CFA CFA Level 1 Question of the Week – Financial Reporting and Analysis

Question of the Week – Financial Reporting and Analysis

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  • AdaptPrep
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    A bookstore earned $200,000 over
    the past year. At a tax rate of 40%, that bookstore incurs an income tax
    expense of $80,000. Under which of the following accounting systems would the
    expense typically be categorized as an operating activity?

    • IFRS only
    • U.S. GAAP only
    • IFRS and U.S. GAAP
    AdaptPrep
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    Under both IFRS and U.S. GAAP, income tax expense on operating
    income is an operating expense. The difference between the two is when the
    income comes from a financing or an investing activity. In that case, the
    expense would still be an operating expense under U.S. GAAP but not under IFRS.

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