F1 - 1.2 Income Statement

Question 1

What are the components of “Other Comprehensive Income” (OCI) ? (Mnemonic: PACER)

Answer 1

• Pension adjustment.
• Available-for-sale debt securities.
• Currency translation adjustments.
• Effective portion of derivatives held as cash flow hedges.
• Revaluation surplus on intangible assets and fixed assets (IFRS only).

Question 2

How purchase discounts are treated while calculating revenues in Single-step Income Statement?

Answer 2

Purchase Discount is to be deducted from COGS and not to be directly included as a revenue line item

Question 3

What is the treatment of Recovery of accounts written off while calculating revenues in Single-step Income Statement?

Answer 3

Recovery of accounts written off will not impact the revenues but will increase the allowance for doubtful debts account

Question 4

What is the meaning of comprehensive income?

Answer 4

Comprehensive income = Net income + Other comprehensive income (OCI).

Comprehensive income is the change in equity during a period from non-owner transactions.

It includes all changes except those resulting from investments by owners and distributions to owners.

Question 5

What are the Earning Per Share (EPS) Reporting & Disclosure requirements for Financial Statements?

Answer 5

The earnings per share must be REPORTED on the face of a public company’s income statement for the following items:
- Income from continuing operations.
- Net income.

And for Income from discontinued operations, either on the face of the I/S or Notes to F/S