ACCT 3110 1st Edition Lecture 9Outline of Last Lecture I. Deferrals vs AccrualsII. Depreciable BasisIII. GoodwillIV. Changes in EquityOutline of Current Lecture I. Multistep Income StatementII. Discontinued OperationsIII. Extraordinary ItemsIV. Intraperiod Tax AllocationV. Noncontrolling InterestVI. Change in Accounting EstimateVII. Accounting for Errors and ChangesVIII. Comprehensive IncomeCurrent LectureMultistep Income Statement- Good b/c segregates data- 1. Operating Sectiono Revenue, COGS, Expenses- 2. Nonoperating Sectiono From peripheral activities, not core activitieso Ex. Subleasing part of building to another company- 3. Earning per Common Share/Income Tax Sectiono EPS= (Net Income-Preferred Dividends)/Weighted Average # of Shareso To get weighted average number of shares add number of shares from last day of each month (including 12/31 of previous year) and divide by 13Discontinued Operations- Stopping a product line, getting rid of a subsidiary in a location- Ex. Denny’s closes all restaurants in Texas- What’s reported? Income less taxesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- If discontinuing something, must change Income from Operations to Income from Continuing Operations- If discontinuing, have to go back to previous year and move whatever you’re discontinuing from continuous to discontinuedExtraordinary Item- Ex. Expenses from an earthquake in South Carolina- Gain or loss has to be both unusual and infrequent- Lots of CEOs try to count different losses as extraordinary items, but few things are actually extraordinary- Most common extraordinary item in US is eminent domainIntraperiod Tax Allocation- How the taxes get allocated between continuing operations, discontinued operations, and extraordinary itemsNoncontrolling Interest- If Company A owns greater than 50% of Company B, GAAP requires the two financial statements to be consolidated- Not a reduction of net income, instead a portion of net income is attributed to the other company- Basically everything in accounting is an estimateChange in Accounting Estimate- Accounted for in the period of change- Not handled retrospectively- Debit liability, credit expenseAccounting Changes and Errors- Retrospectively adjust financial statements for an accounting error and for a change in accounting principles- Ex. If you change from LIFO to FIFO must go back and change previous year to FIFOComprehensive Income- Not included as net income- Exampleso Change in market value of securitieso Unrealized gains/losses on available for sale securitieso Foreign currency translation gains/losseso Certain gains/losses on defined benefit pension plans- Put on Statement of Comprehensive Incomeo Normal income statement except with addition of line item “Other Comprehensive Income and Total Comprehensive Income”- Comprehensive Income=Net Income + Other comprehensive