Income Statement Part II.pptx - Income Statement Part II...

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Income Statement: Part II
Stock Based Compensation Similar to D&A, you will not see a separate line item identifying SBC on the I/S. Instead found on cash flow statement SBC is imbedded within the operating expenses in which the employee is classified Software engineer – R&D Corporate manager – SG&A Factory supervisor – COGS What happens when a company compensates an employee with stock options or restricted stock?
SBC Example Accrual accounting suggests that the SBC is recognized in the same period as it is earned. A company pays a sales person a salary of $100,000 and stock options valued at $50,000 that vest over 5 years. $110,00 of SG&A will be recognized even though only $100,000 was spent The extra $10,000 is a non-cash expense
Google’s footnotes on “other income” Note: Marketable securities are mark-to-market. (Does not follow historical/initial cost principle)
Tax Expense The tax expense companies recognize on their income statement does not equal that actual cash taxes they have to pay for the same period.

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