Unformatted text preview: it would include this gain in the selling, general, and administrative expense line item, thus reducing that expense. This made it appear that the company had done a better job of controlling operating expenses than it actually had. Other companies that also recently announced changes to increase the informativeness of their income statements included PepsiCo and General Electric. Why have investors and analysts demanded more accuracy in isolating “Other gains and losses” from operating items? Answer: Greater accuracy in the classification of operating versus nonoperating (“Other gains and losses”) items permits investors and analysts to judge the real operating margin, the results of continuing operations, and management's ability to control operating expenses....
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- Spring '11
- Income Statement, Expense, Operating expense, administrative expense line, Dennis Galante/Stone/Getty Images