Is Comprehensive Income Useful?

Journal of Contemporary Accounting and Economics, Vol. 2, No. 1, June 2006

32 Pages Posted: 15 Jun 2011

See all articles by Gary C. Biddle

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics; Columbia Business School; HKU Business School; London Business School

Jong-Hag Choi

Seoul National University - College of Business Administration

Date Written: June 2006

Abstract

With the International Accounting Standards Board (IASB) now considering the question, we examine 16 different definitions of income across three applications: information content, predictive ability and executive compensation contracting. Our results reveal that comprehensive income defined by FASB Statement 130 (NI130) dominates both traditional net income (NI) and fully comprehensive income (NIbroad) in explaining equity returns, but that NI dominates NI130 and NIbroad in explaining executive compensation. These findings are strikingly consistent with prior lobbying positions. In predictive ability, no definition clearly dominates. When income components are considered, NIbroad dominates in all three applications, thus lending support to the disclosure of comprehensive income components.

Keywords: comprehensive income, information content, executive compensation predictive ability

JEL Classification: M41, G12, G31

Suggested Citation

Biddle, Gary C. and Choi, Jong, Is Comprehensive Income Useful? (June 2006). Journal of Contemporary Accounting and Economics, Vol. 2, No. 1, June 2006 , Available at SSRN: https://ssrn.com/abstract=1864363

Gary C. Biddle (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

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Columbia Business School ( email )

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HKU Business School ( email )

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London Business School ( email )

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Jong Choi

Seoul National University - College of Business Administration ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

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