Does Other Comprehensive Income Accounting Information Have Decision Usefulness?

In the background of international convergence of accounting standards,in June of 2009,the PRC ministry of Finance released Interpretation of Enterprise Accounting Standard No.3,requiring that other comprehensive income and comprehensive income be added to the earning statement reporting,categorized in the annotation into re-classifiable and non-re-classifiable in to increase and decrease.And details of the composition of the other comprehensive income should be listed under each category.In January 2014,in the revised draft of "Enterprise Accounting Standard No.30—reporting of financial statement",the Ministry of Finance requires that the specific composition of other comprehensive income disclosed in the original accounting statements annotation should be listed in detail in the earning master table,so that importance of the other comprehensive income is not highlighted and its transparency increased.The other comprehensive income reflects the net value of current unconfirmed gains and losses according to the rules and regulations with income tax deducted.Reporting the other comprehensive income not only allows the financial report to follow the international trend but also provides the financial report with non-business accounting information which is closely interrelated with the price changes in assets market and the future currency flow.To report the earning related information in the financial report can help the investors with their appraisals.The other comprehensive income reporting notably improves the transparency of the report,reduces the cost of appraisement and enhances the availability of the accounting information for decision making.On this basis,this paper will study decision usefullness of the other comprehensive income accounting information,based on the perspective of relevance and comparability,in the background of the emerging capital market in an economy in transition.The clean earning theory holds that the components of a company's earnings are different in the aspect of stability,risk level,and predictability,and their availability to the decision making in economic activities also varies.As an important part of the company's earning composition,it reflects he economic activities and has special economic and accounting implications.This paper,using the economic and accounting earning as the entry point,elaborates on the implementation of other comprehensive income and the relations between the other comprehensive income and accounting information quality/economic decisions by the user.The emergence of the other comprehensive income is the outcome of the game playing between the accounting earning and economic earning,the product of the fair value accounting,and it gives expression to the transition from the view of revenue and expense to the balance concept.The other earnings' reporting improves the availability for decision making of the accounting information quality and financial reports.The reporting of other comprehensive income agrees with information comparability which is the main driving force of accounting standards reform in China and improve the decision usefulness of accounting imformation.Therefore,this paper also looks at the influence of the reporting of other comprehensive income on the accounting information comparability in the listed companies,conforming to the trend of convergence between domestic and international standards,providing practical support to the standard reform.Further study shows that there is a significant positive correlation between the other comprehensive income reporting and accounting information comparability,indicating that with a sufficient other comprehensive income report the comparability is more likely to improve.The other comprehensive income highlights the unrealized gains and losses in the company income statement,which used to be unseen in the balance sheet,so it makes the accounting information clearer,more comparable and timely,improving the quality of the accounting information and enriching the information of company performance.It helps the understanding and using of the accounting information and better guarantees the purpose of the report.On that basis this paper verifies the value relativity of other comprehensive earning and,furthermore,of the components of the other comprehensive income.There is a significant positive correlation between the other comprehensive income total and the stock price/earnings.There is also a significant positive correlation between the change of fair values for available-for sale financial assets,the change in owner's equity in the invested entities/gains and losses from cash flows hedging instruments and the stock price/income.The reporting of other comprehensive income allows the financial report to capture more details of the economic activity influence and provides the user with more relevant,comparable and useful information of the performance,so the analyzer can better estimate the future earnings and cash flow in the surplus forecast,with a more accurate and reasonable result.Therefore,this paper also investigates in the other comprehensive income reporting's influence on the analyzer's estimation.The results show that there is a significant positive correlation between the reporting and accuracy of the analysis forecast and a significant negative correlation between the reporting and forecast dispersion,thus the forecast accuracy is improved.The reporting of the other comprehensive income provides the analyst with additional information that positively affects the forecast validity.The innovation and possible contribution of this paper lie in:(1)In it for the first time the influence of the other comprehensive income reporting on comparability is discussed and tested.The other comprehensive income reporting indeed can improve the possibility and the accounting information credibility of the listed company.The research field of the other comprehensive earning is also expanded,and our understanding of the other comprehensive income and accounting information quality.The paper provides policy suggestion to listed companies for them to better the quality of accounting information,so it has both theoretical and practical implications.(2)From the analyst's angle,the availability of other comprehensive income for the decision making is also tested.Based on the emerging capital market,the relation between the accounting information and analyzers' forecast is deepened,the research horizon of the other comprehensive income is broadened,and the research on accounting information's influence on the forecasts is enriched.