Abstract

SOUSA FERNANDEZ, Francisco. The decline of the traditional statement of income in the face of the recent rise of clean surplus accounting: a historical and conceptual perspective. Contad. Adm [online]. 2010, n.230, pp.47-76. ISSN 0186-1042.

With the adoption of comprehensive income in the 1990's by the most important accounting standards boards, most notably the IASB and the FASB, we are witnessing a shift towards a clean surplus accounting. The comprehensive view of income measures income in terms or both the changes in the market value of a firm's assets and liabilities as well as the profit/ loss resulting from a firm's transactions. By contrast, so-called "dirty surplus" accounting measures income only on the basis of a firm's transactions; thus, it is much less connected with market reality. The primary objective of this paper is to provide a historical and conceptual examination of the "clean surplus versus dirty surplus" controversy as it has transpired within Anglo-Saxon influenced countries. Additionally, we verify that comprehensive income has become more relevant with the revision of IASB's IAS 1 in 2007. This statement allows firms to incorporate the traditional profit and loss account into a Statement of Comprehensive Income. The objective of this change is to provide investors, the primary users of reference in Anglo-Saxon accounting models, with more useful and relevant information. This objective is important since we are trending toward the Anglo-Saxon model.

Keywords : clean surplus versus dirty surplus; historical and conceptual approach; decline of profit and loss account; statement of comprehensive income; IAS 1 2007.