Please enable JavaScript.

Coggle requires JavaScript to display documents.

Income Statement - Coggle Diagram

- - - - Specific identification: when a firm can identify exactly which item were sold and which items remain in inventory
      - FIFO: first purchased first sold -> COGS: first purchased, Ending inventory: most recent purchased
        (US and IFRS)
      - LIFO: last purchased first sold -> COGS: last purchased, Ending inventory: most recent purchased
        (US only since LIFO -> higher COGS -> lower income taxes)
      - Weighted average cost: Cost per unit = Cost of available goods / Total units available
        (US and IFRS)
    - - Straight - line method: Depreciation expense = (Cost - Residual) / Useful life
        -> compared to accelerated depreciation:
        in early years: lower depreciation expense, higher NI
        in later years: higher depreciation expense, lower NI
      - Accelerated depreciation method: speed up the recognition of depreciation expense in a systematic way.
        Total depreciation expense of accelerated depreciation method = Total depreciation expense of straight-line method
      - Declining balance method (DB): applies constant rate of depreciation to an asset's book value each year
      - Double-declining balance method (DDB): applies two times the straight-line rate to the declining balance
        DDB depreciation expense = (2/useful life) * (cost - accumulated depreciation)
        Note:
        
        Depreciation ends once reach the estimated residual value
        
        If residual value = 0 -> DB method will never fully depreciate it -> change to straight-line at some point in useful life
        
        Use timeline for better calculation
    - - Straight-line method (the same as depreciation)
      - Intangible assets with indefinite lives (goodwills) -> not amortized
        -> test for impairment (annually) -> expense = impairment amount (if assets is impaired - bị giảm giá trị)
    - - Sell goods / services on credit -> Bad debt expense: lists the dollar amount of receivables your company does not expect to collect
        (Chi phí nợ khó đòi)
        -> Matching principle: estimate warranty expense in the period of the sale
      - Warranty expense: the cost that a company anticipates incurring for the replacement or repair of products customers purchase
        (Chi phí bảo hành)
        -> If provide warranty -> Matching principle: estimate warranty expense in the period of the sale
  - - - Retrospective application (Áp dụng hồi tố): Restatement of all prior - period FSs, including the current ones -> enhance comparability
        Modified retrospective application: No restatement, adjust beggining value of affected account for cumulative effects of changes
        -> Applied for:
        
        Changes in accounting policies / standards
        
        Changes in accounting method applied
        
        Correction of accounting errors / Prior - period adjustment
      - Prospectively application (Áp dụng tương lai)
        -> Applied for: Changes in accounting estimate (Dùng cho thay đổi thứ yếu, không làm thay đổi CF)
      - Accounting policies and significant estimate -> Footnote and MD&A section
  - - - Management decides to dispose of but either has not yet done so / has disposed of in current year after the operation had generated income / loss
      - Gain / loss from: Assets, Operating activities, Investing activities, Financing activities -> reported separately in income statement (After "Income from continuing operation")
      - Past income statements must be restated -> separate income / loss from discontinued operations
    - - Gain/ loss from sales of A / part of business (not ordinary operation)
        Impairment, write-offs, write-downs, restructuring cost
      - Included in income from continuing operations
        -> Reported before tax (Above "income from continuing operation")
- - - - Goods are exchanged for cash: Cash & Revenue
      - Sales of goods made on credit: Account receivable & Revenue
      - Payment for goods is received prior to the transfer of the goods: Cash & Unearned Revenue
    - - Identify contract with a customer
        
        Identify the separate or distinct performance obligations in the contract
        
        Determine the transaction price
        
        Allocate the transaction price to the performance obligations in the contract
        
        Recognize revenue when the entity satisfies a performance obligation
      - Terms
        
        Contract: agreement between >=2 parties that specifies their obligations and rights
        -> For contract to exist: Collectability must be probable (Có căn cứ thu tiền)
        
        Performance obligation: promise to deliver a distinct good / service
        (Distinct:
        1/ the customer can benefit from the good on its own or combined with other resources that are readily available
        2/ the promise to transfer good can be identified separately from any other promises)
        
        Transaction price: amount the firm expected to receive from customer in exchange for transferring good / service
        -> usually fixed but can be variable (bonus for early delivery)
      - Note
        
        Under IFRS, principles-based approach is applied to revenue recognition
        
        Accrual Accounting Principle: Revenue should be recognized when earned
        
        Recognize revenue only when it is highly probable that they will not have to reserve it
        
        For long-term contract:
        
        Revenue is recognized based on Progress toward completing (measured from input sides / output side)
        
        Progress = Total cost incurred / Total cost estimate -> Revenue = Progress Transaction P
        Revenue (bonus included) to date = Progress (Transaction cost + Bonus)
        If have contract modification -> determine if extension of existing one or create a new contract
        If there is agent -> Rev of agent = commission / net amt of sale # Rev of principal = transaction P / gross amt of sale
        
        Capitalize cost to secure longterm contract (sales commission)
- - - - Effective tax rate = Income tax exp / Pre-tax income
      - Gross profit margin = Gross profit / Rev
      - Net profit margin = Net income / Rev
      - Operating expense margin = Operating exp / Rev
      - Pretax margin = Pre-tax income / Rev
    - - Retained earnings (RE) = NI at year-end - Dividend payment
        -> Lợi nhuận giữ lại cho mục đích đầu tư (investing)
      - Comprehensive income = NI + other comprehensive income
- - - - used for bonds, stocks
        not really happen (estimate EPS = ? if it is converted in the beginning of the period)
      - Formula
      - Example
      - Note
    - - used for options, warrants
        EPS is calculated as if financial instruments has been exercised
      - Assumption: Fund received by the company from the exercise of the options would be used to hypothetically purchase shares of the company's common stock in the market, at average market price
      - Formula
      - Note
      - Example