ANALYZING OPERATING ACTIVITIES

Accounting Concept of Income  Based on the concept of accrual accounting  Two major process in income measurement : Revenue recognition Matching

Measuring Acounting Income  Revenues and Gains Distinction: based on the ongoing business activites that produce revenues.  Expenses and Lossess Distinction: based on the ongoing business activites that produce revenues.

Alternative Income Classification and Measures  Recurring vs nonrecurring Net income, comprehensive income, and continung income Core income (exludes all nonrecurring items)  Operating vs nonoperating

Nonrecurring Items  Extraordinary items  Discontinued operations  Accounting changes  Special items  Asset impairments, Restructuring Charges

Revenue and Gain Recognition  Analysis is to ascertain that revenue recognition method properly reflect economic reality.

Deferred Charges  R&D  Computer softwarre expenses  Exploration and Development Costs in Extractive Industries