Abstract

International Financial Reporting Standards(IFRS) allows two alternative formats for the presentation of other comprehensive income(OCI)：1) a single statement of net income and OCI and 2)a separate statement of OCI. While International Accounting Standards Board(IASB)expressed the preference for a single statement, many opponents to the single statement argued that there would be undue focus on the bottom line of the single statement. As a result IASB decided that an entity should have the choice of presentation of OCI. The objective of this study is to investigate the determinants of the choice of OCI presentation,to test whether the relevance of accounting information and stock prices is enhanced after adopting IFRS, and to analyze whether the differential relevance exists depending on the choice of presentation formats. If the differential relevance exists between the two alternative formats, it would be interpreted that the users are misled by the choice of format that does not affect the substance. However if the differential relevance does not exists, we could consider that IASB allowed the alternative formats without reasonable conclusion basis. Eighty five percent of publicly traded companies in Korea select the single format, and the companies with the big firm size, and high book value and net income per share are more likely to select the separate format. I found that the relevance of book value, net income and OCI information and stock prices are enhanced after adopting IFRS. However the differential relevance of choice of format and stock prices is not statistically significant. The results provide that the argument of the opponents to the single statement is not reasonable, and the comparability of income statement would be declined due to allowing the alternative formats. Also alternative comprehensive income statements formats should be revised for the single format in the future.

Keywords

• comprehensive income statement
• other comprehensive income
• value relevance

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