Professional Documents
Culture Documents
INTERMEDIATE
ACCOUNTING
VOLUME 1
ELEVENTH CANADIAN EDITION
Prepared by:
Darrin Ambrose CPA, CMA, MBA
University of Calgary
CHAPTER 4:
REPORTING FINANCIAL
PERFORMANCE
Business Models
The basic business model identifies three activities:
1. Financing
Obtaining cash funding
2. Investing
Use of funding to buy assets and invest in people
3. Operating
Use of assets and people to generate profits
Communicating Information
About Performance
Quality of Earnings
Integrity of information
Sustainability of earnings
2. Presentation
Quality of Earnings
Characteristics of high quality earnings:
1.
Nature of Content
2.
Presentation
Discontinued Operations
Discontinued Operations
A distinction made between:
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Discontinued Operations
Measurement & Presentation
Depreciation is not recognized for held for sale assets
Remeasured at lower of carrying value and fair value
net of cost to sell
Once asset is written down, subsequent gains can be
recognized only up to the amount of original loss
Presented separately on balance sheet
Under ASPE, held for sale asset retains original
classification as current or non-current
Under IFRS, held for sale assets generally classified as
current
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Discontinued Operations
Statement Presentation
Income from continuing operations (net of tax)
$xx,xxx
Discontinued Operations:
Income (Loss) from operations (net of tax) $xx,xxx
Gain (Loss) on disposal (net of tax)
xx,xxx xx,xxx
Net Income
$xx,xxx
x
x
x
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Presentation of Performance
Under IFRS, the statement of comprehensive
income can be presented either:
as a single combined statement, or
as two separate statements
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600,000
90,000
30,000
2.
Income tax expense often reported separate from expenses as the last
line item in determining net income
Advantages:
Simplicity
Disadvantage:
.
Oversimplification
Revenues
Expenses
=
Net Income
Earnings per
Share
Revenues
Net Sales
Other Revenues
(e.g. Dividend, Rental)
Expenses
Cost of Goods Sold
Selling Expenses
Administrative Expenses
Interest Expense
Income Tax Expense
Any Gains/Losses from
Discontinued Operations must be
disclosed separately from
Continuing Operations 20
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Continuing Operations
Discontinued Operations
Operating section
Nonoperating section
Income tax
Includes other
gains/losses not included
in net income
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Continuing OperationsDetail
Net Sales
Operating Section
Nonoperating Section
Income Tax
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Presenting Expenses:
Nature versus Function
Under IFRS, analysis of expenses must be
presented based on either:
Nature of expenses (e.g. purchase of materials,
transportation costs, employee benefits, depreciation,
etc.)
Function of expenses (e.g. cost of sales,
administrative costs, etc.)
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Looking Ahead
IASB and FASB are preparing a converged standard on
Financial Statement Presentation
At the time of printing, the project was on hold.
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