tailieunhanh - Lecture Intermediate accounting (Volume 1, 11th Canadian edition) – Chapter 4: Reporting financial performance

After studying this chapter, you should be able to: understand how firms create value and manage performance, understand how users use information about performance to make decisions, understand the concept of and be able to assess quality of earnings/information,. | 1 CHAPTER 4: REPORTING FINANCIAL PERFORMANCE 2 2 Chapter 4: Reporting Financial Performance After studying this chapter, you should be able to: Understand how firms create value and manage performance. Understand how users use information about performance to make decisions. Understand the concept of and be able to assess quality of earnings/information. Understand the differing perspectives on how to measure income. Measure and report results of discontinued operations. Measure income and prepare the income statement and the statement of comprehensive income using various formats. Prepare the statement of retained earnings and the statement of changes in equity. Understand how disclosures and analysis help users of financial statements assess performance. Identify differences in accounting between IFRS and ASPE and potential changes. 3 3 Reporting Financial Performance 4 4 Business Models The basic business model identifies three activities: Financing Obtaining cash funding Investing Use of funding to buy assets and invest in people Operating Use of assets and people to generate profits Financial statements should capture these fundamental business activities 5 5 LO1 Overview of the Business Model 6 LO1 6 Communicating Information About Performance Income Statement helps users: Evaluate past performance and profitability Provide a basis for predicting future performance Help assess the risk of not achieving future net cash inflows 7 7 LO2 Limitations of Income Statement Statement of income/comprehensive income has the following limitations: Items are excluded if they cannot be measured reliably Amounts reported are affected by accounting methods used Use of estimates in measuring income Financial reporting bias GAAP shortcomings 8 8 LO2 Quality of Earnings Quality of earnings refers to how solid earnings numbers are Two main aspects to consider: Content Integrity of information Sustainability of earnings Presentation Earnings presentation is clear and concise Easy | 1 CHAPTER 4: REPORTING FINANCIAL PERFORMANCE 2 2 Chapter 4: Reporting Financial Performance After studying this chapter, you should be able to: Understand how firms create value and manage performance. Understand how users use information about performance to make decisions. Understand the concept of and be able to assess quality of earnings/information. Understand the differing perspectives on how to measure income. Measure and report results of discontinued operations. Measure income and prepare the income statement and the statement of comprehensive income using various formats. Prepare the statement of retained earnings and the statement of changes in equity. Understand how disclosures and analysis help users of financial statements assess performance. Identify differences in accounting between IFRS and ASPE and potential changes. 3 3 Reporting Financial Performance 4 4 Business Models The basic business model identifies three activities: Financing Obtaining cash funding Investing