Income Statement Flashcards
Define “gains.”
Increase in equity or net assets from peripheral or incidental transactions.
What is the order of income statement presentation?
(1) Income from Continuing Operations
(2) Income from Discontinued Operations (net of tax)
(3) Extraordinary Items (net of tax)
(4) Net Income
How are unusual or infrequent items reported?
They must be separately reported, if material, as a component of income from continuing operations.
Define “expenses.”
Decreases in net assets or incurrence of liabilities through the provision of goods and services.
Define “losses.”
Decreases in equity or net assets from peripheral or incidental transactions.
What items are not shown on the income statement?
(1) Prior period adjustments
(2) Foreign currency translation adjustments
(3) Unrealized gains and losses on available for sale (AFS) securities
(4) Unrecognized pension items
(5) Cumulative effect of changes in accounting principle
(6) Unrealized gains and losses on cash flow hedges
Does accounting income take a transactions-based determination of income or a change in net worth?
Accounting income is transaction based.
What represents increases in net assets or settlements of liabilities by providing goods and services?
Revenues.
What is economic income?
The change in the net worth of a business enterprise during an accounting period.
What two formats are accepted under IFRS for income statement presentation?
Single-step and multiple-step income statements.
What does the multiple-step income statement present?
Includes multiple subtotals of revenues, expenses, gains and losses (Sales - Cost of Goods Sold = Gross Profit; Gross Profit - operating expenses = income from operations; etc.)
Are extraordinary items allowed in IFRS?
No, extraordinary items are not allowed.
What is operating margin?
The excess of operating revenues over operating expenses.
What does the single-step income statement present?
Total revenues and gains less total expenses and losses.
Does the IFRS have a required minimum list of items to be reported on the income statement?
Yes, it has a minimum list of items.
