How comprehensive is comprehensive income? The value relevance of foreign currency translation adjustments

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15 Citations (Scopus)

Abstract

Prior empirical research has been unable to forge an unambiguous link between foreign currency translation adjustments, which are an element of "other items of comprehensive income," and firm valuation. This study adds to the existing literature by empirically testing the value relevance of foreign currency translation adjustments in an earnings and book value model. Interaction terms, which serve as proxies for the theoretical sources of exchange rate exposure, are included in the estimating equation. The main finding of this study is that foreign currency translation adjustments are significantly value relevant when their parameter estimates are allowed to vary in the cross-section.

Original languageEnglish
Pages (from-to)97-122
Number of pages26
JournalJournal of International Financial Management and Accounting
Volume16
Issue number2
DOIs
StatePublished - 1 Jun 2005

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Comprehensive income
Foreign currency
Value relevance
Book value
Interaction terms
Cross section
Testing
Exchange rate exposure
Firm valuation
Empirical research

Cite this

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