Information Quality of Operating Income under K-IFRS

In 2011, Korea officially adopted K-IFRS as its corporate accounting system, under which the measurement of operating income includes other income and expense items that were previously categorized as non-operating income under the former system, K-GAAP. This paper examines how the measurement standards under K-IFRS and K-GAAP affect the persistence and value relevance of operating income. We provide early evidence that the persistence and value relevance of operating income have declined under K-IFRS compared to those under K-GAAP. This finding suggests that a lack of specific guidance on how to report other income and expense items may decrease the informativeness of operating income.