Question

On the income statement, a company reports impairment losses related to intangible assets as an extraordinary item due to their infrequent occurrence, and amortization expense as part of continuing operations.

a. true
b. false

Answer 1

A company reports impairment losses as part of operating expenses, not as extraordinary items, and amortization expense as part of continuing operations, making the statement false.

Step-by-step explanation:

The statement that a company reports impairment losses related to intangible assets as an extraordinary item on the income statement is false. As per the accounting standards like IFRS (International Financial Reporting Standards) and US GAAP (Generally Accepted Accounting Principles), impairment losses are included as part of operating expenses and are not categorized as extraordinary items.

Extraordinary items are both infrequent and unusual, whereas impairments can occur more regularly and are not considered unusual for accounting purposes. The amortization expense of intangible assets is correctly reported as part of continuing operations on the income statement because it is a systematic allocation of the cost of an intangible asset over its useful life.