COMPREHENSIVE INCOME, AN HISTORICAL PERSPECTIVE. THE DEVELOPMENT OF PROPRIETORSHIP AND ENTITY THEORIES, AN INTERNATIONAL APPROACH

ASB considers that the concept of Comprehensive Income (C.I.) successfully answers financial statements users’ needs. In June 2011, IASB and FASB separately issued convergent amendments on the presentation of O.C.I. The Boards also agreed two options to present items of O.C.I. This paper argues that the opportunity should now be taken to carry out further research in order to validate this new approach as being in accordance with existing accounting principles. The IASB and the FASB working jointly on comprehensive income has rekindled the heated twentieth century debate over proprietary versus entity theory. We examine that historic debate for the purpose of better understanding the current issues related to income determination. We suggest that as long as proprietary theory (Sprague, 1908, Hatfield, 1909, Canning, 1929) more recently residual equity theory (Sprouse, 1958) and contrast it with entity theory (Paton and Littleton, 1930. We argue that proprietary theory with its focus on measuring stockholder remains dominant. We then examine why we do not think that comprehensive income will not be adequate to meet users’ needs in a global economy. We then discuss the current IASB standard for measuring comprehensive income and discuss the advantage that entity theory affords in a global economy. We then examine the contemporary literature about “disclosure” (Beretta and Bozzolan, 2004; Hutton, 2004; Beattie and McInnes, 2006) and “value relevance” (Biddle and Choi, 2006; Ernstberger, 2008; Barton et al., 2010). Our objective is to offer an alternative measure of C.I. based on economic income that will provide all users better information for decision making.