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Income Statement & Balance Sheet & Discontinued Operations

Information
Period costs expensed immediately
Unexpired/capitalized costs costs that will expire in the future periods (matched against
future revenue)
-inventory COGS
-insurance prepaid (12 months max) insurance expense
-NBV fixed asset depreciation expense
-patents patent expense (amortization)
Income statement performance for period of time
Income Statement
Information
Information
Continuing operations = operating (revenue, expense) + non-operating (gain, loss)
-revenue expense + gain loss = continuing operations income
Excluded Items Key
Prior year adjusted operation expense
Unrealized gain/loss Bg = beginning
Items SP = sale price
Separate Line Items BV = book value
Revenue (net sales after sale discounts & returns) NBV = net book value
Expired/charged cost (related to revenue) (i.e. sold inventory) FV = fair value
Expense (i.e. depreciation, insurance, patent, other expenses) COGS = cost of goods sold
Non-operating Items (unusual/infrequent/unforeseeable event) SGA = selling general
Gains administrative
Loss GP = gross profit
Interest revenue HFS = held for sale
Interest expense HTM = held till maturity
Unusual/Infrequent/Unforeseeable Event AFS = available for sale
Unexpected natural disaster (usually does not occur) AR = accounts receivable
Foreign government property possession/forfeiture/seizure/freeze NR = notes receivable
Union strike AP = accounts payable
Sale/dispose investments NP = notes payable
Sale/dispose/abandon fixed assets PPE = property, plant, &
equipment
Expense Types
LE: [X] [Y] = lesser of [X]
Selling Expenses (operating expense)
or [Y]
Sales salary
Freight-out (not freight-in; freight-in is capitalized with inventory)
Sale commissions
Advertising
Office space rent (used by sale department)
Depreciation/amortization

General/Administration Expense (operating expense)

Office salary
Accounting/legal
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Insurance
Office space rent (used by administer/similar department)
Non-operating Expense
Interest expense (has separate disclosure)
-for banks income statement, it would be operating due to it being part of core
business
Charity Expense
Donations to organizations
No payroll deductions
No operation commitment expense (i.e. commitment to improving environment)
Discontinued Operations (divesture)
Information
Reported at net of tax
Reported only if has material/strategic shift effect on company and was
disposed/classified HFS (i.e. major geographic area/investment/business line)
Reported as separate income component; below continuing operations income
Reported in period of occurrence
Sale costs are incremental direct costs
Disclosed within notes/f/s face
Reports any income/loss from the current year relating to discontinued component
regardless of plans date to discontinue
(I.E. plan accepted in June, January to May there was a $500 income (gain) from
operations, still reported under discontinued operations)
Discontinued Operations Types
Actual operations gain/loss
Asset disposal gain/loss
Impairment loss
Impairment gain (after impairment loss occurred prior year)
Reporting Requirements
Disposed of already (has material effect on f/s results)
Classified HFS (has material effect on f/s results)

Business HFS
Information
Stops amortization/depreciation
Gain/loss of sale recognized in year of occurrence
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Entity Component Types (Key Words)

Operating/reportable segment
Reporting unit
Subsidiary
Asset group
Component
Business line
Process (after classified HFS)
Impairment analysis on component

Gross Gain (Loss) = SP/NRV BV sale costs related liabilities (i.e. mortgage)

Gain (Loss) = LE: [Gross Gain (Loss)] [cumulative prior impairment loss -1]

Final results of component operations

Gain/loss component disposal

*cumulative prior years impairment loss = all impairment loss + impairment loss
(From prior&current year discontinued assets not sold yet) (From discontinued assets in current year being sold)

Business Classified HFS Requirements (requires all)

Sale plan
Available immediate for sale
Active program to locate buyer
Sale probable, expected complete within 1 year
Actively marketed
Actions to complete will unlikely cause withdraw

Income Statement Formats

Multi-step Income Statement Format
*Net sales = sales/services/rent gross revenue sales returns sales discounts
*Net purchases = purchases + freight-in purchase returns purchase discount
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*COGS = bg inventory + net purchases end inventory

Operating: (Core-business)
Net Sales (sales gross revenue sales return sales discount)
COGS/cost of service sold/cost of rent income
GP
SGA/Operating Expenses (selling & general/administration)
Operating Income
Non-operating: (Auxiliary)
Other Revenue/Gains
+ Interest Revenue
+ Gain (sale/dispose/abandon on fixed asset)
+ Other Revenue
Other Expense/Losses
Interest Expense
Other Expense
Loss (sale/dispose/abandon on fixed asset)
Income before unusual items
Unusual Items
+ Gain (sale/dispose on investment/security)
Loss (sale/dispose on investment/security)
Income before taxes (EBT)
Taxes
Income Tax Expense (EBT tax rate)
Income Continuing Operations
Discontinued Operations: (includes all annual income/loss from component, regardless when plan was accepted)
+ Gain, net of tax (sale/dispose/abandon discontinued Y, net of related liabilities)
Loss, net of tax (sale/dispose/abandon discontinued Y, net of related liabilities)
Impairment Loss, net of tax (discontinued Y not sold in current year**)
Impairment revalued, net of tax (prior year impairment revalued once sold in current year**)
Net Income
*note: Y = component, subsidiary, division, segment, department, asset group, business unit/line
**note: once sold the impairment becomes a gain or loss and is no longer reported as an impairment.
Calculation in the year once sold:

Gross Gain/Loss = SP/NRV BV sale costs related liabilities

Gain/Loss (impairment revalued) = LE: [Gross Gain/Loss] [cumulative prior impairment loss -1]

Single-step Income Statement

*income tax expense = all revenue/gains all expenses/losses = EBT tax rate (Excludes discontinued operations)

Operations:
+ All revenues/gains (exclude discontinued operations)
All expenses/tax/losses (exclude discontinued operations)
Income Continuing Operations
Discontinued Operations: (includes all annual income/loss from component, regardless when plan was accepted)
+ Gain, net of tax (sale/dispose/abandon discontinued Y, net of related liabilities)
Loss, net of tax (sale/dispose/abandon discontinued Y, net of related liabilities)
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Impairment Loss, net of tax (discontinued Y not sold in current year**)

Impairment revalued, net of tax (prior year impairment revalued once sold in current year**)
Net Income
*note: Y = component, subsidiary, division, segment, department, asset group, business unit/line
**note: once sold the impairment becomes a gain or loss and is no longer reported as an impairment.
Calculation in the year once sold:

Gross Gain/Loss = SP/NRV BV sale costs related liabilities

Gain/Loss (impairment revalued) = LE: [Gross Gain/Loss] [cumulative prior impairment loss -1]

Balance Sheet
Information
Classified balance sheet valuable due to current assets/liabilities netting equals
working capital
-higher working capital means can pay obligations and meet earnings
-higher working capital is less short-term risk
-current assets current liabilities = working capital
Stocks (common/preferred)/paid-in capital are contributions
Retained earnings/accumulated other comprehensive income internally generated
Treasury stock is contra-equity (company buys its own stock back)
Financial risk come from capital structure
Prepaid insurance regardless of term is report at 12 months
Discontinued operation assets classified for HFS; planned to be sold within1 year
Liquidation Distribution Receive Rank
Liability Holders (creditors/lenders)
1. Secured
2. Unsecured
Equity Holders
3. Preferred
4. Common

Classified Balance Sheet

Current Assets
+ Cash (mailed checks after T/B date overdrafts)
+ Trade Securities (FV)
+ AR (net allowance) (AR allowance doubtful current year payments)
+ NR
+ Inventory
+ Prepaid Expense
+ Assets Discontinued Operations (classified HFS; actively marketed; plan to sale within1 year)
+ Investments currently due (within 1 year)
Non-current Assets
Investments:
+ AFS Security (FV)
+ HTM Security
+ Investments (stocks/licenses/bonds/cash in bond sinking fund)
PPE/Tangible:
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+ Land
+ Building
+ Plants
+ Equipment
Accumulated Depreciation
Intangible:
+ Goodwill
+ Patent/Copyright/Trade Marks (net amortization)
Other:
+ Pensions/other post-retirement assets
+ Deferred Income Tax Asset
Total Assets
Current Liabilities
+ Long-term Debt/Bonds Payable currently due (within 1 year)
+ Unearned Revenue
+ Customer Deposits
+ AP
+ NP
+ Salary Payable
+ Interest Payable
+ Dividends Payable
Non-current Liabilities
+ Bonds Payable (Bonds Payable + Premium Bond Payable Discount Bond Payable)
+ Deferred Tax Liability
+ Pensions/other post-retirement liabilities
Total Liabilities

Equity (shareholders equity) (residual interest)

+ Common Stock (at par)
+ Preferred Stock (at par)
+ Paid-in Capital (excess par)
+ Retained Earnings (end) (after dividends/net income) [Net Income + bg Retained Earnings Dividends]
+ Accumulated Other Comprehensive Income
Treasury Stock
Total Equity (Total Shareholders Equity)
Total Liabilities and Equity

Balance Sheet (normal)

Assets
+ All Assets
Total Assets

Liabilities
+ All Liabilities
Total Liabilities

Equity (shareholders equity)

+ All Equity
Total Equity (Total Shareholders Equity)
Total Liabilities and Equity
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