Question: Which of the following is not an acceptable way of displaying the components of other comprehensive income under IFRS?

(a) Within the statement of retained earnings.

(b) Second income statement.

(c) Combined statement of comprehensive income.

(d) All of these choices are acceptable.

Short Answer

Expert verified

Option a is the correct answer.

Step by step solution

01

Meaning of Retained Earnings

Retained earnings refer to the amount of profits left with a business entity after making the payments of all direct costs, indirect costs, income taxes, and dividends to the shareholders.

02

Explanation for the correct options

The components of other comprehensive income are not reported under IFRS in the statement of retained earnings. Still, they are disclosed in the statement of profit and loss or income statement of a business concern.

03

Explanation for the incorrect options

The income statements include a variety of formats, such assingle-step and multi-step income statements. An income statement must reflect the other comprehensive income. In addition, the statement of combined comprehensive income also considers the components of other comprehensive income, such as unrealized revenues, expenses, gains, and losses.

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Most popular questions from this chapter

Lebron Co. owns most but not all of the shares of its subsidiary Bryant Inc. Lebron reported net income of \(124,700. The amount to be attributed to the noncontrolling interest in Bryant is \)30,000. Indicate how Lebron will report the noncontrolling interest in its income statement.

(Multiple-Step and Single-Step Statements) The accountant of Latifa Shoe Co. has piled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2017.

Rent revenue \(29,000

Interest expense 18,000

Market appreciation on land above cost 31,000

Salaries and wages expense (selling) 114,800

Supplies (selling) 17,600

Income tax 37,400

Salaries and wages expense (administrative) \)135,900

Other administrative expenses 51,700

Cost of goods sold 496,000

Net sales 980,000

Depreciation on plant assets (70% selling, 30% administrative) 65,000

Cash dividends declared 16,000

There were 20,000 shares of common stock outstanding during the year.

Instructions

  1. Prepare a multiple-step income statement.
  2. Prepare a single-step income statement.
  3. (c) Which format do you prefer? Discuss.

Distinguish between the modified all-inclusive income statement and the current operating performance income statement. According to present generally accepted accounting principles, which is recommended? Explain.

Portman Corporation has retained earnings of \(675,000 at January 1, 2017. Net income during 2017 was \)1,400,000, and cash dividends declared and paid during 2017 totaled $75,000. Prepare a retained earnings statement for the year ended December 31, 2017.

Which of the following statements is correct regarding income reporting under IFRS?

(a) IFRS does not permit revaluation of property, plant, equipment, and intangible assets.

(b) IFRS provides the same options for reporting comprehensive income as GAAP.

(c) Companies must classify expenses by nature.

(d) IFRS provides a definition for all items presented in the income statement.

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