“Income is often described as a ‘flow’ as distinct from a ‘stock’ (e.g. of net assets or capital). Companies do have … net revenues. But that is only one part of the increment in wealth.” Chambers, R. J., 1983, ‘Price Variation and Inflation Accounting, McGraw-Hill Book Company, Sydney, p34.
Today AASB / IASB distinguish the ‘flow’ as either revenue or gains therefore acknowledging the distinction made by Chambers.
Select a company from the Australian Securities Exchange website and download the 2014 annual report.
- With reference to the above statement describe what you understand by the term ‘income’ and how they are measured using examples from your selected annual report.
- Discuss ‘income’ and the problems of measurement in the context of the present AASB / IASB standards and framework.
- Evaluate the categorisation and treatment of ‘income’ in your annual report in the context of AASB / IASB standards and framework.
- Comment on the relationship between the measurement of ‘income’ and decision useful information with examples from your selected annual report.