Chapter 4
Which of the following items are included in calculating operating income?
-expenses related to primary revenue-generating activities -revenues related to primary revenue-generating activities
An income statement prepared in accordance with IFRS allows expenses to be classified by
-function -nature
A multiple-step income statement includes which of the following?
-gross profit -income before taxes -operating income
The advantages of a multiple-step income statement is
-it provides more information than a single-step income statement -it reports the relationships between various items -it reports expenses by function
gains and losses are increases or decreases in equity from which type of transactions?
-peripheral -incidental
if a casual relationship cannot be established between revenues and expenses , which of the following occurs
-record the expense as incurred -allocate the expense over several periods -relate the expense to a particular period
identify which items on an income statement are included in calculating income from continuing operations
-revenue -income tax -loss
The two approaches for preparing an income statement are the ________ step and _______ step approaches
-single -multi
Which of the following terms are used to describe an income statement?
-statement of operations -statement of earnings
Income tax expense is reported in what way on the income statement?
As a separate line item
Which standards require certain minimum information to be reported on the face of the income statement?
IFRS
________ requires certain minimum information be reported on the face of the income statement, while _____ does not have minimum requirements
IFRS; US GAAP
Revenues, expenses, gains, and losses that will likely continue in future periods make up what?
Income from continuing operations
GAAP requires that restructuring costs are recognized when?
Only in the period incurred
The ______-______ Act established a requirement that a if a company includes non-GAAP earnings in any report filed with the SEC or any public disclosure or press release, it must also provide a _____ with earnings according to GAAP
Sarbanes Oxley; reconciliation
Expenses reported on an income statement can be classified by nature or by function under these accounting standards
U.S. GAAP
the purpose of a statement of cash flows is to provide information about the
cash receipts and cash disbursements during a period
Any long-lived asset, whether tangible or intangible, should have its balance reduced if there has been a significant _____ of value
decline, decrease, or reduction
The evidence that a financial statement user or analyst might use as evidence to suggest that earnings have been smoothed is
earnings have a steady stream over time
the outflows of resources while generating revenue are referred to as
expenses
what represents the costs of providing goods and services to customers?
expenses
What basis is used for estimated restructuring costs?
fair value
True or false: Under both U.S. GAAP and IFRS, the "bottom line" of the income statement is typically referred to as net income or net loss.
false
The income statement is considered most useful for predicting
future profitability
which of the following is an increase in equity from a peripheral or incidental transaction that is included in income from continuing operations?
gain
statement of operations and statement of earnings are additional titles for the
income statement
the statement used to predict future profitability and a company's future cash-generating ability is the
income statement
Categorizing operating expenses as nonoperating expenses is an example of
income statement classification shifting
When a company uses a special charge such as restructuring costs and shows a loss on the income statement, income may be manipulated through
income statement classification shifting
Income smoothing describes the concept that
managers manipulate the pattern of income to not vary much between years
An income statement that classifies items and uses subtotals for gross profit, operating income, and income from continuing operations is called a(n) ______ -step income statement
multi
under U.S. GAAP, the bottom line of the income statement is either:
net income or net loss
The more frequently a company incurs restructuring costs, the more appropriate it is for financial statement users to include those costs in estimates of _____ earnings when forecasting future performance
permanent
The initial measurement of restructuring liabilities is at fair value, which often is estimated as the _____ _____ of estimated future cash flows
present; value
under IFRS, the bottom line of the income statement is either:
profit or loss
Although U.S. GAAP uses the term net income on the income statement, IFRS uses the terms ______ and ______.
profit; loss
The ability of reported earnings to predict a company's future earnings is referred to as earnings ______
quality
_____ costs include costs associated with shutdown or relocation of facilities
restructuring
the inflow of resources resulting from providing goods or services to customers is referred to as
revenue
Operating and nonoperating items are not separately classified in a ______ -step income statement
single
A company prepares its income statement by listing all sources of revenues and gains at the top, followed by a list of all expenses and losses. Which income statement approach does this describe?
single-step
which of the following terms is also used as a heading for an income statement
statement of operations
the purpose of the income statement is to
summarize the profit-generating activities that occurred during a particular reporting period
earnings quality refers to
the ability of reported earnings to predict future earnings
Net income using the multiple-step income statement presentation is ____ net income using the single-step income statement presentation (greater than, the same as, or less than)
the same as
True or false: If a causal relationship can be established, expenses are reported in the same period that the related revenue is recognized
true