Other Comprehensive Income and Value Relevance Under the K-IFRS Regime
Asian Tax Journal Vol. 16 No. 5 (2015), pp. 39-64
Abstract
Under the K-IFRS regime, accounting standards are principles-based and income statements include comprehensive incomes such as unrealized gains and losses. This paper examines value relevance of other comprehensive incomes under the K-IFRS regime and also differences of value relevance, if any, between income-reporting firms and loss-reporting firms. The sample was 4,170 firm years observed from 2011 to 2013 under the K-IFRS regime. To investigate the relationship between net income and stock price, this paper used the extended Collins et al.(1999) model using beginning book values of net asset(BVt-1) instead of ending book values of net asset(BVt). Results show that there is a significantly positive association between firm value and other comprehensive incomes, which is consistent with our expectations that other comprehensive income has a potential influence on firm value. And the other comprehensive incomes are negatively or positively associated with firm value at a significant level for income reporting firms and loss-reporting firms, respectively. It is also consistent with the popular belief among participants in the capital market that the value relevance of other comprehensive incomes varies depending on firms’ operating performances. This paper documents that other comprehensive income disclosure has a positive influence on market participants' firm valuation under the K-IFRS.
Keywords
- other comprehensive incomes
- Value Relevance
- unrealized gains and losses
Related Articles
The Effects of the Application of the IFRS 9 Expected Credit Loss Model：Focusing on Abnormal Loan Loss Provisions and Value Relevance of Bank
26(6) 43-86
The Value Relevance of R&D Expenditures in Biotechnology Special Listing Firms
25(4) 77-102
The Effects of In－process R&D Information on Value Relevance of Capitalized R&D in Bio－Pharmaceutical Industries
23(5) 139-160
Market Uncertainty and the Value Relevance of Earnings
23(3) 69-92
The Effects of R&D Capitalization and Accounting Error Correction on Value Relevance：Focused on the Theme Supervision of Bio－Pharm Companies
22(4) 67-95