What is the income statement useful in determining?
Profitability, value for investment purposes, and credit worthiness
Unexpired costs
Costs that will expire in future periods and be charged against revenues from future periods
What is the presentation order of the major components of an income and retained earnings statement?
(IDA)
- Income (or loss) from continuing operations
- Income (or loss) from Discontinued operations
- Cumulative effect of change in Accounting principle
Under FASB, where should income/loss that are unusual or infrequent or both be reported?
Separately as part of income from continuing operations and disclosed
Multi-step income statement
Reports operating revenues and expenses separately from nonoperating revenues and expenses and other gains and losses
Single step income statement
Total expenses (including income tax expense) are subtracted from total revenues
What 3 calculations does loss from discontinued operations consist of?
- Impairment loss
- Gain/loss from actual operations
- Gain/loss on disposal
Under GAAP, what are synonymous terms for a “component of an entity”?
Operating segment Reportable segment Reporting unit Subsidiary Asset group
Under IFRS a component of an entity may be:
Separate major line of business/geographical area of operations
Subsidiary acquired exclusively with a view to resale
What criteria must be met for a component or a disposal group to be classified as “held-for-sale”?
- Mgmt commits to plan to sell
- Component is available for immediate sale
- Active program to find buyer has been initiated
- Sale of the component is probable and expected to be complete within one year
- Sale of component is being actively marketed
- Unlikely that significant changes to plan will be made
Under US GAAP, what does the classification of a component as held for sale trigger?
Impairment analysis of the component
Under IFRS, what must be done before a disposal group can be classified as held for sale?
The individual assets/liabilities of the component must be measured in accordance with applicable standards and any resulting gains and losses must be recognized
When will the results of operations of a component(s) of an entity or business/nonprofit activity be reported in discontinued operations?
If it:
- has been disposed of, or
- is classified as held for sale
What are the conditions that must be present in order for a disposal component, group of components, business activity or nonprofit activity to be reported in discontinued operations?
The disposal represents a strategic shift that has or will have a major effect on the entity’s operations and financial results
What is considered to be a major shift that could have an effect on operations and financial results?
(GEL)
- Disposal of major Geographical area
- Disposal of major equity method investments
- Disposal of major line of business
What are the types of items included in the results of discontinued operations?
- Results of operations of the component
- Gain/loss on disposal of component upon sale
- Impairment loss (and subsequent increase in FV) of component
A gain that is recognized for subsequent increase in FV of a component cannot be in excess of:
Previously recognized cumulative loss
When are the results of discontinued operations of a component reported in discontinued operations?
In the period the component is either disposed of or held for sale
When are anticipated future gains and losses recognized?
When they occur
Where are adjustments to amounts previously reported in discontinued operations that are directly related to the disposal of a component in prior period classified?
Current period discontinued operations
What must happen for a settlement to be considered directly related to a component?
Must:
- have demonstrated cause-and-effect relationship
- occur no later than one year after the date of the disposal transaction
What is a component classified as held for sale measured at?
Lower of its carrying amount or fair value less costs to sell (NRV)
Exit or disposal activities
Downsizing or “closing hub”
What are costs associated with exit/disposal activities?
Involuntary employee termination benefits
Costs to terminate contract (not capital lease)
Costs to consolidate facilities/relocate employees
