Accounting: The Language of Business - Vol. 2 (Intermediate: Part 55)

There are some pretty obvious ways of benchmarking creativity. One way is to perform what I call a creativity audit, which is to look at your capabilities and look at your performance and examine the percentage of revenue that comes from products that are less than five years old, less than three years old and that are current with the present accounting period. You can then compare those figures to those of your competition along the same axes.

John Kao

Statements of Net Income and Comprehensive Income (Part J)

by

Charles Lamson

After a company reports a component of an entity as a discontinued operation, it must separately report the results of operations of the discontinued component in the comparative statements of net income for all prior periods. We will discuss prior period adjustments in an upcoming post. In addition to the impact on the net income statement, companies report assets that are classified as components of an entity held for sale separately on the balance sheet. We will discuss this, in detail in a later post.

Exhibit 5.13 illustrates General Electric Company's presentation of discontinued operations on the statement of net income and in additional footnote disclosures. The income from discontinued operations changed significantly over the three years presented with a loss of $954 million in 2016, a loss of $7,495 million in 2015, and income of $5,855 million in 2014. (See General Electric Company's annual report at www.ge.com). In Note 2, General Electric provides more information about the portions of its businesses that it defined as discontinued operations, primarily its financial services businesses in GE Capital. The note further details the income related to the two classifications of total income or loss from discontinued operations: earnings or loss from discontinued operations, net of tax, and the gain or loss on disposal of the component, net of tax. 

EXHIBIT 5.13 Discontinued Operations, General Electric Company, Financial Statements and Notes, December 31, 2016

Excerpt from Net Income Statement

Excerpt from Note 2

Companies often dispose of Individually significant operations, operations that do not meet the definition of a discontinued operation. Because these disposals can be major and the amounts involved large, a company must disclose the pre-tax profit (loss) and the amount attributable to its shareholders. 

  

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 190-191*                                    

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