Comprehensive Income: Evidence on the Effectiveness of FAS 130

The Journal of American Academy of Business, Cambridge, Vol. 4, No. 1, pp. 228-232, March 2004

Posted: 26 Feb 2009

See all articles by Bruce Dehning

Bruce Dehning

Chapman University - The George L. Argyros College of Business and Economics

Paulette Ratliff

affiliation not provided to SSRN

Date Written: March 23, 2004

Abstract

Statement of Financial Accounting Standards No. 130 (FAS 130) "Reporting Comprehensive Income" requires all publicly traded companies to include a Statement of Comprehensive Income in their set of basic financial statements. As Comprehensive Income items have previously been disclosed in various parts of the financial statements, listing these items in statement form provides no information that has not already been available. Therefore, if markets are efficient, the disclosures required by FAS 130 should not affect firm value. The purpose of this paper is to provide empirical evidence of the usefulness of CI disclosures as required by FAS 130. In this study, we examine data for firms in periods immediately before and after enactment of FAS 130 rules. We find that there is no difference in the market's valuation of comprehensive income adjustments before and after the implementation of FAS 130. This is consistent with the efficient markets hypothesis in that there is no change in the way the market values the information due solely to the placement of the disclosure. Unless other benefits of FAS 130 can be shown, this statement appears to require additional information without a commensurate payback.

Keywords: Comprehensive Income, FAS 130, Recognition, Disclosure

JEL Classification: M15, M41, O14

Suggested Citation

Dehning, Bruce and Ratliff, Paulette, Comprehensive Income: Evidence on the Effectiveness of FAS 130 (March 23, 2004). The Journal of American Academy of Business, Cambridge, Vol. 4, No. 1, pp. 228-232, March 2004, Available at SSRN: https://ssrn.com/abstract=1306200

Bruce Dehning (Contact Author)

Chapman University - The George L. Argyros College of Business and Economics ( email )

1 University Drive
Orange, CA 92866
United States

Paulette Ratliff

affiliation not provided to SSRN ( email )

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