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Accounting Review


accounting choice; comprehensive income; executive compensation; managerial


  1. Linda Smith Bamber
  2. John (Xuefeng) Jiang
  3. Kathy R. Petroni
  4. Isabel Yanyan Wang




    Firms can report comprehensive income in either an income-statementlike
    performance statement or the statement of equity. Traditional theories of contracting
    incentives cannot explain this reporting location choice that only affects where
    comprehensive income data appear, because the contractible values of net income,
    other comprehensive income items, and comprehensive income are exactly the same
    regardless of the location where the firm reports comprehensive income. Drawing on
    theory, analysis of comment letters, and results of survey-based and behavioral research,
    we identify two factors—equity-based incentives and concerns over job security—
    that help explain why most firms do not follow policymakers’ preference to
    report comprehensive income in a performance statement. Our empirical evidence on
    a broad cross-section of firms shows that managers with stronger equity-based incentives
    and less job security are significantly less likely to use performance reporting.
    Overall, our study suggests that even though the reporting location choice is inconsequential
    in a traditional rational markets view, managers act as if they believe that
    comprehensive income reporting location matters.


    Vol 85, Nomor 01, Tahun 2010


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