Question

Unusual and infrequent gains and losses are reported net of tax. They include the elimination of a component of the business and restructuring charges. Do they also include restructuring charges and are reported net of tax?

1) Yes
2) No

Answer 1

Unusual and infrequent gains and losses are reported net of tax, which includes restructuring charges after accounting for the company's effective tax rate.

Step-by-step explanation:

The question pertains to the accounting treatment for unusual and infrequent gains and losses in financial reporting. According to accounting principles, these gains and losses do indeed include restructuring charges and are reported net of tax. The term 'net of tax' means that the amount presented on the income statement has already had the tax effects accounted for. This is done to give a clearer picture of the actual economic impact of these events on the company, by showing what the company has gained or lost after taxes have been taken into consideration.

When a company provides or makes public its effective tax rate, this is used to calculate the net of tax amount. The effective tax rate is the average rate at which a company's pre-tax profits are taxed and considers various tax benefits that the company may receive.