Risk Relevance of Comprehensive Income
24 Pages Posted: 22 Dec 2012
Date Written: August 31, 2012
We examine the volatility and risk relevance of three income measures: net income, comprehensive income, and comprehensive income adjusted for asset revaluations for a sample of 79 New Zealand non-financial firms from 2003-2008. Comprehensive income is more volatile than net income and adjusted comprehensive income. There is a strong positive correlation between the three income volatility measures and market risk. However, the volatility of comprehensive income incremental to net income is not related to market risk. Furthermore, the incremental volatility of comprehensive income does not modify the pricing of net income. The results have policy implications for the IASB.
Keywords: Comprehensive Income, Income Volatility, Asset Revaluations, Risk, IFRS
JEL Classification: M41
Suggested Citation: Suggested Citation