Labelling in financial reporting: An examination of “other comprehensive income” and non-professional investors' judgements

Abstract

Other comprehensive income (OCI) is often confusing for financial statement users and the International Accounting Standards Board has proposed new labelling to improve its presentation. Using an experimental method, we find that OCI labelling influences non-professional investors' evaluation and judgements on financial performance. Non-professional investors place greater weight on OCI information presented with explicit labels when assessing both the current and future performance of a company. Our results indicate that improving the presentation of OCI information enhances their perceived relevance in investors' decision-making. The results have practical implications for standard setters and financial statement users.