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The statement of income is referred to by various names, such as the income statement, statement of operations, statement of earnings, or others. Whatever name is used, its purpose is the same: to provide users of the financial statements with a measurement of a reporting entity’s results of operations over a period of time. This allows users to make important investing, lending, and other decisions by understanding trends of key measures such as sales and profitability. The income statement contrasts with the balance sheet, which provides a measure of financial position at a point in time. It also contrasts with the statement of comprehensive income, which shows the change in a reporting entity’s equity from all sources (net income, as well as revenues, expenses, gains, and losses included in comprehensive income but excluded from net income).
Various accounting standards include guidance on the income statement presentation and related disclosure of certain transactions. Other chapters of this guide discuss specific topics. This chapter covers requirements that are more general in nature, or that are not covered by other chapters. The following list includes some of the authoritative guidance that is more pervasive for purposes of income statement presentation.
Presentation
  • ASC 205, Presentation of Financial Statements
  • ASC 225, Income Statement
  • ASC 235, Notes to Financial Statements
Revenues
  • ASC 606, Revenue from contracts with customers
  • ASC 605, Revenue
  • ASC 610-20, Gains and losses from the derecognition of nonfinancial assets
Expenses
SEC
New guidance
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance within ASC 606 provides a comprehensive, industry-neutral revenue recognition model intended to increase financial statement comparability across companies and industries.
ASU 2014-09 also provides guidance on the recognition of gains and losses on transfers of nonfinancial assets and in substance nonfinancial assets to counterparties that are not customers. That guidance is within ASC 610-20, Gains and losses from the derecognition of nonfinancial assets. Refer to PPE 6.2 for accounting guidance and FSP 8 for additional presentation and disclosure requirements.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments, introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Refer to LI 13.1 for detailed guidance on effective dates.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. ASU 2018-18 clarifies that elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2019. All other entities have an additional year. Reporting entities can early adopt ASU 2018-18, but no earlier than their adoption of ASC 606. Refer to PwC’s Revenue from contracts with customers guide and FSP 3.6.6 for details.
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