FAR - Framework, Overview & Statements - General-Purpose Financial Statements - Income Statement

Question 1

How are unusual or infrequent items reported?

Answer 1

They must be separately reported if material as a component of income from continuing operations.

Question 2

What items are not shown on the income statement?

Answer 2

1) prior period adjustments; 2) foreign currency translation adjustments; 3) unrealized gains/losses on AFS securities; 4) unrecognized pension items; 5) cumulative effect of changes in accounting principles; 6) unrealized gains/losses on cash flow hedges.

Question 3

What represents increases in net assets or settlements of liabilities by providing goods and services?

Answer 3

Revenues.

Question 4

Define “losses”.

Answer 4

Decreases in equity or net assets from peripheral or incidental transactions.

Question 5

Does accounting income take a transactions-based determination of income or a change in net worth?

Answer 5

Accounting income is transaction based.

Question 6

Define “gains”.

Answer 6

Increases in equity or net assets from peripheral or incidental transactions.

Question 7

What is the order of income statement presentation?

Answer 7

1) Income from Continuing Operations; 2) Income from Discontinued Operations (net of tax); 3) Extraordinary Items (net of tax); 4) Net Income.

Question 8

Define “expenses”.

Answer 8

Decreases in net assets or incurrence of liabilities through the provision of goods or services.

Question 9

What is economic income?

Answer 9

The change in the net worth of a business enterprise during an accounting period.