University of Cincinnati Lindner College of Business

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Is Other Comprehensive Income Reported in the Income Statement More Value Relevant?

Author(s): Stephen Lin, Donel Martinez, Changjiang Wang, Ya-wen Yang

Status: Accepted
Year: 2016
Publication Name: Journal of Accounting, Auditing & Finance


This study examines (a) whether other comprehensive income (OCI) is more value relevant when reported in a more prominent and transparent location in financial statements, (b) how economic condition affects value relevance of OCI reported in different locations, and (c) whether value relevance of OCI is affected by the implementation of Accounting Standard Update (ASU) 2011-05, which requires reporting OCI in either a combined state- ment of income and comprehensive income or a separate statement of comprehensive income (SCI), and prohibits reporting OCI only in the statement of changes in shareholders’ equity (SSE). Using manually collected data for the period 2000-2012, we find that investors consistently priced OCI reported in the SSE during the entire test period. We also find that investors priced OCI reported in the SCI only during recent financial crisis period (2007- 2009) when the magnitude and volatility of OCI significantly increased. Further evidence shows that this finding is not driven by the investment bias of transient investors. Finally, we find that value relevance of OCI decreases for firms that changed the reporting location of OCI from SSE to SCI following the implementation of ASU 2011-05 compared with firms that did not change the reporting location. As investors are expected to be more capable of incorporating information reported in a more transparent location into price, this study explores some plausible explanations for the puzzling finding and calls for future research.


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