The Value Relevance Research Of Comprehensive Income Based On Chinese A-listed Company

In the new economic age,with the development of economy and diversificationof enterprises’business,many gais and losses generate in enterprises’activities.As thetraditional accounting income overemphasizes historical cost,prudence,realizing andmatching principle,it has limitations in confirming and measuring these gains andlosses,and can’t reflect enterprises’truth income timely and correctly.Comprehensiveincome is the reform and development of the traditional income.It both includesincome arising from the core business and the gains and losses arising from theperipheral business.As the European and American countries successively put forwardrelated accounting standards of comprehensive income,our country implemented theinterpretation No.3of CAS in June2009,which requires enterprises to presentcomprehensive income and other comprehensive income in the income statement.As a new income index,is comprehensive income more value relevance than netincome?Which form of comprehensive income has its highest valuerelevance?Whether the interpretation No.3of CAS has improved the value relevanceof comprehensive income or not? Based on the annual financial report data fromShanghai and Shenzhen A-share stock markets from year2007to2012before andafter the implementation of Interpretation No.3of CAS,this paper compare therelative value relevance among net income and3types of comprehensiveincome(such as aggregated comprehensive income、net income+aggregated othercomprehensive income and net income+disaggregated other comprehensiveincome).This paper also investigate the incremental value relevance of othercomprehensive income and its components.We both uses price model,return modeland cash flow model to get reliable empirical evidence.In the comparision of therelative value relevance,we don’t just simply compare the model’s goodness offit(R2),but use Vuong Z test to get more reliable evidence.In addition,we use twomethods to test the effect of the implementation of Interpretation No.3of CAS. Ourconclusions are as follows:Aggregated comprehensive income has lowest value relevance,but disaggregatedcomprehensive income is more value relevance than aggregated comprehensiveincome and net income,especially in the form of net income+disaggregated othercomprehensive income. Other comprehensive income and its components haveincremental value relevance. The implementation of Interpretation No.3of CAS hasnot obviously improved the relative and the incremental value relevance.There mayexist two reasons:(1)Comprehensive income and its components had been disclosuredin the statement of changes in equity before;(2)The componts of other comprehensiveincome are required to be disclosured as a footnote,which lower their transparencyand importance. Other comprehensive income and its components have incrementalvalue relevance and should be displayed in the performance income as part ofearnings,just as the No.30of CAS do,which had been modified in Jan2014.