Chapter 4 - Reporting Financial Performance

statement of income/earnings name under ASPE

income statement

statement of income/earnings name under IFRS

• as two separate statements: statement of profit or loss & statement of comprehensive income

• as a combined statement: statement of financial performance

what are the various ways to measure income?

• net income

• comprehensive income

• operating income

describe net income

revenues and gains

less expenses and losses from continuing and discontinuing operations

• supported by ASPE

describe comprehensive income

net income plus/minus OCI/loss

• includes all changes in equity except shareholder transactions

• supported by IFRS

describe operating income

ongoing revenues less expenses

• current operating performance approach

• excludes non-operating expenses (ie. interest, taxes)

• also known as operating profit or EBIT (earnings before interest and taxes)

describe OCI

• OCI = comprehensive income less net income

• unrealized gains and losses on certain securities, foreign exchange gains or losses and other gains and losses defined by IFRS (not recognized under ASPE)

• excluded from net income bc does not reflect day-to-day business operations

describe single-step income statement

includes two main groups: revenues/gains less expenses/losses

• simple presentation, easy to understand

• disadvantages: oversimplification and lacks detail

describe multiple-step income statements

more detailed and separates revenue and expenses into categories

• separates operating from non-operating transactions

• matches costs and expenses with related revenues

under multiple-step income statement what is included in the operating section?

• sales or revenue

• COGS

• selling expenses

• administrative or general expenses

under multiple-step income statement what is included in the non-operating section?

• other revenues and gains

• other expenses and losses

under multiple-step income statement, list the different sections

1. continuing operations

   a. operating section

   • sales or revenues

   • COGS

   • selling expenses

   • admin. or general expenses

   b. non-operating section

   • other revenues and gains

   • other expenses and losses

   c. income tax

2. discontinued operations

3. OCI

explain earnings per share (EPS)

EPS = (NI - preferred dividends) / (weighted avg shares outstanding)

• key indicator of a company’s performance

• measures number of dollars earned per common share - does not report dollars paid to shareholders as dividends