Is comprehensive income superior to net income as a measure of firm performance? 1 This paper has substantially benefited from the comments and suggestions of S.P. Kothari (the editor), Doug Skinner (the referee and discussant), Ashiq Ali, Ray Ball, Mary Barth, Bill Beaver, Mary Harris, Sanjay Kallapur, Tom Lys, Lillian Mills, Krishna Palepu, Mort Pincus, Katherine Schipper, Mark Trombley, Terry Warfield, Ross Watts, John Wild, Jerry Zimmerman and the conference participants at the 1998 Journal of Accounting and Economics Conference. The research assistance of Marcella Feng and Irina Moroaica is gratefully acknowledged. Trezevant acknowledges the financial support provided by a KPMG Peat Marwick Faculty Fellowship and an Elaine and Kenneth Leventhal Research Fellowship. 1

Is comprehensive income superior to net income as a measure of firm performance? 1 This paper has... With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Is comprehensive income superior to net income as a measure of firm performance? 1 This paper has substantially benefited from the comments and suggestions of S.P. Kothari (the editor), Doug Skinner (the referee and discussant), Ashiq Ali, Ray Ball, Mary Barth, Bill Beaver, Mary Harris, Sanjay Kallapur, Tom Lys, Lillian Mills, Krishna Palepu, Mort Pincus, Katherine Schipper, Mark Trombley, Terry Warfield, Ross Watts, John Wild, Jerry Zimmerman and the conference participants at the 1998 Journal of Accounting and Economics Conference. The research assistance of Marcella Feng and Irina Moroaica is gratefully acknowledged. Trezevant acknowledges the financial support provided by a KPMG Peat Marwick Faculty Fellowship and an Elaine and Kenneth Leventhal Research Fellowship. 1

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Publisher
Elsevier
Copyright
Copyright © 1999 Elsevier Science B.V.
ISSN
0165-4101
DOI
10.1016/S0165-4101(98)00033-0
Publisher site
See Article on Publisher Site

Abstract

With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries.

Journal

Journal of Accounting and EconomicsElsevier

Published: Jan 1, 1999

References

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