Value relevance of the comprehensive income versus net income: a European perspective

This paper investigates the value relevance of comprehensive income versus traditional income, in order to consider the usefulness of reporting dirty surplus items in a more transparent way. To that end it uses price and return models. The sample includes 11,793 observations of quoted companies in Germany, France, The Netherlands and the United Kingdom in the period 1993-2002. The results provide evidence on the value relevance of income, both net and comprehensive income, moreover they confirm the usefulness of dirty surplus items. With regard to the individual role of these adjustments, there is not a common behaviour, but the decomposition of three analyzed adjustments appears to be clearly useful in the United Kingdom. These results have some implications for regulators; they reveal the convenience of disclosing separately the income and dirty surplus items in the same income statement, as this provides more transparency.