CFA Practice Question

CFA Practice Question

An EPS amount is always shown for ______.

I. the cumulative effect of accounting changes
II. income from continuing operations
III. income before extraordinary items and the cumulative effect of accounting changes
A. II and III
B. I and III
C. I, II and III
Explanation: All of these responses are true.

User Contributed Comments 14

User Comment
fielddar I don't understand how II and III can both be true. II says EPS amount is always shown for income BEFORE cumulative effect of accounting changes, III says EPS amount is always shown for cumulative effect of accounting changes.
shasha EPS reports for intermediate components of income besides net income, might be the reason for choice I, II and III.
shasha how could I & III be correct at the same time? they're talking opposite things!
jason From the textbook: "when the income statement contains intermediate components of income, EPS should be disclosed for each component". That is, EPS is shown for both "income before extraordinary items and the cumulative effect of accounting changes" and "cumulative effect of accounting changes".
min The answer is correct as EPS is shown for BOTH income before extraordinary items AND the cumulative effect of accounting changes.
jayjunk Shasha, there are multiple EPS reported. So one can be different from another.
steved333 Dammit! The only reason I didn't think I was right was because I wasn't thinking about different EPS's! Aaaarrrggghhhh! I'm going to be so happy once I'm past this test!!!
jwebbs past the test or pass the test?
steved333 Once I'm beyond this test. So, once I AM past this test. Which would, of course, require passing it, but I meant what I said...

But good attention to detail!
Kuki income before extraordinary items = income from continuing operations...
pjdeschenes I think about EPS reporting from non-recurring items as DEA: (1) Discontinued Ops, (2) Ext. Items, (3) Accounting Changes. I includes 1-3; II comes before 1; and III includes just 1.
StanleyMo that's why we need adjusted them when we analyze the annual report.
cfaajay EPS will be based on Income excluding the Extraordinary items ,this will contain cumulative effect of accounting change,say for e.g if accounting change is related to change in depreciation method ,then this will be applied retrospectively ,as its change in principle ,which will ask for restating the prior financial statements and the cumulative effect of all those changes will effect the current income,so while calculating EPS that will need to be considered.
CalebMast I interpreted 'cumulative' effect to be comprehensive, like comprehensive income and going directly to balance sheet, not included in earnings. Frustrating.
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