The Portable MBA in Finance and Accounting, 3rd Edition
Analyzing Business Earnings 101
- Office Depot Inc., annual report, December 1999, 57, 56.
- SFAS No. 130, Repor ting Comprehensive Income(Nor walk, CT: FASB,
June 1997).
- Translation (remeasurement) gains and losses that result from the application
of the temporal (remeasurement) method continue to be included in the income
statement as part of conventional net income. Only translation adjustments that re-
sult from application of the all-current translation method are included in other com-
prehensive income. Recent changes in the accounting for financial derivatives also
result in the inclusion of certain hedge gains and losses in other comprehensive in-
come: SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
(Norwalk, CT: FASB, November 1998).
- An annual survey conducted by the AICPA reveals the following pattern of
adoption of the alternative reporting methods of SFAS No. 130 for 497 firms: (1) a
combined statement of income and comprehensive income, 26 firms; (2) a separate
statement of comprehensive income, 65 firms; and (3) reporting comprehensive in-
come directly in shareholders’ equity, 406 firms. AICPA, Accounting Trends and
Techniques(New York: AICPA, 2000), 429.
- An earlier version of the Baker Hughes case study also appeared in
E. Comiskey and C. Mulford, Guide to Financial Repor ting and Analysis(New York:
John Wiley, 2000), chapter 3.
- Phillips Petroleum, annual report, December 1999, 33.
- Research and development costs must be written off immediately—even if
the in-process R&D is purchased from another firm. Whether this expense is de-
ductible for tax purposes turns on the manner in which the acquisition is structured.
Generally, the expense is deductible in transactions structured as asset acquisitions
but not in the case of stock acquisitions.
