Ch 4 Reporting Financial Performance V2-1

Ch 4 Reporting Financial Performance V2-1 -...

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Ch 4 Reporting Financial  Performance 1
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2 Reporting Financial Performance Income Statement Usefulness Limitations Quality of earnings Reporting Irregular Items Discontinued operations Extraordinary items Unusual gains and losses Changes in estimates Format of the Income Statement Elements Single-step Multiple-step Intermediate components Nature versus function Condensed income statement Special Reporting Issues Intraperiod tax allocation Earnings per share Retained earnings Comprehensive income IFRS/Private GAAP Comparison Comparison Analysis Looking ahead
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3 Reporting Financial Performance Income Statement Usefulness Limitations Quality of earnings Reporting Irregular Items Discontinued operations Extraordinary items Unusual gains and losses Changes in estimates Format of the Income Statement Elements Single-step Multiple-step Intermediate components Nature versus function Condensed income statement Special Reporting Issues Intraperiod tax allocation Earnings per share Retained earnings Comprehensive income IFRS/Private GAAP Comparison Comparison Analysis Looking ahead
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Overview of the Business Model 4
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5 Uses and Limitations of the Income  Statement Uses: Evaluate past performance and profitability Assist in predicting future performance Assess potential risk or uncertainty in achieving future cash flows Limitations: Items are excluded if they cannot be measured reliably Amounts reported are affected by accounting methods used Use of estimates in measuring income Different ways of measuring income
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6 Quality of Earnings The reliability of the information presented is dependent on the quality of earnings Characteristics of high quality earnings: 1. Nature of Content Unbiased and determined objectively Represents economic reality Reflects earnings from ongoing operations Can be correlated with cash flows from operations Based on sound business strategy/model •. Presentation Does not disguise or mislead ( transparent ) Information presented is understandable Also, information is clear and concise
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7 Reporting Financial Performance Income Statement Usefulness Limitations Quality of earnings Reporting Irregular Items Discontinued operations Extraordinary items Unusual gains and losses Changes in estimates Format of the Income Statement Elements Single-step Multiple-step Intermediate components Nature versus function Condensed income statement Special Reporting Issues Intraperiod tax allocation Earnings per share Retained earnings Comprehensive income IFRS/Private GAAP Comparison Comparison Analysis Looking ahead
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8 Widely used by smaller private companies.
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Ch 4 Reporting Financial Performance V2-1 -...

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