Sector Diversification of Statements of Comprehensive Income Illustrated with the Example of Entities Listed on the Warsaw Stock Exchange

Abstract Research background: The rules of preparing the statement of comprehensive income are included in the International Accounting Standard 1 “Presentation of Financial Statements” which gives a lot of freedom in the way information is presented in these documents. So the following question was asked whether the way of presenting information regarding results between enterprises representing the same industries manifests similarities or differences? Purpose: The main aim of this paper is to verify whether despite the high level of flexibility given by IAS 1 in presenting information, the statements of comprehensive income prepared by entities belonging to the same sectors, manifest significant similarities. Research methodology: The research covered the financial statements prepared for the financial years 2015–2017 and by almost 200 entities listed on the Warsaw Stock Exchange and representing 14 different industries. The method of descriptive statistics was used in the quantitative analysis. Results: The results obtained allowed to show many similarities in statements drawn up by entities representing the same sectors concerning among others: the forms of drawing up this document, the variant of a statement, its internal construction and presentation of other comprehensive income. Novelty: Research on sector differentiation of information in the statement of comprehensive income on a group of entities listed on the Warsaw Stock Exchange has not been conducted yet.


Introduction
The statement of comprehensive income was introduced in the solutions of the International Financial Reporting Standards in 2007 extending the current traditional profit and loss account to include the concept of comprehensive income. The rules of preparing a new statement are included in the International Accounting Standard 1 "Presentation of Financial Statements".
In 2019 it is ten years since the new solutions were introduced to the practice of preparing financial statements, which encourages conducting further research in this area.
The aim of the analysis is to present synthetically the rules of presenting information in a statement of comprehensive income in the light of new solutions included in the International Accounting Standards (IAS). The paper constitutes background for discussing the results of the conducted research concerning sector diversification of a way of presenting such information in the statements of entities listed on the Warsaw Stock Exchange (GPW). The following research hypothesis was formulated before the analysis was initiated: Despite a high level of flexibility in the way information is presented, the statements of comprehensive income prepared by entities belonging to the same sectors manifest significant similarities.
In order to achieve the objective, an analysis of accessible source literature including the solutions included in the International Accounting Standards was conducted (a source analysis method); also, the information included in the statements of the comprehensive income of 181 entities of 14 sector indices listed on the Warsaw Stock Exchange was analysed.
The method of descriptive statistics was used in the quantitative analysis. This paper consists of two parts. The first part presents the most important aspects and problems relating to the preparation of a statement of comprehensive income in line with IASs; the second part includes the results of the conducted research aiming at verifying the formulated research hypothesis.

The Statement of Comprehensive Income in the Light of the Solutions of the International Financial Reporting Standards
The concept of comprehensive income (CI) consists in the inclusion of events recognised before in equity in a financial statement of an entity. It is specified in its definition included in IAS 1, according to which comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners (IAS 1, paragraph 7). In such a situation, a statement of comprehensive income includes the current financial statement of an entity established in a traditional profit and loss account extended to include other comprehensive income (OCI), so far included in equity.
The main reason for introducing the concept of comprehensive income into financial reporting was the growing importance of the concept of value management and of understanding profit as increasing prosperity (wealth) of owners (Szychta, 2011, p. 82;Gierusz, 2014, p. 190), and also the growing demand of users for information prospective in character (Gierusz, 2014, p. 190;Emerling, 2014, p. 44). The aim of the introduced changes was to "remove" revenues and expenses from equity that is categories independent of the owners of equity (Walińska, Jurewicz, 2011, p. 27).
When discussing a statement of comprehensive income, it should be emphasised that international standards (IAS 1) leave plenty of room in the scope of the form of presenting the information concerning the total result and internal structure of this document. The freedom concerns among others (Bek-Gaik, 2013a, p. 27): -the form of the presentation of the statement of the total financial result, -the method of presenting expenses, -the method of recognising income tax, -the obligation to present other comprehensive income.
Preparing a statement of comprehensive income, entities are entitled to choose one of two forms of presentation, that is one document including the current financial result together with other comprehensive income, or two separate statements, that is a profit and loss account and a statement of comprehensive income, which then starts with a net profit. The freedom of preparing this statement consists also in the fact that in accordance with paragraph 99 of IAS 1, an entity has the right to choose the method of presenting information about the costs of basic activity, that is according to type (a comparative option) or according to the cost centres and cost objects (a multiple-step variant). Moreover, regardless of the choice of the form of presentation, IAS 1 does not impose one constant structure, but it gives (in paragraph 82) only minimum information which must be presented.
As far as information concerning other comprehensive income is concerned, IAS 1 gives many possibilities of choice as regards the method of its presentation, i.e. in net amounts, that is net of related tax effects, or in gross amounts, that is before related tax effects with one amount shown for the aggregate amount of income tax relating to OCI (IAS 1, paragraph 91). However, since July 2012 the standard has imposed the obligation to present information concerning OCI with a division into two separate categories, i.e. information which is not later reclassified into profit or loss and information reclassified into profit or loss after certain conditions are met.
The aim of introducing such a solution was to increase the transparency of information about the total result and to facilitate its comparison (Strojek-Filus, 2015, p. 135), also to approximate the solutions in IASs to the American solutions included in the US GAAP (Hołda, 2013, p. 50).
It is also worth noticing that the freedom in the shaping of this element of a financial statement is not only limited to the choice of the method and the rules of presenting information concerning current operating profit or other comprehensive income, but it also concerns the used nomenclature. It applies to both the name of a statement itself and of its individual elements.
Such freedom in naming individual items, as numerous authors point out, can lead to conceptual chaos and hinder the comparability of information included in a financial statement between individual entities (Buk, 2013, p. 13;Sajnóg, 2014, p. 482).
Due to the great freedom, the method of presenting information in a statement of comprehensive income has become one of the three research areas into this element of a financial statement 1 , which focus on the one hand on evaluating the methods of presenting information in this statement, on the other hand on their usefulness in the process of making economic decisions and in the evaluation of an entity's accomplishments.
In Poland empirical research in respect of comprehensive income has been conducted by It refers to both the mentioned before nomenclature and the form and structure of the document itself (e.g. Szychta, 2012, p. 80;Bek-Gaik, 2013a, p. 33;Sajnóg, 2014, p. 482, Prewysz-Kwinto, 2018. The lack of transparency and comparability of presented information can cause problems in making the right economic decisions by stakeholders (Winnicka, 2013, p. 186).
The formulated conclusions encouraged conducting another research this time focusing on sector diversification of the method of presenting information in this element of a financial statement. It was to answer the question whether the way of presenting information regarding results between enterprises representing the same industries manifests similarities or differences.
In order to answer the question, statements of the comprehensive income of entities listed on the Warsaw Stock Exchange (GPW) representing 14 different sectors were analysed. The received results are presented further in the paper.
1 In addition to the research on the method of presenting information, it distinguishes a group of studies into the influence of adopted solutions within the scope of presentation on the evaluation of an entity's financial situation and the impact of information concerning CI and OCI on the market price of shares and investors' decisions (Strojek-Filus, 2015, p. 129).

The Research Methodology and Characteristics of the Studied Group
The research covered 197 entities listed on 15 th February 2019 on the Warsaw Stock Exchange, which comprises 14 sector indices representing 14 different industries: the financial services industry (banks), the construction industry, the chemical industry, the energy industry, the information technology industry, the pharmaceutical industry, the media industry, the automotive industry, the real estate industry, the clothing industry, the oil and gas industry, the food industry, the telecommunications industry and the mining industry.
The researched group excluded all the entities that did not prepare financial statements in accordance with IAS/IFRSs (applied the provisions of the Polish Accounting Act); it also excluded the entities which did not prepare financial statements in the whole period of research.
The number of such entities amounted to 16, as a result of which the researched group consisted of 181 entities. Their characteristics are presented in Table 1. Among all the researched entities, capital groups preparing consolidated statements constituted 93.4%. Individual enterprises preparing only separate statements amounted to 6.6%.
Moreover, 89% of the researched entities represented national entities and 11% foreign entities drawing up statements in the English language and in a foreign currency. The entities from the WIG-construction constituted the biggest group -it included 19.9% of all entities and WIG-real estate -14.9%. The fewest entities were found in the indices of the chemical, oil and gas, and telecommunications sectors -four in every index.
In the analysis, for the purpose of comparing the results, financial statements ( The research did not cover 2018, because when it was being conducted, the statements were not fully accessible.

The Results of the Conducted Research
The research started with the verification of what form of presenting a statement of comprehensive income the examined groups selected. In accordance with IAS 1, the entities obligated to prepare one having the option to select one statement (a statement of comprehensive income), or two individual ones, i.e. a profit and loss account and a statement of comprehensive income. The obtained results taking into account the type of conducted activity are presented in Table 2. It also includes the kind of variant selected by the entities, i.e. a comparative one (based on nature of expense) or a multiple-step one (based on function of expense).
The results presented in Table 2 show that the percentage of the entities preparing a statement of comprehensive income in the form of one statement was slightly higher (51.9%) than of those which chose the two separate ones (48.1%). It should be emphasised here that the results obtained for a group selected in such a way did not confirm the results of the research  It should also be added that during the analysed period, as few as two entities (which (a multiple-step variant). The analysis did not include the financial statements of banks, since they draw up income statements according to distinct rules specific for these entities. Therefore, the analysis covered 168 financial statements, and the obtained results were earlier presented in Table 2.
The presented results show that the multiple-step variant was the prevailing method of preparing a profit and loss account -it was used by a significant 79.8% of the examined entities. The comparative option was chosen by only 20.2% of the examined entities. It is worth adding that in the case of two entities, the analysis of an income statement itself did not lead to an unambiguous evaluation as regards which variant had been chosen, since sales revenues were balanced against one cumulative entry named "operating costs", which adjusted with other operating revenue gave an operating result immediately. Determining how the costs were presented required consulting the notes.
When analysing the obtained results considering the type of conducted activity in a more detailed way, it should be noted that only the telecommunications sector chose the comparative option more frequently (75%), and in the oil and gas industry the usage of the comparative option and the multiple-step variant was equal (50% in each case). In all the other sectors, the presentation of costs according to the cost centres and cost objects dominated. This variant was selected by all the entities of the chemical industry, 94% of those from the IT sector and 92% from the construction industry. The oil and gas industry should be particularly emphasised here, as in its case all the companies using the multiple-step variant manifested an identical internal structure of this document, whereas in the case of those using the comparative option, the structure was varied.
The following part of the conduced research is devoted to presenting information concerning other comprehensive income. It started with specifying the type of result (positive or negative) achieved by the examined entities in this part of the statement. The obtained results, with regard to the type of conducted activity, are presented in Table 3.  Analysing the mean value and the standard deviation calculated separately for individual examined sectors, it was noted that values lower than the value of the whole examined group (both the mean and the standard deviation) were demonstrated in the whole examined period by: the chemical, clothing, telecommunications and real estate industries. However, banks manifested a higher mean OCI to EAT ratio.
Further analysis of a statement of comprehensive income focused on specifying how entries recognised as other comprehensive income were presented, thereby verifying whether the examined entities met the obligation to present that information dividing it into two groups, i.e. other comprehensive income reclassified into profit and loss and those not reclassified.
The analysis showed that among all the entities with other comprehensive income, such a division was used by 80.5%. The remaining 19.5% did not use such a division, and OCI was presented together. It means that a significant one fifth of the examined entities did not meet the obligation included in IAS 1.
The conducted analysis enabled specifying which sectors among the ones covered by the research did not meet the obligation to present two groups of OCI the most often. They were the pharmaceutical industry, of which as many as 75% of the entities did not present OCI. It was followed by the real estate sector (41.2%) and the IT sector (37.5%). On the other hand, all the chemical sector entities presented OCI in accordance with IAS 1.
When analysing other comprehensive income presented in statements, it should be underlined that those that can be reclassified into profit and loss appeared more often -i.e. in the case of 53.0% of all the financial statements covered by the research and 72.2% of those in which OCI was presented and divided. Those not reclassified appeared in 33.7% of all statements and in 45.9% of those presenting OCI, respectively.
Analysing the method of presenting OCI in terms of the conducted activity, OCI reclassified into profit and loss appeared in all banks and entities in the chemical, oil and gas and telecommunications sectors and in 80% of the mining industry. It was presented the least often by the entities conducting pharmaceutical activities. As far as other comprehensive income not reclassified into profit and loss is concerned, they appeared the most often in chemical enterprises (100%), banks (84.6%), the oil and gas industry (80%) and in mining and telecommunications -75% in each.
It is worth adding that only in the case of one industry all the entities simultaneously presented the OCI that are both reclassified and not reclassified -it was the chemical sector.
However, the only sector in which in none of the entities OCI reclassified and not reclassified was presented was the media sector.

Conclusions
The conducted analysis of the comprehensive income statements of entities listed on the WSE and representing 14 different sectors enabled drawing numerous important conclusions.
As far as the structure of the document itself is concerned, the participation of the entities drawing it up in the form of one statement was insignificantly bigger that those choosing two statements. Thereby, it did not confirm the results of the earlier research, which indicated a more frequent preparing of a statement of comprehensive income in two separate statements. This could result from the fact that the research covered a significantly bigger group of entities than the earlier research did.
It should also be underlined that although the examined entities exercise the freedom given by IAS 1 in the scope of the method of presenting information and the structure of a statement itself, it is possible to see numerous similarities in statements drawn up by entities representing the same sectors. It concerns among others the following: 1. The forms of drawing up this document -the presentation in the form of two statements was more often chosen by the entities belonging to the telecommunications and construction industries, and in the form of one by those from the IT, clothing, oil and gas and media sectors.
2. The variant of a statement -the multiple-step variant was selected by all the entities from the chemical industry and by over 90% of those from the IT and construction sectors; the comparative option dominated in the telecommunications industry.
3. Its internal construction -all the entities from the chemical, mining oil and gas and pharmaceutical sectors differentiated the same levels of a financial result in the multiple-step variant; in the comparative option such a situation was observed in the case of statements of entities from the energy, IT, automotive, food and pharmaceutical industries.
As far as the conclusions drawn from the presentation of other comprehensive income are concerned, it must be stated at the beginning that its participation in the net profit is not very high. In the examined period, it varied from 15 to 21%. However, its diversification between the examined entities is considerable, which is reflected in the high value of the standard deviation.
Moreover, the value of the result with OCI (positive, negative) is subject to considerable changes in individual years contrary to the current net profit -the participation of the entities which in the whole examined period generated net profits was around 82%. Despite a significant variation of OCI between the examined entities, also in this area numerous similarities between statements drawn up by the entities representing the same sectors can be seen, which confirms the hypothesis formulated in the introduction. The similarities concern among others the following: 1. The presence of OCI -in the whole examined period, OCI was present in all banks and the entities from the energy industry, the chemical and mining sectors; on the other hand, the IT and media sectors manifested OCI the least frequently.
2. The level of OCI to EAT ratio -a mean value and the standard deviation of the OCI to EAT ratio were lower in relation to the value for the whole group in the chemical sector, clothing sector and telecommunications sector; banks manifested higher values of this ratio.
3. The compliance of the methods of presentation of OCI with IFRS 1 -all the entities from the chemical industry presented OCI with a division into two groups required by IFRS; however, this obligation was not met by the majority of entities involved in the production of medicines.
The abovementioned conclusions enable stating that the research hypothesis formulated in the introduction was proven correct. They encourage further research on the similarities and differences in the way information is presented in financial statements prepared in accordance with IAS/IFRS, including the use of more advanced statistical methods.