22b Income statement vs Statement of Income

The Schweser text states: _The statement of comprehensive income reports all changes in equity expect (I think they meant EXCEPT) for__shareholder transactions (e.g., issuing stock, repurchasing stock, and paying dividends)._The income statement (also known as the statement of operations or the profit and loss__statement) reports on the financial performance of the firm over a period of time. The__elements of the income statement include revenues, expenses, and gains and losses. I’m not sure I understand. Is one of them supposed to broader version of the other? I ask because there was a test question about a company raising new cash by issuing and selling new shares. Why wouldn’t an income statement be affected by the issuance of new stock, or the buyback of old stock?

Is not really the idea whether which is a broader version but rather how are they presented under different governing accounting standards- Are them presented seperately or a combination of financial statements. Take IFRS for example, Other comprehensive income (" OCI") can be presented together with the Income Statement i.e. as a Statement of Comprehensive Income OR: OCI can be presented seperately in a statement and in which case the Net Income figure will be at the top. For U.S. GAAP , OCI can be presented together with the Statement of Owner’s Equity OR; OCI can be presented seperately in another statement (same as IFRS)

For this, the transaction involve shareholders’ transactions, in which case the Statement of Owner’s Equity will be affected; not the Income Statement. Also, the Statement of Cash Flows will be affected too - particularly Cash Flows from Financing (" CFF") Hope this helps :slight_smile:

I should probably have disclosed that I have zero accounting background

So I guess that GAAP is the rulebook that the USA people go by and IFRS is the rulebook that the whole world is supposed to go by?

Does that mean that when an international company (that is HQ’d in the USA) does their books, they have to do it twice, one for each accounting standard? Walmart is an example.

For this, I think I’m not in the suitable position to advise but from what I have gathered to date from my reading (Schwesers Notes hereafter " SN"); different countries follow different standards set by their home country accounting standards bodies; e.g. for my country- Singapore, we have the FRS in which companies operating here follows.

Also, converging efforts for accounting standards between IFRS and U.S. GAAP are still ongoing. For companines listing in the U.S. but is not IFRS/U.S. GAAP-reporting, need to produce an addition reconciliation statement - which reconcile the figures reported to figures that will be appearing under U.S. GAAP standards. However having said that, companies which are IFRS-reporting (and list in US) need not produce any reconciliation statement.

_ *You can refer to SN page 39 too* _

Reference to what I said above, international companies like Walmart need only follow U.S. GAAP. If what have been stated in Page 39 of SN hold, then I will be able to quote you an example. Citing one of the telco company from my country- SingTel; if it list their shares in the U.S., a reconciliation statement (which reconcile financial results to U.S. GAAP) need to be prepared in addition to the standard set of financial statements. Reason: The company does not follow IFRS or U.S. GAAP.

Hope the above are helpful. :slight_smile:

Yes, Comprehensive Income is the broader version of Other Comprehensive Income (OCI). The following equation will make it more clear.

Comprehensive Income = Net Income (the one that you see regularly) + Other Comprehensive Income (Mostly contains Unrealized items).

You will read about OCI in the Balance Sheet reading.

Don’t worry. I have a bachelors in business administration with majors in Finance and I also did not know about Other Comprehensive Income (OCI) or Comprehensive Income until I opened CFA books.

Yes, US companies follow GAAP. However, whole world does not follow IFRS. IFRS is followed mostly in Europe and Commonwealth countries (those countries where Britishers ruled). However, a lot of countries have their own Accounting Standards. I read in CFA book that Canada has their own version of GAAP. The above poster said they have their own Accounting Standards in Singapore.

My understanding is that Walmart (Parent) will HAVE to follow US GAAP. However, Walmart subsidiaries will have to follow the Accounting Standards of the country in which they are operating and that’s too if those subsidiaries are public companies. If those subsidiaries are private companies, then they would not need to present financial statements. Walmart USA (parent) will make consolidated statements according to US GAAP in any case. However, I am not an accountant so please do not consider my opinion as final.