Term
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Definition
| revenues minus expenses plus gains minus losses. |
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Term
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Definition
| reflect the net assets that a firm receives from its customers when it sells goods or renders services. |
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Term
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Definition
| reflect the net assets consumed in generating revenues. |
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Term
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Definition
| to look at how firms have performed over time, to explain perform, and to compare performance across firms. |
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Term
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Definition
| statement of operations or the statement of operating activity. |
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Term
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Definition
| income statemtn that reflects the results of operations during an accouting period. |
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Term
| Balance sheet and income statement |
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Definition
| Income statement reflects changes in net assets during the one-year accounting period ending on this date. |
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Term
| Differences between U.S GAAP and IFRS |
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Definition
| U.S GAAP provides little guidance about which items the firm must separately display or their order. IFRS requires, at minimum, the separate display of revenues, financing costs, income tax expense, profit or loss for the period, and certain other items. |
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Term
| Retained Earnings (ending) |
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Definition
| Retained Earnings (beginning) + Net Income - Dividends |
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Term
| Retained Earnings (beginning) - Retained Earnings (ending) = |
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Definition
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Term
| Change in Retained Earnings |
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Definition
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Term
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Definition
| require seperate display of items whose size, nature, or frequency must seperately display necessary for for accurately portraying performance. |
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Term
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Definition
| require separate display necessary for accurately portraying performance. |
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Term
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Definition
| requires seperate display of portion of profit or loss attributable to the minority (noncontrolling)interest and the portion attributable to the parent entity, a topic discussed in more detail. |
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Term
| What does IFRS and U.S GAAP do for firms who present expenses? |
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Definition
| IFRS requires separate display of portion of profit or loss attributable to the minority interest and the portion attributable to the parent entity. U.S GAAP is silent on issue. |
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Term
| Do multiple segments of the firm have to disclose the revenues of each segment? |
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Definition
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Term
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Definition
| sales revenues less discounts, allowances, and returns. |
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Term
--Reporting Expenses--
Cost of goods sold: |
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Definition
| Cost of products sold and services provided during the period. |
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Term
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Definition
| Difference between sales and cost of sales. |
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Term
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Definition
| Difference between revenues and expenses associated with core operating activities. |
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Term
| Subtracting total operating expenses from sales yields |
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Definition
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Term
| How can items be classified as operating expense? |
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Definition
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Term
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Definition
| selling the headquarters of a business. |
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Term
| Nonoperating expenses - operating income= |
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Definition
| Profit before income taxes. |
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Term
| Definition of operating income: |
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Definition
| No authoritative guidance on what is a core operating expense. Defined by management what a core operating expense is. |
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Term
| Sales - Operating Expenses |
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Definition
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Term
| Operating Income - nonoperating expese |
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Definition
| profit before income taxes |
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Term
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Definition
| Multiplying applicable tax rate (effective tax rate) with Profit before income taxes. |
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Term
| Income with continuing operations and income from discontinued operations |
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Definition
| earnings that will not continue because the firm either sold, or made a decision to sell, a portion of its business. |
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Term
--Revenue Recognition--
Definition:
Criteria: |
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Definition
timing and measurement of revenues.
1. Completion of earnings process: seller has done all (or nearly all) that it has promised to do for the customer. seller has delivered all of the goods and services it has agreed to provide.
2. Recepit of assets from the customer: The seller has recieved cash or some other asset that it can convert to cash, ex: collecting accounts receivable. |
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Term
--Revenue Measurement--
Sales discounts and allowances: |
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Definition
| customers can take advantage of discounts for prompt payment and seller may grant allowances for unsatisfactory merchandise. |
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Term
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Definition
| Collect and keep cash in smaller amounts than the sum of the exchange prices. |
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Term
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Definition
| When the firm consume benefits. |
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Term
| Criteria for Expense Recognition |
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Definition
1. Recognition of expense for products at the same time as revenues.
2. when the firm consumes the benefits of an asset over time, the cost becomes an expense of the period when the firm consumes the benefits. |
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Term
--Recognition of Product Costs--
Cost of Goods sold reports the decrease in inventory |
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Definition
| When the firm recognizes that the good is sold, the firm can then recognizes the revenues sold and a reduction in inventory. |
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Term
| Three types of material become product costs: |
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Definition
| I1. Direct material costs. 2. Direct Labor Costs 3. Manufacturing Overhead costs |
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Term
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Definition
| Manufacturing overhead includes costs such as property taxes, insurance, factory utilities, etc. |
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Term
--Recognition of Period Expenses--
Administrative costs |
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Definition
| firm recognizes them as expenses when it consumes their benefits in the accounting period. |
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Term
--Comprehensive Income--
Other Comprehensive Income: |
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Definition
| refer to changes in net assets that are not transactions with owners and do not appear on the income statement. |
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Term
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Definition
| changes in net assets for a period except for changes arising from transactions with owners. |
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Term
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Definition
| Net Income + Other Comprehensive Income |
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Term
| Accumulated Other Comprehensive Income |
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Definition
| Both U.S GAAP and IFRS require companies to report cumulative effect of other comprehensive income in a balance sheet account. |
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Term
| Retained Earnings (ending)= |
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Definition
| Retained Earnings (beginnning)+ Net Income - Dividends |
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Term
| Accumulated Other Comprehensive Income (ending) |
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Definition
| Accumulated Other Comprehensive Income (beginning) + Other comprehensive Income |
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Term
| U.S GAAP and IFRS require presentation of an income sttemnt and presentation of items of Other Comprehensive Income. U.S GAAP permits three reporting formats. |
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Definition
1. A single statement of comprehensive income that shows all the changes in net assets except from transactions with owners.
2. A two-statement presentation that includes an income statement and a separate statement of comprehensive income.
3. A separate display of items comprising Other Comprehensive Income within a statement of changes in shareholders' equity. |
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Term
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Definition
| Ratio of Net Income to Revenue. Used to compare companies of different profitability. |
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Term
| Common-Size Income Statement: |
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Definition
| expresses each expense and net income as a percentage of revenues. Shows relations between expense, revenues, and net income. |
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Term
| Time-Series Analysis can show how profit magins increase: |
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Definition
Result from four factors:
1. Decreasing cost of goods sold to sales percentage.
2. A decreasing selling, general, and admministrative (SG&A) expense to sales percentage.
3. A decreasing interest expense to sales percentage.
3. A decreasing interest expense to sales percentage.
4. An increasing other income to sales percentage. |
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