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REPORTING IRREGULAR ITEMS - first present them in the...

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REPORTING IRREGULAR ITEMS As the use of a multiple-step or condensed income statement illustrates, GAAP allows flexibility in the presentation of the components of income. However, the FASB developed specific guidelines in two important areas: what to include in income and how to report certain unusual or irregular items. What should be included in net income has been a controversy for many years. For example, should companies report irregular gains and losses, and corrections of revenues and expenses of prior years, as part of retained earnings? Or should companies
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Unformatted text preview: first present them in the income statement and then carry them to retained earnings? This issue is extremely important because the number and magnitude of irregular items are substantial. For example, Illustration 4-5 (on page 140) identifies the most common types and number of irregular items reported in a survey of 600 large companies. Notice that more than 40 percent of the surveyed firms reported restructuring charges...
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