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  In May 2014, the IASB and FASB issued converged accounting standards which aim to provide a principles-based approach to revenue recognition. The core principle behind these converged standards is that revenue is to be recognized in order to “depict…

The IASB Conceptual Framework describes expenses as “decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions…

When assessing a company’s possible future performance, it is advisable to separate recurring items from non-recurring items. Recurring items are items of income and expense that are likely to continue in the future, while non-recurring items are those which are…

When assessing a company’s current or potential future financial performance, it is important to consider the effects of both operating and non-operating components of the income statement. For example, a company that may appear to be profitable based on the…

Both IFRS and US GAAP require a company to present its earnings per share (EPS) on the face of the income statement for net profit or loss (net income) and profit or loss (income) from continuing operations. The calculation of…

Dilutive securities and anti-dilutive securities can impact the calculation of earnings per share (EPS) in opposite ways. It is therefore very important to ascertain whether the inclusion of a financial instrument in the EPS calculation has dilutive or anti-dilutive properties….

Conversion of the income statement to a common-size income statement facilitates an assessment of a company’s performance across time periods (time series analysis), and across companies (cross-sectional analysis). Common-size analysis of the income statement is performed by stating each line…

The balance sheet is also known as the statement of financial position or statement of financial condition. It is a financial statement that gives a snapshot of a company’s assets, and its sources of capital, i.e., liabilities and shareholder’s equity,…

‘Comprehensive income’ and ‘other comprehensive income’ are two components of the income statement that can have a material effect on the profitability of a company. It is therefore very important to understand the difference between these two items and the…

Based on accounting conventions, certain items of revenue and expense are excluded from the net income calculation. These excluded items are referred to as ‘other comprehensive income.’ Under both IFRS and US GAAP, there are four types of items that…