Research On Presentation And Disclosure Of Other Comprehensive Income

With the rapid development of technology and financial innovation since 1990s, business activities are becoming more and more complex. As an economic system that provides financial information, accounting is constantly faced with new problems and challenges that traditional financial statements can no longer adequately reflect the true value of the enterprises and reveal the potential business risks. They were strongly criticized by scholars and users for declining in value relevance. Scholars and users ask for thorough reform to improve the traditional financial reporting system. Standard-setting institutions in different countries set to reform the traditional income statement to provide decision-making useful information to users of financial statements, resulting in the generation of the concept of "comprehensive income" and "statement of comprehensive income."In September 2007, International Accounting Standards Board (IASB) issued an amendment to the international accounting standards No.1-Presentation of financial statements (IAS1). In this amendment, the board formally introduced the concept of "comprehensive income" and give companies the options to present "comprehensive income" in one form or in two forms. To achieve convergence with the International Financial Reporting Standards (IFRS), while at the same time to meet the needs of economic development, the Ministry of Finance issued the "Enterprise Accounting Standards Interpretation No.3" (referred to as "Interpretation No.3") in 2009, requiring companies to list "other comprehensive income" and "total comprehensive income" below the item of "earnings per share" in the income statement and to disclose the items of other comprehensive income in detail categories in the footnotes of financial statements. To further improve the presentation of other comprehensive income, IASB issued amendments to IAS1-presentation of items of other comprehensive income In June 2011, which requires companies to present comprehensive income in two categories "can not be reclassified subsequently to profit or loss" and "can be reclassified subsequently to profit or loss when specific conditions are met". In 2014, China issued "Accounting Standards No.30-Presentation of Financial Statements" (CAS30), demanding the enterprises present other comprehensive income by categories, thus achieving sustained convergence with IFRS.With the increasing practices of other comprehensive income disclosure, more and more scholars began to get involved in the research of disclosure of comprehensive income and have made some achievements. This paper first analyzes the theoretical basis of other comprehensive income, and then through comparative study on the literature, this paper analyzes the contents of other comprehensive income in Financial Reporting Standards(FRS), Generally Accepted Accounting Principles(GAAP), the international financial reporting standards(IFRS), and China’s accounting standards(CAS). This paper also attempts to make a statistical analysis of financial reports of listed companies in Shanghai Stock Exchange in 2014 to discover the problems in the presentation of other comprehensive income. In the end, the paper proposes some policy recommendations to promote the development of comprehensive income theory as well as to improve the quality of information of other comprehensive income.