Exam 5: Income Statement: Reporting Results of Operating Activities

While no general principle describes the nature of items excluded from net income and included in Other Comprehensive Income, they tend to arise from remeasurements of assets and liabilities (often, remeasurements at fair value) and not from transactions.For example, IFRS permits but does not require firms to revalue certain noncurrent assets upward to reflect increases in fair value in excess of acquisition cost.Under IFRS, such a revaluation remeasurement increases assets (because the firm now records an existing asset on the balance sheet at a larger number) and increases Other Comprehensive Income.These increases are accumulated in a(n) _____ account, Revaluation Surplus.

The statement of cash flows begin with revenues; for this reason, analysts often refer to revenue growth as "top-line" growth.

What criteria must sales transactions meet in order for the seller to recognize revenues before collecting cash?

Items classified as operating expenses reflect management's judgment that the item is a cost of the core business.

Accumulated Other Comprehensive Income

Expenses provide future benefits, and assets measure the consumption of those benefits.

The firm recognizes an expense when the following condition(s) hold(s).

Under accrual accounting, revenues are recognized when

Current accounting practice takes the viewpoint of shareholders by reporting the amount of net income available to shareholders after subtracting from revenues all expenses incurred in generating the revenue by claimants (for example, employees, lenders, governments) other than shareholders.