The definitions of net income and comprehensive income and their implications for measurement

Ikuo Nishikawa, Takao Kamiya, Yasunobu Kawanishi

Research output: Contribution to journalComment/debate

8 Citations (Scopus)

Abstract

SYNOPSIS: Historically, accounting standard-setters have not been successful in defining net income. Nor have they been successful in justifying the use of other comprehensive income (OCI) and recycling. This paper proposes the definitions of net income and comprehensive income and an approach to measurement based on the proposed definitions. Net income and comprehensive income should be defined as two separate elements of financial statements, with OCI being the linkage factor that reconciles the two elements. Recycling of all OCI items is required for both elements to have the characteristic of all-inclusiveness. Net income should represent the irreversible outcomes of an entity’s business activities, and it follows that the measurement basis of current value should be used from the perspective of reporting an entity’s financial performance only when an asset (or a liability) is readily converted to cash (or settled) and the entity’s business activity does not legally, contractually, or economically restrict the entity’s opportunity to convert the asset to cash (or settle the liability).

Original languageEnglish
Pages (from-to)511-516
Number of pages6
JournalAccounting Horizons
Volume30
Issue number4
DOIs
Publication statusPublished - 2016 Dec 1

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Comprehensive income
Net income
Other comprehensive income
Liability
Business activity
Cash
Assets
Factors
Financial statements
Financial performance
Linkage
Inclusiveness
Accounting standards

ASJC Scopus subject areas

  • Accounting

Cite this

The definitions of net income and comprehensive income and their implications for measurement. / Nishikawa, Ikuo; Kamiya, Takao; Kawanishi, Yasunobu.

In: Accounting Horizons, Vol. 30, No. 4, 01.12.2016, p. 511-516.

Research output: Contribution to journalComment/debate

Nishikawa, Ikuo ; Kamiya, Takao ; Kawanishi, Yasunobu. / The definitions of net income and comprehensive income and their implications for measurement. In: Accounting Horizons. 2016 ; Vol. 30, No. 4. pp. 511-516.
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