Elements of the Income Statement

Income – Increases in economic benefits during the accounting period in the form of inflows or enhancements of as

Income includes both revenues and gains.

·       Revenues - ordinary activities of a company
·       Gains - may or may not arise from ordinary activities.

Revenue Accounts
·       Sales
·       Fee revenue
·       Interest revenue
·       Dividend revenue
·       Rent revenue

Gain Accounts
·       Gains on the sale of long-term assets
·       Unrealized gains on trading securities.

Expenses – Decreases in economic benefits during the accounting period in the form of outflows or depletions of as

Examples of Expense Accounts

·       Cost of goods sold
·       Depreciation expense
·       Interest expense
·       Rent expense
·       Salary expense

Gains and Losses - otjer income and expense

IASB takes the position that both
·       revenues and expenses and
·       other income and expense
should be reported as part of income from operations.

Additional items that may need disclosure:

Ø  Losses on write-downs of inventories to net realizable value or of property, plant, and equipment to
Ø  Losses on restructurings of the activities and reversals of any provisions for the costs of restructurin
Ø  Gains or losses on the disposal of items of property, plant, and, equipment or investments.
Ø  Litigation settlements.
Ø  Other reversals of liabilities.

Income from continuing operations

Finance cost - total expenses associated with securing financing for a project or business arrangement. Financing c

Discontinued Operations
A component of an entity that either has been disposed of, or is classified as held-for-sale, and:
1. Represents a major line of business or geographical area of operations, or
2. Is part of a single, co-coordinated plan to dispose of a major line of business or geographical area of operation
3. Is a subsidiary acquired exclusively with a view to resell.

Companies report as discontinued operations

1. (in a separate income statement category) the gain or loss from disposal of a component of a business.
2. The results of operations of a component that has been or will be disposed of separately from continuing operat
3. The effects of discontinued operations net of tax, as a separate category after continuing operations.

Net Income
Represents the income after all
ü  revenues and
ü  expenses
for the period are considered.

Other comprehensive income is defined as comprising "items of income and

expense (including reclassification adjustments) that are not recognized in
profit or loss as required or permitted by other PFRSs".

Total comprehensive income is defined as "the change in equity during a period

resulting from transactions and other events, other than those changes
resulting from transactions with owners in their capacity as owners".

Examples of items recognized in other comprehensive income:

- changes in revaluation surplus
- remeasurements of a net defined liability or asset
- exchange differences from translating functional currencies
into presentation currency
- gains and losses on remeasuring available for sale financial assets
- the effective portion of gain and losses on hedging instruments
in a cash flow hedge
- gains and losses on remeasuring an investment in equity instruments
where the entity has elected to present them in other comprehensive income
- the effects of changes in the credit risk of a financial liability designated
as at fair value through profit or loss
- actuarial gains and losses on defined benefit plans
- Reclassification adjustments - amounts reclassified to P or L in the current
period, that were recognized in OCI in the current or previous years.
(treated as reduction to OCI)

Summary
Other comprehensive income is defined as comprising "items of income and
expense (including reclassification adjustments) that are not recognized in
profit or loss as required or permitted by other PFRSs".

Total comprehensive income is defined as "the change in equity during a period

resulting from transactions and other events, other than those changes
resulting from transactions with owners in their capacity as owners".

Examples of items recognized in other comprehensive income:

- changes in revaluation surplus
- remeasurements of a net defined liability or asset
- exchange differences from translating functional currencies
into presentation currency
- gains and losses on remeasuring available for sale financial assets
- the effective portion of gain and losses on hedging instruments
in a cash flow hedge
- gains and losses on remeasuring an investment in equity instruments
where the entity has elected to present them in other comprehensive income
- the effects of changes in the credit risk of a financial liability designated
as at fair value through profit or loss
- actuarial gains and losses on defined benefit plans
- Reclassification adjustments - amounts reclassified to P or L in the current
period, that were recognized in OCI in the current or previous years.
(treated as reduction to OCI)
ows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contribut

outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distrib

ty, plant, and equipment to recoverable amount, as well as reversals of such write-downs.
for the costs of restructuring.
ent or investments.

s arrangement. Financing costs may include interest payments, financing fees charged by intermediary financial institutions, an

ographical area of operations, or

nent of a business.
ately from continuing operations.
uing operations.
an those relating to contributions from shareholders.

than those relating to distributions to shareholders.

iary financial institutions, and the fees or salaries of any personnel required to complete the financing process.
g process.
P -1
Sales 450,000
less cost of goods sold -210,000
Gross profit 240000
Selling and administrative expenses -75,000
Other income and expense:
Gain on sale of plant assets 45,000
Income from operations 210000
Financing cost - interest -10,000
Income from continuing operations 200000
Discontinued operations:
Loss on discontinued operations -20,000
Net income 180000
Other comprehensive income:
Unrealized gain on AFS financial assets 15,000
Total comprehensive Income 195,000

Net income 180,000

less allocation to non-controlling interest -60,000
Net income attributable to shareholders 120,000

Retained earnings, beg 0

Add: Net income 180,000
Total 180,000
less dividends -8,000
Retained earnings, 12/31/21 172,000

P-2
Sales 97,500,000
Less cost of sales -46,350,000
Gross income/profit 51,150,000
Operating expenses:
Uncollectible accounts expense -2,750,000
Freight out -4,000,000
Administrative expenses -11,250,000
Sales commissions -6,000,000
Other income and expenses: Loss on ret. Of LTD -3,000,000
Loss on sale of equipment -2,000,000
Income from operations 22,150,000
Interest income 4,850,000
Income from continuing operations before tax 27,000,000
Income tax (30%) -8,100,000
Net income 18,900,000
P-3
Sales 50,000,000
Less cost of goods sold -30,000,000
Gross profit 20,000,000
Distribution cost/selling expenses -5,000,000
General and administrative expenses -4,000,000
Other income and expenses:
Gain on early extinguishment of LTD 500,000
Investment income 3,000,000
Gain on expropriation 2,000,000
Income from operations 16,500,000
Finance charges -2,000,000
Income from continuing operations before taxes 14,500,000
P-4 Income includes both reve
Dividend income from investments 1,520,000
Distribution income from trust 200,000
Interest income on deposits 150,000
Income from bank treasury bills 80,000 Revenue Accounts
Income from dealing in securities and derrivatives
held for trading 200,000
Write-down of securities and derrivatives held for trading -70,000 130,000
Other income 170,000
Total income 2,250,000

Gain Accounts
P-5
Accounting and legal 25,000
Officers' salaries 150,000
Insurance 85,000
Total general and administrative expense 260,000

P-6
Advertising 150,000
Sales salaries and commissions 140,000
Rent (220,000/2) 110,000
Freight-out 80,000
Total selling expenses 480,000

P-7 Gains and Losses (other income and expense)

Gain on sale of investments 210,000 IASB takes the position that both
Loss on write-down of inventories -70,000 ·       revenues and expenses and
Other income and expense 140,000 ·       other income and expense
should be reported as part of income from operations.

P-8
Dividend revenue 4,000 Additional items that may need disclosure:
Rental revenue 20,000 Ø  Losses on write-downs of inventories to
Other income and expense 24,000 Ø  Losses on restructurings of the activities
Ø  Gains or losses on the disposal of items
Ø  Litigation settlements.
P-9 Ø  Other reversals of liabilities.
Impairment loss on intangibles 70,000
litigation settlement 40,000
Write-off of obsolete inventory 60,000
Other income and expense 170,000
P - 10
Discontinued operation - segment of business for sale
- Operations (revenue-exp.)
- Impairment loss (CA of Assets - Recoverable)
- Termination cost
- Gain or loss on sale

Gain on sale of discontinued operations 60,000

Tax (20%) -12,000
Gain from discontinued operation 48,000
 Income includes both revenues and gains.
·       Revenues - ordinary activities of a company
·       Gains - may or may not arise from ordinary activities.

Revenue Accounts
·       Sales
·       Fee revenue
·       Interest revenue
·       Dividend revenue
·       Rent revenue

Gain Accounts
·       Gains on the sale of long-term assets
·       Unrealized gains on trading securities.

ome and expense)

nd expenses and
me and expense
income from operations.

ed disclosure:
rite-downs of inventories to net realizable value or of property, plant, and equipment to recoverable amount, as well as reversa
estructurings of the activities and reversals of any provisions for the costs of restructuring.
ses on the disposal of items of property, plant, and, equipment or investments.

als of liabilities.
amount, as well as reversals of such write-downs.
P - 11 Discontinued operation - segment of business for sale
Gain on sale of assets 1,200,000 - Operations (revenue-exp.)
Operating losses -1,400,000 - Impairment loss (CA of Assets - Recoverable)
Loss from discontinued operations -200,000 - Termination cost
- Gain or loss on sale
Income from continuing operations 0

P - 12
Income from continuing operations 150,000
Discontinued operations ? -15,000
Net Income 135,000

P - 13
Impairment loss (C.A. - Recoverable) (8M-6.5M) 1,500,000 Discontinued operation - segment of business for sale
Loss from operations 2,000,000 - Operations (revenue-exp.)
Loss from discontinued operation 3,500,000 - Impairment loss (CA of Assets - Recoverable)
- Termination cost
- Gain or loss on sale
P - 14
Termination cost -2,000,000
Operations (revenue - operating cost) 4,000,000 (8M-4M)
Income from discontinued operation 2,000,000

P - 15
Other income and expense:
Dividend income 400,000
Other comprehensive income:
Unrealized loss on AFS securities -300,000
Total 100,000
Tax (20%) -20,000
Total Comprehensive income 80,000
- Recoverable)

ent of business for sale

A of Assets - Recoverable)
P - 16 Comprehensive Income:
Sales revenue 500,000 NI + OCI
Cost of sales -350,000
Gross profit 150,000
Operating expense -55,000
Other income and expense - dividends 2,000
Net Profit 97,000
OCI: Unrealized gain on AFS securities 20,000
Total comprehensive income 117,000

Examples of items recognized in other comprehensive income:

- changes in revaluation surplus
- remeasurements of a net defined liability or asset
- exchange differences from translating functional currencies
into presentation currency
- gains and losses on remeasuring available for sale financial assets
- the effective portion of gain and losses on hedging instruments
in a cash flow hedge
- gains and losses on remeasuring an investment in equity instruments
where the entity has elected to present them in other comprehensive income
- the effects of changes in the credit risk of a financial liability designated
as at fair value through profit or loss
- actuarial gains and losses on defined benefit plans
- Reclassification adjustments - amounts reclassified to P or L in the current
period, that were recognized in OCI in the current or previous years.
(treated as reduction to OCI)

P - 17
Other comprehensive income:
Unrealized gain on AFS 600,000

P - 18
Share of total comprehensive income of associates 20,000
Less: Share of profit of associates -15,000
Share on other comprehensive income of associates 5,000
Exchange difference - translation gain 7,000
Exchange difference gain on disposal reclassified to P or L -21,000 *
Increase in asset revaluation surplus 45,000
Total other comprehensive income 36,000

When a foreign operation is disposed of, the cummulative amount of exchange

differences recognized in other comprehensive income and accumulated
in the separate component of equity relating to that foreign operation shall be
recognized in profit or loss upon disposal.
In other words exchange differences accumulated in OCI is reclassified or
transferred to P or L.
(deduction from OCI and add to P or L)*

P - 19
Revenue 355,000
Work performed by the entity and capitalized (Revenue) 15,000
Total revenue 370,000
Decrease in inventories of finished good and WP -107,900
Raw materials and consumables used -92,000
Depreciation and amortization -17,000
Employee benefit expense -43,000
Other income 11,300
Other expense -5,500
Share in profit of associates 30,100
Finance cost -18,000
Loss from discontinued operations -30,500
Income tax expense -32,000
Profit/Net income 65,500

Actuarial gains on defined benefit pension plans 1,333

Exchange difference gain on translating foreign operations 10,667
Gains on property revaluation 3,367
Share on OCI of associates( unrealized loss on AFS) -700
Unrealized gains on AFS 26,667
Unrealized loss on derrivatives in an effective cash flow hedge -4,000
Income tax relating to OCI -9,334
Other comprehensive income 28,000

Profit for the year 65,500

Other comprehensive income for the year 28,000
Total comprehensive income 93,500

P - 20
1.
Sales (net)
Less cost of goods sold
Gross profit 0
Less operating expenses:
Selling
Administrative
Other income and expense:
Gain on sale of equipment
Loss due to earthquake
Finance cost:
Interest income
 Interest expense
Income from continuing operations before tax 0
Less income tax expense
Income from continuing operations 0

2.
Loss from operations of discontinued segment (net of tax)
Gain on sale of Segment X44 (net)
Income from discontinued operations 0

3.
Income from continuing operations
Income from discontinued operations
Profit 0

4.
Retained earnings, 1/1/21
Prior period adjustment (net of tax)
Adjusted retained earnings, 1/1/21 0
Add profit
Total 0
Less cash dividends (4 per OS)
Retained earnings, 12/31/21 0
P - 20
Sales 1,568,000
Less cost of sales -960,800
Gross profit 607200
Less operating expenses:
Selling expenses -156,800
Administrative expenses -134,400
Operating income 316000
Other income and expense:
Gain on sale of equipment 25,600
Loss due to earthquake -33,600
Finance cost:
Interest income 18,400
Interest expense -27200 -8,800
Income from continuing operations before taxes 299200
Less income tax expense -99,840
Income from continuing operations 199360

Loss from operations of discontinued segment(net of tax) -16,800

Gain on sale of segment ( net) 25,200
Income from discontinued operations 8400

Income from continuing operations 199,360

Income from discontinued operations 8,400
Profit/Net income 207760

Retained earnings, 1/1/21 474,400

Prior period adjustments -30,800
Adjusted RE, 1/1 443600
Add profit 207,760
Total 651360
Less dividends -32,000
Retained earnings, 12/31/21 619360