How are they calculating NOI here?

From Schweser: "Penguins Inc. uses the temporal method to translate foreign currency amounts. During the year, it reported net income of \$5,000,000, an unrealized gain on available-for-sale securities of \$150,000, an extraordinary loss of \$200,000, a gain from discontinued operations of \$175,000, and a foreign currency translation loss of \$250,000. The difference between Penguins’ comprehensive income and normal operating income is closest to: A. \$125,000 B. \$150,000 C. \$250,000 For calculating NOI, they take Net Income and add back Extraordinary loss, and deduct gain from discontinued operations to get NOI=\$5,025,000. Why do you ADD extraordinary loss and SUBTRACT a gain from discontinued operations? (I know how to calculate Comprehensive income=Net Income+unrealized gain on available-for-sale securites)

They add/subtract these items as we want to see a realistic NOI. As there was a loss, you have to add the loss back to take out the effect of the loss.

I think because the net income number includes the effect of the extraordinary loss and discontinued operation. So if \$5 million number already includes the loss from extraordinary items, and extraordinary items are not part of _operating_ income, then you have to add back the loss

I’m not getting any of the answers. Are you supposed to remove foreign currency translation from net income (temporal method) to arrive at net operating income?

the answer should be A

So what is a general formula for NOI, because I want to cut down on having to think about subtracting certain gains/adding certain losses in specific situations in the heat of the exam. If there’s one formula that sums it up, I can plug-and-go. Thank yee!!

rellison Wrote: ------------------------------------------------------- > From Schweser: > > "Penguins Inc. uses the temporal method to > translate foreign currency amounts. During the > year, it reported net income of \$5,000,000, an > unrealized gain on available-for-sale securities > of \$150,000, an extraordinary loss of \$200,000, a > gain from discontinued operations of \$175,000, and > a foreign currency translation loss of \$250,000. > The difference between Penguins’ comprehensive > income and normal operating income is closest to: > > A. \$125,000 > B. \$150,000 > C. \$250,000 > > For calculating NOI, they take Net Income and add > back Extraordinary loss, and deduct gain from > discontinued operations to get NOI=\$5,025,000. Why > do you ADD extraordinary loss and SUBTRACT a gain > from discontinued operations? > > (I know how to calculate Comprehensive income=Net > Income+unrealized gain on available-for-sale > securites) Comp. Income = 5M + unrealized gain on av. for sale sec. --> 5.125M NOI = 5M + 200k - 175k = 5.025M 5.125-5.025 = .125M or 125k A

That’s equal to 100K CFABLACKBELT, but I got that same answer as you

Isn’t there a loss for the currency translation deducted from comprehensive income? F in PUFE going straight to comprehensive income? Comp. income=5M+150K (unrealized gain on AFS) - 250K (loss from currency translation)=4.9M NOI==5M+200K(extraordinary loss)-175K(gain from discontinued operations)=5.025M The difference is 125K, A

map1, under temporal method, doesn’t the translation gain or loss get reported directly in the income statement?

WOW, that was a huge error for me! Thank you AliMan. So, since under the temporal method, the loss from currency translation hits the income statement, shouldn’t it be added back in calculating NI? As 5M+200K-175K+250K=5.275M, and comprehensive income 5M+150k=5.15M?

Yes, that’s how I thought of it exactly. I must have put it in my calculator wrong