You are not currently logged in.
Access JSTOR through your library or other institution:
If You Use a Screen ReaderThis content is available through Read Online (Free) program, which relies on page scans. Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Reporting Earnings: A New Approach
Financial Analysts Journal
Vol. 35, No. 6 (Nov. - Dec., 1979), pp. 67-71
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4478291
Page Count: 5
You can always find the topics here!Topics: Net income, Income statements, Financial statements, Financial advisers, Memoranda, FASB standards, Sales volume, Business structures, Sales operations, Prices
Were these topics helpful?See something inaccurate? Let us know!
Select the topics that are inaccurate.
Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Preview not available
What information should the earnings statement convey, and in what form? What information should be relegated to footnotes, and what presented outside the formal financial statements altogether? In August, the Financial Accounting Standards Board issued a discussion memorandum that suggests new reporting formats for earnings information. The new formats are intended, not only to highlight the more predictable aspects of earnings, but also to facilitate comparisons between companies in the same industry. Traditional earnings statements fail to identify the impact of "developments outside the normal operations of the business," to distinguish fixed from variable expenses or to separate sales results into volume effects and price effects. Because all this information is of potential value to users of financial statements, the FASB's discussion memorandum includes a multiple-step earnings statement format that breaks out irregular revenue and expense and provides subtotals for cost of products sold and operating earnings. It also presents a format for analyzing changes in income per share that illustrates the effects of changes in sales volume, mix and price on the profitability of normal operations. The discussion memorandum attempts to present the issues surrounding the disclosure of earnings information in a neutral manner that takes into account the needs of both users and preparers of financial statements. The FASB's final standards will depend to a large extent on responses from financial analysts, preparers of financial statements and other interested parties.
Financial Analysts Journal © 1979 CFA Institute