An Empirical Research On The Value-relevance Of Comprehensive Income

With the deepening of capital market and creativity of financial instruments, the traditional income based on historical cost,realization principle and conservatism principle gradually is exposed its limitations. It emphasizes the current operating results of the enterprises, in that it only reports the interests the enterprises already achieved currently, while the unachieved interests are left out, which severely delayed the actual happening of economical events, thus undermine the value of the information. Because the traditional income doesn't fit to the accounting goal:"decision-usefulness views". Anymore, it can't satisfy the needs of the information users. The reform of the reporting style is highly demanded.In other countries, many researchers did a lot of studies on comprehensive income and most of these countries already formed relatively mature comprehensive income reporting format. China's Ministry of Finance published a new" Accounting Standards "in 2006, which embodies the concept of comprehensive income views. In June,2009, China's Ministry of Finance mentioned in published "Interpretation of Accounting Standards No.3" listed companies must report "total comprehensive income" from 2009 in their annual interests report. This act made the research of disclosure of comprehensive income become more timely and necessary. Looking at the research on comprehensive income in our country, it is not difficult to discover that our researchers put more emphasis on the research of the concept, theory and the appropriate reporting methods of comprehensive income. However, not much work has been done on the value relativity, prediction, and timeliness of comprehensive.In this paper, I use three years after the promulgation of new guidelines for the annual report data for the study samples, and use empirical research methods to do the research on the value-relevance of comprehensive income. I hope that my research can provide some empirical evidence of the research on comprehensive income. And for the implementation of comprehensive income report, put forward some reasonable proposals.This paper is divided into five parts. The first part describes the research background and significance, as the later chapters of the study set point. The this part describes the ideas and framework in five aspects. And the it make the introduction of the main approach to the study and innovation.The second part summarized and discussed the report of comprehensive income and the value-relevance of comprehensive in two aspects of literature. and made comments on literature review.The third part describes the meaning of comprehensive income, characteristics, content and theory related concepts in detail. This part analyzes the content of comprehensive income and proposes to four theoretical basis of comprehensive income. These theories provide a solid theoretical basis for the fourth part of the theory of empirical research and implementation of comprehensive income in our country.In the forth part, I selected all the A-shared companies in China's stock for three years and annual data for the study samples. and proposed three hypotheses. I use price model and Feltham-Ohlson model and do the empirical analysis through descriptive statistics and regression test. I make comparative analysis of direct and indirect disclosure of comprehensive income value relevance of the information disclosed, and I study the specific content of comprehensive income associated with stock price level.In the fifth part, considering that China's capital market is not perfect enough, and the fair value measurement is not widely used I put forward four suggestions to hope these suggestions can play the role of better ideas for implementing the comprehensive income report in our country widely.After the comprehensive comparative analysis, we draw the following conclusions firstly, mount comparing discoursing "comprehensive income" a directly in the income statement to discoursing it in the statement of changes in equity indirectly, the former showed more significant positive correlation with enterprise value. It illustrates the effectiveness of our policy, and information users have already accepted the comprehensive income information. Secondly, in the individual items of comprehensive income, there are only fair value gains and losses, asset impairment loss are positively correlated with the stock price. Other items such as:equity and included in project-related income tax impact of foreign currency translation differences, such as foreign exchange gains and losses are positively correlated with the stock price. But not only on the empirical evidence, we should not exclude the weak items from the content, and we should consider our financial environment and the system to measure the value of importance. Hypothesis two's empirical evidence indicts that the provisions of other comprehensive income of the No.16 documents issued by China's ministry of finance in 2009 are limitations, insufficient, incomplete; we should expand the content contained in other comprehensive income. Thirdly not all of the unrealized gains associated with the enterprise value, only some of the unrealized gain can increase the usefulness of accounting information. They also demonstrated impairment losses, fair value gains or losses in the core of comprehensive income.Main contribution of this paper:Firstly, the research point is an innovation. In 2006, the Ministry of Finance issued new accounting standards reflects the idea of comprehensive income. In June 2009 the Ministry of Finance issued the "Enterprise Accounting Standards No.3" in the formal introduction of the concept of comprehensive income. In the same year, the Ministry of Finance document 16 to be disclosed in detail in the notes of other comprehensive income provides a uniform format. The implementation of these guidelines is a starting point for this study. On the above, I make a more profound analysis, and using empirical research methods, data, the model to demonstrate the introduction of policies so that users of financial information to the gradual acceptance of comprehensive income information. So, the premise of the text has some innovative research, research policy perspective followed by the release of research results has certain timeliness.Secondly, I use three-year data for the study sample to study the Comprehensive income information on the value dynamically. Meanwhile, scholars have not yet implemented the new accounting standards for three consecutive years of earnings data in annual reports an empirical study. Research over the past year, the data only for static analysis, and year of data often can not see the impact of the macroeconomic environment; enterprises can not be investigated and realized gains to adjust the amount of unrealized gains. Therefore, in this paperⅠexpand the scope of the study period, and use the empirical research methods to study the information content of comprehensive income, I hope that it has some innovative and comprehensive income for Empirical Research in China to add some empirical evidence.Thirdly, the research model is an innovation. This study not only research on the value of comprehensive income, but also a detailed breakdown of the comprehensive income, a separate project on the value of each individual test of relevance. Looking at the domestic normative comprehensive income research, its findings may carry some of the subjective; the data demonstrate a lack of empirical research is lack of innovation. Although occasionally you can see a few of empirical studies in some high level of academic journals in the country, basically they are still in the early studies of the level of the international academic community, they have not combined the comprehensive income of the individual studies to the overall analysis yet, so the research model and variables of this article has some innovative settings.