632598256894

Alternative Income Statement Formats
Examples of the two principal income statement formats under current GAAP are presented here. The
income statement of Dow Chemical Company in Exhibit 3.5 is single-step , and that of Adobe
Systems, Inc., in Exhibit 3.6 is in the multistep format. An annual survey of financial statements
conducted by the American Institute of Certified Public Accountants (AICPA) reveals that about 14%
of the 600 companies in its survey use the single-step format. 11 The distinguishing feature of the
multistep statement is that it provides intermediate earnings subtotals that are designed to measure
operating performance. In principle, operating income should be composed almost entirely of
recurring items of revenue and expense that result from the main operating activities of the firm. In
practice, numerous material nonrecurring items may be included in operating income. For example,
restructuring charges are often included in operating income.
Exhibit 3.5 Consolidated single-step statements of income: Dow Chemical Company, years
ended December 31 (in millions).
Source: Dow Chemical Company, annual report, December 2007.