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The value relevance of comprehensive income under IFRS and US GAAP: empirical evidence from Germany

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  • Jurgen Ernstberger

Abstract

The IASB and FASB are currently conducting a project on performance reporting which broadly addresses the definition and presentation of income in financial statements. This study examines and compares the current practice of performance reporting under IFRS and US GAAP within a homogenous institutional setting. Therefore, it uses a sample of companies which were listed in the major segments of the German stock exchange during the period 2001–2004 and which voluntarily applied IFRS or US GAAP. The major results of our study are that: comprehensive income appears to provide no incremental value relevant information beyond net income in explaining stock returns; comprehensive income under IFRS provides more incremental value relevant information than comprehensive income under US GAAP; concerning the components of other comprehensive income, only unrealised gains and losses from available-for-sale financial assets in the IFRS sample are clearly incremental value relevant.

Suggested Citation

  • Jurgen Ernstberger, 2008. "The value relevance of comprehensive income under IFRS and US GAAP: empirical evidence from Germany," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 5(1), pages 1-29.
    • Handle: RePEc:ids:ijaape:v:5:y:2008:i:1:p:1-29
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    Citations

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    Cited by:

    1. Matthias Demmer & Paul Pronobis & Teri Lombardi Yohn, 2019. "Mandatory IFRS adoption and analyst forecast accuracy: the role of financial statement-based forecasts and analyst characteristics," Review of Accounting Studies, Springer, vol. 24(3), pages 1022-1065, September.
    2. Veltri, Stefania & Ferraro, Olga, 2018. "Does other comprehensive income matter in credit-oriented systems? Analyzing the Italian context," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 30(C), pages 18-31.
    3. Ido Kallir & Tamir Agmon, 2015. "Valuating the Value and Risk of International Start-up Ventures," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(2), pages 203-217, April.
    4. Thomas Ryttersgaard, 2021. "Bridge over troubled water: Is it possible to define other comprehensive income?," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2021(1), pages 61-87.
    5. Alain Devalle & Riccardo Magarini, 2012. "Assessing the value relevance of total comprehensive income under IFRS: an empirical evidence from European stock exchanges," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 8(1), pages 43-68.

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