 Hello and welcome to the session in which we will discuss unusual and unfrequent gain losses and non-controlling interests as they appear on the income statement. This topic is covered in a typical chapter 3 or chapter 4 in an intermediate accounting course and surely it's covered on the CPA exam. Whether you are an accounting student or a CPA candidate, I strongly suggest you take a look at my website farhatlectures.com. I don't replace your CPA review course. I'm a supplemental material. I'm a useful addition to your CPA review course. I explain the material differently. I provide you alternative explanation, alternative resources that's going to help you understand your CPA review course, which in turn will help you understand the material and pass the exam. Your risk is one month of subscription. I do have resources for many college courses such as governmental accounting, tax audit, cost accounting, so on and so forth. My CPA supplemental material is aligned with your CPA review course, whether we are taken Becker, Gleam, Roger or Wiley and I do also have the AI CPA previously released questions you can access them through the website. Please connect with me on LinkedIn if you haven't done so, like this recording, share it with others, connect with me on Instagram, Facebook, Twitter and Reddit. So in this session we're going to be covering unusual and unfrequent gain and losses in a non-controlling interest. Now unusual gains and losses could have been covered in the prior session. In the prior session, if you remember, I looked at the income statement and I broke the income statement into three components. I said we're going to have the operating section, we have the non-operating and we have the tax. Well, I could have also included this unusual and unfrequent gain and losses because they are part of one of these sections here. But I did not. And the reason I did not is because if you took accounting maybe 10 years ago, seven, eight, I don't really exactly remember the exact date. But a few years ago, those unusual and unfrequent, not or and unfrequent, they were treated differently. I'm not going to tell you even how they were treated differently because it's irrelevant for us. It's not relevant for us anymore. But the point is I want to discuss them separately in case you took that accounting course long time ago. Now you need to know that they are treated differently now. So what are unusual gain and losses? Those losses and gains that don't occur on a day-to-day basis giving the company's business environment. So in other words, we do have gains and losses, but they don't occur as much. They're a little bit unusual given our environment. And infrequency and occurrence, it means they don't really occur on a regular basis giving our environment, given our business environment. So the best way to kind of look at those is take a look at some examples. But regardless, both of these unusual and infrequent or unusual or infrequent, they are listed under the non-operating section. So they are listed with other revenues and gains, other expenses and losses. The other thing I want to make you aware of, they are listed before income tax. Simply put, they are listed here in this section and therefore they're going to be netted out and eventually we apply tax on them. So simply put, I'm going to tell you how they are listed. They are listed, I'm going to use the word gross of tax. And why am I using this? Gross of tax. Well, the reason I'm using this word gross of tax is because in the next session, we're going to be looking at other items on the income statement and those other items will be listed net of tax. When I say gross of tax, it means they are listed before we pay taxes, before the income tax is applied to them. Okay, there is no such thing as gross of tax, but you guys get the point gross at the gross amount. Next, we would look at discontinued operation. It's listed net of tax and I'll explain what does that mean. Okay, but that's very important. And the reason I emphasize this point because unusual and infrequent, unusual and infrequent, they used to be reported net of tax. I just want to clarify this for the people who took accounting a while ago. Now, what are some example of those unusual or infrequent and infrequent gains and losses? Well, for example, if you sell an abandoned property, plant and equipment, you might have a gain or a loss. That's fine. It's listed here. If you have employee strike as a result, you have losses. It's listed here. If you have gains and losses from casualties such as fire or from natural disasters, floods or earthquake, you might say, you might say, how could you have gains or losses? How could you have gains? Well, if the insurance reimburse you more than your book value, then you will have a gain on those natural disaster. Impairment of receivable, impairment of property, plant and equipment, impairment of goodwill. They could happen. Impairment means the asset that you have, it's not giving you the same utility as before for one reason or another. For example, receivable is no longer collectible. The property, plant and equipment, they can no longer recover their book value. Same thing for impairment value, for impairment of goodwill. Well, if that happens, it happens with all businesses. Guess what? Those are non-operating expenses. Now, restructuring charges, when the company restructure, when they lay off employees, when they change positions, they would incur a cost because they have to pay those employees what's called a package or a golden package basically for them to leave so they can restructure again, have different employees in different places. Those are regular non-operating expenses. They do happen. Gains and losses result as a result of retirement of that and this is important because they used to test this a lot on the CPA exam. When you retire a debt, when you buy back your own debt, you might have a gain or a loss. Don't worry about it. It is part of your non-operating expenses. It's not extraordinary. It's just regular, part of your non-operating expenses. So all of those items, examples of non-operating. So don't let them basically confuse you on the exam day where they'll give you an example, where is this reported? It's all under non-operating expenses. Non-controlling interests and income, that's another topic, but first we need to know what is non-controlling interests because that's a line that's gonna be on the income statement. So what is a non-controlling interest? And you would learn about this later on when you take a course called advanced accounting or consolidation accounting. Well, when a company owns more than 50% of another company, but less than 100%. Well, guess what? You own a company. So to be in control of another company, you have to have more than 50%. Once you have more than 50%, anywhere in this, more than 50%, you are in control. And because you are in control, you consolidate 100%. You consolidate the balance sheet, you consolidate the income statement at 100%. Even though you might own only 70% of this company, regardless, although you own 70%, you consolidate 100%. So what's gonna happen is, because you consolidate 100%, remember, we still have 30% of the company that you don't own. So that's the portion of equity or net asset interest in the subsidiaries that doesn't belong to you, to the parent company, to the company that purchased it, because you don't own 100%, you only own 70%. What does that mean? It means you have to account for the 30% interest separately on the income statement. You have to report their figures, specifically their income separately on the income statement and obviously take it out of your consolidated figures, take it out of the 100%. The best way to illustrate this is to just show you a quick example. But again, you're gonna have to know this later on much, much more in details. Assume Adam Company acquires 60% of the outstanding stock of Ryan. So Adam owns only 60%. Well, that gives Adam control over Ryan's company. Because Adam owns more than 100%, it consolidate Ryan's financial results at a 100% rate. We consolidate 100%. Now GAP required that net income to be allocated to the controlling and non-controlling interests. So what we have to do, net income, we have everything in net income coming to us, but that's not really us, we only own 60%. So let's assume Ryan earned a million dollar. That's Ryan, that's the subsidiary. Our consolidated net income is three million. Which industry million include the million? So this three million, because it's consolidated, it include this million. Then what's gonna happen, we're gonna have to deduct less net income attributable to the non-controlling interest. Remember, Ryan's own, other shareholders of Ryan company owns 40%. Therefore, what we have to do, we have to deduct 400,000 from our consolidated net income to come back to our net income that's attributable to the Adam company. Of not if, of Adam company. So the net income of Adam's company is 2.6 million. And that's including the share of Ryan's income. The share of Ryan's income. Basically, if 40% goes to the minority interest or the non-controlling interest of Ryan's company, what remain is 60% to us. So simply put, of this 2.6 million, 600,000 of it is the consolidated net income that's coming from Ryan's company that belongs to Adam's company. And what happened to the 400,000, we deducted it to show that it's not our net income. Once again, this topic will be covered heavily in a course called advanced accounting. I'm gonna remind you again, whether you're an accounting student or a CPA candidate, I can help you because my resources are aligned with your CPA review course. I don't replace your CPA review course, keep it. But I can help you do better understanding the material. And I do have, for example, advanced accounting. If you happen to be taking advanced accounting, I do have governmental accounting, advanced accounting, cost accounting, whatever course you are taking, auditing. Also, my CPA review material is aligned with your CPA review course. So it's easy to go back and forth between my material and your material. In the next session, we would look at a very important topic. Well, all topics are important, but I believe that's important. Is this continued operation? Again, we're still working within the realm of the income statement. Once again, good luck, study hard, the CPA is worth it and stay safe.