AIDEA BICENTENARY CONFERENCE
Lecce, September, 19-21, 2013
Accounting - Track 3.2: The possible role of financial reporting in supporting economic
growth
THE PERFORMANCE REPORTING CHOICES IN EUROPE AND USA.
A SURVEY ON THE “SUCCESSFUL” CONVERGENCE IFRS/US-GAAP AFTER THE
ADOPTION OF IAS 1 revised *
ROBERTO VERONA
University of Pisa
1.
FEDERICA DONI
University of Milano-Bicocca
SILVIA ROSSETTI
University of Pisa
INTRODUCTION
The current financial crisis has sparked a debate on the fair value accounting (FVA), also known
as mark-to-market accounting (MTM). The FVA has been indicated as one of the elements that
have significantly contributed to the financial crisis and amplified its negative consequences on the
global economic system. Despite the criticism expressed by authoritative institutions such as the
American Bankers Association and the U.S. Congress, also contrary opinions like the following
have been elaborated “FVA is neither responsible for the crisis nor is it merely a measurement
system that reports assets value without having economic effects of its own”. The return to
Historical Cost Accounting (HCA) appears anachronistic and bearing little benefit as “lack of
transparency under HCA could make matters worse during crises” (Laux, Leuz, 2009).
Both standard setters IASB and FASB have tried to promote FVA in order to increment the
information relevance of financial reports (Barth et al., 2007; Barlev, Haddad, 2003).
The lack of theoretical framework representing a common base for the determination of the fair
value has advanced the research in this field, which has resulted in a form of specialization in FVA
(Aliabadi et al., 2011; Strampelli, 2011).
Some commentators have even suggested that the both the accounting model and the standardsetting process should be revised as by virtue of the financial crisis they have become obsolete. The
proposed new accounting model, improved version of the existing choice-based GAAP model, is
designed to draft accounting reports that can “measure wealth and provide information that can
diagnose financial health”. The new model would also improve the standard-setting process
(Mosso, 2010). However, such view point is over critical and too focused on the problematic
aspects of the FVA. The negative aspects of the FVA, including being excessively subjective and
1
based on reporting of unrealized losses misleading economic decisions, cannot be considered the
reasons of the financial crisis. As it is often the case in times of crisis, the criticism towards existing
accounting systems and their anomalies becomes excessive; however, these systems cannot be
swiftly changed to accommodate temporary needs. On the other hand the known business saying
“never waste a crisis” should be valid also for accounting. The financial crisis can offer the
possibility for reflection and input for positive changes (Carmona, 2010), therefore substantial
amelioration could be brought to some accounting principles.
However some compelling questions emerge: would the analysis of the effects of the financial
crisis at global level stimulate or revert the process of accounting harmonization? Will the criticism
sparked by the financial crisis result in the acceleration or the hindrance of the process of
convergence of the IFRS/US-GAAP? Could the criticism in the two different sets of accounting
standards be resolved with a common strategy with a uniform conduct at European and American
level?
The exigency of reaching a definition of a unified set of accounting principle will not just result
in the effective solution of the “Tower of Babel accounting” (Erikson et al., 2009) but also improve
comparability of data, and financial and economic communication of stock markets.
The recent process of accounting harmonisation made possible by the adoption in 2005 of
IAS/IFRS methods represent the beginning of a practice tending to overcome the accounting
differences not just at European level but more generally on a worldwide scale for the progressive
adoption of a common global accounting language (Mc Gregor 1999; Pozzoli, 2003; Erikson et al.,
2009). It emerges a super partes need for a project of convergence between the European discipline
IAS/IFRS with the American accounting principles US GAAP, which justifies the progressive
harmonisation of these two accounting systems (Tarca, 2005; Callagan, Treacy, 2007). This process
of harmonisation would also represent a significant input for the globalisation of financial markets:
accounting information could reach a great level of homogenisation to allow the comparison
between financial, economic and capital data and the consequent improvement of economic and
financial communication (Fisher, 2006; Hussein, 2007).
The coexistence of two sets of accounting standards in the U.S. market and the need highlighted
by the two standard setters to promote the convergence process are the main reasons behind the
empirical research that is the object of this paper.
We investigate these questions using the 2008-2009 and 2012 IFRS annual reports of companies
based in four European countries: France, Germany, Italy and the UK and the 2009 US-GAAP
annual reports of companies based in the US. The main purpose of our research is to evaluate the
differences (Bloomer, 1996; Ampofo & Sellani, 2005; PwC, 2012; Kvaal & Nobes, 2010; 2011) on
2
the reporting performance choices between the two accounting standards, respectively IFRS and
U.S. GAAP.
The paper proceeds as follows: Paragraph 2 describes the general objectives of the study,
Paragraph 3 highlights a literature overview, Paragraph 4 shows the research design and the sample
of companies analysed, Paragraph 5 emphasizes the discussion of results and then Paragraph 6
shows the concluding remarks
2.
OBJECTIVES OF THE PAPER
The adoption of the IAS/IFRS principles has brought about a radical change in certain key
aspects of the drawing of the financial statements. For several years now, the IASB has been
making significant revisions to some basic accounting rules, also in view of the future convergence
between the IFRSs and the US-GAAPs (Norwalk Agreement FASB-IASB, September, 2002; A
Roadmap for Convergence between IFRSs and US GAAP2006-2008, Memorandum of
Understanding between the FASB and the IASB 27 February 2006 (MoU); FASB and IASB
Reaffirm Commitment to Memorandum of Understanding A Joint Statement of the FASB and
IASB November 5, 2009 Progress Report on Commitment to Convergence of Accounting
Standards and a Single Set of High Quality Global Accounting Standards 24 June 2010; Report to
the Trustees of the IFRS Foundation IFRS Foundation staff analysis of the SEC Final Staff
Report—Work Plan for the consideration of incorporating IFRS into the financial reporting system
for US issuers 22 October 2012; Meeting of the G-20 Finance Minister and Central Bank Governors
15-16 February 2013 Update by the IASB and FASB).
One of the themes that will be affected by this revision process is the concept of income
formation, and therefore the IFRS approach to the definition of business performance.
At European level, income determination on the basis of the IFRSs has been characterized by a
series of evolution steps that have caused considerable changes, with the common aim to improve
external disclosure of the real performance achieved by the companies, in order to meet the
information needs of the potential investors (IASCF, Framework for the Preparation and
Presentation of Financial Statements, 1989; Conceptual Framework for Financial Reporting 2010
(the IFRS Framework) approved by the IASB, September 2010). While the historical cost criterion
has not been abandoned, the adoption of fair value as “benchmark” criterion has led, in general
terms, to the abandonment of the concept of realized or produced income and the introduction of the
concept of “true and fair view” of the income, financial and asset position, including factors of
future realizability. This is known as a “hybrid” or realizable income structure, i.e. an income
structure inclusive of proceeds and revenues that, although accrued, have not yet been realized, and
3
are linked to the application of the fair value criterion. This results in an increase in the number of
items to be recorded as income components, which must be measured solely on an accrual basis,
since accrual is sufficient and actual realization is not required.
The “new” concept of income must therefore be associated with an appropriate income statement
structure that will represent the different conceptual approach in a consistent manner. The income
statement schedule under IAS 1 does not require a rigidly set form; in fact, only the minimum
number of entries is required: this means that the financial statements of different companies are not
comparable, and therefore the actual performances cannot be compared through the calculation of
profitability indexes like ROE, ROI, EVA etc. This issue, perceived by the international standard
setters, led to the need to revise the accounting principle, and resulted in the development of
projects aimed at improving the representation of the so-called “comprehensive income”.
As it is well-known, the “comprehensive income” may be assessed by the summation of the net
income and other single items called “other comprehensive income (OCI)” which may refer to:
1) foreign currency translation adjustments on foreign subsidiaries; 2) actuarial gains and losses
arising on defined benefit plans; 3) revaluation of property, plant and equipment; 4) changes in fair
value of financial instruments in a cash flow hedge; 5) actuarial gain and losses arising on available
for sales (AFS) financial instruments.
The difficulties in the recognition of the different items which may be included in the OCI have
boosted a joint project between the two standard setters (Presentation of Items of Other
Comprehensive Income. Proposed amendments to IAS 1). It has caused a further revision of the
IAS 1 by drawing an Exposure Draft (ED/2010/5) put into Amendments to IAS 1 in June 2011.
In a similar way, even if with different contents, the FASB has issued the Accounting Standard
Update 2011-05, , on the basis of ED Presentation of Items Reclassified Out of Accumulated Other
Comprehensive Income (issued August 16, 2012, comments Due, October 15, 2012) which is
effective for all public companies in fiscal years beginning after December 15, 2011.
In particular this document strongly emphasizes “location” because the ASU 2011-05 will no longer
permit to the public companies to report the OCI in the statement of changes in equity. This issue
has a considerable importance because “the current practice of the vast majority of public
companies is the above mentioned form of reporting” (Chambers, 2011).
This change should reach a real convergence between IFRS and US GAAP since the potential ways
to report the comprehensive income become only two: the companies must report total
comprehensive income and its components either in a single continuous statement of
comprehensive income or in two separate, but consecutive, statements of net income and other
comprehensive income. The reporting guidance under US GAAP and IFRS essentially converged
4
but there are still differences between US GAAP and IFRS with regard to what is included in
comprehensive income and in reclassification requirements.
The main objectives of this research are the following ones:
OB1:to analyse the way of reporting of the comprehensive income within the Annual Report of
listed European and American companies during the two-year period 2008-2009 and in 2012;
OB2: to verify the impact of the requirements issued by the IAS 1 revised referring to the
presence of some performance indicators and the improvement of the performance disclosure within
the Annual Report.
The first goal OB1 requires the following researches to be the developed:
1) the check of the number of Income Statement tables. For the sample of European
companies (2009), it is provided a choice between two alternatives, namely a single statement or
two separate statements, while on the basis of FAS 130 it is considered a choice among three
alternatives i.e. in addition to the ones already highlighted it is possible to expose other
comprehensive income in the statement of changes in net assets (Statement of changes in equity);
2) ways for exposing the intermediate results (in particular verification of the presence of the
operating result);
3) ways for exposing the income related to the financial area (especially verification of the
presence of the balance between financial income and expenses);
4) highlight of the income of an extraordinary nature;
5) criteria for classification of costs, by nature or by function.
The second objective OB2 requires the following researches to be the carried out:
1. calculation of ROE in two different ways: ROENI (Net Income) and ROECI
(Comprehensive Income);
2. checking for the presence of NON-GAAP measures related to performance in the
narrative section of the Annual Report and possible indication of the number and type of indicators
calculated;
3. verification of the significance of OCI and the volatility of comprehensive income
compared to net income.
3.
BACKGROUND OF THE STUDIES AND CONTRIBUTION OF THE PAPER TO THE LITERATURE
The international debate on this issue is extensive and varied: in particular, there are many
researches carried out by American scholars, since the concept of comprehensive income has been
adopted in the annual report resulting from of the implementation of FAS 130 in 1998. A similar
approach is detectable in the UK in relation to the adoption of accounting standard Financial
5
Reporting Standards, FRS 3 Reporting Financial Performance, in 1992. In this perspective, the
researches carried out in Europe are relatively recent, especially in continental countries, such as
Italy, France, Germany, Spain, etc..
The focus of our investigation does not include a deepening of theoretical studies, usually
divided in two well-known lines of research: 1) The Value Relevance of other comprehensive
income (Barth et al., 2001; Biddle, Choi, 2006; Holtausen, Watts, 2001, Mechelli, 2011), 2) the
judgements expressed by professional investors and non-professional users in relation to the method
of presentation of comprehensive income (Maines, Mc Daniel, 2000; Tarca et al. 2008).
The main studies, with an emphasis on empirical research, will be divided into two groups: 1)
researches conducted in Europe and 2) researches in the U.S.. With regard to the first group, studies
post IAS 1 Revised 2007 will be selected. The analysis of the results obtained will be useful in
order to make a proper comparative judgment on the data arising from this work.
In Italy, the empirical studies on the subject have significantly increased since the adoption of
IAS 1 Revised 2007. The concept of comprehensive income, new to the Italian accounting tradition,
was the subject of some researches done on listed companies that have outlined some interesting
results (D’Este, Fellegara 2009; Devalle 2010; Ferraro, 2011; Incollingo, Di Carlo 2012; Cimini,
2012; De Cristofaro, Falzago 2012; Agostini, Marcon 2013; Di Carlo, Incollingo, Lucchese 2013).
The most consistent results of the different empirical researches are those that focus on the ways
to represent the OCIs (Fellegara, D’Este, 2009; Ferraro, 2011; Cimini, 2012; De Cristofaro, Falzago
2012; Agostini, Marcon 2013). In particular, the results of the researches conducted on the
accounting records for the financial year 2009, the first year in which such principle was enforced
(D’Este, Fellegara 2009; Ferraro, 2011; De Cristofaro, Falzago, 2012; Cimini, 2012), were further
enhanced by those conducted on the following years (Agostini, Marcon 2013), thus confirming the
original choices made by compilers of financial statements and providing further insight into their
underlying motivation. For instance, the overwhelming choice made by compilers of financial
statements - to have a separated prospectus - has been accounted for by the scholars partly as a
consequence of the value of the OCIs (Ferraro, 2011; Cimini, 2012), but above all as the effect of
Italy’s fondness for the historical cost criterion (D’Este, Fellegara, 2009), or, even more generally,
as a solution that is more in tune with our accounting criteria (Ferraro, 2011; De Cristofaro,
Falzago, 2012; Agostini, Marcon, 2013). As to the latter point, the authors’ conclusion is that Italy
has only partly understood the meaning of the “restructuring of income” (De Cristofaro, Falzago,
2013) given by IAS 1 (revised), and has seen the information it provides as an “addition” to net
income. As to the weight of the OCIs, instead, the researchers conducted on financial statements
even before the launch of the IAS 1 (revised) found that the weight of the “other” income items
6
were not negligible (Devalle; 2010). Such results were corroborated by several parties, who also
emphasised the extremely volatile nature of Comprehensive Income (D’Este, Fellegara, 2009;
Cimini 2012; Di Carlo, Incollingo, 2012; Di Carlo et al., 2013). Inferential statistical analyses were
mainly carried out to measure: the predictive power of Other Comprehensive Income vs. corporate
cash flows (Di Carlo et al.; 2013), or its impact on corporate performance vs. net income (Ferraro,
2011; Cimini, 2012). In this respect, the results confirmed: the high predictive power of OCIs on
future cash flows (Di Carlo et al.; 2013), the independent configuration of income in Other
Comprehensive Income (Cimini, 2012), and its relationship with performance (Ferraro, 2012).
Researches made in other countries, such as Spain and New Zealand (Sousa Fernandez, Carro
Arana, 2010; Wong, Wong, 2010), provided similar results.
On the contrary, as to the second group (U.S. researches), in the light of the launch of SFAS 130
in 1998, researchers focussed on two areas of the OCIs: i.e. assessing the impact of OCIs on
managers’ disclosure choices (Ketz, 1999; McCoy et al. 2009; Smith Bamber et al., 2010; Jordan,
Clark, 2002) and the effects of the new ways of disclosing a company’s performance provided by
the OCIs on equity markets and on professional or non-professional investors (Maines, McDaniel,
2000; Dehing, Ratliff, 2004; Chamber et. al, 2007; Tarca et al., 2008).
The key results of the researches conducted in the first line of studies found that US companies’
have a propensity to represent the OCIs in the ‘statement of changes in equity’ prospectus rather
than in the double prospectus, a choice associated by some with managers’ salaries and bonuses
(Bamber et al., 2010). Such studies also measured the weight of each OCI item and found them to
be extremely volatile, as was also found by the researches conducted in Italy and Europe, while the
relation between the OCIs and the company’s size was found to be fairly weak (Ketz, 1999).
This research aims to provide a further contribution to the studies already carried out for two
different reasons: 1) the situation of reporting performance preferences is analysed both in the
European and in the U.S. context in order to assess the actual degree of convergence between the
two sets of IFRS and U.S. GAAP. Most of the research conducted in the period immediately
following the adoption of IAS 1 revised consider only one country (Smith, 2011; Ferraro, 2011;
Cimini, 2012 ;) or two (Incollingo, Di Carlo, 2011) or simply consider separately either European
countries or the U.S), and 2) a particular focus on how to present not only the Comprehensive
Income but also the Statement of Income, for a precise appreciation of the disclosure of the
performance within the Annual Report, also with regard to sensitivity shown by the two standard
setters in the two recent documents issued by the FASB and IASB: the Amendment ASU No. 20115, and Presentation of Items of Other Comprehensive Income, Amendments to IAS 1, June 2011.
7
4. RESEARCH DESIGN
The sample group surveyed was the result of a selection of countries and firms. Given that the
aim of the research was to assess the performance reporting practices in Europe, the selection
focused on the countries with higher GDP namely, Germany, France, the United Kingdom and
Italy. For the analysis on the application of U.S. GAAP, the country of reference is obviously the
United States. The study will analyze the companies quoted in stock markets, selected according to
capitalization (the relevant data are obtained from Datastream). For each country, the sample will
include the 10 largest companies in terms of market capitalization. The sample group will not
include companies of the financial sector, such as banks, insurances and real estate firms. The
financial sector remains “under-researched” in literature and according to Nobes (Kvaal & Nobes,
2010) this is justifiable because of different legislation on certain accounting items specific to these
sectors. The choice of the largest companies, in terms of size, was based on their greater influence
on equity markets (Cairns et al. 2011), as well as greater attention to compliance with IFRS,
primarily focused on the needs of the global investor community (Chaplinski, Ramanchad, 2000;
Wu, Kwok, 2002).
Financial statements of groups of listed companies in France, Germany and Italy are drawn up in
euros, unlike financial statements of listed groups in London, where the currency is mainly the
pound, while in some cases dollars or euros are used instead. In these cases, values were not
converted to the exchange rate of the closing date of the fiscal period, since differences in currency
did not affect our calculations.
The first step of the research will focus on the consolidated financial statements of the 20082009 financial years. The second step will concentrate on the consolidated financial statements of
the 2008-2008-2012 financial years. Annual reports were collected directly from company websites.
In short, the research hypotheses related to the first objective will be the following ones:
H1: There is a correlation between the choice of the format and size of companies;
H2: There is a correlation between the choice of the format and the sign of the OCI;
H3: There is a correlation between the choice of format and leverage;
H4: There is a correlation between the choice of the format and the status of a U.S. listing.
The research hypotheses connected to the second objective will be the following ones:
H5: The calculation of the ROECI expresses the measure of performance better than the
calculation of the ROENI;
Finally, as regards the general objective concerning the assessment of a convergence on the issue
of presentation of the Income Statement both in Europe and globally between Europe and the USA,
the following hypotheses will be tested:
8
H6: The presence of NON-GAAP measures in general and the space given to the communication
of performance is improved since the adoption of IAS 1 revised.
H7: Compared to U.S. firms, European companies have an increasingly similar behaviour in the
choice of the presentation of the income statement in 2009 and 2012 rather than in 2008;
H8: Italian, French and German companies have a similar behaviour in the choice of the
presentation of the income statement;
H9: British and American companies have a similar behavior in the choice of the presentation of
the income statement.
5. DISCUSSION OF RESULTS
The results of our survey are reviewed below and appropriately compared, whenever feasible,
with the results of previous surveys, sorted by the geographical origin of the surveyed sample,
either Europe or USA. Based on a trend generally accepted in literature, empirical surveys come in
two types: 1) descriptive surveys, and 2) surveys based on value relevance-based statistical
methods. Our survey definitely belongs to the first line of research, despite using some statistical
methods. Cramer’s V index for the combination of qualitative variables, R square for the linear
correlation and the point-biserial correlation coefficient with the t test for the difference between the
averages, in order to test the absence of correlation between a quantitative variable and a
dichotomic variable.
The data we derived from the consolidated statements of the sampled companies are:
1. Net Income and shareholders’ equity;
2. Other Comprehensive Income, where any change which occurred during the year (1),
added to the net income, gives the value of the Comprehensive Income;
3. total value of assets and liabilities in the Balance Sheet.
As to the first goal, data were collected with a view to understanding the preparers’ choices
about how to present the Comprehensive Income and the general financial performance through the
annual report. Such choices go either way: they may help potential investors’ make their choices
when they make the description, and disclosure, clearer, and they may provide useful information to
find opportunities to implement specific budget policies (Fellegara, D’Este, 2009).
The topics we selected, based on choices about Comprehensive Income, were:
1.
amount and significance of OCI items;
2.
number of prospectuses used.
1
In the 2008 financial statements, the prospectus used to record the OCI items was that of Changes in Net Worth, which made it
difficult to find the relevant values; for our survey, the prospectuses we used to find such information was either the Changes in Net
Worth or the Profit and Loss account.
9
Significance of OCI items
The first survey we conducted looked for companies where the overall amount of OCI items was
zero: such aspect would have actually affected any further survey, for two reasons: 1) the lack of
OCI items would not make any change in the assessment of corporate performance; 2) companies
with zero OCI items, where therefore the net income and the comprehensive income would
basically be the same, could opt for a “single” Profit and Loss account, just for the sake of a simpler
presentation (Cimini, 2012), since they would have no interest in using a separated Profit and Loss
account. In the surveyed sample, no companies were found to have zero OCI items, either in the
sample of European companies or in the sample of US companies; therefore, this had no impact on
the next surveys so it did not reduce the significance of the results. (See table n. 1).
The second survey was focused on the significance of OCI items, in the following terms:
1. Total amount of OCI items and trend in the surveyed three-year period;
2. Frequency of number of cases per type of OCI item;
3. Algebraic sign of the OCI item and trend in the surveyed period;
4. Impact of OCI items on Net Income.
France: The following was found in the first and third aspects: the sample of French companies
recorded a negative value in the year 2008, a positive value in 2009, and then negative again in
2012, although the amount was less than a half that of 2008. Looking at each component, we found
that the highest frequency (29 on a total of 115) was found in: 1) foreign currency translation
adjustments on foreign subsidiaries; 2) actuarial gain/losses arising on available for sales (AFS)
financial instruments; this appeared throughout the surveyed period, even if in different ways.
Finally, as to the incidence of OCI items on Net Income in 2008, just two companies had positive
OCI items that could have any incidence, at a fairly low rate of 5% to 9.9%, while in all the rest the
incidence on Net Income was negative and for one company (Total) the rate was quite low, at 5% to
9.9%, while for five companies it ranged between 10% and 99% and for two companies (Electricitè
de France and L’Oreal) it exceeded 100%. The situation dramatically changed in 2009: most of the
companies (8 companies) had a positive incidence, with one company (Carrefour) reaching as much
as about 130%; in addition, negative values were recorded by two companies only. In 2012, the
situation changed again, since just two companies had a positive incidence, one of which with a
very low rate, while most of the sample had OCI items that negatively affected the Net Income at
rates above 10%. In conclusion, a review of the algebraic signs showed that in 2008 there were just
two cases of a positive OCI, while a completely different situation, with eight cases of a positive
OCI, occurred in 2009, while a situation similar to that of 2008 happened again in 2012 with just
10
two cases of a positive OCI. As to the number of companies having opposing signs of NI and CI,
there were two companies that in 2008 had a positive NI and a negative CI, while in 2009 there
were no companies with opposing signs in their two performance indicators, and finally in 2012
there was just one company with a positive NI and a negative CI.
Italy. In the sample of Italian companies, the situation is the following: the trend of the overall
amounts was slightly negative in 2008, then it increased and turned into a positive amount, although
near to zero, then became negative again in 2012, with a higher rate, in absolute terms, than that of
2008. The negative value of the overall OCI items in 2012 seems to be due to a rise in the
prevalence of negative values, although not too high, also in the actuarial gains/losses on benefitbased plans and actuarial gains/losses for assets revaluation . In terms of frequency, most cases fall
in the first two items, even if in the last year the frequency of the item that expresses differences
from conversions of financial statements is lower. As to the impact on Net Income, in 2008 just one
company in the sample recorded a positive OCI, the incidence of which was 24%, while for all the
rest the impact on Net Income was negative and for one company (Mediaset) it was low, at less than
1.9%, while for eight companies it ranged between 10% and 99%. The situation dramatically
changed in 2009: in fact, the number of companies with a negative incidence of OCI items is
reduced, while four companies are found to have a positive incidence at rates of approximately 1020%. As to the rest of the sample, some companies had a negative impact at fairly low rates, while
two companies of the sample reached higher rates, especially one (Fiat group) where the rate was
approximately 96%. In 2012, when the overall amount of OCI items was negative again, there was
a special case with one company (Telecom Italia) having a positive incidence of approximately
107% on the NI: however, such position was countered by finding as many as 6 companies, with 4
of them having OCI items that negatively affect the NI, at rates of 10 to 50%. Overall, Italy had an
overwhelming number of negative OCI items in 2008 i.e. approximately 90%, a situation which
dramatically changed in 2009 with a perfectly balanced number of positive OCI items and negative
OCI items, both at 50%. In 2012, the situation reverted to one very much like that of 2008, with a
very low rate (20%) of positive OCI items and 80% of negative OCI items. An unprecedented
situation was that of no Italian companies having NIs and CIs with opposing signs.
United Kingdom. Moving now to the United Kingdom, where a review of the overall amount of
OCI items showed an singular scenario: the total number recorded in 2008 (with a positive sign)
was very high, compared with 2009 and 2012, both with a negative sign, even if much less negative
in 2012 than in 2009. 2008’s high value of OCI items seems to be due to the position of BG Group,
so further investigations into the values of each OCI item recorded in the annual report will be
required. As to the frequency of cases of changes in costs and revenues that may be equated to OCI
11
items, we noticed that most of such cases were found not only in the first three types of OCI items
(see in the table no 2. items no. 10°, 10b, 10c) but in the item no. 10d as well. Such situation
occurred in virtually the same manner all through the surveyed period. Commenting on the rate of
incidence of each OCI item on the NI in 2008, we found a high positive incidence in two companies
at 80-100%, while in the rest of the sample such incidence was negative, with some fairly consistent
values, one of which was in excess of 100%. In 2009, the situation found six companies with a
positive incidence of 300%, while in the rest of the sample such rates were fairly low. The situation
in 2012 is again close to a negative incidence: few companies were found to have a positive
incidence at rates of just above 5-1%, while the negative cases definitely outnumbered the rest. A
brief review of the algebraic signs of the OCI items showed that in the first year the negative signs
definitely outnumbered the positive signs by 70%, while the trend was reversed in 2009, reaching a
state of near equivalence, i.e. 60% positive signs and 40% negative signs. The year 2012 reflects the
situation of the year 2008, with virtually the same rates. Finally, in 2008 a company was found to
have a positive NI and a negative CI, while in 2009 and 2012 there were no differences in the
algebraic signs at all.
Germany. Moving on to the last European sample, Germany, a review of the trend in the overall
amount of OCI items suggested that it was negative in 2008 and remarkably improved in 2009,
when it was near to zero, but which however became negative again in 2012, even if still better than
in 2008. As to the frequency of cases, we found 100% of the first three types of OCI items in the
surveyed three-year period, while the frequency of the other items, with 10e and 10f still high,
found few cases of revaluations of assets, which, incidentally, did not change at all during such
period. In the first year, the rate of incidence of the OCI items on the NI reached extremely negative
values: in seven companies of the sample, such incidence ranged between 10 and 90%, and for two
companies (EOAN and BMW) such values were actually extremely high, in excess of 100%. In
2009, the situation looked far more balanced, even if three companies had between about 10 and
70%, with BMW always having a negative incidence of over 100%. Looking at the situation in
2012, only two companies had positive values, while in the rest of the sample the incidence was
negative, even as much as between 40% and 120%. Therefore, a brief review of the algebraic signs
suggested an emblematic situation in 2008, the only one in the European sample, where the values
of the OCI items were all negative, while one year later the situation looked more balanced, with
approximately 60% positives and 40% negatives. The last year looked instead like 2008 again,
where the negative signs outnumbered the positive ones; in 2008, there were two companies with a
positive NI and a negative CI, while in 2009 and 2012 only one company had such values.
12
United States. At the end of our survey of the significance of OCI items, we apply the same
considerations to the US sample, where the OCI items featured in the 1998 financial statements, so
the year 2009 does not have the same significance in terms of new regulations that it has for
European companies. If we should make a comment on the overall amount of OCI items, initially
the time-related trend was deeply negative in 2008 and remarkably improved in 2009 and then it
became negative again, but at a rate that, in absolute terms, was much better than that of 2008. As to
the frequency of each OCI item, the first two items showed up in the highest number of cases, the
other OCI items occurred in fewer cases, and such frequency was zero for the OCI that concerns
profits/losses from the valuations of tangible and intangible assets (2) at fair value.
A review of the rate of incidence of OCI items on NI shows that 2008’s values tended to be
negative: actually, three companies had negative rates at over 100%. The situation looked better in
2009, with half the sample recording a positive incidence on the NI and a small number of
companies, just two of them, having a negative incidence of approximately 50%. In the last year,
there were fewer positive positions, and three companies were found to have OCI items with a
fairly high negative incidence on the NI. An overall review of the algebraic signs suggested that in
2008 the negative signs outnumbered the positive signs (at 70%), while the 2009 situation was well
balanced again, very much like that of Germany, the UK and Italy, with positive signs slightly
outnumbering the negative signs, a situation which becomes diametrically opposite in 2012. In
2008, three companies were found to have a positive NI and a negative CI, while in 2009 and 2012
no companies had differing signs at all.
One last issue related to the significance of “Other Comprehensive Income” (“OCI” in the
following), i.e. the influence of OCI on the computation of ROE indicator, will be discussed after
the assessment oh “H5 Hypothesis”: a topic that is analyzed in the following.
In brief, consistent with the achieved results, some considerations about the significance of OCI
can be drawn as follows:
1.
The trend in the overall amount of OCIs throughout the examined three-year period (see
table 1 and graph 1) turns out to be comparable (i.e. evenly distributed) along the whole set of
analysed Companies: an abrupt soar is registered indeed from end of 2008 to 2009, both in Europe
and United States, even though, as far as only UK is considered, values are higher than the rest of
the sample (this abnormal value has been deleted). From that time onwards (2009 to 2012) the OCI
values go down to a level which is anyway higher than in 2008, except Italy which displays a significant
drop in 2012.
2
Statements that contain these unrealized items include SFAS No. 52 Foreign Currency Translation, SFAS No. 87
Employers’ Accounting for Pensions, and SFAS No. 115 Accounting for Certain Investments in Debt and Equity
Securities, Coy et al., 2009, p. 84.
13
Table n. 1: Total amount of OCI (Other Comprehensive Income)
absolute values
2008
2009
2012
France
- 15,31
5,03
- 6,09
Italy
2,27
0,51
- 3,31
UK
- 29,18
23,93
- 6,42
German - 19,82 - 0,85 - 11,40
USA
- 77,47
5,03
- 13,03
relative values (2008=100)
2008
2009
2012
-100,00 32,84 - 39,76
-100,00 22,37 -146,18
-100,00 82,01 - 21,99
-100,00 - 4,30 - 57,54
-100,00
6,49
- 16,82
Graph n. 1: Total amount of OCI (Other Comprehensive Income), relative values (2008=100)
100.00
50.00
France
2008
2009
2012
(50.00)
(100.00)
Italy
UK
German
USA
(150.00)
(200.00)
2. The frequency of “OCI cases” (see table n. 2) displays an even trend and evolution all
along the sample of analysed Companies; in other words, its pattern is fairly constant. The
most frequently registered items are “10a” and “10b” and, in the case of US, we can point
out the absolute lack of item “10e”. In the European sample Germany stands out since its
frequency is the highest of all the OCIs of other Countries, except for item “10e.
Table n. 2: Frequency of number of cases per type of OCI item (Other Comprehensive Income) in 2008, 2009
and 2012
10a) Foreign currency translation adjustments on foreign subsidiaries
10b) Changes in fair value of financial instruments in a cash flow hedge
10c) Actuarial gain/losses arising on available for sales (AFS) financial instr
10d) Actuarial gains/losses arising on defined benefit plans
10e) Revaluation of property, plant and equipment
10f) Others
10a) Foreign currency translation adjustments on foreign subsidiaries
10b) Changes in fair value of financial instruments in a cash flow hedge
10c) Actuarial gain/losses arising on available for sales (AFS) financial instr
10d) Actuarial gains/losses arising on defined benefit plans
10e) Revaluation of property, plant and equipment
FRANCE
2008 2009 2012
10
10
9
5
9
9
9
10
10
2
4
2
0
3
1
7
8
7
tot 33
44
38
ITALY
2008 2009 2012
9
8
7
9
10
10
6
5
4
2
2
4
1
6
4
Tot
29
23
29
8
4
22
115
Tot
24
29
15
8
11
14
10f) Others
tot
10a) Foreign currency translation adjustments on foreign subsidiaries
10b) Changes in fair value of financial instruments in a cash flow hedge
10c) Actuarial gain/losses arising on available for sales (AFS) financial instr
10d) Actuarial gains/losses arising on defined benefit plans
10e) Revaluation of property, plant and equipment
10f) Others
tot
10a) Foreign currency translation adjustments on foreign subsidiaries
10b) Changes in fair value of financial instruments in a cash flow hedge
10c) Actuarial gain/losses arising on available for sales (AFS) financial instr
10d) Actuarial gains/losses arising on defined benefit plans
10e) Revaluation of property, plant and equipment
10f) Others
tot
10a) Foreign currency translation adjustments on foreign subsidiaries
10b) Changes in fair value of financial instruments in a cash flow hedge
10c) Actuarial gain/losses arising on available for sales (AFS) financial instr
10d) Actuarial gains/losses arising on defined benefit plans
10e) Revaluation of property, plant and equipment
10f) Others
tot
FR
10a) Foreign currency translation adjustments on foreign subsidiaries
29
10b) Changes in fair value of financial instruments in a cash flow hedge
23
10c) Actuarial gain/losses arising on available for sales (AFS) financial instr.
29
10d) Actuarial gains/losses arising on defined benefit plans
8
10e) Revaluation of property, plant and equipment
4
10f) Others
22
Total 115
3
30
7
6
38
35
UK
2008 2009 2012
8
10
9
8
9
9
9
9
10
8
8
7
2
3
1
6
7
7
41
46
43
GERMANY
2008 2009 2012
9
10
10
10
10
10
10
10
10
9
9
8
2
3
5
7
7
6
47
49
49
USA
2008 2009 2012
9
9
10
8
9
8
7
7
8
6
7
7
0
0
0
4
1
2
34
33
35
IT
24
29
15
8
11
16
103
16
103
Tot
27
26
28
23
6
20
130
Tot
29
30
30
26
10
20
145
Tot
28
25
22
20
0
7
102
UK GR USA TOT
27 29 28
137
26 30 25
133
28 30 22
124
23 26 20
85
6
10
0
31
20 20
7
85
130 145 102 595
3 By considering table n. 3 it is possible to have an overview of the incidence of the OCIs
over NI, expressed in terms of percentage points. In 2008 over half of the sample (27
Companies) exerted a negative incidence of 54%, while in 2009 one can see a greater
dispersion of the number of companies, even though an amount of 18 Companies exerts
a positive influence equal to 36% over the Net Incomes; this percentage is partially
counterbalanced by a group of 10 Companies whose negative incidence is of 20%. In
addition, year 2012 is characterized by a significant gathering of Companies (N = 20)
which exerts a negative incidence of 40%.
Table n. 3: Relationship of OCI (Other Comprehensive Income) to Net Income
OCI as % of NI
2008
2009
2012
15
> 100%
10% to 99.9%
5% to 9.9%
3% to 4.9%
2% to 2.9%
Up to 1.9%
0 or Not Reported
Up to –1.9%
-2% to -2.9%
-3% to -4.9%
-5% to -9.9%
-10% to -99.9%
>-100%
Total
Number
1
4
2
0
2
0
0
2
2
0
2
27
8
50
%
2%
8%
4%
0%
4%
0%
0%
4%
4%
0%
4%
54%
16%
100%
Number
2
18
2
4
1
2
0
5
1
1
3
10
1
50
%
4%
36%
4%
8%
2%
4%
0%
10%
2%
2%
6%
20%
2%
100%
Number
1
6
2
1
3
3
0
2
2
1
7
20
2
50
%
2%
12%
4%
2%
6%
6%
0%
4%
4%
2%
14%
40%
4%
100%
4 The algebraic sign of OCIs (see graph n. 2) appears to be uneven throughout the
comprehensive analysed sample; in 2008 We have a clear prevalence of the negative
sign, with Germany scoring 100% of negative OCIs; conversely, in 2009 We have a
basically equivalent distribution of the two signs, except for the case of France in which
a clear prevalence of the positive sign is evident. In 2012 the negative sign is the most
prevalent again, except for USA in which it is equal to 60% of cases: the lowest
recorded percentage in the sample.
Graph n. 2: Algebraic sign of OCI (Other Comprehensive Income)
2008
USA
30%
GER
70%
100%
0%
UK
30%
ITA
70%
10%
FR
90%
20%
0%
80%
20%
40%
OCI +
60%
80%
100%
OCI -
16
2009
USA
60%
40%
GER
60%
40%
UK
60%
40%
ITA
50%
FR
50%
80%
0%
20%
20%
40%
OCI +
60%
80%
100%
80%
100%
OCI -
2012
USA
40%
GER
60%
10%
UK
90%
30%
70%
ITA
20%
80%
FR
20%
80%
0%
20%
40%
OCI +
60%
OCI -
Reporting alternatives
The choice of the “profit and loss account” format, which is not subject to particular rigid
regulations, is somewhat adaptable and can be adjusted according to preparers’ subjective initiative;
this choice requires a thorough analysis of different options possible with the implementation of
IFRS and US-GAAP regulations; these sets of rules were affected by a rapid development in the
course of the three-year period of reference as regards disclosure of financial performance. In the
view of these ongoing modifications, Companies were compelled to modify and adjust their
framework of reference for financial statements’ editing; inevitably, this attitude led to different
decisions as regard the chosen format and the modalities for Comprehensive Income disclosure; in
addition, while performing this task, supplemental information had to be provided in order to give
17
useful explanations about the nature and arrangement of OCIs. It must be highlighted that the
introduction of the OCIs’ system deeply affected traditional accounting systems which were based
on realized financial items
and on financial profits to be shared. As a consequence of this,
disclosure of detailed information, with particular reference to recycling procedures, is crucial for
users, especially in the light of well-known criticalities related to the duplication of OCI’s
accounting entries (Fellegara, D’Este, 2009).
The task of choosing the format, in the analyzed three-year period, is characterized and affected
by the coexistence of different situations: 1) Year 2008: both European and US Companies are free
to choose from three possible options, Combined Statement of Net Income and Comprehensive
Income, Separate Financial Statement and Statements of Stockholders’ Equity; 2) Year 2009:
European Companies may choose from two options, while US Companies may choose from three;
3) Year 2012: both European and American Companies may choose only from the first two options
and it is not allowed anymore to report the Comprehensive Income in the Statement of Change in
Equity; American Companies cannot chose the latter option as well, according to a prescription of
ASU 2011 (FASB, 2011).
With reference to the conducted empirical researches, whose some aspects have been
debated in Par. 3, the scenario of American Companies is neatly outlined; it is characterized by a
rather even attitude; until 2011, the most common choice made by preparers was the third abovementioned option, although FASB heartily recommended the choice of one option among the other
two. From the point of view of US Accounting System, the most commonly employed method
accepts an “all-inclusive” concept of Income (APB Opinion No 9 Reporting the Results of the
Operations and, later on, APB Opinion No. 20 and APB Opinion No. 30); according to this concept
all revenues, expenses, gains and losses recognized during the period are included in income,
regardless of whether they are considered to be results of normal, recurring operations of the period.
In spite of this common approach, a widespread and accepted attitude among preparers would
include also specific elements of the Incomes, such as particular changes in assets and liabilities, in
the shareholders’ equity, instead of reporting them in the Income Statement.
In this regard, the issue of SFAS 130 was meant to improve disclosure of those unrealized items
that were commonly registered only in the Statements of Changes in Stockholders’ Equity. The
information provided by comprehensive income was expected to assist investors, creditors and
other financial statement users in evaluating an enterprise’s economic activities, and its timing and
magnitude of future cash flows (Coy, 2009). However, the disclosure of comprehensive income
created an additional performance measure that many feared would confuse readers and would
prove more volatile than net income. Another criticality related to SFAS No. 130 is the fact that the
18
resulting comprehensive income figure is incomplete. Given the FASB’s partial approach to fair
value accounting, these OCI items capture some fair value changes for assets but disregard liability
fair value changes (Hirst, 2006).
Furthermore, obligations in reporting OCI’s items, as stated in SFAS 130, would have required a
single procedure for accounting and specification instead of the above-said three options.
The first option for the format choice gives instructions for a combined statement of net income
and comprehensive income in which items are registered in a dedicated section of the Profit and
Loss Statement, immediately after the Net Income section. One advantage of this option is the
presentation of two indicators in a single statement; this feature is likely to be much appreciated by
any user who is gathering proper information for decision making. The primary disadvantage is that
net income can be looked at as a subtotal in the income statement and comprehensive income can
be thought of as the new bottom line. This will reduce the prominence of net income as the
principle measure of a company’s performance and may cause confusion among some financial
statement users about true earnings (Campbell et al., 1999).
Conversely, the second option implies the edition of a separate Financial Statement whose initial
section consists of revenues of Net Income, while its final paragraph reports the Comprehensive
Income. The advantage of choosing this option is that the Income Statement is not affected by
information drawn from the Comprehensive Income, and this definitely helps users to access a Net
Income disclosure which is more accurate than in the other option; so, it is likely that preparers who
opt for this Statement believe that NI is a more significant performance indicator than CI (Coy,
2009). A “Sophisticated professional investor”, also, can make more gains from this kind of format,
since She/he can find further detailed information in it. A disadvantage nonetheless is associated
with the Separate Financial Statement, as well: it involves a significant thickening in the amount of
charts and tables presented for the annual report; it is indeed an additional bulk data format with
respect to the usual four reports (see Campbell 1999), and this might negatively affect disclosure
effectiveness, besides bringing in additional costs for Companies. One last consideration is that the
third option, i.e. reporting the CI in the Statement of Stockholders’ Equity, turned out to be the
“least innovative” approach with respect to the prior practice; for this reason, this tool would have
been less difficult to apply for Companies, especially during their first stage of SFAS 130
implementation. To comply with SFAS No. 130 using the third approach, companies only need to
show how these components are added together to produce comprehensive income and add
disclosures about tax effects (Coy, 2009).
The main advantage of this format is that Companies are able to report CI data in it, though the
efficacy of this indicator for performance disclosure is downrated. Therefore, in this case CI would
19
provide “secondary” information if compared to the Net Income indicator. FASB did not introduce
specific obligations to be followed in the choice from the three option, even though the Board
encourages reporting entities to show the components of OCI and total CI in either a Combined
Statement of Net Income and Comprehensive Income or in a separate statement. In spite of the
employed format, EPS is still being calculated on the basis of the NI, and the Comprehensive
Income per share is not presented in the Financial Statement. Several and distinct empirical studies
have been carried out in USA; they investigated the perception declared by different subjects and/or
Institutions: Chief Financial Officers and professional users (King et al, 1999), professional security
analysts and portfolio managers (Hirst, Hopkins, 2006), non professional investors (Maines, Mc
Daniel, 2000), financial executives and chief executive officers (Hunton et al., 2006), propertyliability insurers (Lee et al., 2006). Main results of this surveys pointed out negative opinions
concerning the adoption of the third format: reporting comprehensive income in a Statement of
Changes in Stockholders’ Equity, from users’ perspective, means that this information is unrelated
to corporate performance and, therefore, is scarsely used by investors. Moreover, disclosure in the
statement of stockholders’ equity can be an aid to firms who wish to manage earnings without
detection (Coy, 2009). Harsh criticism expressed about this format make analysts call for an
imminent removal of it (Fitzpatrick et al., 2010).
At the time of the issue of SFAS 130, this option was meant to be a compromise between FASB
and several requests made by Corporate Managers, even though the American Board was already
leaning towards the other two options. Therefore, on the 16th of June, 2011, with the issue of ASU
2011-05 Presentation of Comprehensive Income, the current scenario came into being and, with it,
only two alternatives were basically being adopted: 1) a single continuous statement of
comprehensive income and 2) two separate but consecutive statements of Net Income and other
Comprehensive Income. The single continuous statement should be displayed in two parts: Net
Income and Other Comprehensive Income, with total amounts for each part. Alternatively, if two
consecutive statements are used, the first statement would be the traditional income statement and
the second statement would be a statement of comprehensive income that begins with Net Income.
Under both alternatives, Companies must now report total Comprehensive Income in an income
statement-type (Chambers, 2011).
Exposure Draft issued by the Boards in May 2010 (IASB, 2010) proposed the single-statement
presentation of comprehensive income. Those proposals would have eliminated all other
presentation options for comprehensive income. Various objections to the mandatory singlestatement presentation were raised in the 2010 comment letters responding to the Exposure Draft
20
(3). When the Boards re-deliberated in late 2010, they decided to allow two options, both of which
are performance-statement options: presenting the components of comprehensive income either in a
single-statement or in a two-statement format. However, if a two-statement format is used, the
statements must be presented consecutively. The Boards decided to allow both performancestatement options because they concluded the differences were minimal between a continuous,
single statement and two consecutive statements.
With respect to the analysed US Financial Statements (table n. 4), 80% of Companies in 2008
chose to present OCIs within the Statement of Changes in Equity; in the rest of the sample, one half
of the Companies employed the Separate Financial Statement while the other half employed the
Combined Statement. This scenario was pretty much unaltered in 2009, while in 2012 a significant
change appeared: 70% of the sample switched to a presentation of CI within the Combined
Statement, and the rest of the sample kept using the Statement of Changes in Equity4.Therefore, we
are dealing with a true milestone in the development of CI placement and registration, with
particular reference to the pioneristic USA introduction of a new concept of “Income” and
“Revenue”. This evolution of the “Income” concept was first made evident at the end of the 90’,
though at the time it was still based on the “Historical cost” model .
With respect to the European sample, the following scenario came into being: The IAS 1-revised
was evenly adopted throughout France, given that 100 % of Companies, both in 2009 and 2012
opted for the Combined Statement; in 2008 the France scenario was similar to Us, since 80% of
Companies opted for the presentation of the Statement of Changes in Equity.
Focusing on the Italian scenario, the most common and widespread attitude is quite similar to the
French one: 100% of Companies in 2008 and 2012, in contrast with just a 30% of Companies
choosing the Combined Statement in 2008. Our progress in the analysis of these data shows that, in
Europe, UK has a completely different trend. Unlike Italy and France, in 2008 UK Companies
opted in most cases for the employment of the “two-in one” standard of account (90%). The
Statement of Changes of Equity was used just in one case. This tendency remains virtually
unchanged in 2009 and 2012, with just the exception of one case in which the Statement of Changes
of Equity was chosen (“Astrazeneca”).
3
Examples of comments are: 1) A single-statement presentation would emphasize net income, making it only a subtotal rather than
the bottom line, and would create confusion in the capital markets. 2) A single-statement presentation would create confusion about
which income number was used for earnings per share calculations. 3) A single-statement presentation would inappropriately
emphasize items of other comprehensive income, which are typically noncore activities that are outside the control of management.
4 This exception consists of the following Companies: “Apple”, “Microsoft” and “Procter & Gamble”; it was due to the fact that their
financial cycle's deadline is subsequent to December, the 31 th; so, on those occasions, the new regulations stated in ASU 2011 begun
to be applied in financial cycles starting from December, the 15 th,. For Businesses whose financial cycle started before this date it was
impossible to choose the third mentioned option. It must be highlighted that “Wal Mart Stores”, as well, might have behaved in the
same way, though it opted for the second choice, as other Businesses did. For nonpublic entities, the effective date is for fiscal years
ending after December 15th, 2012. Early adoption is permitted.
21
As regards Germany, the scenario in this Country is quite similar to the UK; in 2008 indeed,
German Companies hardly opted for the Statement of Changes in Equity, (30 % of cases) if
compared to Italy and France; conversely, an high prevalence of Combined Statements is recorded.
In 2009 We can see an high prevalence of the Statement of Changes in Equity (90%) and, in 2012,
this option is selected by all the Companies of the sample.
While performing a data analysis, some questions arise about what motivations might induce a
shared adoption of the last mentioned Statement within the sample. Several research hypothesis
have been suggested to answer these questions. They aim at identifying a set of variables which can
explain the prevalence of that option. These hypothesis, already discussed in previous literature,
must be verified by means of a statistic association analysis between two characters by V Cramer
index.
Table n. 4: Method Used to Report Comprehensive Income and Its Components
FRANCE
2008
Reporting Method
N.
%
Not reported
0%
Combined Statement of Net Income & Comprehensive Income
0
0%
Separate Statement of Comprehensive Income
2
20%
Included in Statement of Stockholder’s Equity
8
80%
total
10 100%
ITALY
Reporting Method
Not reported
Combined Statement of Net Income & Comprehensive Income
Separate Statement of Comprehensive Income
Included in Statement of Stockholder’s Equity
total
2008
%
0
0%
0
0%
3
30%
7
70%
10 100%
N.
2009
%
0%
0
0%
10 100%
0
0%
10 100%
2012
%
0%
0
0%
10 100%
0
0%
10 100%
N.
N.
2009
N.
%
0
0%
0
0%
10 100%
0
0%
10 100%
2012
N.
%
0
0%
0
0%
10 100%
0
0%
10 100%
UK
2008
2009
2012
%
N.
%
N.
%
Not reported
0
0%
0
0%
0
0%
Combined Statement of Net Income & Comprehensive Income
0
0%
1
10%
1
10%
Separate Statement of Comprehensive Income
9
90%
9
90%
9
90%
Included in Statement of Stockholder’s Equity
1
10%
0
0%
0
0%
total 10
100% 10
100% 10
100%
Reporting Method
N.
Reporting Method
N.
GERMAN
Not reported
Combined Statement of Net Income & Comprehensive Income
Separate Statement of Comprehensive Income
Included in Statement of Stockholder’s Equity
total
EUROPE
Reporting Method
Not reported
Combined Statement of Net Income & Comprehensive Income
Separate Statement of Comprehensive Income
2008
%
0
0%
0
0%
7
70%
3
30%
10 100%
2008
%
0%
21
53%
N.
2009
N.
%
0
0%
0
0%
9
90%
1
10%
10 100%
2009
%
1
3%
38
95%
N.
2012
N.
%
0
0%
0
0%
10 100%
0
0%
10 100%
2012
%
1
3%
39
98%
N.
22
Included in Statement of Stockholder’s Equity
total
USA
Reporting Method
Not reported
Combined Statement of Net Income & Comprehensive Income
Separate Statement of Comprehensive Income
Included in Statement of Stockholder’s Equity
total
19
40
48%
100%
2008
%
1
10%
1
10%
8
80%
10 100%
N.
1
40
3%
100%
2009
%
0%
2
20%
8
80%
10 100%
N.
40
0%
100%
2012
%
0%
7
70%
3
30%
10 100%
N.
Format and size
H1: There is a correlation between the choice of the format and size of companies.
In addition to what We’ve just underlined, for our evaluation of Companies’ size, Market
Capitalization was the selected measurement unit, as it was in the stage of selection for the sample.
When committing to choosing the most adequate proxy for assessing Companies’ size, a vigorous
doctrinal debate arose: this choice is indeed affected by several troubles: literature has so far
selected four proxies: 1) total amount of investments, 2) total amount of sales, 3) total amount of
employees and 4) Market Value. No proxy appears to be more adequate than the others (Smith,
Boyes, Peseau, 1975), even though in several studies the Natural Logarithm of Investments is the
preferred Indicator (Cimini, 2012).
A detailed enunciation of this hypothesis inevitably requires some elucidations; this is due to the
fact that in the 2008-2009 period and in 2012 particular modifications took place with the issue of
IAS 1 revised and of ASU 2011-05 (FASB, 2011). A unification of regulations stated in IASB e
FASB was in fact registered and this provided a sort of “new protocol” for choosing the format in
2008 (three option allowed) and in 2012 (two options allowed). This standardization, however, did
not occur in 2009, when Europe and USA issued two different sets of regulations. On one hand, the
IAS 1 Revised only permitted two options, on the other hand USA still consented to choose from
three options. Therefore, “H1 Hypothesis” cannot be verified for year 2009 because of the presence
of non-homogeneous sets of regulations. In the light of this, the approach of analyzing two groups
of Companies (European and USA’s) as a unit in a comprehensive sample is feasible only for years
2008 and 2012.
The situation of 2008, as shown in the box plot (see graph n.3) proves that there is no link between
the format and the size as companies which have 0 format and those having 1 format have a similar
distribution compared to the size variable, save for two outlier values. The point-biserial coefficient
has been calculated and subsequently a test t has been performed, but no significant differences
emerged. Therefore, there is no correlation between the considered variables.
Graph n. 3: Box plot, distribution of SIZE (Market val by co. 2008) by FORMAT
23
180000
160000
140000
120000
100000
80000
60000
40000
Market val by co.
(31/12/2008)
20000
0
FORMAT 0
FORMAT 1
FORMAT: 0=within Statement of changes in equity
Format 1=two prospectuses
Company size is often taken into account in Correlation analysis since information about the
magnitude of a firm may affect specific choices made by preparers and/or Managers when
committed to editing Financial Statements. Nonetheless, the size factor analysis never led to
significant results in literature: Campbell et al. proved for instance, in a study conducted on
American Companies, that biggest Firms opted for the Statement of Changes in Equity, but no
adequate explanation is provided about the choice of the size factor (Campbell et al., 1999).
Similarly, Kets analyzes trends in some American Companies allocated to two distinct groups on
the basis of their size factor. All these businesses displayed similar scores with respect to Net
Income, Comprehensive Income and how OCI affected NI. The format choices in the two groups,
anyway, do not appear to be correlated to the size factor (Kets, 1999). A quite similar outcome is
achieved in a study which analysed Italian Firms listed on Italian Stock Exchange in 2009 (Cimini,
2012); in this research, the selected size-indicator and its relation to OCI scores is correlated to the
format choice. Hypotesis H1 is not tested for the year 2012 as from the available data on the sample
it can be seen that almost all companies have chosen the same kind of format and no significance
correlation between the two variables emerges
Therefore, “H1 Hypothesis” is not verified for the analyzed sample.
Format and sign of OCI
24
H2: There is a correlation between the choice of the format and the sign of the OCI
When committing to the verification of “H2 Hypothesis”, also, the above mentioned
considerations are valid. Therefore, 2008 and 2012 are the only years to be examined. In this case, a
possible correlation between two variables is investigated. These two variables are: 1) the Format
variable and 2) a dichotomous variable (whose two only possible scores are “positive” and
“negative”). The interest is studying a possible correlation between these variables is due to the fact
that preparers and managers of Companies whose OCI is either negative or equal to 0 might not
want to disclose this information to potential investors.
Previous research (Ferraro, 2011) suggests that companies that have positive OCI values and
have a less relevant impact compared to the Net Income may have an interest in keeping the Net
Income as a traditional measure of performance and keep the format of Income Statement as
unvaried as possible, searching for the simplest solution. A different situation may be that of
companies having a negative net income but positive OCI values, which could be interested in
opting for the format of single comprehensive income statement in order to “relegate” traditional
income with a negative (hence unattractive) sign to the simple role of intermediate result (Ferraro,
2011).
Such observations, based on the consideration of cases, have been subjected to statistical tests in
order to give the results an even stronger value. The results of our survey on a sample of European
and American companies for the year 2008 confirm that there is no strong relationship between the
two nominal variables: algebraic sign of the OCI and choice of format. Contingency table “2X2”
was created (see graph n. 4), and this allowed us to calculate the quadratic average contingency
coefficient of Cràmer V index, which, as known, can vary between zero (in case of complete
independency between the two variables) and one (in case of maximum dependency between the
variables). In our case the table shows values of chi square and value V which are quite low, where
the latter is indeed very close to zero. A similar survey on a sample of service companies listed in
the Italian stock exchange (consolidated financial statements and draft budgets for 2009) shows the
same result, demonstrating that, generally speaking, the theories on business tendency to adopt an
integrated single prospectus, in case they have negative OCI values, are completely unrealistic (De
Cristofaro, Falzago, 2012).
Hypothesis H2 is not fully confirmed for the analysed sample, as it appears there is a low
dependency between the two identified variables.
Graph n. 4: Algebraic sign of OCI (Other Comprehensive Income) in 2008
25
2008
44%
50%
36%
40%
30%
20%
10%
0%
10%
8%
2%
0%
One
Two
+
-
Sign OCI
+
-
2008
Number of prospectuses
Other
One
Two
Other*
TOT
0
1
4
18
5
22
9
41
TOT
1
22
27
50
χ2
0,225
V
0,067
Format and leverage
H3: There is a correlation between the choice of format and leverage.
The leverage indicator has been calculated as the ratio between total activity and total liabilities.
The elaboration of the contingency table doesn’t show any dependency between the two variables
(see graph n. 5).
Hypothesis H3 is not confirmed for the analysed sample.
26
Graph n. 5: Box plot, Leverage-Format (2008)
7
6
Leverage
5
4
3
2
1
0
FORMAT 0
FORMAT 1
FORMAT: 0=within Statement of changes in equity
Format 1= two prospectuses
Min Outlier
Max Outlier
Format and status of dual listing companies
H4: There is a correlation between the choice of the format and the status of a U.S. listing.
The status of dual listing companies (see graph n. 6) can lead us to believe there is a higher
tendency to disclosure in order to attract capitals from overseas investment, or it would be fair to
believe that such companies are subjected to stronger pressure by stakeholders, due to a continued
strengthening of the disclosure (Haniffa, Cooke, 2005). The analysis, as shown in the contingency
table, proves there is a low dependency between the two nominal variables.
Hypothesis H4 is not fully confirmed for the analysed sample, as there is a low connection
between the two identified variables.
Graph n. 6: correlation between the choice of the format and the status of a U.S. listing
2008
40%
30%
30%
22% 22%
24%
20%
10%
2%
0%
0%
one
two
yes
other
no
27
Dual listing
Yes
No
2008
Number of prospectuses
One
Two
Other*
TOT
0
1
11
11
15
12
26
24
TOT
1
22
27
50
χ2
1,255
V
0,158
2009
46%
50%
40%
34%
30%
20%
10%
14%
2%
4%
0%
0%
one
two
yes
other
no
Dual listing
Yes
No
2009
Number of prospectuses
One
Two
Other*
TOT
1
0
17
23
7
2
25
25
TOT
1
40
9
50
χ2
4,678
V
0,306
2012
60%
52%
50%
40%
40%
30%
20%
10%
2%
6%
0%
0%
0%
one
two
yes
2012
Number of prospectuses
One
Two
Other*
TOT
other
no
Dual listing
Yes
No
1
0
20
26
3
0
24
26
TOT
1
46
3
50
χ2
4,710
V
0,307
*all'interno dello Statement of changes in equity
28
Comparison between the two performance indicators: ROECI and ROENI
H5: The calculation of the ROECI expresses the measure of performance better than the
calculation of the ROENI;
Hypothesis H5 is confirmed for the analysed sample.
Furthermore, this aspect can give us useful information in relation to a comparison between
indicator CI as opposed to NI with regards to the informative advantage/disadvantage of the
potential investors, as stemming from the inclusion of the new concept of CI. This statistical
analysis completes the already commented section on the significance of OCI. As it can be seen
from graph n. 7, a regression analysis was carried out over the course of 3 years and the situation
appears to have significantly improved from 2008 (ante IAS 1 revised) to 2009 and 2012 (post IAS
1 revised). Indeed, the points appear to be better aligned on a straight line and the values of R
square definitely seem higher, closer to 1, the maximum value: this highlights a perfect and
positive correlation between the two variables.
As underlined in the introduction, the concept of Comprehensive Income has attracted strong
criticism with regards to the risk of higher volatility of the indicator, as opposed to the most
traditional NI. Components of comprehensive income tend to be more volatile than net income. A
key concern for some managers about standards increasing the prominence of comprehensive
income (by requiring it to be presented in a performance statement) is that it could lead investors to
increase their assessment of the volatility of the firm’s performance (Henry, 2011). This aspect,
indeed, if empirically verified, may be seen by investors and stakeholders as having a negative
impact both on the outside, in terms of stock exchange quotes and cost of equity , than on the inside,
because of a worsened evaluation by managers (Incollingo, Di Carlo, 2011).
Graph n. 7: Correlation between ROE (ni) and ROE (ci)
29
2008
y = 0.9502x - 0.0571
R² = 0.4782
130%
120%
ROE (ci)
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-30%
0%
-10%
-10%
ROE (ni)
10%
30%
50%
70%
90%
110%
130%
-20%
-30%
2009
130%
120%
y = 1.0569x + 0.0064
R² = 0.919
ROE (ci)
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-30%
0%
-10%
-10%
ROE (ni)
10%
30%
50%
70%
90%
110%
130%
-20%
-30%
30
2012
130%
120%
y = 0.8866x - 0.0065
R² = 0.9198
ROE (ci)
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
-30%
0%
-10%
-10%
ROE (ni)
10%
30%
50%
70%
90%
110%
130%
-20%
-30%
We can now focus on the results of the last part of our survey, which concentrates on the
convergence within Europe and between Europe and the United States. It shall be clarified that the
following hypothesis have been reviewed using the methods of descriptive statistics.
H6: The presence of NON-GAAP measures in general and the space given to the communication
of performance is improved since the adoption of IAS 1 revised.
A descriptive analysis doesn’t show an improvement in the presence of NON GAAP measures
following the adoption of the IAS 1 revised (see graph n. 8). The presence of information with
regards to the performance in the annual report is also reviewed in other surveys (Devalle 2010;
Ferraro, 2011; De Cristofaro, Falzago, 2012; Agostini, Marcon, 2013). The impact of the adoption
of IAS 1 could have caused an incentive to increase the information on the financial performance,
even though the calculation of the so called NON GAAP measures. However, this has not
happened, despite a number of differences among the various countries taken as samples: this
aspect, which in any case cannot be generalised because of the non-significant numerosity of the
sample, has probably been negatively influenced by the financial and economic crisis which has
31
impacted the corporate groups for the years which have been the object of the survey (Fernandez,
Carro Arana, 2010).
Graph n. 8: Communication of performance in 2008. 2009 and 2012
12
10
8
2008
6
2009
4
2012
2
0
France
Italy
UK
Germany
USA
H7: Compared to U.S. firms, European companies have an increasingly similar behaviour in the
choice of the presentation of the income statement in 2009 and 2012 rather than in 2008
This hypothesis is based on the predictable expectation that the adoption of IAS 1 revised may
have caused an improvement in the convergence process among the European countries reviewed.
The analyzed variables concern a number of modes of presentation of Income Statement. This
hypothesis is confirmed (see graph n. 9 and 10) with regards to the chosen format: in the years 2009
and 2012, as already commented in the introductory section, European companies have aligned on
the option of Separate Financial Statement, save for some sporadic cases in Germany and in the
UK. Hence, with regards to the choice of the format in Europe, there is a full convergence and this
appears fundamental in terms of disclosure of performance and comparability of information
regarding the CI (Tarca et al., 2008).
Surveys on a number of other countries, such as Italy (Cimini, 2012), Spain, etc, with regards to
the budgets of 2009, a year before the adoption of the IAS 1 revised, have shown similar results on
different samples, and this is confirmed by our analysis for the year 2012 too, two years after the
adoption of the accounting principle. The main objective of companies is, hence, that of keeping the
two indicators of performance separate, through the drafting of two separate prospects so as to place
the OCI separate from other positive and negative components of income.
The elimination of the third choice, largely adopted throughout the European sample in the years
before 2009 but not quite as much in the US sample, therefore shows an expectation of the IASB
towards higher transparency, thus removing the possibility for preparers “to hide” an important
indicator of profitability in the Statement of changes in equity. With regards to other modes of
presentation of the Income Statement on the other hand, there isn’t always homogeneity and
alignment: one just needs to look at the way in which the financial area is presented or the one in
32
which classification of costs is also presented. Furthermore, significant differences remain despite
the adoption of the same IAS normative framework.
Hypothesis H7 is confirmed for the analysed sample in relation to the chosen reporting method,
the adopted terminology and the absence of extraordinary items.
Graph n. 9: Income statement: by function, by nature or neither
100%
0%
0%
90%
0%
100%
20%
90%
80%
70%
80%
50%
70%
60%
60%
60%
80%
50%
50%
40%
90%
40%
80%
30%
20%
0%
10%
10%
30%
50%
20%
10%
30%
10%
20%
0%
0%
FR
ITA
by function
GER
by nature
UK
neither
USA
by function
by nature
neither
Graph n. 10: Numbers of prospectuses
100%
100%90%
100%
100%
100%
100%
80%
70%
70%
80%
60%
40%
20%
30%
20%
30%
10%
0% 0% 0%
0% 0% 0%
0% 0%
0% 0% 0%
0% 0% 0%
0%
one
two
prospectus prospectuses
other
one
two
prospectus prospectuses
2008
2009
FR
ITA
other
one
two
prospectus prospectuses
other
2012
GER
33
90%
100%
90%
80%
90%
80%
70%
80%
60%
40%
20%
0%
10%
10%
10%
10%
30%
20%
0%
0%
10%
0%
0%
0%
one
two
prospectus prospectuses
other
one
two
prospectus prospectuses
2008
2009
UK
other
one
two
prospectus prospectuses
other
2012
USA
H8: Italian, French and German companies have a similar behaviour in the choice of the
presentation of the income statement;
H9: British and American companies have a similar behavior in the choice of the presentation of
the income statement.
Hypothesis H8 and H9 are based on the presumption that the accounting continental systems
such as those of Italy, France and Germany follow a similar behaviour, while Anglo-Saxon ones,
UK and US, show more similar characteristics (Kvaal, Nobes, 2010), see graph n. 11, 12, 13 and
14.
Hypothesis H8 is confirmed for the analysed sample in relation to the adopted terminology and
the absence of extraordinary items.
Hypothesis H9 is confirmed for the analysed sample with regards to the inclusion of a line, to the
presence of financial income and expenses and to the absence of extraordinary items.
34
Graph n. 11: Terminology adopted
FR
0%
ITA
GER
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
90%
90%
100%
2008
income statement or statement of income
profit and loss account
0%
10%
10%
90%
90%
100%
2009
income statement or statement of income
profit and loss account
0%
10%
10%
100%
90%
100%
2012
income statement or statement of income
profit and loss account
0%
0%
10%
UK
0%
USA
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2008
income statement or statement of income
50%
operations statement
0%
statement of comprehensive income
0%
0%
0%
statement of earnings
10%
40%
2009
income statement or statement of income
50%
operations statement
0%
statement of comprehensive income
0%
0%
statement of earnings
40%
2012
50%
0%
statement of comprehensive income
0%
0%
statement of earnings
90%
10%
10%
income statement or statement of income
operations statement
100%
90%
10%
10%
30%
35
Graph n. 12: Absence of extraordinary items
100%
100%
90%
80%80%
100%
100%
100%
90%
100%
100%
90%
90%
90% 90%
90%
80%
80%
100%
80%
70%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
2008
2009
FR
ITA
2012
2008
GER
2009
UK
2012
USA
Graph n. 13: Income statement: inclusion of a line (the possibility to highlight a first partial result in the
income statement)
100%
100%
90%
80%
80%
70%
70%
70%
80%
70%
80%
70%
70%
60%
90%
50%
60%
50%
50%
50%
40%
40%
30%
30%
20%
20%
10%
40%
30%
40%
30%
30%
20%
10%
10%
0%
0%
2008
2009
FR
ITA
GER
2012
2008
2009
UK
2012
USA
36
Graph n. 14: Presence of financial income and expenses
100%
100%
90%
80%
80%
70%
80%
70%
60%
60%
90%
60%
60%
70%
60%
50%
50%
50%
40%
40%
30%
30%
30%
30%
20%
20%
20%
10%
10%
0%
40%
40%
30% 30%
20%
20%
0%
2008
2009
FR
ITA
GER
2012
2008
2009
UK
2012
USA
6. CONCLUSION
It is sometimes claimed that financial reporting was a significant cause of the recent financial
crisis or that it made the crisis significantly worse. The evidence does not suggest that fair value
accounting either caused the recent crisis or made it significantly worse. Fair value simply reflected
falling asset prices, it did not cause them (Singleton-Green, 2012). Standard setters and regulators
appear to have different objectives: standard setters are primarily interested in transparency,
regulators in financial stability. But standard setters and regulators do have some interests in
common; they both want to use financial reporting information to help understand economic reality.
(Barth, 2011).
One way to understand the reality of the economic system is the correct interpretation of the
economic-financial reality of companies and in particular of their financial performance. Standard
setters have worked in order to improve the ways of communication of performance within the
annual report, through the review of the IAS 1 (IAS 1 revised, 2007), within a joint project between
IASB and FASB (IASB, 2010).
The result is the adoption of an accounting principle common to both set of standards, IFRS and
US GAAP, which causes drastic innovation in terms of performance reporting choices. We can thus
see the introduction of a new concept of income, which is only “new” for the European accounting
systems but not for the American one, as it was already known at the end of the ‘90s. This is the
Comprehensive Income, which is given by the sum of the Net Income and the Other
Comprehensive Items. The definition of other comprehensive is somewhat “circular”: it comprises
37
everything that is in comprehensive income but excluded from net income. Components of other
comprehensive income include unrealized gains and losses on available-for-sale securities, net gain
or loss on certain derivatives, currency-translation adjustments, revaluation of property, plant and
equipment and certain gains or losses associated with pension or other postretirement benefits
(IASB ED/2010/5).
The aim of this project has been that of analysing the situation post-IAS 1 revised in the most
directly affected areas, Europe and the USA. The application of a different accounting principle,
substantially convergent between IFRS and US GAAP, shall thus be considered positively in times
of financial crisis. It is however important to underline that “there is a large gap between what
standard setters can achieve and what they are expected to achieve. Social systems are so complex
that it is unrealistic to expect anyone to have the knowledge and ability to design a better system.
We need a better balance between the top-down imposition of standards and bottom-up evolution of
accounting practice” (Singleton-Green, 2012).
This research intended to conduct an empirical survey in order to verify the degree of effective
convergence with regards to the Income Statement and the communication of performance within
the traditional annual report. The research has been developed through the verification of different
hypothesis which statistical tests have only partially confirmed. Results obtained, partially
corroborated by previous research, underline that the format of the Income Statement and the
“location” of the Comprehensive Income can be interpreted both as factors which can influence the
choices of investors (Maines, 2000; Tarca et al. 2008) and as an instrument available to managers in
order to alter the communication of the firm’s performance (Riedl, Srinivasan, 2010).
The change in presentation options made by ASU 2011-05 is a relatively small step toward
convergence because differences remain in how comprehensive income is calculated and reported
under the two sets of standards. There are, in fact, remaining differences between U.S. GAAP and
IFRS with respect to the types of items that should be included in other comprehensive income and
their related reclassification adjustments (Harrington, 2012). Nonetheless, the options for
presentation will be conformed, a change that should facilitate comparisons of financial statements
prepared under the different sets of standards (Henry, 2011). The real problem remains the
continuing lack for a conceptual framework for the Comprehensive Income (Rees, Shane, 2012) .
Indeed, some consider comprehensive income to be “an artifact of compromise-based standard
setting [that] has often been used as a repository for items that conceptually belong in the income
statement (5)”.
5
Comment letter from the CFA Institute dated September 30, 2010. Retrieved from http://www.fasb.org/jsp/FASB/
CommentLetter_C/CommentLetterPage&cid=1218220137090&project id=1790-100
38
The study of the method of presentation of the income statement is useful in order to identify the
choices of performance reporting adopted by various companies: a basic step would be to consider
not only the prepares’ point of view but also the users’ one. For this purpose, the analysis should be
integrated with experiments similar to those carried out in some studies such as Maines, 2000 and
Tarca et al., 2008 through the evaluation of professional and non-professional investors’ or users’
judgements. Another limitation is the selected sample: in this perspective, it could be useful to
increase the number of companies and countries involved in research in order to make
generalizations at European level.
Acknowledgments:
We appreciate doc. Giovanni Riccardi, research fellow at the University of Pisa, for his help in
statistical analysis.
*
Although this paper is the result of conjoint analysis, sections 1 and 6 have been written by
Roberto Verona, while sections 2, 3 and 4 by Silvia Rossetti, and section 5 by Federica Doni.
39
REFERENCES
ACCOUNTING PRINCIPLES BOARD (APB), (1966), Reporting the Results of Operations. Opinion 9.
Available
at:
http://www.fasb.org/jsp/FASB/Page/PreCodSectionPage&cid¼1176156405418&pid¼1218220137031
AGOSTINI M., MARCON C., (2013), Comprehensive Income (CI) Statement’s Compliance With
International Accounting Standard (IAS) 1 (Revised 2007 and 2011): Evidence from Italian Listed Corporate
Groups, Journal of Modern Accounting and Auditing, Vol. 9, No. 1, pp. 1-19.
ALIABADI, S., CHEN H., & DORESTANI, A., (2011). Fair Value Determination. A Conceptual Framework.
Journal of Accounting – Business Management, Vol. 18, No. 1, 93-107.
AMPOFO A.A., SELLANI J.R. (2005). Examining the differences between United States Generally
Accepted Accounting Principles (U.S. GAAP) and International Accounting Standards (IAS): implications
for the harmonization of accounting standards, Accounting Forum 29, pp. 219-231.
BAMBER L.S., JIANG J., PETRONI, K.R., WANG, I.Y., (2010). Comprehensive Income: Who’s Afraid of
Performance Reporting?, The Accounting Review, Vol. 85, No. 1, pp. 97-126.
BARKER, R., (2010). On the Definition of Income, Expenses and Profit in IFRS. Accounting in Europe,
Vol. 7, No. 2, pp. 147-158.
BARTH, M., LANDSMAN W., LANG M., & WILLIAMS C., (2007). ACCOUNTING QUALITY: INTERNATIONAL
accounting standards and US GAAP, SSRN.
BELLANDI F. (2009). Accounting for Equity and Other Comprehensive Income, Università La Sapienza,
Roma.
BLOOMER C., (1996). The IASC-US comparison project: a report of the similarities and differences
between IASC standards and US GAAP, Connecticut, FASB.
CAIRNS D. (2010). Accounting standards and the financial crisis, Accountancy Magazine, March, 67.
CALLAGAN, S., TREACY, M., (2007). Towards convergence. IFRS to US GAAP Differences,
Accountancy Ireland, Vol. 39, No. 6, pp.10-14.
CARMONA, S., (2010). Editorial, European Accounting Review, Vol. 19, No. 1, pp. 1-5.
CHAMBERS D.J. (2011). Comprehensive Income Reporting: FASB Decides Location Matters, The CPA
Journal, September, pp. 22-25.
CHAMBERS D.J., LINSMEIER T.J., SHAKESPEARE C.E., SOUGIANNIS T. (2007). An evaluation of SFAS No.
130 comprehensive income disclosures, Review of Accounting Studies, Vol. 12, pp. 557-593.
CHAPLINSKI, S., RAMCHAND, L., (2000). The Impact of Global Equity Offerings. The Journal of Finance,
Vol. 6, pp. 2767-2789.
CIMINI R., (2012). La rappresentazione del comprehensive income in Italia: l’evidenza empirica
nell’esercizio di prima applicazione dello IAS 1-revised, Rivista Italiana di Ragioneria e di Economia
Aziendale, Gennaio-Febbraio, pp. 95-107.
40
D’ESTE C., FELLEGARA A.M. (2009). Valore economico, fair value e redditi non realizzati, prime
evidenze empiriche della rendicontazione del comprehensive income in Italia. Financial Reporting, n. 4, pp.
9-34.
DE CRISTOFARO T., FALZAGO B., (2012). Quale format per il nuovo Conto Economico ex IAS revised
2007? Prime evidenze empiriche sulla rappresentazione del Comprehensive Income, Economia aziendale on
line, N.1/2012, available on www.ea2000.it
DEHNING, B., RATLIFF, P.A. (2004). Comprehensive income: Evidence on the effectiveness of FAS 130.
The Journal of American Academy of Business, 4(1/2), pp. 228-232.
DEVALLE A. (2010). Misurazione della performance nel bilancio IFRS, Pearson Italia, Milano-Torino.
ERIKSON, D., ESPLIN, A., MAINES, L.A., (2009). One world – One accounting, Business Horizons, Vol.
52, pp. 531-537.
FERNANDEZ, F.S., CARRO ARANA, M.M., (2010). Effects Of Comprehensive Income on ROE In a
Context of Crisis: Empirical Evidence for IBEX – 35 Listed Companies (2004-2008), International Business
& Economics Research Journal; Vol. 9, No, 1, pp. 89-100.
FERRARO O. (2011). Comprehensive Income in Italy: Reporting Preferences and Its Effects on
Performance Indicators, Journal of Modern Accounting and Auditing, December 2011, Vol. 7, No. 12, pp.
1315-1328.
FINANCIAL ACCOUNTING STANDARDS BOARD (1997). Reporting Comprehensive Income. Statement of
Financial Accounting Standards No. 130. Stanford, CT: FASB.
FINANCIAL ACCOUNTING STANDARDS BOARD (2011), Accounting Standards Update, Comprehensive
Income, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out
of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, No. 2011-12,
December 2011, available on www.fasb.org
FITZPATRICK B.D., RAJU S.S., TOCCO A.L., (2010). Comprehensive Income Option: A Detriment To
Transparency, International Business and Economic Research Journal, Vol. 9, Issue 8, pp. 21-28.
GONCHAROV I., HODGSON A. (2011). Measuring and Reporting Income in Europe, Journal of
International Accounting Research, Vol. 10, No. 1, pp. 27-59.
HANIFFA R.M., COOKE T.E., (2005). The impact of culture and governance on corporate social reporting.
Journal of Accounting and Public Policy, Vol. 24, pp. 391–430.
HARRINGTON T.L. (2012). Changes to Comprehensive Income Reporting, CPA Journal, Summer.
HENRY E. (2011). Presentation of Comprehensive Income: Another (Small) Step Toward Convergence,
The Journal of Corporate Accounting & Finance, / November/December, pp. 85-90.
HIRST D.E., HOPKINS P.E. (1998). Comprehensive Income Reporting and Analysts’ Valuation Judgments,
Journal of Accounting Research, Vol. 36 Studies on Enhancing the Financial Reporting Model, pp. 47-75,
Blackwell Publishing.
HUNTON, J.E., LIBBY, R., MAZZA, C.L., (2006). Financial Reporting Transparency and Earnings
Management. The Accounting Review, Vol. 81, No. 1, pp. 135-157.
41
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) (2007), IAS 1 - Presentation of Financial
Statements, available on http://www.ifrs.org
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) (2008), Preliminary Views on Financial
Statement Presentation – Discussion Paper, October, available on http://www.ifrs.org
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB), International Accounting Standard Board Financial Accounting Standards Board (IASB-FASB) (2010), Project Update – Statement of Comprehensive
Income – Joint project of the IASB and FASB available on http://www.ifrs.org.
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB), (2010). Exposure Draft. ED/2010/5.
Presentation of Items of Other Comprehensive Income. Proposed Amendments to IAS 1, available on
http://www.ifrs.org
IASB, (2013). Meeting of the G20 Finance Ministers and Central Bank Governors 15-16 February 2013
Update by the IASB and FASB convergence, available on http://www.ifrs.org
INCOLLINGO A. (2009). La comunicazione della performance aziendale attraverso il bilancio. Dinamiche
evolutive nei principi e nella prassi internazionale, Giappichelli, Torino.
INCOLLINGO A., DI CARLO A., (2012) IAS 1 revised e nuova rappresentazione della performance
economica nel bilancio: evidenze empiriche da Italia e Francia, Financial Reporting, No. 2, pp. 11-41.
INCOLLINGO A., DI CARLO A., LUCCHESE M., (2013) The quality of comprehensive income as
performance measure: evidence from Italian listed companies, 36th Annual Congress European Accounting
Association, 6-8 May, Paris.
JORDAN, C.E., CLARK, S.J., (2002). Comprehensive Income: How is It Being and What are Its Effects?,
The Journal of Applied Business Research, Vol. 18, No. 2, (Spring) pp. 1-8
KETZ J.E., (1999). Comprehensive Income: What do the Numbers Disclose?, The Journal of Corporate
Accounting and Finance/Summer, pp. 79-96.
KVAAL E., NOBES C., (2010). International differences in IFRS policy choice: a research note,
Accounting and Business Research, Vol. 40, No. 2, 173-187.
LAUX C., LEAUZ C., (2009) The Crisis of Fair Value Accounting: Making Sense of the Recent Debate,
Chicago Booth Research paper no. 33, Accounting, Organization and Society, Vol. 34, pp. 826-834.
LEE, Y.J., PETRONI, K.R., SHEN, M., (2006). Cherry Picking, Disclosure Quality, and Comprehensive
Income Reporting Choices: The Case of Property-Liability Insurers. Contemporary Accounting Research,
Vol. 23, No. 3, pp-655-692.
LIPE, M.G., (2009). Early evidence of the volatility of comprehensive income and its components.
Academy of Accounting and Financial Studies Journal, Volume 13, Special Issue, 2009, pp. 83-92.
MAINES L.A., MCDANIEL L.S. (2000). Effects of Comprehensive Income Characteristics on
Nonprofessionals Investors’ Judgements: The Role of Financial-Statements Presentation Format, The
Accounting Review, Vol. 75, No. 2, pp. 179-207.
42
MC COY T.L., THOMSON J.H., HOSKINS M.A. (2009). Early evidence of the volatility of comprehensive
income and its components, Academy of Accounting and Financial Studies Journal, Volume 13, Special
Issue, 2009, pp. 83-92.
MC GREGOR W., (1999). An insider’s view of the current state and future direction of international
accounting standard setting. Accounting Horizons, Vol. 13, No. 2, 159-168.
MOSSO D., (2010). Transparency Unveiled: Financial Crisis Prevention through Accounting Reform.
Accounting Horizons, Vol. 24, No. 1, 95-107.
PANDIT G.M., PHILLIPS J.J. (2004). Comprehensive Income: Reporting Preferences of Public Companies,
The CPA Journal, November, pp. 40-41.
PANDIT G.M., RUBENFIELD A., PHILLIPS J.J., (2006). Current NASDAQ Corporation Methods of
Reporting Comprehensive Income, Mid-American Journal of Business, Vol. 21, No. 1, pp. 13-19.
PISANI M. (2007). La misura delle prestazioni nel bilancio di esercizio. Il comprehensive income
statement, FrancoAngeli, Milano.
POZZOLI, M., (2003). Processo di convergenza dei “principi contabili internazionali generalmente
accettati”. Contabilità Finanza e Controllo, Vol. 8-9, pp. 808-817.
PRICEWATERHOUSECOOPERS, (2012). Similarities and Differences. A comparison of IFRS and US
GAAP, PWC, Londra.
REES L.L., SHANE P.B. (2012). Academic Research and Standard Setting: The Case of Other
Comprehensive Income, Accounting Horizons, Vol. 26, No. 4, pp. 789-815.
RIEDI, E.J., SRINIVASAN, S., (2010). Signaling Firm Performance Through Financial Statement
Presentation: An Analysis Using Special Items. Contemporary Accounting Research, Vol. 27, No. 1, pp.
289-332.
SINGLETON-GREEN B., (2012). Commentary: Financial Reporting and Financial Stability; Causes and
Effects, Australian Accounting Review, No. 60, Vol. 22, Issue 1, pp. 15-17.
SINGLETON-GREEN B., (2012). The US and IFRS: Which Way Ahead?, Australian Accounting Review,
No. 60, Vol. 22, Issue1, pp. 51-53.
SMITH D.J., BOYES W.J., PESEAU D.E., (1975), The measurement of firm size: Theory and evidence for
the U.S. and the U.K. Review of Economics and Statistics, Vol. 57, No. 1, pp. 111-114.
TARCA A., (2005). International Convergence of Accounting Standards: an investigation of the use of
IAS “options” not acceptable under US GAAP. International Journal of Business Studies, Vol. 13, No. 1, pp.
67-86.
TARCA A. (2013). Appendix. The Case for Global Accounting Standards: Arguments and Evidence,
available on http://www.ifrs.org.
TARCA A., HANCOCK P., WOODLIFF D., BROWN P., BRADBURY M., VAN ZJIL T. (2008). Identifying
Decision Useful Information with the Matrix Format Income Statement, Journal of International Financial
Management and Accounting, Vol. 19, No.2, pp. 184-217.
43
THINGGARD F., WAGENHOFER A., et al., (2006). Performance Reporting – The IASB’s Proposed Formats
of Financial Statements in the Exposure Draft of IAS 1, Accounting in Europe, Vol. 3, pp. 35-63.
VALIPOUR, H., SHAHABI, A., MORADI, J., (2012). Relevance of Income Levels and Income Components
for Determining Firm Value. European Journal of Economics, Finance and Administrative Sciences, Vol. 44,
pp. 36-44
VAN CAUVENBERGER, I. DE BEELDE (2007). On the IASB Comprehensive Income Project: An Analysis
of the Case for Dual Income Display, Abacus, Vol. 43, No. 1, pp. 1-26.
WEISS, J., (2011). Accounting Standards Update (ASU) 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. GAAP Update Service, Vol. 11, Issue 14.
WONG J., WONG N. (2010). Voluntary disclosure of operating income, Accounting and Finance, Vol. 50,
pp. 221-239.
WU, C., & KWOK C.C.Y., (2002), Why Do US Firms Choose Global Equity Offerings, Financial
Management, Summer, pp. 47-65.
44