Quality of Net Income vs. Total Comprehensive Income in the Context of IAS/IFRS Regulation
The purpose of this study is to investigate the quality of total comprehensive income (TCI) relative to net income (NI), prepared in accordance with International Financial Reporting Standards (IAS/IFRS). Using a data set covering 2,273 firms from 22 countries in Europe, Asia and Australia between 2006 and 2010, we provided evidence that net income always dominates comprehensive income as a valuation metric. The findings indicated that NI is more value relevant than TCI in predicting the future operating cash flows and income. In addition, NI is more persistent and timely, and explains the actual operating cash flows more precise than TCI. Accruals linked to NI have also better quality than those related to TCI. However, we found that TCI is less smoothing and more conservative than NI. These results do not support the claim that income measured on a comprehensive basis is a better measure of firm performance than NI.
The aim of this study is to investigate the impact of International Financial Reporting Standards (IFRS) on earnings‟ quality. More specifically, this paper aims at verifying whether the IFRS…
The purpose of this study is to investigate the quality of total comprehensive income (TCI) relative to net income (NI), prepared in accordance with International Financial Reporting Standards (…