Question

Real World Case 4-15 (Static) Income statement format; restructuring costs; earnings per share; comprehensive income; statement of cash flows; Ralph Lauren (L04-1, 4-3, 4-5, 4-6, 4-8] Ralph Lauren Corporation is a global leader in the design, marketing, and distribution of premium lifestyle products, including men's, women's and children's apparel. Below are selected financial statements taken from a recent 10-K filing. RALPH LAUREN CORPORATION CONSOLIDATED STATEMENTS OF INCOME Fiscal Year Ended April 1, 2017 $ 6,652.8 (3,201.7) 3,651.1 ($ in millions, except per share data) Net sales Cost of goods sold Gross profit Other costs and expenses: Selling, general, and administrative expenses Amortization of intangible assets Impairments of assets Restructuring and other costs Total other costs and expenses, net Operating income Foreign currency losses Interest expense Interest and other income, net Equity in losses of equity-method investees Income before provision for income taxes Provision for income taxes Net income Net income per common share: (3,149.4) (24.1) (253.8) (318.6) (3,745.9) (94.8) (1.1) (12.4) 8.7 (5.3) (104.9) (5.6) (99.3) $ Basic $ (1.20) (1.20) Diluted $

Answer 1

Answers.

1. Ralph Lauren Corporation is using Multiple-step format to present its income statement. Income Statement is divided into two parts i.e., Consolidated Statement of Income and Consolidated Statemen of Comprehensive Income. In the first part of income statement, expenses are further break out into categories like other costs and expenses, operating income etc.

So, company is using multiple-step format.

2. Yes, the company reports restructing costs.

Note: Restructing costs are reported as non-operating charges and are not expected to recur in the future. Althought they are non-recurring costs, they still are reported in the income statement.

3. Yes, the company reports asset impairments.

Note: An asset impairment arises when there is a sudden drop in the fair value of an assets below its recorded cost. The accounting for asset impairment it to write off the difference between the fair value and the recorded cost. It must be shown in the income statement.

4. Comprehensive income is a more inclusive financing reporting methodology is a more includes disclosure of certain financial information that historically has not been recognised in the calculation of net income.

So, comprehensive income must be shown in the separate income statement.

5. Other comprehensive items did the company report:

• currency translation differences.
• Currency translation differences arising on net investment hedge.
• Loss on cash flow hedges, net of deferred tax.
• Share of other comprehensive income of equity accounted investees, net of deferred tax.
• Disposal of AFS financinal assets, net of deferred tax.

6. The company is using indirect method to report net cash provided by operating activities. Other method which the company could be used is Direct Method.

7. Pruchase of investment is the largest cosh outflow from investing activities.