Vol. 3 Income Statements

Question 1

(non-recurring items and non-operating items)
when a company disposes of or establishes a plan to dispose of one of its component operations and will have no further involvement in the operation, the income statement reports separately the effect of this disposal as …

Answer 1

a “discontinued” operation [under both IFRS and US GAAP]

Question 2

(non-recurring items and non-operating items)
Changes in accounting policies are reported through …

Answer 2

retrospective application

Question 3

(non-recurring items and non-operating items)
retrospective application [definition]

Answer 3

the financial statements for all fiscal years sown in a company’s financial report are presented as if the newly adopted accounting principle had been used throughout the entire period

Question 4

(non-recurring items and non-operating items)
retrospective application [location]

Answer 4

Notes to the financial statements

Question 5

(non-recurring items and non-operating items)
Based on the information herein, describe whether the company results appear better or worse under the new revenue recognition standard

Answer 5

Question 6

(non-recurring items and non-operating items)
Under U.S. GAAP, operating activities [definition]

Answer 6

generally involve producing and delivering goods and providing services;

all other events that are not defined as investing or financing activities

Question 7

(non-recurring items and non-operating items)
All other events that are not defined as investing or financing activities, are classified as

Answer 7

operating activities

Question 8

(non-recurring items and non-operating items)
non-financial service companies differ from financial service companies in the treatment in these items on the income statement

Answer 8

non-operating and operating items;

specifically, non-financial service companies must include interest expense on debt securities, including amortization of any discount or premium

Question 9

(non-recurring items and non-operating items)
The amount of interest expense is related to the amount of a company’s borrowings, and is generally described where?

Answer 9

Notes to the Financial Statements

Question 10

(non-recurring items and non-operating items)
Under US GAAP, interest and dividends received are shown as _________
on the statement of cash flows

Answer 10

operating cash flows

Question 11

(non-recurring items and non-operating items)
US GAAP differs from IFRS in the treatment of interest and dividends received how?

Answer 11

IFRS allows them as either operating or investing;
US GAAP allows them as operating only.

Question 12

(non-recurring items and non-operating items)
Under US GAAP, interest paid is shown as _____ on the statement of cash flows

Answer 12

operating [cash flows]

Question 13

(non-recurring items and non-operating items)
Under US GAAP, dividends paid are shown as _________ on the statement of cash flows

Answer 13

financing [cash flows]

Question 14

(non-recurring items and non-operating items)
The amount of financing expense will depend upon …

Answer 14

the company’s financing policy (target capital structure) and borrowing costs.

Question 15

(non-recurring items and non-operating items)
For a non-financial company, a significant amount of this type of income would typically warrant further exploration

Answer 15

financing income