The impact of the gains and losses recognised direclty in equity on the company profitability. An empirical evidence from European Stock Exchanges

Alain Devalle -


The paper presents the results of an analysis of the impact of the gains and losses recognised directly in equity on the company profitability measured by the Return on Equity ratio. IFRSs define the total comprehensive income that represents a fundamental concept in financial reporting.

Furthermore, there is a great debate on the definition and relevance of the comprehensive income.

By means of an empirical analysis of the consolidated financial statements of the groups listed on the UK, French, German, Spanish and Italian Stock Exchanges and belongings to the main indexes, this research aims at verifying the impact of the "dirty surplus" on the evaluation of the profitability of a company measured by the return on equity ratio.

This paper shows that gains and losses have an important influence on the net income and have a highly variable weight in function of the nationality of the groups analysed and the different years. Consequently the ROE has considerable increases and decreases over the years.

Thus, under an investor point of view is profoundly different to evaluate the profitability of a company by the net income or by the total comprehensive income.

This research contributes to defining the relevance of the comprehensive income, which is a fundamental definition in accounting and extremely present after the revision of the IAS 1 by the IASB.


gains and losses recognised directly in equity, return on equity, comprehensive income, IFRS, profitability

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Registered by the Cancelleria del Tribunale di Pavia N. 685/2007 R.S.P. – electronic ISSN 2038-5498


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