An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Keiichi Kubota
Musashi University

Kazuyuki Suda
Waseda University

Hitoshi Takehara
Waseda University

Abstract: This paper investigates the relative and incremental information content of the other comprehensive income items currently disclosed in Japan as dirty surplus. For that purpose we employ Wald statistics test by Biddle et al. (1995). The evidence from the relative information content test demonstrates that the net income turns out to be the dominant income measure as well as the “pseudo” comprehensive income in which selected combinations of the other comprehensive income items are added to (subtracted from) the net income numbers. However, all inclusive “pseudo” comprehensive income was inferior. In the incremental information content test we find that all items of other comprehensive income possess incremental information content except the land revaluations in case of the risk adjusted returns. The evidence at the industry level also confirms our basic findings and the disclosure of the net income as well as the selected items of other comprehensive income is warranted.

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