Accounting: The Language of Business - Vol. 2 (Intermediate: Part 49)

We have a remarkably complete picture in many ways - and it could be that we're not accounting for something that's almost three-quarters of the entire universe

Saul Perlmutter

Statements of Net Income and Comprehensive Income (Part G)

by

Charles Lamson

Condensed Statement of Net Income 

Companies use condensed income statements when a large number of line items limits the usefulness of the net income statement. That is, too much detail distracts the user from identifying key measures and relationships on the net income statement. Rather than present a cluttered income statement, many companies will provide a condensed income statement and disclose the details of significant revenues and expenses in the footnotes or supporting schedules. 

Exhibit 5.6 below presents a sample condensed, multiple-step statement of net income for Puppini Products. 

EXHIBIT 5.6 Condensed Income Statement

Exhibit 5.7 Shows a sample footnote as an example of detailed footnotes or supplementary schedules needed to explain material income statement line items. 

EXHIBIT 5.7 Footnote to Support Condensed Income Statement Line Items 

Exhibit 5.8 presents the multiple-step income statement of Kimberly-Clark Corporation. The multiple step income statement includes gross profit, operating profit, and income before taxes and equity interests. The company includes a separate section to highlight its equity investment income (called share of net income of equity companies), which is about 6% of net income in 2016. Although Kimberly-Clark is a vast company, its income statement is very concisely presented.

EXHIBIT 5.8 Income Statement, Kimberly-Clark Corporation, Financial Statement, December 31, 2016 (https://www.kimberly-clark.com/-/media/kimberly/pdf/annual-report/kmb-2016-10k_umbracofile.pdf)

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 179-181*

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