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Question 4 The president of Vancouver Viacom made the following comments to shareholders: Regarding management attitudes, Vancouver Viacom has resisted joining an increasing number of
Question 4 The president of Vancouver Viacom made the following comments to shareholders: Regarding management attitudes, Vancouver Viacom has resisted joining an increasing number of companies who along with earnings announcements make extraordinary or nonrecurring loss announcements. Many of these cases read like regular operating problems. When we close plants, we charge earnings for the costs involved or reserved as we approach the event. These costs, in my judgment, are usually a normal operating expense and something that good management should expect or anticipate. That, of course, raises the question of what earnings figure should be used in assessing a price earnings ratio and the quality of earnings Required: PRE a. Discuss your reactions to these comments. (6 marks) b. What factors determine whether a gain or loss is extraordinary? (4 marks) [Total: 10 marks
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