VALUE RELEVANCE OF OTHER COMPREHENSIVE INCOME UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS WITH AN EMPIRICAL STUDY IN THE PALESTINE EXCHANGE

Abstract

The value relevance of comprehensive income and other comprehensive income components has been examined in order to demonstrate whether the explicit disclosure of comprehensive income, which came under the IAS 1 (revised 2007) improved the value of accounting information from the point of view of investors for use in decision making and whether this information reflecting the economic conditions and changes of the company’s equity compared to the case of net income. This study was based on solid research models on the relevant value and predictive capacity of the other comprehensive income and was depend on statistical models developed by Fasan et al. (2014), Mechelli and Cimini (2014), He and Lin (2015), Günther (2015), which are based on the theories and concepts provided in this study. Thus, this study provides empirical analysis of the relevant value by looking at the correlation between market values and accounting figures and examining the correlation between comprehensive income and other comprehensive income components with share prices and returns on equity and investigates whether other comprehensive income has the potential to help in predicting of future net income and future cash flows. A sample of 27 Palestinian public shareholding companies between 2005 and 2018 was used. In collecting this data the manual method was used, through the annual financial statements disclosed by the companies for the mentioned period, in order to examine whether the comprehensive income is more value-relevance than net income.