implementation Effect

Performance indicator is the basis for enterprise valuation,and the classification of accounting income and its disclosure not only affect the decision to be made by the internal and external financial report users of an enterprise,but also affect the resource allocation and capital flow of the entire society.In international economic environment and the context of financial innovation,business activities are becoming more and more complex,and non-traditional new sources of income generates constantly and thus,�other comprehensive income�(OCI)become an important part of corporate income.Due to the significant changes in the accounting recognition and measurement methods defined in the Statements of Financial Accounting Concepts No.8(SFAC No.8)issued by Financial Accounting Standards Board(FASB)and the 2010 Conceptual Framework for Financial Reporting issued by International Accounting Standards Board(IASB),as well as the formulation and implementation of the Accounting Standards for Enterprises No.30-Presentation of Financial Statements(hereinafter referred to as �CAS 30(2014)�)in our country in 2014,major change occurs to the contents and structure of the income statement prepared by adopting Financial Position Approach,and new theoretical and practical requirements are put forward for the definition of OCI concept and its presentation system.In this paper,according to the said actual environment change,the theoretical basis for and system reform of OCI presentation is specified,the historical reform of OCI presentation system,the contents of OCI presentation and the actual change in OCI presentation method are analyzed,research is further made on the impact mechanism and path of the reform and implementation effect of OCI representation system,and empirical verification is made from three perspectives,i.e.the quality of accounting information,the cost of equity capital and investment efficiency.The research made in this paper will assist relevant internal and external stakeholders of an enterprise to understand the relevant theories of OCI in a better way,promote the implementation of and supervision on OCI presentation system,provide experience and support for optimizing the investment decision,fund allocation and performance evaluation to be made by financial report and information users,be conducive to the global convergence of our country's accounting standards,and promote the development of China's economic globalization.In the actual context of reform and constantly global convergence of OCI presentation system,some core issues need to be clarified: Firstly,what is the system context for the convergence of OCI presentation system and International Financial Reporting Standards(IFRS);Secondly,how is the implementation effect of CAS 30(2014)on the adjustment to OCI presentation,does it improve the quality of corporate accounting information,and does it affect the behaviors of investors,managers and other stakeholders;Thirdly,have the expected targets been achieved by the OCI presentation system reform made in our country,have it reduced the difference with IFRS,and whether and in what areas further improvements are required.Based on the above actual context and theoretical requirements,this paper focuses on the following three aspects:Firstly,the development condition and periodic results of OCI presentation system both at home and abroad are specified,its development motivation and trend are explored,and useful inspiration is obtained,starting from the theoretical basis for and literature overview of OCI presentation research.On this basis,the overall trend of our country's OCI presentation changes,the current status of sub-item presentation and disclosure,as well as the problems exiting during OCI presentation course are analyzed,and the impact mechanism and path of the implementation effect of OCI representation is specified.Secondly,based on OCI presentation system reform and by applying the theory of Economic Consequences,the effect of the OCI presentation system reform made in our country is researched,the influence of OCI presentation system reform on the quality of corporate accounting information,the cost of equity capital and investment efficiency is verified empirically,and it is verified further and empirically,by virtue of �reform of the presentation criteria for financial statement-OCI classification-based presentation-improvement of the quality of accounting information-reducing the cost of equity capital " and " reform of the presentation criteria for financial statement-OCI classification-based presentation-improvement of the quality of accounting information-improvement of corporate investment efficiency�,that whether the positive influence of OCI presentation system reform on the quality of corporate accounting information will indirectly reduce the cost of equity capital and increase investment efficiency.Thirdly,the expected effect and the actual effect of the OCI presentation system reform made in our country are compared in respect of their difference based on the above analysis and empirical verification results,i.e.the difference between our country's OCI presentation system and IFRS,and the difference between the expected effect and the actual implementation effect of OCI presentation system reform.The effect of OCI presentation system in our country is summarized,the existing problems are analyzed,and relevant policy suggestions are provided to standards formulation organizations,enterprises and stakeholders,through the above analysis.The main conclusions made in this paper are follows:Firstly,from the perspective of development history,the reform of OCI information disclosure system is consistent with the income cost theory in economics,and its practical application depends on the changes in actual macro and micro environment as well as the needs of different stakeholders,although it can reflect the essence of enterprise's economic activities in a better way.Specifically,our country's accounting standards depend on IFRS reform process,and the requirements for disclosure of OCI develop from non-reporting to off-balance sheet disclosure and then to classification-based presentation in balance sheet.The continuous development and improvement of OCI presentation indicate the increasing importance of its position in today's financial reporting systems both at home and abroad.Secondly,OCI representation system reform improves the quality of accounting information.And,its effect shows obvious difference in state-owned enterprises and non-state-owned enterprises,mainly showing that the implementation of OCI presentation system makes the improvement degree of the accounting information quality of state-owned enterprises more than that of non-state-owned enterprises.In this paper,it is considered that non-state-owned enterprises need the accounting information with better quality for its daily management due to the different incentive mechanisms of our country?s state-owned enterprises and non-state-owned enterprises.In addition,if an enterprise's governance environment is poor,or if its equity concentration is high,the reform of OCI presentation system will have greater influence on the quality of accounting information.Thirdly,the reform of OCI presentation system reduces enterprise?s cost of equity capital,and such effect has no obvious difference in state-owned enterprises and non-state-owned enterprises;The transfer of other comprehensive income into the current net profit affects the cost of equity capital of the enterprise and will be significantly negatively correlated with the cost of capital of the enterprise;the reform of OCI presentation system improves the accounting information quality of enterprises,no matter state-owned enterprises or non-state-owned enterprises,and further reduces enterprise's cost of equity capital.Fourthly,OCI presentation system reform improves enterprise's investment efficiency,and such effect has no obvious difference in state-owned enterprises and non-state-owned enterprises;OCI presentation system reform improves the accounting information quality of enterprises,no matter state-owned enterprises or non-state-owned enterprises,and reduces agent costs and information inconsistency,and further improves corporate investment efficiency;if the degree of the limitation on an enterprise?s financing is high,the influence of OCI presentation system reform on investment efficiency will be enhanced further.The possible innovations in this paper are as follows:Firstly,it is attempted to make a pioneering and empirical research on our country's current OCI presentation status,and show the systematic nature of the research.In this paper,research is respectively made on the general trend and fluctuation of the OCI presentation and disclosure in the continuous operation course of enterprise during short term and during the long term of 9 years from the date when our country's listed companies represented OCI in 2009 for the first time as of 2017.In this paper,the sub-item data of OCI presentation or disclosure is specified by checking the annual reports of listed companies manually,and the current presentation status of OCI sub-item contents is described from the perspectives of the quantity,fluctuation and re-classification of information disclosure,which is rarely seen in the same kind of previous researches.Secondly,research is made on the implementation effect of OCI system reform by adopting new dimension.Existing literature mainly focuses on that whether OCI presentation improves the correlation with stock price or return rate,and analyzes the influence of the transparency of OCI presentation on surplus management,based on value correlation and earnings management,but ignores the possible influence of presentation changes on managers and other relevant stakeholders.In this paper,research is made on the possible influence of OCI presentation system reform on the behaviors of investors and internal mangers from two perspectives,i.e.the cost of equity capital and investment efficiency,the internal and external governance effect brought by OCI information are explored,and the relevant literature about the implementation effect of OCI presentation system reform is expended horizontally,which enriches relevant empirical research and is conducive to deepening the understanding of OCI.Thirdly,the implementation effect of OCI presentation system reform is tested and verified by using new data.The current literature related to OCI research is primarily based on developed capital markets,such as USA,UK and EU,and lacks the empirical evidences from emerging capital markets.As an emerging market country,the development condition of China's system context,economic environment and capital market are quite different from that of the countries in Europe and America,and China's specific contents of OCI are also different.In this paper,the implementation effect of OCI presentation system reform is analyzed,based on China's data,by taking the implementation of CAS 30(2014)as a natural event,by using Double Difference Propensity Score Matching Method(PSM-DID).According to the result,the classification-based presentation of OCI improves the quality of accounting information,and has significant influence on the cost of equity capital and investment efficiency.The implementation effect of CAS 30(2014)is verified,and the empirical evidences from emerging asset market countries are provided for the formulation of IFRS.