Is Other Comprehensive Income Reported in the Income Statement More Value Relevant? The Role of Financial Statement Presentation

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 statement 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 i...