According to ASC 225-10-S99-2 (Regulation S-X Rule 5-03, Income Statements), L&L has to state Net Sales and Gross Revenues separately. In the meanwhile, costs and expenses are applicable to sales and revenues. Because L&L has different products and services such as clothing and Spa services, both of them have their unique cost of revenue. Separately stated those in the income statement and arrangement for the presentation are not only making the statements clear, but also required by the code.
By the requirement of ASC 25510-S99-8 (SAB Topic 11.B, Depreciation and Depletion Excluded from Cost of Sales), if cost of sales or operating expenses exclude charges for depreciation, the description of the line item should read as:“ Cost of goods sold(exclusive of depreciation shown separately below).” And depreciation should not be positioned in the income statement in a manner which results in reporting a figure for income before depreciation. In this case, the depreciation would not show in L&L’s income statement.
In ASC 225-20-45-16, it states “a material event or transaction that is unusual in nature or occurs infrequently but not both, shall be reported as a separate component of income from continuing operations.” L&L’s gain on the sale of a long-term asset was not from the on-going operation. Therefore, it would not count for a component of operating income, but in a part of other revenue or gain. And this will be the same reason for the lawsuit settlement income why it counts to part of other revenue or