Reading #25: Income Statement Flashcards
income statement equation
NI = rev - expense
define operating profit
aka op income. gross profit - exepenses
how is operating profit classified for nonfinancial firms?
profit before financing costs, income taxes and non op items
when is rev and expenses recognized in accrual accounting?
when earned and expenses when incurred
% of completion method - IFRS, GAAP or both?
both
completed contract method - IFRS, GAAP or both?
GAAP
change in account principal v estimate; which requires retrospective application?
change in accting principal
define stock dividend
distributino of add’l shares to each shareholder
common size income statement measures as percentage of what?
revenue
define effective tax rate
income tax expense is precentage of pretax income versus a % of revenue
ratio for pretax margin
pretax accting profit/revenue
define retained earnings
NI added to SE through an account
define available-for-sale securities
investment securities not expected to be held to maturity or sold in near term
where are available for sale securities listed (income, balance, cash)
balance sheet at fairvalue
where are unrealized gain loss for available for sale securities
reported in SE as component of other comprehensive income
where is unusual or infrequent items on income statement
before tax and above income from continuing operations
where are extraordinary items
they must be unusual AND infrequent below continuing opps net of tax under GAAP (not allowed in IFRS)
account estimate or account standard causes retrospective restatements?
change in accounting standard
how do you treat a permanently impaired asset
diff btwn carrying value and PV of expected cash flows shld be written down immediately and reported as OP LOSS
define expenses grouping by nature vs. function
nature=group by type (i.e. depreciation from manufact) function=combining all costs, i.e. alll COGS, grouping by same function from diff areas.
what are nonoperating expenses for a nonfinancial firm
investment income and financing expenses. i.e. dividends and interest rec’d
what are types of discontinued ops?
physically and operationally distinct division that is currently for sale
where is income reported for discontinued ops?
reported net of tax below income from continuing ops
