Question: Which of the following is not an acceptable way of displaying the components of other comprehensive income under IFRS?
(a) Within the statement of retained earnings.
(b) Second income statement.
(c) Combined statement of comprehensive income.
(d) All of these choices are acceptable.
Option a is the correct answer.
Retained earnings refer to the amount of profits left with a business entity after making the payments of all direct costs, indirect costs, income taxes, and dividends to the shareholders.
The components of other comprehensive income are not reported under IFRS in the statement of retained earnings. Still, they are disclosed in the statement of profit and loss or income statement of a business concern.
The income statements include a variety of formats, such as single-step and multi-step income statements. An income statement must reflect the other comprehensive income. In addition, the statement of combined comprehensive income also considers the components of other comprehensive income, such as unrealized revenues, expenses, gains, and losses.
On January 30, 2016, a suit was filed against Frazier Corporation under the Environmental Protection Act. On August 6, 2017, Frazier Corporation agreed to settle the action and pay $920,000 in damages to certain current and former employees. How should this settlement be reported in the 2017 financial statements? Discuss.
The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a) What type of income statement format does P&G use? Indicate why this format might be used to present income statement information.
(b) What are P&G’s primary revenue sources?
(c) Compute P&G’s gross profit for each of the years 2012–2014. Explain why gross profit decreased in 2014.
(d) Why does P&G make a distinction between operating and nonoperating revenue?
(e) What financial ratios did P&G choose to report in its “Financial Summary” section covering the years 2009–2014?
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