CFA Level I · CFA Level I Exam · Analyzing Income Statements
Under IFRS, a manufacturer earns 40 from selling a piece of surplus equipment it used in operations, a transaction outside its main business activities. The gain is most likely reported as:
The gain is most likely reported as other income, shown as a gain rather than revenue. Revenue comes from ordinary activities, and selling used operating equipment is incidental to the main business, so it should not be included in revenue or netted against cost of sales.
- Aa reduction of cost of sales.
- Brevenue, because it increased profit.
- Cother income, as a gain rather than revenue.Correct
Explanation
Revenue arises from ordinary activities. Gains from incidental transactions such as disposing of equipment are reported as other income (gains), often shown net of the carrying amount, not in revenue or cost of sales.
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