- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 18. Understanding Income Statements
- Subject 4. Non-Recurring Items and Non-Operating Items
CFA Practice Question
All of the following are reported on the income statement net of taxes except ______ (GAAP, after 2015).
II. accounting changes
III. operating income
I. extraordinary items
II. accounting changes
III. operating income
A. I and II
B. III only
C. I and III
Explanation: Other non-operating items are reported on the income statement net of taxes. Operating income is not reported net of taxes; rather, it is reported as operating income before income taxes and the related income taxes expense is reported separately. While companies no longer must entitle events and their effects as extraordinary, they still have to disclose infrequent and unusual events on the income statement and their effect BEFORE income taxes.
User Contributed Comments 8
| User | Comment |
|---|---|
| cfaketi | accounting changes are reported net of taxes? |
| endurance | accounting changes are reported in the same way as discontinued operations and extraordinary items - net of tax |
| Shaan23 | EXCEPT....Cant miss that stuff....hopefully during exam time I wont be soo lazt |
| Inaganti6 | EXCEPT...ARGH |
| crissb | You can’t recognise extraordinary items under IFRS since 2002, and CFA by default uses IFRS if it does not state which accounting methodology to use, so ...? |
| nmech1984 | e.xcept.... AGAIN....ahhhh |
| nmech1984 | and a second time the same question!! EXCEPT!!! |
| Patdotcom | GAAP doesnt accept extraordinary item after 2015, so the answer should be C |