[Verse 1]
When a company makes a sale, when do we record the gain?
IFRS fifteen and ASC six-oh-six explain the same
Five steps to recognize revenue properly
Contract identified, performance obligations clearly
Transaction price determined, allocate it right
Satisfy performance, then record it bright
[Chorus]
Income statement tells the story
Revenue minus expenses shows the glory
Match the costs to revenues earned
Quality earnings must be learned
Basic EPS and diluted too
Comprehensive income's part of view
[Verse 2]
Matching principle guides expense recognition
Costs should match the revenues in precision
Depreciation spreads the asset's cost
Straight line, declining balance, units produced
Capitalize if benefits future years
Expense immediately if value disappears
[Chorus]
Income statement tells the story
Revenue minus expenses shows the glory
Match the costs to revenues earned
Quality earnings must be learned
Basic EPS and diluted too
Comprehensive income's part of view
[Verse 3]
Non-recurring items need special care
Discontinued operations separate and fair
Unusual or infrequent, mark them clear
Don't let them cloud the regular year
Quality earnings show the truth
Cash flows matter, that's the proof
[Bridge]
Red flags wave when earnings managed
Accruals high and cash flow damaged
Conservative or aggressive style
Affects the numbers all the while
Anti-dilutive securities don't count
Diluted EPS is paramount
[Verse 4]
Basic EPS takes net income clean
Divided by shares outstanding mean
Diluted adds potential shares
From options, warrants, bonds that convert pairs
Other comprehensive income flows
To equity where pension adjustments go
[Chorus]
Income statement tells the story
Revenue minus expenses shows the glory
Match the costs to revenues earned
Quality earnings must be learned
Basic EPS and diluted too
Comprehensive income's part of view
[Outro]
From revenue recognition to the bottom line
Quality and clarity help the numbers shine