The Comprehensive Income Issue in Europe

46 Pages Posted: 10 Dec 2008 Last revised: 31 Aug 2009

See all articles by Igor Goncharov

Igor Goncharov

Lancaster University - Department of Accounting and Finance

Allan Hodgson

University of Queensland - Faculty of Business, Economics and Law; Financial Research Network (FIRN)

Date Written: December 8, 2008


The recent financial crisis and the lobbying of European politicians and banks have led to a vigorous debate about ‘fair value’ gains and losses and highlights plans by current standard setters. The IASB Discussion Paper (2008), Preliminary Views on Financial Statement Presentation promises to extend the ‘fair value’ concept into an aggregated comprehensive income statement. We augment the debate by providing empirical findings on information, measurement, prediction and conservatism issues. Aggregated comprehensive income is found to be inferior to GAAP net income as a general valuation and prediction metric, and switches the conservative attributes of income towards a more timely recognition of good news over bad news. Results are robust to country specific regressions, controls for non-linearities, the impact of reporting incentives, and the underlying accounting framework (local GAAP, US GAAP, IFRS). Disaggregated components are incrementally more value relevant for analysts. For regulators the choice about income measurement boils down to a dilemma whether to ignore the volatile and complex price signals of unrealised gains and losses, to service the narrower demands from the analyst community, or to reduce the conservative role that accounting plays in agency contracting. Our research supports a disaggregated approach without mixing the function and nature attributes of income.

Keywords: comprehensive income, value relevance, IFRS, accounting conservatism

JEL Classification: M41, G12

Suggested Citation

Goncharov, Igor and Hodgson, Allan C., The Comprehensive Income Issue in Europe (December 8, 2008). Available at SSRN: or

Igor Goncharov (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom

Allan C. Hodgson

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

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