lecture 2: income statement Flashcards
when should the revenue be recognized and costs?
- timing of good displacement: at dispathment
- measurement price
- long term contract: continuous or at one point
- mutiple elements
- principal vs. agent
- warranties
- other
when should the revenue be recognized and costs?
- timing of good displacement: at dispathment
- measurement price
- long term contract: continuous or at one point
- mutiple elements
- principal vs. agent
- warranties
- other
when is the control of the promised good transfered to the customer?
- vendor has a right to payment
- customer has legal title of goods
- customer is in physical possession
- transfer of risk and reward occurred
- customer accepted goods
output method (in long term contract)
expert survey the work to determine the value
input method (in long term contract)
compate INPUT costs incurred to date to total expected input costs (cost-to-cost method)
principal (company)
principal= ordering the goods,
firm has to report gross revenue and costs
agent (company)
agent= acts on behalf of the principal,
firm has to report NET fees or commissions
warranties (2 kinds)
- distric service warranty= revenue allocated to the warranty (= reducing amount of revenue allocated to the underlying goods)
- assurance warranty : no impact on RR (only a provision)
advertising revenue
(is a madia revenue)
recognized on publication/ transmission of ads
production revenue
(is a media revenue)
recognized on delivery of content and acceptance by customers
license and distribution revenue
(is a media revenue)
recognized full as soon as cutomer benefits from it.
cost recognition cycle
oder is placed -> goods received from supplier (increasing AP)-> invoice received -> payment made
revenue timing cycle
oder placed -> goods dispatched (revenues are recognised) -> incoive raised -> payment received
separate disclosure items
require additional disclose due to size
discontinued operations
disposed or held for sale
operating income and EBIT
income generating from core activities and expected to be a recurring one, indicates profitability
- Earnings before interest and taxes (EBIT)
EBITDA
earnings before income tax, depreciation and amortization = normalizing earnings
EBITDA
earnings before income tax, depreciation and amortization = normalizing earnings
advanced issues of Management discretion EM
- deferred taxation: time difference in tax and accounting
- stock options granting stock to employees = expense
- retirement benefits employee compensation; depends on the schema
capital structure of earnings per share EPS
- simple= doesn’t have convertible securities
- complex= convertible to equity securities (convertible securities dilute EPS )
diluted EPS
convertible securities cause EPS duluted upon conversion (3types: converible preferred stoch outstanding, convertible debt outstanding, employee stoch option)
convertible preferred stock
-> if- converted method
what would EPS be if securities were converted at the beginning of the period
convertible debt
-> if- converted method
what would the EPS be if the debt was converted
stock options, warrants etc.
-> treasury stock method
what would EPS be IF options exercised and company had used proceed to REPURCHASE common stock.
