‘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…

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…

Dilutive versus Anti-dilutive Securities and Implications for EPS Calculation Dilutive securities are those financial instruments that are potentially convertible into common stock and could potentially dilute or decrease EPS due to the increase in the number of ordinary shares after…

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…

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…

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…

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…

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…

Accounting Standards Codification (ASC) 606 is the new revenue recognition standard affecting all entities getting into contracts with customers to transfer goods or services. These entities include the public, private, and non-profit entities and should be ASC 606 compliant. ASC…