Temporary earnings are best characterized as:

a. earnings that do not have corresponding cash flows.

b. earnings from nonoperating activities.

c. earnings that arise from events that are not likely to recur in the foreseeable future.

d. earnings that do not conform to Generally Accepted Accounting Principles (GAAP).

Question

Business

Kinsley

2 March, 23:42

Temporary earnings are best characterized as:

a. earnings that do not have corresponding cash flows.

b. earnings from nonoperating activities.

c. earnings that arise from events that are not likely to recur in the foreseeable future.

d. earnings that do not conform to Generally Accepted Accounting Principles (GAAP).

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Casey Friedman · Answer 1

Answer: c. earnings that arise from events that are not likely to recur in the foreseeable future.

Explanation: Temporary earnings arise from events that are not likely to recur in the foreseeable future.

They are unlikely to continue in the future such as gains or losses from the sale of equipment, impairment losses, other unusual and infrequent items, discontinued operations, R&D, training expenses, expiration of patents etc. The placement of the elements on the income statement/financial statement guides users in distinguishing temporary earnings from permanent earnings.