Performance reporting: Statement of comprehensive income according to IFRS and professional investor information processing

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The income statement is a core element of financial reporting. Yet, the requirements for the design of the income statement provided by the international standard setter (International Accounting Standards Board, IASB) are vague and leave discretion for preparers of financial reports. In a current discussion paper, the IASB focuses on the decision-usefulness of performance reporting. Until today, a research gap has remained concerning the decision-usefulness of individual performance indicators, their impact on investor information processing and the context-dependence of this process. Therefore, the proposed project aims at significantly enhancing the theory foundation for the design of income reports via a two-step approach consisting of two experiments with professional investors and lenders: In the first experiment (part A), interrelations between different performance indicators such as profit/loss, EBITDA, and operating income are investigated. Further, the effect on investor information processing of income reports as well as the forecast quality of individual performance indicators are examined. We intend to analyze investor information processing as a mediator, which determines whether structural changes in the income statement may improve forecast quality and trust in investor forecasts. The second experiment (part B) explores whether professional investors and lenders process performance information in a different way and whether this process is moderated by important firm characteristics (profit vs. loss firm). To answer these research questions, eye-tracking is used, which will lead to innovative results since it has previously been used only rarely in accounting research.