Chapter 2: Analyzing Income Statements

In this section

• Principles of Revenue Recognition
  Principles of Revenue Recognition (CFA Level 1): Five-Step Model, Identify the Contract(s), and Identify the Performance Obligations. Key definitions, formulas, and exam tips.
• Expense Recognition and Capitalization vs. Expensing
  Expense Recognition and Capitalization vs. Expensing (CFA Level 1): Background and Context, Expense Recognition and the Matching Principle, and Capitalization vs. Expensing At a Glance. Key definitions, formulas, and exam tips.
• Nonrecurring Items and Accounting Policy Changes
  Nonrecurring Items and Accounting Policy Changes (CFA Level 1): Nonrecurring Items: Definition and Significance and Why You Should Care About Nonrecurring Items. Key definitions, formulas, and exam tips.
• Basic and Diluted Earnings per Share
  Basic and Diluted Earnings per Share (CFA Level 1): Significance of EPS, Basic EPS, and Process Flow for Basic EPS. Key definitions, formulas, and exam tips.
• Common-Size Income Statements and Profitability Ratios
  Common-Size Income Statements and Profitability Ratios (CFA Level 1): What Is Common-Size Income Statement Analysis?, Key Benefits, and Typical Flow. Key definitions, formulas, and exam tips.
• Classification of Operating vs. Non-Operating Items
  Classification of Operating vs. Non-Operating Items (CFA Level 1): Why Classify Items as Operating vs. Non-Operating?, Core Distinctions, and Quick Personal Anecdote. Key definitions, formulas, and exam tips.
• EBIT, EBITDA, and Non-GAAP Metrics
  EBIT, EBITDA, and Non-GAAP Metrics (CFA Level 1): Understanding EBIT, Calculating EBIT, and Enter EBITDA. Exam-focused explanations with key terms and takeaways.
• Long-Term Contracts and Installment Sales
  Long-Term Contracts and Installment Sales (CFA Level 1): Key Concepts and Why They Matter, Long-Term Contracts at a Glance, and Installment Sales Basics. Key definitions, formulas, and exam tips.
• Impact of Government Assistance on Income
  Impact of Government Assistance on Income (CFA Level 1): Government Assistance: IFRS vs. US GAAP, Types of Government Assistance and Income Statement Effects, and Grants Related to Income. Key definitions, formulas, and exam tips.
• Classification Shifting and Earnings Management
  Classification Shifting and Earnings Management (CFA Level 1): How Classification Shifting Works and Why Classification Shifting Is Popular. Key definitions, formulas, and exam tips.
• Key IFRS vs. US GAAP Differences in Revenue and Expense Recognition
  Key IFRS vs. US GAAP Differences in Revenue and Expense Recognition (CFA Level 1): Minor Gaps that Remain, Key Differences in Revenue Recognition, and Five-Step Model in IFRS 15 vs. ASC. Key definitions, formulas, and exam tips.
• IFRS 15 vs. ASC 606: Comparative Overview
  IFRS 15 vs. ASC 606: Comparative Overview (CFA Level 1): Core Principles and the Five-Step Model, Subtle Differences in Collectibility, and Presentations of Contract Assets and Liabilities. Key definitions, formulas, and exam tips.