Research On Decision Usefulness Of Comprehensive Income

The disclosure of comprehensive income has a history of several decades in foreign countries,China formally issued the standard just in 2009,requiring enterprises to add the amount of other comprehensive income in the current period under the item of earnings per share.Although the domestic academic community has carried out a lot of research on whether the comprehensive income is useful for decision-making,it has not yet reached a consensus.To this end,this paper uses a combination of theoretical and empirical research methods,based on two perspectives of market value and book value,namely the market share price and short-term book cash flow as explanatory variables to verify the usefulness of comprehensive income decision-making.The main work results and conclusions are as follows:(1)Taking stock price as the explanatory variable to establish a market stock price regression model to test whether comprehensive income and its various components are useful for market stock price decisions.The results show that there is a significant correlation between the comprehensive income and net profit and the market stock price,which proves that both have the usefulness of market stock price decision,but the comprehensive income explains the stock price volatility slightly less than the net profit.(2)Using book cash flow as the explanatory variable,the selected effective samples are used as the research object to establish the book cash flow prediction model,and an empirical test was carried out on the forecasting ability of book cash flow of comprehensive income.The result is similar to the price model.The correlation between net profit and book cash flow is higher than comprehensive income;the correlation between other comprehensive income and book cash flow is not significant,however,when the comprehensive income is divided into net profit and other comprehensive income,it will show a stronger forecasting effect on the book cash flow than the comprehensive income.(3)Analyze and sort out the possible reasons why comprehensive income fails to show higher decision-making usefulness than net profit and other comprehensive income is not useful in decision-making,and put forward practical suggestions.The research in this paper further clarifies the overall thinking of the usefulness of comprehensive income decision-making,and provides empirical support for establishing a conceptual framework of comprehensive income as soon as possible,promoting the application of comprehensive income in practice,and making full use of comprehensive income to maximize its effectiveness.Listed companies and investors should fully understand the usefulness of comprehensive income decision-making,and earnestly grasp the positive effects of comprehensive income accounting standards reform.