IAS 1 recognizes the need for full disclosure of the components of reported net income. Explain why full disclosure of net income components is important if investors are to properly interpret the implications of current reported net income for future firm performance. What is classification shifting? Why does classification shifting make it more difficult for investors to predict future firm performance from current reported net income? How could the problem of classification shifting be reduced?
Answer to relevant QuestionsExplain why financial statement information has characteristics of a public good. Include a definition of a public good in your answer. What does this imply about using the extent of security market reaction to accounting ...The Globe and Mail reported on Imperial Oil Ltd.’ s earnings for the third quarter ended on September 30, 2000, released on October 18, 2000. Net income was a record $ 374 million, up from $ 191 million for the same ...If net income is an unbiased and noisy measure of manager performance, less noise enables a more efficient compensation contract. Explain why. How can accountants reduce noise in net income when net income is an unbiased ...Tom operates a small, fast- growing electronics business. His workload has expanded to the point where he decides to hire a full- time manager. He will then take one year off to travel, and on his return he will concentrate ...The sensitivity of a performance measure is the rate at which the expected value of the performance measure increases as the manager works harder. Precision, or noise, is the reciprocal of the variance of the performance ...
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