What Is Income Smoothing? Income smoothing uses accounting techniques to level out fluctuations in net income from one period to the next. Companies indulge in this practice because investors are generally willing to pay a premium for stocks with steady and predictable earnings streams as opposed to stocks whose earnings are subject to more volatile
What Is an Income Statement? An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period. The other two key statements are the balance sheet and the cash flow statement. The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular
What Is Income Tax? The term “income tax” refers to a type of tax that governments impose on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations. Income taxes are a source of revenue for governments. They are used to
What Is Income Tax Payable? “Income tax payable” is a liability reported for financial accounting purposes that indicatesthe amount that an organization expects to pay in income taxes within 12 months. It is reported in the current liabilities section of a company’s balance sheet. The calculation of income tax payable is determined in accordance with
What Is an Impaired Asset? An impaired asset is an asset that has a market value less than the value listed on the company’s balance sheet. When an asset is deemed to be impaired, it will need to be written down on the company’s balance sheet to its current market value. Key Takeaways Assets should
What Is Impaired Credit? Impaired credit occurs when there has been a deterioration in the creditworthiness of an individual or entity. This is usually reflected through a lower credit score, in the case of an individual, or a reduction in the credit rating assigned to an entity or debt issued by a rating agency or
What Is an Impaired Insurer? An impaired insurer is an insurance company that is potentially unable to fulfill its policy obligations and has been placed under rehabilitation. An impaired insurer is not insolvent but it does pose a potential threat to its policyholders. States consider impaired insurers a risk because they may be unable to fulfill obligations
What Is Impairment? In accounting, impairment is a permanent reduction in the value of a company asset. It may be a fixed asset or an intangible asset. When testing an asset for impairment, the total profit, cash flow, or other benefits that can be generated by the asset is periodically compared with its current book
What Is Imperfect Competition? Imperfect competition exists whenever a market, hypothetical or real, violates the abstract tenets of neoclassical perfect competition. In this environment, companies sell different products and services, set their own individual prices, fight for market share, and are often protected by barriers to entry and exit. Key Takeaways Imperfect competition refers to any economic market that
What Is an Imperfect Market? An imperfect market refers to any economic market that does not meet the rigorous standards of the hypothetical perfectly—or purely—competitive market. Pure or perfect competition is an abstract, theoretical market structure in which a series of criteria are met. Since all real markets exist outside of the spectrum of the
