Sharon, I like how you have extensively analyzed the importance of sustainable income in the evaluation of the income statements. I agree that sustainable income differs from actual net income by the amount of irregular revenues, losses, and gains ( Wahlen, Baginski, & Bradshaw, 2014) . Your post has indicated that with the use of sustainable income, a user can estimate the future earnings with close accuracy. One thing that one draws from your analysis is that a company must not include some of the irregular items including losses, expenses, gains, and revenues on its income statement (Weygandt, Kimmel, & Kieso, 2015) . This explains why sustainable income is an important metric when estimating the future cash flows of the company.
Gains or losses: I was not aware that the gains and losses on discontinued operation items usually refer to the disposal of a significant component of a business such as the elimination of a class of customers. I have also realized that when there is a significant component is disposed of, then the company’s income statement should focus on the disclosing the items or events ( Weygandt, Kimmel, & Kieso, 2015) . The investors are interested in knowing if the disposal is a gain or a loss and would be essential when it comes to making the right decisions in regards to investment.
Delegate your assignment to our experts and they will do the rest.
Your analysis of the extraordinary items reveals that they have to meet some conditions. Although I considered them as being unusual, I did not comprehend them being infrequent. I agree that for them to be unusual, they must be abnormal and only incidentally related to the customary activities of the entity ( Wahlen, Baginski, & Bradshaw, 2014) . I was able to learn that they must not be expected to occur in future for them to be infrequent. The evaluation of the items should be done in regards to the environment the entity operates in and should be reported to the investors.
References
Wahlen, J., Baginski, S., & Bradshaw, M. (2014). Financial reporting, financial statement analysis and valuation . Nelson Education.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting : Tools for Business Decision Making . John Wiley & Sons.
