Research On The Impact Of OCI Presentaion On Accounting Information Quality In Listed Companies In China

In the context of continuing convergence with the International FinancialReporting Standards, the Ministry of Finance (MOF) of the People’s Republic of Chinaissued <No.3Interpretation of Accounting Standards for Business Enterprises>(CaiKuai [2009] No.8), formally introduced the concept of “Other ComprehensiveIncome”(OCI), and required that the listed company of China present the OCI in theStatement of Profit and Statement of Changes in Owners’ Equity since2009, that isdifferent with the current approaches of Internation Accounting Standards Board(IASB)and Financial Accounting Standards Board(FASB), and the unique presentation modelreveals the high attention on the OCI item from MOF. But because of the rather generalconcept of OCI and the unclear understand by related people that lead the confusion andmisapplication on the OCI, the profit and loss which is directly counted into owner’sequity, equity transaction and capital reserve. On the basis of the factual state, this papertakes an in-depth analysis on the connotation and characteristics of OCI by clarifyingthe similarities and differences between confusing concepts related to OCI. That is thebase of theoretical construction of this paper. Specifically, this paper analyses theconnotation, characteristics and specific items of OCI, reviews related literature, anddefines the quality of accounting information and its current research situation, followsthe development of related standards, in turn to sort, review and research the traditionalaccounting earnings, the unrealized gains and losses, comprehensive income, OCI andthe researching literatures of effect on the quality of accounting information, and thus tosummary theoretical gaps of research related to OCI. In recent years, at the internationallevel, the presentation of OCI has been the focus of related parties. The presentationmode、reclassification adjustment and classification presentation requirements havebeen the subject of debate by national and regional standard-making institutions.Combing with the system background of our country, this paper tries to trace and sortthe evolution of the related standards of Accounting Standards Board(ASB), FASB,IASB and some other western representative institutions, then to seek a beneficialenlightenment for the further development and improvement of presentation standards.So above is the theoretical framework of this paper.Three years have past since the implementation of the “Interpretation No.3”, and what is the effect of the presentation of OCI items in domestic capital market? Does ithave any help to improve information disclosure and information asymmetry problemsin domestic? Would the OCI items reflecting in the income statement and statement ofchanges in owner’s equity at the same time contribute to improving the quality ofaccounting information? The empirical part of this paper tries to make a research onthose questions through our country’s data of the listed company of a-share between2009-2011years. Specifically, this paper bases on the existing research pattern, choosesthe three dimensionalities of the value-relevance、earnings management and timely lossrecognition to take a comprehensive investigation on the effect to accountinginformation quality of OCI presentation. This is the innovation of this paper. Firstly,with the descriptive statistics, this paper shows that the implementation effect of OCIpresentation standards is satisfactory, but the total amounts take on degressive tendenceyear by year, and the effect to traditional net income and comprehensive incomeincreases gradually. Secondly, this paper carries OLS regression analysis, the resultsshow that OCI items have the character of incremental value-relevance, namely, thepresentation of OCI items makes it possible to improve the explanatory power of thewhole surplus and book net assets, while the explanatory power of the stock market fornet income weakened; Compared with net income, comprehensive income does nothave the character; The presentation of OCI can inhibit the earnings managementbehavior, and the relationship of diaphaneity of presentation of OCI and earningsmanagement is in inverse correlation; There is no evidence that the presentation of OCIcan increase the frequency of reports on large loss. Overall, to a certain extent thepresentation of OCI enhances a company’s accounting information quality.