Comparing the Value Relevance, Predictive Value, and Persistence of Other Comprehensive Income and Special Items

• 成果类型: Article
• 署名作者: Jones, Denise A.; Smith, Kimberly J.
• 署名单位: William & Mary
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-10133
• 发表日期: 2011
• 页码: 2047-2073
• 关键词: prices fully reflect; Earnings persistence; market valuation; Cash flows; investment securities; net income; accruals; firm; CLASSIFICATION; INFORMATION

摘要

Gains and losses reported as other comprehensive income (OCI) and as special items (SI) are often viewed as similar in nature: transitory items with little ability to predict future cash flows and minimal implications for company value. However, current accounting standards require SI gains and losses to be recognized in net income, while OCI gains and losses are deferred until realized. This study empirically compares OCI and SI gains and losses using a model that jointly estimates value relevance, predictive value, and persistence. Results show that both SI and OCI gains and losses are value-relevant, but SI gains and losses exhibit zero persistence (i.e., are transitory), while OCI gains and losses exhibit negative persistence (i.e., partially reverse over time). Further, we find that SI gains and losses have strong predictive value for forecasting both future net income and future cash flows, while OCI gains and losses have weaker predictive value.