F1 M1 Flashcards
B/S, I/S, and CI
how are gains and losses reported?
at net amts (proceeds less net book value)
where should items of income or loss be reported if they are infrequent and unusual?
reported separately as part of income from continuing operations
nature of item and F/S effects disclosed on face of I/S or in footnotes
what is the multi-step I/S? And what are its benefits?
reports operating revenues and expenses separately from non-operating revenues and expenses
-enhances user info (ex. analytical ratios)
what is the single-step I/S? And what are its benefits?
total revenues and total expenses reported in single step
-simple design and no revenues or expenses are considered more important that any other
examples of discontinued operations?
1) component of an entity
2) groups of components of an entity
3) business or nonprofit activity
4) impairment loss
5) gain or loss from actual operations or on disposal
where is discontinued operations reported?
reported separately from continuing operations in the I/S, net of tax
what are three conditions in which an item will be reported in discontinued operations?
1) has been disposed of
2) held for sale
OR
3) major strategic shift
initial impairment loss calculation
carrying value of assets - fair value
and calculated net of tax rate
what should you do when you have subsequent increases in fair value?
gain recognized for any subsequent increase in fair value - costs to sell, but not in excess of previously recognized cumulative loss
do assets continue to be depreciated or amortized after its disposed of?
No
how is a component classified as held for sale measured at?
the lower of its carrying amt or fair value less costs to sell
what are costs to sell?
the costs associated with making a sale happen
where are foreign currency transaction gains and losses reported?
on the I/S
where are foreign currency translation gains and losses reported?
in OCI
are transactions between a sub and parent considered for foreign currency transactions?
No
what is an exchange rate?
the rate at which two currencies will be exchanged at equal value
the direct method of foreign currency?
the domestic price of one unit of another currency
the indirect method of foreign currency?
the foreign price of one unit of the domestic currency
when the transaction is not settled at B/S date?
report an unrealized gain or loss on foreign currency transaction on I/S and you us the spot rate
what is comprehensive income?
the change in net assets from non owner sources
calculation of comprehensive income
net income
+ other comprehensive income
what is included in net income?
1) income from continuing operations
2) discontinued operations
PUFI items in OCI
1) pension adjustments
2) unrealized gains and losses from AFS or fair value hedges
3) foreign currency translation items
4) instrument specific credit risks
why do pension actuarial losses increase OCI?
they are recorded in shareholder’s equity and amortized into the income statement over time
what is an actuarial gain or loss?
the difference between an employer’s actual and expected payments for defined benefit pension plans
what do you do with pension service costs that have not be recognized?
they are subtracted in OCI as they have not been amortized yet
what are reclassification adjustments?
move OCI items from AOCI to the I/S
calculation of net income
sales
-sales discounts/returns
-COGS
-selling and G&A expenses
+ or - gains or losses usual and frequent
= income from continuing operations
- interest expense net of tax
- income tax expense (income from CO after interest expense * (tax rate)
+ or - gains or losses infrequent and unusual net of tax
+ or - income or loss from discontinued operations net of tax
= net income
what is the single statement approach to comprehensive income statement?
displays OCI items individually and in total below net income amt and totals them for comprehensive income
begins with revenues and expenses to arrive at net income
what is the two statement approach to comprehensive income statement?
displays comprehensive income as a separate statement that immediately follows the I/S
begins with net income and then OCI items net of income tax
required disclosure items
1) tax effects of OCI items (before tax or net of tax)
2) changes in AOCI balances
3) total AOCI as item of equity
4) reclassification adjustments
5) items classified out of AOCI on I/S or notes to F/S
