Ch. 4 Reporting Financial Performance Flashcards
What is the basic business model
Financing: getting cash by borrowing, issuing shares, retaining profits
Investing: in people and assets
Operating: using assets to earn profit
How do users use performance information to make decisions
They use it to evaluate past performance and profitability and to provide a basis for predicting future performance. They use it to assess risk and uncertainty about future cash flows.
What are hard and soft numbers
Hard - easily measured with a reasonable level of certainty ex. Cash sales
Soft - more difficult to measure ex. Provision for bad debt
What is quality of earnings
How solid the earnings numbers are
What is net income
Revenues and gains less expenses and losses from both continuing and discontinued operations
What is comprehensive income
Net income plus/minus other comprehensive income/loss
Earnings per share is based on…
Net income
What is operating income
Ongoing revenues less expenses. It is regular income before irregular items like gains/losses, discontinued operations, OCI.
What is included in discontinued operations
Components that have been disposed of or are being held for sale. Income or loss from operations AND gain or loss on disposal.
Ex. A business component that operates as a separate unit and is clearly distinguishable
How is an asset held for sale measured
Remeasured to the lower of its carrying value and it’s fair value less its cost to sell
How is an asset held for sale that doesn’t meet the definition of discontinued operations presented on financial statements
It is measured and presented the same way as discontinued operations on the balance sheet, any gains or losses on remeasurement are recorded as income from CONTINUING OPERATIONS
How are assets held for sale classified on the balance sheet under ASPE and IFRS
Under ASPE they retain their classification of current or non current.
Under IFRS, they are classified as current.
With regards to tax, how are discontinued operations items and OCI items shown
Net of tax
How is EPS calculated
Net income minus preferred dividends divided by weighted average number of common shares outstanding
