income statement

does EPS relate to Net income or comprehensive income?

NET INCOME

discontinued operations are net of ____

net of tax

what does earnings quality mean?

can it predict future numbers?

the ability of reported earnings (income) to predict a company’s future earnings

what are the 2 criteria for the business to be able to have a discontinued operation on its income statement?

1. company must dispose a component of its business (not just an asset. a component that comprises of cash flows that can be clearly distinguished

2. The elimination of the component must represent a strategic shift having a major effect on the company’s operations

simplified:

1. cash flow

2. strategic shift

what 2 components are included in the discontinued operations section of the income statement?

1. all revenues and expenses generated by the discounted operations for the e tire reporting period

2. any realized gains/losses on the sale of the asset or impairment loss taken on the asset

when you creat an income statement, you put earning per share at the end. what are the 3 lines?

Earnings per share:

1. Income from continuing operations:

2. Loss on discontinued operations

3. Net Income

when there is a change in accounting principle. what does the ____ approach mean??

1. retrospective approach

2. modified retrospective approach

3. prospective approach

1. retrospective approach: change all accounts that are presented in the financial statement (look like this change has always mean in place)

2. modified retrospective approach: changes are applied to adoption period only. (adjust current year balances to reflect change)

3. prospective approach: changes are applied to only current and future periods. don’t adjust any balances.

are changes in accounting estimates done retrospectively, prospectively, or the modified retrospective approach?

prospectively

change all current and future estimates. don’t change the past ones

where is OCI closed to?

closed to AOCI (accumulated other comprehensive income)

what is the equation for comprehensive income

NI + OCI = comprehensive income

does unrealized price changes for debt secures classified as AFS go on income statement or statement of comprehensive income

statement of comprehensive income

does gains/losses from sale of an asset go on IS or statement of OCI

IS

do gains/losses related to pension items go to IS or statement of OCI?

statement of OCI?

do gains/losses related to derivatives go on IS or statement of OCI

statement of OCI

do foreign currency translation adjustments go on IS or statement of OCI

statement of OCI

is loss on sale of debt investment IS or statement of OCI

IS

are restructuring costs IS or statement of OCI

IS

do rent revenues/ lease revenue go on IS or statement of OCI

IS

chas flow hedges: IS or statement of OCI

statement of OCI

do foreign currency exchange gains/losses go on IS or statement of OCI

IS

do you calculate EPS with NI or comprehensive income?

NI

do not include the OCI items in EPS. just regular IS

are changes in accounting principles recorded retrospective or prospective?

retrospective

are changes in accounting estimates recorded retrospective or prospective?

prospective

what is another name for non owner operations

OCI

how many lines do you write in the discontinued operations section on the IS?

ONE

in what order is EPS written?

1. EPS for cont operations

2. EPS for discontinued operation

3. EPS for NI

where is tax expense for continuing operation reported.

after non op income

TAX EXPENSE HERE

then anything below (discontinued operations/ OCI) are reported net of tax

then NI and EPS are on the bottom