CH4. Reporting various income items

Gross profit(총 이익)

• = net sales - cost of goods sold 
• Unusual or incidental revenues are disclosed in other income and expense. Help understanding trends in revenue from continuing operations(지속적인 운영에서의 수익 추세를 이해하는 데 도움)
• Useful in evaluating performance and predicting future earnings. (성능 평가와 미래 이익 예측에 유용)
• Helpful in seeing the trend in gross profits to understand how competitive pressure affected gross profit margin.

Income from operations(영업 이익)

• = gross profit -  selling and administrative expenses - other income and expense 
• Under the K-IFRS, other income and expense are not a part of income from operations. Highlights items that affect regular business activities. Used to predict the amount, timing, and uncertainty of future cash flows(미래 규모, 불확실성 예측)

• Nature of Expense Approach(비용의 본질 접근) and Function of Expense Approach(비용의 기능 접근)

Gains and Losses(손익)

• IASB takes the position that both 1) revenues and expenses and 2) other income and expense should be reported as part of income from operations: Inventory write-down(재고자산손실), restructuring(구조조정), relocation(이전비용), etc.
• Companies can provide additional line items, headings, and subtotals(소계) when such presentation is relevant to an understanding of the entity’s financial performance.
• Additional items that may need disclosure to help users predict the amount, timing, and uncertainty of future cash flows(미래 현금 흐름의 규모 예측에 도움을 주기 위해 공개해야 할 추가 항목들) :
  • Losses on write-downs of inventories to net realizable value(순실현가치) or of PP&E to recoverable amount(회수가능금액), as well as reversals(환입) of such write-downs.
  • Losses on restructurings of the activities and reversals of any provisions for the costs of restructuring(충당금).
  • Gains or losses on the disposal(처분) of items of property, plant, and, equipment or investments.
  • Litigation settlements(소송 합의).
  • Other reversals of liabilities(기타 부채의 환입).

Income before income taxes(세전 이익)

Earnings before Income Tax (EBIT)

• income from operations (operating activities) - interest expense (financing costs) 
• Financing costs must be reported on the income statement.

NI(Net Income, 총 이익)

1. Net Income

• EBIT - Income Tax
• the most important measure of a company’s success or failure for a given period of time.
• Tax implication for revenue and expense might be different. So, there are often extensive disclosures related how the number for income tax expense(소득세비용) is determined.

2. Earnings per Share (EPS)

• Net income one important figure sums up the results of operations.
• A significant business indicator.
• Measures the dollars earned by each ordinary share(보통주 당 벌어들인 달러 측정).
• EPS can be reduced due to dilutive securities(희석성 증권) in the future (convertible bonds(전환사채), stock warrants, options, etc.)

3. Discontinued Operations

1. either has been disposed of(처분되었거나), or is classified as held-for-sale(매각을 위한 보유)
2. Represents a major line of business or geographical area of operations, or
3. Is part of a single, co-coordinated plan to dispose of a major line of business or geographical area of operations, or
4. Is a subsidiary(자회사) acquired exclusively with a view to resell(재판매)
5. Companies report as discontinued operations(중단된 운영) (in a separate income statement category) the gain or loss from disposal of a component of a business.
6. The results of operations of a component that has been or will be disposed of separately from continuing operations.
7. The effects of discontinued operations net of tax(세금 차단) as a separate category(별도 항목), after continuing operations.
8. “Income from continuing operations(계속 운영으로 인한 수익)” can be used only when gains or losses on discontinued operations occur.
9. EPS for each line on the face of I/S or notes.

4. ntraperiod Tax Allocation

• Companies report discontinued operations on the I/S net of tax(세금 차단 후).
• The allocation of tax to this item is called intraperiod tax allocation(세금 배분), allocation of tax within a period.
• Relates the income tax expense(세금 비용) to the specific items that give rise to the amount of the tax provision(충당금).
• On the income statement, income tax is allocated to:
  1. Income from continuing operations(계속 운영으로 인한 수익)
  2. Discontinued operations(중단된 운영)
• “let the tax follow the income”

5. Allocation to Non-Controlling Interest

 

• When a company (parent) owns more than 50% interest of other company (subsidiary), the company should prepares a consolidated income statement (연결재무제표, 연결손익계산서).
• IFRS requires that net income be allocated to the controlling (owned by parent company, 모회사 소유) and non-controlling interest (owned by other shareholders, 비지배지분, 기타주주소유).
• This allocation is reported at the bottom of the income statement, after net income.