Income statement is a statement that allows to asses a firm performance, profitability over a certain

period of time.

Income statement has two main blocks:

1. Incomes and expenses from continuing operations

2. Non-recurring items including discontinued operations.

Discontinued operations examples

Trading companies = 5 -1 = 4 (not classified as DO)

Restaurants = 3 -1 = 2 (not classified as DO)

Consulting firms = 6 - 6 = 0 (classified as DO)

Extraordinary items are not reported separately under IFRS starting from 2002

Under US GAAP, we disclose the fact of unusual or non-recurring items starting from 2015

In conclusion, we do not use the term extraordinary items anymore

Earnings per share (EPS) is measurement that assesses an earning power of a common share

How do we calculate EPS?

Net income−Preferred stock dividends

EPS=
Weighted average number of outstanding common shares

If preferred stock is cumulative, then we deduct dividends anyway even if the BOD has not declared
dividends.

If preferred stock is non-cumulative, then we do not subtract those dividends from net income.

How about dividends in arrears? We do not subtract dividends in arrears from net income