How Comprehensive is Comprehensive Income? The Value Relevance of Foreign Currency Translation Adjustments

26 Pages Posted: 5 Jun 2005  

Jo Ann Pinto

Montclair State University - Accounting, Law & Taxation

Abstract

Prior empirical research has been unable to forge an unambiguous link between foreign currency translation adjustments, which are an element of other items of comprehensive income, and firm valuation. This study adds to the existing literature by empirically testing the value relevance of foreign currency translation adjustments in an earnings and book value model. Interaction terms, which serve as proxies for the theoretical sources of exchange rate exposure, are included in the estimating equation. The main finding of this study is that foreign currency translation adjustments are significantly value relevant when their parameter estimates are allowed to vary in the cross-section.

Suggested Citation

Pinto, Jo Ann, How Comprehensive is Comprehensive Income? The Value Relevance of Foreign Currency Translation Adjustments. Journal of International Financial Management & Accounting, Vol. 16, No. 2, pp. 97-122, June 2005. Available at SSRN: https://ssrn.com/abstract=728707

Jo Ann Pinto (Contact Author)

Montclair State University - Accounting, Law & Taxation ( email )

Upper Montclair, NJ 07043
United States
973-655-4282 (Phone)

Paper statistics

Downloads
21
Abstract Views
2,897