Chap12Grand-finale-財(cái)務(wù)報(bào)表分析課件

GrandfinaleChap12Grand-finale-財(cái)務(wù)報(bào)表分析課件

Shareholders’Equity

1.Understandthedifferentpriorityclaimsofcommonandpreferredshareholdersandthedisclosureofthoseclaimsintheshareholders’sectionofthebalancesheet.2.Understandtheunderlyingconceptsandapplytheaccountingproceduresfortheissuanceofcapitalstock.3.Understandwhytheformatforreportingincomemattersandthatdifferentkindsofincomerequiredifferentformats.

Shareholders’Equity

1.UnderShareholders’Equity4.Understandthedistinctionbetweenearningsandcomprehensiveincome.5.Understandtheunderlyingconceptsandapplytheaccountingproceduresforcash,property,andstockdividends.6.Understandtheunderlyingconceptsandapplytheaccountingproceduresfortheacquisitionandreissueoftreasurystock.7.Developtheskillstointerpretdisclosuresaboutchangesinshareholders’equityaccount.Shareholders’Equity4.UnderstCapitalContributions1.CapitalContributions:Corporationsissuecommonorpreferredstocktoobtainfundstofinanceoperatingandinvestingactivities.2.OperatingTransactions:Firmsuseassetsprovidedbycreditorsandownerstogenerateearnings.3.Distributions:Firmsdistributeassetstoshareholderseitherasadividendorasrepurchaseofcommonorpreferredstock.CapitalContributions1.CapitaReviewofImportantConcepts1.Shareholders’equityisaresidualinterest,representingtheshareholders’claimsontheassetsofafirminexcessoftheclaimsofcreditors.2.Allfirmsissuecommonstock.Firmsmayalsoissuepreferredstockwhichhasaseniorbutlimitedclaimonassets.3.Commonandpreferredstockusuallyhaveaparorastatedvalue.4.Firmsaccumulateinformationaboutrevenuesandexpensestosupporttheincomestatement.Revenuesandexpensesareclosedtoretainedearningsattheendoftheaccountingperiod.5.Firmsmaydistributeassetstoshareholdersasadividendwhichreducesretainedearningsandassets.6.Retainedearningsistheaccumulationofearningsreducedbydividends.ReviewofImportantConcepts1.CapitalContributionsTheCorporateform:1.Limitstheliabilityofowner,2.Allowsforraisingfundsbyissuingshares,3.Makestransferofownershipeasyinsecondarymarkets.Financingacorporation:a.Preferredstock.b.Commonstock.CapitalContributionsTheCorpoPreferredShareholders’EquityPreferredshareholdersgenerallyhaveaclaimonassetsthatissuperiororseniortoanyclaimbycommonshareholders.Theirclaimsareoftenlimitedsothatpreferredshareholderslookmorelikecreditorsthanowners.Somepreferredisconvertibleintocommonshares.Firmsdonothavetoissuepreferredstockandmanyfirmshavenot.PreferredShareholders’EquityCommonShareholders’EquityAllcorporationshavecommonstock;theyneednothavepreferredstock.Commonshareholdersaretheresidualinterestowners;thatis,theyowneverythingthatisleftafterallotherobligationshavebeenfulfilled.Balancesheetdisclosureincludes:1.Capitalcontributions2.Earningsanddividends3.Accumulatedothercomprehensiveincome4.TreasurysharetransactionsCommonShareholders’EquityAllIssuingCapitalStocka.IssueforCash.b.Issuefornon-cashAssets.c.IssueunderOptionArrangements.d.EmployeeStockOptionPlans.e.StockRights.f.StockWarrants.g.ConvertibleBondsorPreferredStock.IssuingCapitalStocka.IssueCapitalContributions--IssueforCashAfirmneedingfinancingmayissuenewsharesofstock.Inreturnfortheshares,thefirmgetscash.Thisisnotdisadvantageoustopreviousownersofsharesbecauseeventhoughownershipgoesup,thetotalassetsgoupalso.forhistoricalandlegalreasons,theincreaseinequityisseparatedintoanincreaseincommonstockatparandtheremainder,anincreaseinadditionalpaid-incapital.Cash 100,000Commonstock($10par) 10,000AdditionalP.I.C. 90,000CapitalContributions--IssueCapitalContributions

--IssueforNon-CashAssetsAfirmmayfinditdesirabletotradestockforanassetotherthancash.Inthiscase,thequestioniswhatisthevalueofthetransactions?Welookfirsttoareliablemarketbasedvalueoftheassetandrecordthatstockandtheassetatthisprice.Ifthevalueoftheassetishardtomeasure,wemaytakethemarketvalueofthestockinstead.CapitalContributions

--IssuCapitalContributions--

IssueUnderOptionsArrangementsFirmssometimesgivestockatreducedpricesorfreeinexchangeforgoodsorservicesorascompensation.Topmanagementisoftencompensatedinstockorstockoptionssothattheywillhavestrongincentivestomakedecisionswhichwillincreasethepriceofshares.CapitalContributions--

IssuEmployeeStockOptionPlansAstockoptionisacontractthatallowstheholdertobuyastatednumberofsharesofstockforafixedprice,calledtheexerciseprice.Ifthemarketpriceisabovetheexerciseprice,thentheoptionhavevalue.Otherwise,theholderwilljustignoretheoptionandithasnovalue.Onthegrantdate,thefirmtransfersoptionstoanemployee,forareducedpriceorfree.Theemployeetypicallycannotsellthestockimmediatelybutmustwaituntilthevestingdate.Whentheemployeedoesbuysharesofstockusingtheoption(togetthelowerprice),thisiscalledexercisingtheoption.EmployeeStockOptionPlansAsEmployeeStockOptionPlans(cont.)Howdoyouvalueanoption?Ifthepriceofthestockfall,itisvalueless.Ifthepricegoesup,thentheamountofincreaseisthevalue.Onecannotknowtheultimatevalueuntiltheexercisedate.TwoGAAPmethods:MarketValueMethod.APBOpinion25Method.Firmshaveargued(underAPB25)thatiftheexercisepriceisabovethecurrentstockprice,thentheoptionhasnovalueandrequiresnorecording.EmployeeStockOptionPlans(cStockRights.Likestockoptions,stockrightsgivetheholdertherighttoacquiresharesataspecifiedprice.StockOptionsaregenerallygrantedtoemployeesandcannotbetransferuntilvested.StockRightsaregenerallygrantedtocurrentshareholderswhocantradetheminsecondarypublicmarkets.GAAPignoreanyvalueinherentinthestockrightonthedateofthegrantandmakenoentrywhengranted.Ofcourse,theexerciseofastockrightisrecordedlikethesaleofshares.StockRights.LikestockoptionStockWarrants.Firmsissuestockwarrantstotheinvestingpublicforcash.Whensold,thewarrantsarerecordedinamannersimilartoaliability.Whenwarrantholdersexercisetheirrights,thefirmrecordsthetransactionlikethesaleofstockexceptthatthewarrantaccountcreatedwhengrantedisreduced.StockWarrants.FirmsissuestoConvertibleBondsorPreferredStockAconvertiblesecuritymaybeexchangedattheholdersoptionforanothersecurity.Forexample,aconvertiblebondmaybeexchangeableforashareofcommonstock.Thisfeatureallowstheholdertochoosetheoptionthathasthegreaterbenefitandisadesirablefeature.Convertiblesecuritiesarerecordedasregularsecuritiesuntiltheyareconverted.ConvertibleBondsorPreferredReportingOperatingTransactionsa.Reportingoperatingtransactions.b.Comprehensiveincome.c.Adjustmentstoretainedearnings.d.Corporatedistributions.Dividendsincash.Dividendsinstock.Stocksplits.e.Treasuryshares.f.Earningspershare.ReportingOperatingTransactioReportingOperatingTransactions(cont.)ThetermEarningshasnoprecisedefinition.Itisusedtorefertoprofitsinageneralsensebutnotatechnicalsense.Itisoftenusedasabroaderviewofprofitwhichmightincludechangesineconomicwealthnotcapturedbynetincome.NetIncomeisameasureofearningsusingaccrualaccountingmethodsasdefinedbyGAAP.Earningsandnetincomeareaggregatesoftheoperatingactivitiesofthefirm.Weassumethatinvestorsdesireearningsinformationsothattheycanforecastfuturecashflowsasinputtotheirinvestmentdecision.ReportingOperatingTransactioReportingOperatingTransactions(cont.)a.Reportingoperatingtransactions1.Recurring/nonrecurringandcentral/peripheral2.Measurementofearningseffect3.Classificationintheincomestatement4.Unrealizedgainsandlossesfromchangesinmarketvalues…5.Aninternationalperspectiveb.ComprehensiveincomeReportingOperatingTransactioRecurring/Nonrecurring

andCentral/PeripheralRecurring/nonrecurringreferswhetherearningscanbeexpectedtorepeatinthefuture.Central/peripheralreferstohowcloselyearningsarerelatedtothecoreactivitiesofthefirm.Thefirmmaybemoreefficientincoreactivitiesthaninperipheralactivities.Sometimesthetermcorecompetenciesisused.Recurring/Nonrecurring

andCeNatureofIncomeItemsCreationandsaleofFirm’sregularproductsIncomefromsalesofproductorlinesofbusinessthatthefirmintendstodiscontinue.PeriodicsalesofequipmentpreviouslyusedinmanufacturingLossesfromearthquakesorhurricanes.Recurring NonrecurringPeripheraltoprimaryoperatingactivityPrimaryoperatingactivityNatureofIncomeItemsCreationMeasurementofEarningsEffectRevenuesandexpensesresultfromrecurringprimaryactivitiesofthefirm.Gainsandlossesresultfromeitherperipheralornonrecurringactivities.Revenueandgainsresultinincreasesinshareholders’equity.Expensesandlossesresultindecreasesinshareholders’equity.Revenuesandexpensesaregrossconceptsinthatnothingissubtracted.Gainsandlossesarenetconceptsinthatacostbasisissubtractedfromaninflowindefiningthegainorloss.MeasurementofEarningsEffectClassificationEarningsfromcontinuingoperationsarerevenues,gains,expensesandlossesfromactivitiesofthefirmthatcanbeexpectedtocontinueinthenearfuture.Earnings,gainsandlossesfromdiscontinuedoperationsareseparatereportsofactivitiesthatwillbediscontinuedinthenearfuture.Extraordinarygainsandlossesaregainsandlossesfromeventswhichareboth1.Unusualinnature,and2.Infrequentinoccurrence.AdjustmentsforchangesinAccountingPrinciplesaredisclosuresoftheeffectsofachangeintheuseofaccountingrules.ClassificationEarningsfromcoUnrealizedGainsandLossesfromChangesinMarketValuesTheFASBhasincreasinglyrequiredfirmstoreportcertainassetsandliabilitiesattheircurrentmarketvalues:1.Inventoriesatlowerofcostormarket2.Plantassetsandintangiblesatcurrentmarketvaluewhenassetimpairmenthasoccurred3.Financialinstrumentsincludingderivativesatmarketvalue4.MarketableequitysecuritiesatmarketvalueUnrealizedGainsandLossesfrUnrealizedGainsandLossesfromChangesinMarketValues(Cont.)Whenanasset(orliability)accountischangedtomarketvalue,doubleentryaccountingsystemsrequireanoffset.Theoffsetisgenerallytoanunrealizedgainorloss.Unrealizedmeansthatthegainorlosswasnottheresultofaneconomictransaction,butratheramarketadjustment.

Marketablesecurities ### Unrealizedgain(orloss) ###Whatisthenatureoftheunrealizedgainorlossaccount?UnrealizedGainsandLossesfrUnrealizedGainsandLossesfromChangesinMarketValues(Cont.)Theunrealizedgainorlossaccountispartofearningsbecauseitchangesthewealthofthefirm.Itmayormaynotbepartofnetincomedependingoftheaccountingrules.Unrealizedgainsorlossesmaybeclosedattheendoftheaccountingperiodandappearontheincomestatement(tradingsecurities)Ortheymaybypasstheincomestatementandappearonthebalancesheet(securitiesavailableforsale)UnrealizedGainsandLossesfrCorporateDistributionsAdividendisthedistributionofassetstotheowners.Theamountofanydividendmaybelimitedbystatueorbycontract.Threeformsofdividends:a.Cashdividends.b.Stockdividends.c.Stocksplits.Stockmayberepurchasedastreasurystock.CorporateDistributionsAdividCorporateDistributions(cont.)1.Legallimitsondividends--statutorysomestateslimitthepaymentofdividends:theyarenotallowedifretainedearningsweretobeforcedtobelowzero.2.Legallimitsondividends--contractualcontractswithdebtorsorothersmayfurtherrestrictthepaymentofdividends.3.Dividendsandcorporatefinancialpolicy4.Accountingfordividendsa.cashdividends pertydividends d.stocksplitsCorporateDistributions(cont.Dividendsincasha.Cashdividends--dividendspaidincashWhendividendsaredeclared,theygiverisetoaliabilityandareductioninretainedearnings

Retainedearnings 150,000 Dividendspayable 150,000

Dividendspayable 150,000 Cash 150,000Whenthecashissentout,theliabilityisfulfilledDividendsincasha.CashdividDividendsinnon-cash.b.Propertydividends--dividendspaidinassetsotherthancash.Theaccountingissimilartocashdividendsexceptwhenthedividendispaid,thecreditistotheassetratherthantocash.

Dividendspayable 150,000 Asset 150,000Dividendsinnon-cash.b.PropeDividendsinStock.c.StockdividendsTechnicallythisisadividendpaidinnewsharesofstockandnotgeneraldividends.Howeverthetermisoftenusedtorefertoallkindsofdividendsincludingcashdividendsinthesenseof“dividendsonstock”ratherthan“dividendspaidinstock.”Retainedearningsarereduced(debited)andcommonstockanda.p.i.c.areincreased(credited).Theeffectofthisistomoveequityfromretainedearningstocommonstockanda.p.i.c.DividendsinStock.c.StockdiDividendsinStock.Accountingforstockdividends:RetainedEarnings### Commonstock### AdditionalP-I-C###DividendsinStock.AccountingStockSplits.d.Stocksplitsorsplit-upsTheoreticallythisisjustalargestockdividend.Ithaslongbeendebatedwhetherthereisanydifferencebetweenastockdividendandastocksplitotherthanthesize.GAAPdoesconsiderthetwodifferentandrequiresadifferentaccountingtreatmentforstocksplits.Specifically,nojournalentryisrequiredforastocksplit.Manybelievethatastocksplitwillresultinanincreaseinthemarketpriceoftheshares.Empiricalevidenceseemstosupportthis,butacausalrelationshiphasnotbeenestablished.StockSplits.d.StocksplitsoStockRepurchases.Treasurysharesarecommonsharesthathavebeenrepurchasedbythefirm.Treasurysharesarenotassetsorinvestments.Instead,theyareareversaloftheissuanceofcommonshares.Recallthatwhenstockwasissued,thefirmreceivedcashandissuedstock:

Cash 100,000 Commonstock($10par) 10,000 AdditionalP.I.C. 90,000StockRepurchases.TreasuryshaTreasuryShares(Cont.)Thepurchaseoftreasurysharesisthereverseoftheissuance;thefirmgivesupcashandgetsbacktheshares:

Treasuryshares(cost) 110,000 Cash 110,000Treasurysharesarerecordedatcostandkeptinaseparateaccountsothatthefirmcanmoreeasilyresellthem,iftheydesire.Treasurysharesareacontra(negative)accounttotheshareholders’equitysection.Treasurysharesdonotreceivecashdividendsorvote.Theymaysplitorreceivedividendsinstock.TreasuryShares(Cont.)ThepurTreasuryShares(Cont.)Iftreasurysharesarelaterresold,thereisnogainorlossonthesale.Ratheranydifferenceincreasesordecreasestheadditionalpaidincapitalaccount.

Cash 14,000 Treasuryshares(cost) 11,000 Additionalp.i.c.from saleoftreasuryshares 3,000

TreasuryShares(Cont.)IftreaEarningsPerSharePubliclytradedfirmsmustshowearnings-per-sharedatainthebodyoftheincomestatement.Earningspercommonshareisnetearningsdividedbytheaveragenumberofoutstandingcommonshares.Firmsthatreportmorethanoneofthefourcategoriesofearningsmustdiscloseearningspercommonshareforeachcategory.Securities(suchaspreferredshares)thatareconvertibleintocommonsharescomplicatethemeaningofthisnumber.Thisisanadvancedaccountingtopic.EarningsPerSharePubliclytraDisclosureofChangesinShareholders’EquityAnnualreportsmustexplainthechangesinallshareholders’equityaccounts.Forretainedearnings,thismeansthatareconciliationmustbepresented.Thisreconciliationmaybeintheincomestatement,thebalancesheetorasaseparatestatement.Also,thismeansthatothercomprehensiveincomeaccountsmustalsobereconciled.DisclosureofChangesinShareComprehensiveIncomeComprehensiveincome=NetIncome+Effectofadjustmentofaccountingpolicies+Effectofforeignexchangetranslation+EffectofsecuritiesavailableforsaleComprehensiveIncomeComprehensWell,intheendofthiscourse,Iwishyou…Well,intheendofthiscoursButthatisnotthemostimportant…"Inartthereiscompassion,incompassionthereishumanityandinhumanitythereisgenerosityandlove.” ---AboutGregoryPeck"InTEACHINGthereiscompassion,incompassionthereishumanityandinhumanitythereisgenerosityandlove.” ---Aboutmyself"InWHATEVERYOUDOthereiscompassion,incompassionthereishumanityandinhumanitythereisgenerosityandlove.” ---AboutyouallButthatisnotthemostimporThanksforthefunjourneywithyou,Andstayintouch…ThanksforthefunjourneywitGrandfinaleChap12Grand-finale-財(cái)務(wù)報(bào)表分析課件

Shareholders’Equity

1.Understandthedifferentpriorityclaimsofcommonandpreferredshareholdersandthedisclosureofthoseclaimsintheshareholders’sectionofthebalancesheet.2.Understandtheunderlyingconceptsandapplytheaccountingproceduresfortheissuanceofcapitalstock.3.Understandwhytheformatforreportingincomemattersandthatdifferentkindsofincomerequiredifferentformats.

Shareholders’Equity

1.UnderShareholders’Equity4.Understandthedistinctionbetweenearningsandcomprehensiveincome.5.Understandtheunderlyingconceptsandapplytheaccountingproceduresforcash,property,andstockdividends.6.Understandtheunderlyingconceptsandapplytheaccountingproceduresfortheacquisitionandreissueoftreasurystock.7.Developtheskillstointerpretdisclosuresaboutchangesinshareholders’equityaccount.Shareholders’Equity4.UnderstCapitalContributions1.CapitalContributions:Corporationsissuecommonorpreferredstocktoobtainfundstofinanceoperatingandinvestingactivities.2.OperatingTransactions:Firmsuseassetsprovidedbycreditorsandownerstogenerateearnings.3.Distributions:Firmsdistributeassetstoshareholderseitherasadividendorasrepurchaseofcommonorpreferredstock.CapitalContributions1.CapitaReviewofImportantConcepts1.Shareholders’equityisaresidualinterest,representingtheshareholders’claimsontheassetsofafirminexcessoftheclaimsofcreditors.2.Allfirmsissuecommonstock.Firmsmayalsoissuepreferredstockwhichhasaseniorbutlimitedclaimonassets.3.Commonandpreferredstockusuallyhaveaparorastatedvalue.4.Firmsaccumulateinformationaboutrevenuesandexpensestosupporttheincomestatement.Revenuesandexpensesareclosedtoretainedearningsattheendoftheaccountingperiod.5.Firmsmaydistributeassetstoshareholdersasadividendwhichreducesretainedearningsandassets.6.Retainedearningsistheaccumulationofearningsreducedbydividends.ReviewofImportantConcepts1.CapitalContributionsTheCorporateform:1.Limitstheliabilityofowner,2.Allowsforraisingfundsbyissuingshares,3.Makestransferofownershipeasyinsecondarymarkets.Financingacorporation:a.Preferredstock.b.Commonstock.CapitalContributionsTheCorpoPreferredShareholders’EquityPreferredshareholdersgenerallyhaveaclaimonassetsthatissuperiororseniortoanyclaimbycommonshareholders.Theirclaimsareoftenlimitedsothatpreferredshareholderslookmorelikecreditorsthanowners.Somepreferredisconvertibleintocommonshares.Firmsdonothavetoissuepreferredstockandmanyfirmshavenot.PreferredShareholders’EquityCommonShareholders’EquityAllcorporationshavecommonstock;theyneednothavepreferredstock.Commonshareholdersaretheresidualinterestowners;thatis,theyowneverythingthatisleftafterallotherobligationshavebeenfulfilled.Balancesheetdisclosureincludes:1.Capitalcontributions2.Earningsanddividends3.Accumulatedothercomprehensiveincome4.TreasurysharetransactionsCommonShareholders’EquityAllIssuingCapitalStocka.IssueforCash.b.Issuefornon-cashAssets.c.IssueunderOptionArrangements.d.EmployeeStockOptionPlans.e.StockRights.f.StockWarrants.g.ConvertibleBondsorPreferredStock.IssuingCapitalStocka.IssueCapitalContributions--IssueforCashAfirmneedingfinancingmayissuenewsharesofstock.Inreturnfortheshares,thefirmgetscash.Thisisnotdisadvantageoustopreviousownersofsharesbecauseeventhoughownershipgoesup,thetotalassetsgoupalso.forhistoricalandlegalreasons,theincreaseinequityisseparatedintoanincreaseincommonstockatparandtheremainder,anincreaseinadditionalpaid-incapital.Cash 100,000Commonstock($10par) 10,000AdditionalP.I.C. 90,000CapitalContributions--IssueCapitalContributions

--IssueforNon-CashAssetsAfirmmayfinditdesirabletotradestockforanassetotherthancash.Inthiscase,thequestioniswhatisthevalueofthetransactions?Welookfirsttoareliablemarketbasedvalueoftheassetandrecordthatstockandtheassetatthisprice.Ifthevalueoftheassetishardtomeasure,wemaytakethemarketvalueofthestockinstead.CapitalContributions

--IssuCapitalContributions--

IssueUnderOptionsArrangementsFirmssometimesgivestockatreducedpricesorfreeinexchangeforgoodsorservicesorascompensation.Topmanagementisoftencompensatedinstockorstockoptionssothattheywillhavestrongincentivestomakedecisionswhichwillincreasethepriceofshares.CapitalContributions--

IssuEmployeeStockOptionPlansAstockoptionisacontractthatallowstheholdertobuyastatednumberofsharesofstockforafixedprice,calledtheexerciseprice.Ifthemarketpriceisabovetheexerciseprice,thentheoptionhavevalue.Otherwise,theholderwilljustignoretheoptionandithasnovalue.Onthegrantdate,thefirmtransfersoptionstoanemployee,forareducedpriceorfree.Theemployeetypicallycannotsellthestockimmediatelybutmustwaituntilthevestingdate.Whentheemployeedoesbuysharesofstockusingtheoption(togetthelowerprice),thisiscalledexercisingtheoption.EmployeeStockOptionPlansAsEmployeeStockOptionPlans(cont.)Howdoyouvalueanoption?Ifthepriceofthestockfall,itisvalueless.Ifthepricegoesup,thentheamountofincreaseisthevalue.Onecannotknowtheultimatevalueuntiltheexercisedate.TwoGAAPmethods:MarketValueMethod.APBOpinion25Method.Firmshaveargued(underAPB25)thatiftheexercisepriceisabovethecurrentstockprice,thentheoptionhasnovalueandrequiresnorecording.EmployeeStockOptionPlans(cStockRights.Likestockoptions,stockrightsgivetheholdertherighttoacquiresharesataspecifiedprice.StockOptionsaregenerallygrantedtoemployeesandcannotbetransferuntilvested.StockRightsaregenerallygrantedtocurrentshareholderswhocantradetheminsecondarypublicmarkets.GAAPignoreanyvalueinherentinthestockrightonthedateofthegrantandmakenoentrywhengranted.Ofcourse,theexerciseofastockrightisrecordedlikethesaleofshares.StockRights.LikestockoptionStockWarrants.Firmsissuestockwarrantstotheinvestingpublicforcash.Whensold,thewarrantsarerecordedinamannersimilartoaliability.Whenwarrantholdersexercisetheirrights,thefirmrecordsthetransactionlikethesaleofstockexceptthatthewarrantaccountcreatedwhengrantedisreduced.StockWarrants.FirmsissuestoConvertibleBondsorPreferredStockAconvertiblesecuritymaybeexchangedattheholdersoptionforanothersecurity.Forexample,aconvertiblebondmaybeexchangeableforashareofcommonstock.Thisfeatureallowstheholdertochoosetheoptionthathasthegreaterbenefitandisadesirablefeature.Convertiblesecuritiesarerecordedasregularsecuritiesuntiltheyareconverted.ConvertibleBondsorPreferredReportingOperatingTransactionsa.Reportingoperatingtransactions.b.Comprehensiveincome.c.Adjustmentstoretainedearnings.d.Corporatedistributions.Dividendsincash.Dividendsinstock.Stocksplits.e.Treasuryshares.f.Earningspershare.ReportingOperatingTransactioReportingOperatingTransactions(cont.)ThetermEarningshasnoprecisedefinition.Itisusedtorefertoprofitsinageneralsensebutnotatechnicalsense.Itisoftenusedasabroaderviewofprofitwhichmightincludechangesineconomicwealthnotcapturedbynetincome.NetIncomeisameasureofearningsusingaccrualaccountingmethodsasdefinedbyGAAP.Earningsandnetincomeareaggregatesoftheoperatingactivitiesofthefirm.Weassumethatinvestorsdesireearningsinformationsothattheycanforecastfuturecashflowsasinputtotheirinvestmentdecision.ReportingOperatingTransactioReportingOperatingTransactions(cont.)a.Reportingoperatingtransactions1.Recurring/nonrecurringandcentral/peripheral2.Measurementofearningseffect3.Classificationintheincomestatement4.Unrealizedgainsandlossesfromchangesinmarketvalues…5.Aninternationalperspectiveb.ComprehensiveincomeReportingOperatingTransactioRecurring/Nonrecurring

andCentral/PeripheralRecurring/nonrecurringreferswhetherearningscanbeexpectedtorepeatinthefuture.Central/peripheralreferstohowcloselyearningsarerelatedtothecoreactivitiesofthefirm.Thefirmmaybemoreefficientincoreactivitiesthaninperipheralactivities.Sometimesthetermcorecompetenciesisused.Recurring/Nonrecurring

andCeNatureofIncomeItemsCreationandsaleofFirm’sregularproductsIncomefromsalesofproductorlin