Reporting Irregular Items on the Multi-Step Income Statement Georgia CTAE Resource Network Curriculum Office, June 2009 To accompany curriculum for the Georgia Peach State Career Pathways June 2009, Dr. Marilynn Skinner

REPORTING IRREGULAR ITEMS ALL-INCLUSIVE APPROACH most items are recorded in current period income CURRENT OPERATING APPROACH income from regular and recurrent items is reported MODIFIED ALL-INCLUSIVE APPROACH irregular items are highlighted

Discontinued Operations Assets Operating Results Activities of the segment Clearly distinguishable Not “discontinued operations”  disposal of a part of a business line  shifting production locations  phasing out a product line

Income from continuing operations$20,000,000 Discontinued operations Loss from operation of discontinued division (net of tax)$300,000 Loss from disposal of division (net of tax) 500, ,000 Net Income$19,200,000

Extraordinary Items  Unusual (unrelated to ordinary activities)  Infrequent Not “extraordinary”  write-down of receivables, inventories, etc.  gains or losses from sale of PP&E  effects of a strike Question 27, p. 151 $450,000 gain on forced condemnation sale of facility.

Unusual Gains and Losses  unusual or infrequent but not both  report in “Other Gains and Losses”  before income tax

Changes in Accounting Principle  e.g. change in inventory or depreciation method  report the retroactive impact as of the beginning of the year  report as an adjustment to beginning R/E; not on the income statement Brief Exercise 4-7, p. 153 Change in estimate of bad debt expense.

Changes in Estimates  e.g. change in estimate of the useful life of an asset or bad debts expense  do not handle retroactively  include in ordinary income Prior Period Adjustments  record as an adjustment to the beginning balance of retained earnings  does not affect net income