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Income Statement PresentationCompanies widely use two forms of the income statement. One is the single-step income statement. The statement is so named because only one step, subtracting total expenses from total revenues, is required in determining net income (or net loss).In a single-step statement, all data are classified into two categories: (1) revenues, which include both operating revenues and nonoperating revenues and gains (for example, interest revenue and gain on sale of equipment); and (2) expenses, which include cost of goods sold, operating expenses, and nonoperating expenses and losses (for example, interest expense, loss on sale of equipment, or income tax expense). The single-step income statement is the form we have used thus far in the text. Illustration 5-7shows a single-step statement for Wal-Mart.Illustration 5-7 Single-step income statementsThere are two primary reasons for using the single-step form: (1) A company does not realize any type of profit or income until total revenues exceed total expenses, so it makes sense to divide the statement into these two categories. (2) The form is simple and easy to read. International Note
The IASB and FASB are involved in a joint project to evaluate the format of financial statements. The first phase of that project involves a focus on how to best present revenues and expenses. One longer-term result of the project may well be an income statement format that better reflects how businesses are run.A second form of the income statement is the multiple-step income statement. The multiple-step income statement is often considered more useful because it highlights the components of net income. The Wal-Mart income statement in Illustration 5-8is an example.