Accounting Policies, Income Statement and Related Items
Abstract
GAAP requires company to disclose accounting policy in their financial reports. These policies provide relevant information to decision makers on choices taken by executives. Financial statements are the final product of accounting process. Income statement provides data for investment and other decisions. The net income is essentially the common income statement form, consisting of classifications such as income from continuing operations, discontinued operations, extraordinary items, and cumulative effects of changes in accounting principles. In this study we investigate the relative ability of comprehensive income and net income to summarize firm performance. Per statement of financial accounting standards no. 220 (SFAS 220-10-2), if used with related disclosure and other information in the financial statements, the information provided by reporting comprehensive income should assist investors, creditors, and others in assessing an entity’s activities and the timing and magnitude of an entity’s future cash flows. Accounting policies defined in the literature
Accounting policies are specific policies and procedures used by a company to prepare its financial statements. These include any methods, measurement systems and procedures for presenting disclosures. Accounting policies differ from accounting principles in that the principles are the rules and the policies are a company's way of adhering to the rules. (Investopedia.com) Disclosure of accounting policies should include accounting principles and methods of application that involve: (1) A selection from generally accepted alternatives; (2) Those peculiar to the industry or field of endeavor; and
(3) Unusual or different applications of generally accepted accounting principles.
Examples of disclosures are basis of consolidation, depreciation methods, and inventory pricing. Disclosure of accounting policies assists financial readers in better interpreting a company's financial statements. Thus
GAAP requires company to disclose accounting policy in their financial reports. These policies provide relevant information to decision makers on choices taken by executives. Financial statements are the final product of accounting process. Income statement provides data for investment and other decisions. The net income is essentially the common income statement form, consisting of classifications such as income from continuing operations, discontinued operations, extraordinary items, and cumulative effects of changes in accounting principles. In this study we investigate the relative ability of comprehensive income and net income to summarize firm performance. Per statement of financial accounting standards no. 220 (SFAS 220-10-2), if used with related disclosure and other information in the financial statements, the information provided by reporting comprehensive income should assist investors, creditors, and others in assessing an entity’s activities and the timing and magnitude of an entity’s future cash flows. Accounting policies defined in the literature
Accounting policies are specific policies and procedures used by a company to prepare its financial statements. These include any methods, measurement systems and procedures for presenting disclosures. Accounting policies differ from accounting principles in that the principles are the rules and the policies are a company's way of adhering to the rules. (Investopedia.com) Disclosure of accounting policies should include accounting principles and methods of application that involve: (1) A selection from generally accepted alternatives; (2) Those peculiar to the industry or field of endeavor; and
(3) Unusual or different applications of generally accepted accounting principles.
Examples of disclosures are basis of consolidation, depreciation methods, and inventory pricing. Disclosure of accounting policies assists financial readers in better interpreting a company's financial statements. Thus