adjustments or changes that companies must make because financial circumstances did not turn out as expected. changes in estimate are not considered error or extraordinary items
modified all inclusive concepts
approach, adopted by the accounting profession, that dictates that companies record just about all items, including irregular one, as part of net income, and that companies must highlight irregular items in the financial statements.
methods of income measurment that focuses on the income-related activities- revenue, expense, gain, and loss transactions- that have occured during the period
intraperiod tax allocation
reporting of irregular items in an accounting period on the income statement or statement of retained earnings net of tax. Such allocation relates the income tax expense of the fiscal period to the specific items that give rise to the amount of the tax provision. It helps financial statement users better understand the impact of income taxes on the various components of net income, and it discourages statement readers from usind pretax measures of performance when evaluating fiancial results
earnings per share (EPS)
a distilled and important income figure, calulated as net income minus preferred dividends, divided by the weighted average of common shares outstanding.
occurs for a company when 2 things happen: 1 a company eliminates the result of operations and cash flows of a component from its on going operations, and 2 there is no significant counting involvment in that component after the disposal transaction. Companies report discontinued operation indicating the gain or loss from disposal of a business
the planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings
statement of stock holders equity
one of the basic financial statements, which reports the changes in each stockholders equity account and in total stock holders' equity during the year. Typically shows balances at the beginning of the period, additions, and deductions, and balances at the end of the period.
current operating performance approach
income-reporting approach that advocates reporting only regular and recurring revenue and expense elements, but not irregular items, in income
multiple-step income statement
income statement format that separates operating transactions from nonoperating transactions, and matches costs and expenses with realted revenues. It highlights certain intermidiate components of income that analysts use to compute ratios for assessing the performance of the company
income measure that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.
nonrecurring material items that differ significantly from a company's typical business activities. unusual in nature and infrequency
single step income statement
income stetement format that consists of just two groupings: revenues and expenses.
income-statement components for which the FASB has established special reporting rules. These items fall into 6 general categories: 1 discounted operations, 2 extraordinary items, 3 unsual gains and losses, 4 changes in accoutning principle, 5 changes in estimate, 6 corrections of errors
capital maintenance approach
an income measurement approach in which a company determines income for the period based on the change in equity, after adjusting for capital contribution or distribution. AN alternative to the transaction approch for income measurment
accumulated other comprehensive income
an entry in the stockholders' equity section of the balnce sheet that reports the cumulative amounts of Other Comprehensice Income. It measires the amounts of all gains and losses in a period that bypass the income statement but affect stockholders' equity.
other comprehensive income
measure of the amounts of all gains and losses ina period that byapss the income statements but affect the stockholders' equity.
quality of earnings
the extenct to whic earnings is useful to investors and creditors in making resource allocation decisions, generally in terms or predicting future earnings and cash flows. Hgher quality earnings exhibit higher levels of relevance and reliability. Earnings managment negatively affects the quality of earnings when it disorts the information in a way that does not accuratly predict future earnings and cash flows
the financial report that measures the success of company operations for a given period of time. Often call stament of invoice or stament of earnings
appropriated retained earnings
a retained earnings account that is restricted for a specific use, usually comply with contractual requirements, board of directors' policy, or current necessity.
prior period adjustments
corrections of accounting errors made in previous accoutning periods. Companies correct such errors by making proper entries in the acounts and reporting the corrections in the financial statements in the year in which they are discovered.