F1-Income Statement Flashcards
What is the presentation order of the major components of an income and retained earnings statement? IDEA
(I)ncome (or loss) from continuing operations–IS after & before net of tax
Income (or loss) from (D)discontinued operations–IS net of tax
(E)xtraordinary Items–IS net of tax
(A)counting principle–RE net of tax
What are some of the main categories of expenses and example of them under normal operations?
Inventory Costs: Purchase price, freight in
Selling expense: Freight out, salaries and commission, advertising
General & Administrative: Officer’s salaries, accounting, legal & insurance
Non-operating: Auxiliary activities, interest expense (returned to buyer, not paid on own loans)
What 3 types of transactions can be in Discontinued Operations?
- Impairment loss
- Gain/Loss from actual operations
- Gain/Loss on disposal
Note: ALL recored in the period in which they occur
In reporting Discontinued Operations, how is a “component” of an entity defined under U.S. GAAP?
- An operating Segment
- A reportable Segment
- A reporting Unit
- A subsidiary
- An asset group
In reporting Discontinued Operations, how is a “component” of an entity defined under IFRS?
- A separate major one of business or geographical area of operations.
- A subsidiary acquired exclusively with a view to resale
How are subsequent increases in the fair value of a discontinued component accounted for?
A gain is recognized for the subsequent increase in fair value less costs to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.
Define Gross concept
Gross concept is for revenues and expenses
gross revenues= revenues minus returns & allowances minus discounts.
gross expenses= only expenses that benefit the current period or allocation of unexpired costs to a current period.
Define Net concept
Net concept is for gains and losses (proceeds-nbv)
gains or losses= replacement cost minus deductible minus costs associated with dismantling old property minus carrying amount
What types of costs are associated with exit and disposal activities?
- Involuntary employee-termination benefits
- Costs to terminate a contract that is not a capital lease
- Other costs associated with exit or disposal actives
What are the 3 REQUIRED criteria that must be met for a liability to be recognized as an exit or disposal activity?
- An obligating event has occurred
- The event results in a present obligation to transfer assets or to provide services in the future, and
- The entity has little or no discretion to avoid the future transfer of assist or providing of service
Define Extraordinary items
*Unusual and Infrequent
*Material in nature
*Of a character significantly different from the typical or customary business activities (unusual)
*Not expected to recur in the foreseeable future (infrequent)
*Not normally considered in evaluating the ordinary operating results of an enterprise.
Note: NO EXTRAORDINARY ITEMS IN IFRS-ALL ARE INCLUDED IN INCOME FROM OPERATIONS
Define Development-Stage enterprise
GAAP only
Enterprise that devotes substantially all of its efforts to establish a new business and either planned principal operations have not commenced or no significant revenue has been generated for them.
Note: Start up costs are expensed immediately as incurred.
What additional accounting treatments are given to start up enterprises?
- Accumulate losses identified as “deficit accumulated during development stage”
- In the IS, show revenue and exposes, and cumulative of both amounts from company’s inception
- In the SCF, include cumulative ants of cash inflows and outflows from ent. inception and current amounts of cash in and outflows for each period
- Issue a separate statement of SE, indicating shares issued, date of issuance, dollar amounts assigned and non cash consideration, if any
