320 Lesson 2a

320 Lesson 2a - Reporting Financial Performance Week 2-1-...

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Unformatted text preview: Reporting Financial Performance Week 2-1- Balance Sheet December 31 2009 Assets Liabilities Shareholders Equity Income Statement For the year ended December 31, 2010 Revenues-Expenses = Net income + Comprehen- sive income = Total compre- hensive income Balance Sheet December 31 2010 Assets Liabilities Shareholders Equity-2- Income statement Usefulness evaluate past performance and profitiability provide a basis for predicting future performance help assessing risk or uncertainty of future cash flows Limitations mix of determined amounts and estimates methods selected affect amounts reported no common understanding of what income is-3- Quality of Earnings Content + how presented = quality Content should be: unbiased, understandable, represent reality, transparent useful for predicting future performance useful for predicting future cash flows Earnings management selection of policies, use of estimates, timing of transactions to achieve targeted outcomes Notes: Investors look for high quality earnings - -4- Income statement content revenues expenses gains losses Ordinary activities Peripheral activities other comprehensive income profit/loss of minority interest-5- Income statement formats Single-step list all revenues then all expenses except income taxes Multiple step list sales then cost of goods sold determine gross margin then other operating expense then financing expenses Notes: Do E4-5-6- Do E4-5: Items to be included: a. Revenue b. Finance costs c. Share of profit/loss of associates and JV accounted for under the equity method d. Tax expense e. A single amount comprised of the total of:- post-tax profit or loss of discontinued operations- post-tax gain/loss on the measurement to fair value less costs to sell or on the disposal of the assets constituting the discontinued operation f. Profit or loss g. Each component of other comprehensive income h. Share of other comprehensive income of associates or JV accounted for under equity i. Total comprehensive income-7- Intraperiod Tax Allocation...
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320 Lesson 2a - Reporting Financial Performance Week 2-1-...

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