Research On The Relationship Between The Presentation Of Other Comprehensive Income And Earning Quality

Interpretation No.3of the Accounting Standards for Business issued by ministry offinance on June23,2009, think "other comprehensive income" is that cannot be included inthe profit or loss of profits or lossesˋaccording to the requirements of the relevantaccounting standards, and interpretation no.3requires the enterprise must add othercomprehensive income project. Interpretation No.3is another measure that make ourcountry accounting standards tend to the international accounting standards, it achieves thechange of our financial report form the traditional income to the comprehensive income,and regulate the disclosure of the listed companies’ accounting information, and it hasimportant implications for curbing earnings manipulation in listed companies, protectingthe interests of the investors, promote the healthy development of securities market in ourcountry.At present, the other comprehensive income has been presented for many years, thenwhat relationship is between the other comprehensive and earnings quality and what impactdoes the presentation of other comprehensive income have on earnings quality. With thesequestions, this paper collects financial data which was disclosed by listed companies inShanghai A-share form2010to2012as a study sample, compare the reliability andrelevance among the three years’ earnings quality, to test and analysis if the presentation ofother comprehensive can reduce the steerable accrued profits by modified Jones model,then improve the reliability of earnings quality and enhance the transparency of theaccounting information. And test and analysis if the presentation of other comprehensiveincome can promote the correlation of the earnings quality by price model, then providedecision-making guidance for investors, regulate behavior of surplus management withinthe enterprises and provide suggestions for our accounting standards assigning organization.After a series of test analysis, we got the following conclusion: the presentation of othercomprehensive income has positive and beneficial impact on listed companies’ earningsquality, it makes the companies’ earnings management behavior is restricted, then reducesthe degree of companies’ earnings management, and improve the authenticity of surplusinformation and the reliability of the earnings quality; the presentation of other comprehensive income enhance value relevance of earnings quality. So, since thepresentation of other comprehensive income, the positive impact on earnings quality needsfurther follow-up study, because of the lack of data and model in this paper.Although this paper passed the test of hypothesis, because of the provisions of othercomprehensive income in Interpretation No.3is too simple and the less detaileddescription, it’s hard for enterprises to use it; insufficient recognition of the presentation ofother comprehensive income in enterprises result in many problems in the process ofpresentation; because of the investors’ acceptability of the surplus indicator like othercomprehensive income, the other comprehensive income is difficult to play its proper role.So we can improve the other comprehensive income’s positive impact on earnings qualityfrom the following four aspects. First of all, clear the standard of other comprehensiveincome; secondly, drawing lessons from foreign evaluation system of earnings qualityindicator to building index evaluation system of our country’s capital markets; again,present project level2following the other comprehensive income in the income statementand obtain its source in detail; finally, strengthening propaganda, training, guiding of theother comprehensive income.