The location of comprehensive income reporting – does it pass the financial analyst revision test?

Abstract

Purpose This paper aims to test whether a change in the reporting location of income, and other comprehensive income (OCI) components, in a statement of comprehensive income (SoCI) under International Financial Reporting Standards affects their value-relevance and use by financial analysts. Design/methodology/approach The study tests the associations between CI, OCI, share returns and financial analyst forecast revisions. Findings Results show that comprehensive income is less value-relevant than net income, regardless of reporting location. Changing the reporting location of OCI components to the SoCI does not provide incremental improvement for financial analysts or stock prices. Finally, the paper finds that analysts use OCI components to revise forecasts. Originality/value The paper addresses the question of which OCI components should be reported, and the importance of reporting location. The paper extends the examination of OCI components to financial analysts as expert financial report users.