Accounting 3301

Accounting 3301-02 Case 1

1.  State the criteria for recognizing an event as an remarkable item as written in the FASB Codification.  

FASB Code 225-20-45

1. legal opinion is required to segregate in the income teaching the effects of events or transactions that are extra commonplace items (as required by paragraphs 225-20-45-10 with 45-11).

An event or transaction shall be presumed to be an ordinary and usual activity

of the reporting entity, the effects of which shall be included in income from

cognitive operations, unless the evidence clearly supports its classification as an

extraordinary item.

2: State the knows of the case.

The Issue of the case is that the company sustained a tax loss of $8.4 million

The loss was primarily due to $10 million in expenses related to product recall

 

Why is the issue of manifestation of the recall amount contentious?

The issue was controversial because if reported as an extraordinary item their income from continuing operation allow show an increase from the prior year.



 

Why is presentation as an extraordinary item on the income statement a positive choice for the company? 

Because it will shows an increase in prior year profit

The Stock market will valuate the continued growth in ongoing profitability and will discount the onetime loss

Also it would increase the company bonuses

What are the negative consequences of presenting the item as extraordinary on the income statement?

The negative consequences are if the extraordinary item is if not unconquerable and it happen again then it will show multiply the loss and will affect bonuses and the company overall profit

3:  List the stakeholders (parties) involved and those that will be affected by the decision.

The stakeholder is the company...If you want to get a full essay, order it on our website: Ordercustompaper.com



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