The Impact of Financial Reporting Quality on Relevance of Level and component of Income Statement

Classification of financial statement - especially income statement - has been always one of the most controversial topics in accounting and financial literature. The standard inventors have been always encountered the question that how this classification can increase the usefulness of financial information and consequently improve the valuation of shares by investors. This paper seeks to explore the relevance of level and component of income statement with respect to financial reporting quality and classified the firms based on the levels of quality of financial reporting. Statistical sample includes 66 companies during 2007 to 2011. Statistical technique which has been used to test the hypotheses is the Multivariate Regression. The results show that the levels and component of income statement are significant factors in the valuation of firms listed in TSE and by increasing the quality of financial reporting; the information content of the component of income statement will increase.

Keywords:

Income statement , relevance , firm value , financial reporting quality