Intermediate Accounting

Cover......Page 1
Title Page......Page 5
Dedication......Page 6
Brief Contents......Page 7
From the Authors......Page 8
About the Authors......Page 9
Acknowledgments......Page 16
Table of Contents......Page 18
1 Financial Accounting and Accounting Standards......Page 29
Exciting Times......Page 30
Financial Reporting Environment......Page 31
Objective of Financial Reporting......Page 32
What Do the Numbers Mean? Don’t Forget Stewardship......Page 33
The Need to Develop Standards......Page 34
Securities and Exchange Commission (SEC)......Page 35
American Institute of Certified Public Accountants (AICPA)......Page 36
Financial Accounting Standards Board (FASB)......Page 37
What Do the Numbers Mean? You Have to Step Back......Page 40
FASB Codification......Page 41
GAAP in a Political Environment......Page 42
Evolving Issue Fair Value, Fair Consequences?......Page 43
The Expectations Gap......Page 44
Financial Reporting Issues......Page 45
International Accounting Standards......Page 46
Conclusion......Page 47
IFRS Insights......Page 56
What Is It?......Page 63
Need for a Conceptual Framework......Page 65
Development of a Conceptual Framework......Page 66
Overview of the Conceptual Framework......Page 67
Qualitative Characteristics of Accounting Information......Page 68
What Do the Numbers Mean? Living in a Material World......Page 71
What Do the Numbers Mean? Show Me the Earnings!......Page 72
Basic Elements......Page 75
Economic Entity Assumption......Page 76
Monetary Unit Assumption......Page 77
Basic Principles of Accounting......Page 78
Cost Constraint......Page 83
Summary of the Structure......Page 84
What Do the Numbers Mean? Don’t Count These Please......Page 85
FASB Codification and Exercises......Page 99
IFRS Insights......Page 100
3 The Accounting Information System......Page 105
Needed: A Reliable Information System......Page 106
Accounting Information System......Page 107
Basic Terminology......Page 108
The Accounting Equation......Page 109
Financial Statements and Ownership Structure......Page 111
The Accounting Cycle......Page 112
Record and Summarize Basic Transactions......Page 113
Posting......Page 114
Chart of Accounts......Page 116
The Recording Process Illustrated......Page 117
Trial Balance......Page 122
Adjusting Entries......Page 123
Adjusting Entries for Deferrals......Page 124
What Do the Numbers Mean? Am I Covered?......Page 126
Adjusting Entries for Accruals......Page 128
Preparing Financial Statements......Page 134
Closing......Page 135
Reversing Entries—An Optional Step......Page 138
Income Statement......Page 139
Balance Sheet......Page 140
What Do the Numbers Mean? Statements, Please......Page 141
Appendix 3A: Cash-Basis Accounting versus Accrual-Basis Accounting......Page 142
Conversion from Cash Basis to Accrual Basis......Page 144
Operating Expense Computation......Page 145
Illustration of Reversing Entries—Accruals......Page 147
Illustration of Reversing Entries—Deferrals......Page 148
Summary of Reversing Entries......Page 149
Adjustments Columns......Page 150
Adjusted Trial Balance......Page 152
Preparing Financial Statements from a Worksheet......Page 153
IFRS Insights......Page 177
4 Income Statement and Related Information......Page 183
Financial Statements Are Changing......Page 184
Usefulness of the Income Statement......Page 185
Quality of Earnings......Page 186
What Do the Numbers Mean? Some Things Never Change......Page 187
Elements of the Income Statement......Page 188
Intermediate Components of the Income Statement......Page 189
Condensed Income Statements......Page 191
Single-Step Income Statements......Page 192
Reporting Various Income Items......Page 193
Discontinued Operations......Page 194
Noncontrolling Interest in Income......Page 197
Earnings per Share......Page 198
What Do the Numbers Mean? Four: The Loneliest Number......Page 199
Accounting Changes and Errors......Page 200
Changes in Accounting Estimates......Page 201
Summary......Page 202
Retained Earnings Statement......Page 203
Comprehensive Income......Page 204
Statement of Stockholders’ Equity......Page 205
Evolving Issue Income Reporting......Page 206
FASB Codification and Exercises......Page 224
IFRS Insights......Page 225
Hey, It Doesn’t Balance!......Page 231
Usefulness of the Balance Sheet......Page 233
What Do the Numbers Mean? Grounded......Page 234
Classification in the Balance Sheet......Page 235
What Do the Numbers Mean? “Show Me the Assets!”......Page 241
What Do the Numbers Mean? Warning Signals......Page 244
Report Form......Page 245
Statement of Cash Flows......Page 246
Purpose of the Statement of Cash Flows......Page 247
Content of the Statement of Cash Flows......Page 248
Preparation of the Statement of Cash Flows......Page 249
Usefulness of the Statement of Cash Flows......Page 251
Additional Information......Page 254
Notes to the Financial Statements......Page 255
What Do the Numbers Mean? What About Your Commitments?......Page 256
Techniques of Disclosure......Page 258
Using Ratios to Analyze Performance......Page 260
Analytics in Action......Page 287
IFRS Insights......Page 288
How Do I Measure That?......Page 295
Applications of Time Value Concepts......Page 297
Simple Interest......Page 298
Compound Interest......Page 299
What Do the Numbers Mean? A Pretty Good Start......Page 300
Single-Sum Problems......Page 302
Future Value of a Single Sum......Page 303
Present Value of a Single Sum......Page 304
Solving for Other Unknowns in Single-Sum Problems......Page 306
Annuities (Future Value)......Page 307
Future Value of an Ordinary Annuity......Page 308
Future Value of an Annuity Due......Page 310
What Do the Numbers Mean? Don’t Wait to Make That Contribution!......Page 311
Examples of Future Value of Annuity Problems......Page 312
Present Value of an Ordinary Annuity......Page 314
Present Value of an Annuity Due......Page 315
Examples of Present Value of Annuity Problems......Page 317
Deferred Annuities......Page 318
Valuation of Long-Term Bonds......Page 320
Effective-Interest Method of Amortization of Bond Discount or Premium......Page 321
Present Value Measurement......Page 322
What Do the Numbers Mean? How Low Can They Go?......Page 324
FASB Codification and Exercises......Page 339
Is Your Cash Trapped?......Page 351
Cash......Page 353
Reporting Cash......Page 354
Summary of Cash-Related Items......Page 355
Evolving Issue What Counts for Cash?......Page 356
Receivables......Page 357
Measurement of the Transaction Price......Page 358
Variable Consideration......Page 359
Valuation of Accounts Receivable......Page 361
Allowance Method for Uncollectible Accounts......Page 362
What Do the Numbers Mean? Please Release Me?......Page 366
Recognition of Notes Receivable......Page 367
Other Issues......Page 371
Disposition of Accounts and Notes Receivable......Page 372
Presentation and Analysis......Page 377
Appendix 7A: Cash Controls......Page 380
The Imprest Petty Cash System......Page 381
Physical Protection of Cash Balances......Page 382
Reconciliation of Bank Balances......Page 383
Appendix 7B: Collectibility Assessment Based on Expected Cash Flows......Page 385
Example......Page 386
Recording Bad Debts......Page 387
FASB Codification and Exercises......Page 412
IFRS Insights......Page 413
8 Valuation of Inventories: A Cost-Basis Approach......Page 417
To Switch or Not to Switch......Page 418
Classification......Page 419
Inventory Cost Flow......Page 420
Inventory Control......Page 422
Goods Included in Inventory......Page 423
Costs Included in Inventory......Page 426
Which Cost Flow Assumption to Adopt?......Page 428
Average-Cost......Page 429
First-In, First-Out (FIFO)......Page 430
Last-In, First-Out (LIFO)......Page 431
LIFO Reserve......Page 432
What Do the Numbers Mean? Comparing Apples to Apples......Page 433
LIFO Liquidation......Page 434
Dollar-Value LIFO......Page 435
What Do the Numbers Mean? Quite a Difference......Page 439
Major Advantages of LIFO......Page 440
Major Disadvantages of LIFO......Page 441
Basis for Selection of Inventory Method......Page 442
Evolving Issue Repeal LIFO!......Page 444
Ending Inventory Misstated......Page 445
Purchases and Inventory Misstated......Page 446
FASB Codification and Exercises......Page 472
9 Inventories: Additional Valuation Issues......Page 475
Not What It Seems to Be......Page 476
Definition of Net Realizable Value......Page 477
Methods of Applying LCNRV......Page 478
Recording NRV Instead of Cost......Page 479
Use of an Allowance—Multiple Periods......Page 480
Lower-of-Cost-or-Market......Page 481
How Lower-of-Cost-or-Market Works......Page 483
Evaluation of the LCNRV and Lower-of-Cost-or-Market Rules......Page 484
Valuation at Net Realizable Value......Page 485
Valuation Using Relative Sales Value......Page 486
Purchase Commitments—A Special Problem......Page 487
The Gross Profit Method of Estimating Inventory......Page 489
Computation of Gross Profit Percentage......Page 490
Evaluation of Gross Profit Method......Page 491
Retail Inventory Method......Page 492
Retail-Method Concepts......Page 493
Retail Inventory Method with Markups and Markdowns—Conventional Method......Page 494
Special Items Relating to Retail Method......Page 496
Evaluation of Retail Inventory Method......Page 497
Presentation of Inventories......Page 498
Analysis of Inventories......Page 499
Stable Prices—LIFO Retail Method......Page 500
Fluctuating Prices—Dollar-Value LIFO Retail Method......Page 501
Changing from Conventional Retail to LIFO......Page 503
FASB Codification and Exercises......Page 527
IFRS Insights......Page 528
10 Acquisition and Disposition of Property, Plant, and Equipment......Page 537
Watch Your Spending......Page 538
Property, Plant, and Equipment......Page 539
Cost of Land......Page 540
What Do the Numbers Mean? Robbing Peter to Pay Paul......Page 541
Interest Costs During Construction......Page 542
Qualifying Assets......Page 543
Amount to Capitalize......Page 544
Comprehensive Example of interest Capitalization......Page 545
Special Interests Related to Interest Capitalization......Page 547
Cash Discounts......Page 548
Deferred-Payment Contracts......Page 549
Issuance of Stock......Page 550
Exchanges of Nonmonetary Assets......Page 551
Other Asset Valuation Methods......Page 555
What Do the Numbers Mean? Disconnected......Page 556
Improvements and Replacements......Page 557
Rearrangement and Reinstallation......Page 558
Summary of Costs Subsequent to Acquisition......Page 559
Involuntary Conversion......Page 560
Appendix 10A: Accounting for Contributions......Page 561
Conditional Contribution......Page 562
Exchange Transactions......Page 563
FASB Codification and Exercises......Page 588
11 Depreciation, Impairments, and Depletion......Page 591
Here Come the Write-Offs......Page 592
Depreciation—A Method of Cost Allocation......Page 593
Factors Involved in the Depreciation Process......Page 594
What Do the Numbers Mean? Alphabet Dupe......Page 595
Methods of Depreciation......Page 596
Special Depreciation Methods......Page 599
Other Depreciation Issues......Page 601
Recognizing Impairments......Page 604
Measuring Impairments......Page 605
Impairment of Assets to Be Disposed Of......Page 606
Establishing a Depletion Base......Page 607
Write-Off of Resource Cost......Page 608
Estimating Recoverable Reserves......Page 609
Continuing Controversy......Page 610
Evolving Issue Full-Cost or Successful-Efforts?......Page 611
Presentation of Property, Plant, Equipment, and Natural Resources......Page 612
Analysis of Property, Plant, and Equipment......Page 613
Tax Lives (Recovery Periods)......Page 615
Example of MACRS......Page 616
Tax versus Book Depreciation......Page 617
What Do the Numbers Mean? In the Bonus (Boomerang?)......Page 618
FASB Codification and Exercises......Page 639
IFRS Insights......Page 640
Is This Sustainable?......Page 649
Characteristics......Page 651
Amortization of Intangibles......Page 652
Marketing-Related Intangible Assets......Page 654
Customer-Related Intangible Assets......Page 655
Contract-Related Intangible Assets......Page 656
Technology-Related Intangible Assets......Page 657
What Do the Numbers Mean? Patent Battles......Page 658
Goodwill......Page 659
Impairment of Limited-Life Intangibles......Page 662
Impairment of Indefinite-Life Intangibles Other Than Goodwill......Page 663
Impairment of Goodwill......Page 664
What Do the Numbers Mean? Impairment Ups and Downs......Page 665
Presentation of Intangible Assets......Page 666
Identifying R&D Activities......Page 667
Accounting for R&D Activities......Page 668
Costs Similar to R&D Costs......Page 669
Presentation of Research and Development Costs......Page 671
Evolving Issue Recognition of R&D and Internally Generated Intangibles......Page 672
FASB Codification and Exercises......Page 690
IFRS Insights......Page 691
13 Current Liabilities and Contingencies......Page 699
Now You See It, Now You Don’t......Page 700
Current Liabilities......Page 701
Notes Payable......Page 702
Unearned Revenues......Page 704
What Do the Numbers Mean? Microsoft’s Liabilities—Good or Bad?......Page 705
Income Taxes Payable......Page 706
Employee-Related Liabilities......Page 707
What Do the Numbers Mean? How Do You Want That?......Page 711
Current Maturities of Long-Term Debt......Page 712
Refinancing Illustration......Page 713
What Do the Numbers Mean? What About That Short-Term Debt?......Page 714
Gain Contingencies......Page 715
Loss Contingencies......Page 716
What Do the Numbers Mean? Frequent Flyers......Page 722
Evolving Issue Greenhouse Gases: Let’s Be Standard-Setters......Page 724
What Do the Numbers Mean? More Disclosure, Please......Page 725
Presentation of Current Liabilities......Page 726
Presentation of Contingencies......Page 727
Analysis of Current Liabilities......Page 728
What Do the Numbers Mean? I’ll Pay You Later......Page 730
FASB Codification and Exercises......Page 751
IFRS Insights......Page 752
Going Long......Page 759
Issuing Bonds......Page 761
What Do the Numbers Mean? All About Bonds......Page 762
Valuation and Accounting for Bonds Payable......Page 763
What Do the Numbers Mean? How’s My Rating?......Page 766
Effective-Interest Method......Page 767
Illustration......Page 771
Long-Term Notes Payable......Page 772
Notes Not Issued at Face Value......Page 773
Special Notes Payable Situations......Page 775
Fair Value Option......Page 778
What Do the Numbers Mean? Fair Value Fun House......Page 779
Off-Balance-Sheet Financing......Page 780
What Do the Numbers Mean? Obligated......Page 781
Presentation and Analysis of Long-Term Debt......Page 782
Appendix 14A: Troubled-Debt Restructuring......Page 784
Transfer of Assets......Page 785
Modification of Terms......Page 786
Example 1—No Gain for Debtor......Page 787
Example 2—Gain for Debtor......Page 789
Concluding Remarks......Page 791
FASB Codification and Exercises......Page 809
IFRS Insights......Page 810
It’s a Global Market......Page 815
What Do the Numbers Mean? 1209 North Orange Street......Page 817
Components of Stockholders’ Equity......Page 819
Issuance of Stock......Page 820
What Do the Numbers Mean? The Case of the Disappearing Receivable......Page 823
Preferred Stock......Page 824
Reacquisition of Shares......Page 826
Purchase of Treasury Stock......Page 828
Sale of Treasury Stock......Page 829
What Do the Numbers Mean? Buybacks—Good or Bad?......Page 830
Financial Condition and Dividend Distributions......Page 831
Types of Dividends......Page 832
Stock Dividends and Stock Splits......Page 835
What Do the Numbers Mean? Splitsville......Page 837
Presentation......Page 839
Analysis......Page 841
Dividend Preferences......Page 843
Book Value per Share......Page 844
Analytics in Action......Page 865
IFRS Insights......Page 866
Kicking the Habit......Page 873
Accounting for Convertible Debt......Page 875
Convertible Preferred Stock......Page 877
Stock Warrants......Page 878
Stock Warrants Issued with Other Securities......Page 879
Evolving Issue Is That All Debt?......Page 881
Stock Compensation Plans......Page 882
Measurement—Stock Compensation......Page 883
What Do the Numbers Mean? What’s the Debate About?......Page 884
Recognition—Stock Compensation......Page 885
Restricted Stock......Page 886
Disclosure of Compensation Plans......Page 888
Basic Earnings per Share......Page 890
Earnings per Share—Simple Capital Structure......Page 891
Comprehensive Example......Page 893
Diluted Earnings per Share......Page 894
Diluted EPS—Convertible Securities......Page 895
Diluted EPS—Options and Warrants......Page 897
Antidilution Revisited......Page 898
EPS Presentation and Disclosure......Page 899
Summary of EPS Computation......Page 901
Appendix 16A: Accounting for Stock-Appreciation Rights......Page 902
SARs—Share-Based Liability Awards......Page 903
Stock-Appreciation Rights Example......Page 904
Appendix 16B: Comprehensive Earnings per Share Example......Page 905
Diluted Earnings per Share......Page 906
FASB Codification and Exercises......Page 929
IFRS Insights......Page 930
Winners and Losers......Page 937
Investments in Debt Securities......Page 938
Debt Investment Classifications......Page 939
Held-to-Maturity Securities (Amortized Cost)......Page 940
Available-for-Sale Securities (Fair Value Through Other Comprehensive Income)......Page 942
Trading Securities (Fair Value Through Net Income)......Page 946
Investments in Equity Securities......Page 947
Holdings of Less Than 20%......Page 948
Holdings Between 20% and 50% (Equity Method)......Page 950
What Do the Numbers Mean? Who’s in Control Here?......Page 952
Fair Value Option......Page 953
Impairment of Value......Page 954
Reclassification Adjustments......Page 957
Transfers Related to Debt Securities......Page 960
Summary of Reporting Treatment of Securities......Page 961
Appendix 17A: Accounting for Derivative Instruments......Page 962
Producers and Consumers......Page 963
Speculators and Arbitrageurs......Page 964
Example of Derivative Financial Instrument—Speculation......Page 965
Differences Between Traditional and Derivative Financial Instruments......Page 967
Derivatives Used for Hedging......Page 968
Fair Value Hedge......Page 969
Cash Flow Hedge......Page 971
Embedded Derivatives......Page 973
Qualifying Hedge Criteria......Page 974
Summary of Derivatives Accounting......Page 975
Fair Value Hedge......Page 976
Financial Statement Presentation of an Interest Rate Swap......Page 978
Appendix 17B: Fair Value Disclosures......Page 979
Disclosure of Fair Value Information: Financial Instruments......Page 980
Disclosure of Fair Values: Impaired Assets or Liabilities......Page 982
Conclusion......Page 983
FASB Codification and Exercises......Page 1006
IFRS Insights......Page 1007
It’s Back......Page 1019
Background......Page 1021
Overview of the Five-Step Process: Boeing Example......Page 1022
Extended Example of the Five-Step Process: BEAN......Page 1023
Identifying the Contract with Customers—Step 1......Page 1027
Identifying Separate Performance Obligations—Step 2......Page 1028
Determining the Transaction Price—Step 3......Page 1029
Allocating the Transaction Price to Separate Performance Obligations—Step 4......Page 1033
Recognizing Revenue When (or as) Each Performance Obligation Is Satisfied—Step 5......Page 1035
Summary......Page 1036
Sales Returns and Allowances......Page 1037
Repurchase Agreements......Page 1040
Principal-Agent Relationships......Page 1042
Consignments......Page 1043
Warranties......Page 1045
Summary......Page 1047
Presentation......Page 1048
Disclosure......Page 1052
Evolving Issue Revenue: “It’s Like An Octopus”......Page 1053
Revenue Recognition over Time......Page 1054
Percentage-of-Completion Method......Page 1055
Completed-Contract Method......Page 1060
Long-Term Contract Losses......Page 1061
Appendix 18B: Revenue Recognition for Franchises......Page 1064
Franchise Accounting......Page 1065
Recognition of Franchise Rights Revenue over Time......Page 1067
FASB Codification and Exercises......Page 1094
Taxes Are A-Changing......Page 1095
Fundamentals of Accounting for Income Taxes......Page 1097
Future Taxable Amounts and Deferred Taxes......Page 1098
Future Deductible Amounts and Deferred Taxes......Page 1102
Deferred Tax Asset—Valuation Allowance......Page 1105
Income Statement Presentation......Page 1106
Specific Differences......Page 1107
Tax Rate Considerations......Page 1110
What Do the Numbers Mean? Global Tax Rates......Page 1111
Accounting for Net Operating Losses......Page 1112
Loss Carryforward Example......Page 1113
Balance Sheet......Page 1117
Note Disclosure......Page 1118
What Do the Numbers Mean? Imagination at Work......Page 1119
Income Statement......Page 1120
The Asset-Liability Method......Page 1122
First Year—2019......Page 1124
Computing Deferred Income Taxes—End of 2019......Page 1125
Deferred Tax Expense (Benefit) and the Journal Entry to Record Income Taxes—2019......Page 1126
Financial Statement Presentation—2019......Page 1127
Taxable Income and Income Taxes Payable—2020......Page 1128
Deferred Tax Expense (Benefit) and the Journal Entry to Record Income Taxes—2020......Page 1129
Appendix 19B: Accounting for Net Operating Loss Carrybacks......Page 1130
Loss Carryback Example......Page 1131
Loss Carryback with Carryforward......Page 1132
FASB Codification and Exercises......Page 1153
IFRS Insights......Page 1154
20 Accounting for Pensions and Postretirement Benefits......Page 1161
Where Have All the Pensions Gone?......Page 1162
Fundamentals of Pension Plan Accounting......Page 1163
Defined Contribution Plan......Page 1164
Defined Benefit Plan......Page 1165
The Role of Actuaries in Pension Accounting......Page 1166
Measures of the Liability......Page 1167
What Do the Numbers Mean? Roller Coaster......Page 1168
Components of Pension Expense......Page 1169
Using a Pension Worksheet......Page 1171
2020 Entries and Worksheet......Page 1172
Prior Service Cost (PSC)......Page 1173
Amortization......Page 1174
2021 Entries and Worksheet......Page 1175
Smoothing Unexpected Gains and Losses on Plan Assets......Page 1177
Corridor Amortization......Page 1178
2022 Entries and Worksheet......Page 1181
2023 Entries and Worksheet—A Comprehensive Example......Page 1183
Assets and Liabilities......Page 1185
Net Income......Page 1186
Comprehensive Income......Page 1187
Within the Notes to the Financial Statements......Page 1188
Special Issues......Page 1191
What Do the Numbers Mean? Who Guarantees the Guarantor?......Page 1192
Accounting Guidance......Page 1194
Differences Between Pension Benefits and Healthcare Benefits......Page 1195
Obligations Under Postretirement Benefits......Page 1196
Postretirement Expense......Page 1197
2020 Entries and Worksheet......Page 1198
Recognition of Gains and Losses......Page 1199
2021 Entries and Worksheet......Page 1200
Disclosures in Notes to the Financial Statements......Page 1201
What Do the Numbers Mean? Want Some Bad News?......Page 1203
FASB Codification and Exercises......Page 1227
IFRS Insights......Page 1228
Times Are A-Changing......Page 1243
A Look at the Lessee......Page 1245
A Look at the Lessor......Page 1246
Advantages of Leasing—Lessors......Page 1247
Conceptual Nature of a Lease......Page 1248
Lease Classification......Page 1249
Lessee Accounting for Finance Leases: An Example......Page 1253
Lessor Accounting for Sales-Type Leases......Page 1256
What Do the Numbers Mean? Not So Fast......Page 1257
Sales-Type Lease Example......Page 1258
Lessee Accounting for Operating Leases......Page 1260
Lessor Accounting for Operating Leases......Page 1263
Special Lease Accounting Problems......Page 1264
Residual Values......Page 1265
Other Lease Adjustments......Page 1269
Bargain Purchase Options......Page 1271
Presentation, Disclosure, and Analysis......Page 1272
Evolving Issue Bring It On!......Page 1276
Accounting Issues in Sale-Leaseback Transactions......Page 1277
Financing Transaction (Failed Sale)......Page 1278
Sale-Leaseback Example......Page 1279
Direct Finance Lease Accounting......Page 1281
Direct Financing Lease Example......Page 1282
Lease Classification......Page 1286
Accounting for Finance Lease......Page 1287
Lease Terms: Scenario 2......Page 1288
Lessee Accounting—Operating Lease......Page 1289
Lessor Accounting—Operating Lease......Page 1292
FASB Codification and Exercises......Page 1321
IFRS Insights......Page 1322
22 Accounting Changes and Error Analysis......Page 1329
In the Dark......Page 1330
Background......Page 1331
Changes in Accounting Principle......Page 1332
What Do the Numbers Mean? Quite a Change......Page 1333
What Do the Numbers Mean? Change Management......Page 1335
Impracticability......Page 1342
Other Accounting Changes......Page 1343
Changes in Accounting Estimates......Page 1344
Changes in Reporting Entity......Page 1346
Accounting Errors......Page 1347
Example of Error Correction......Page 1348
Summary of Accounting Changes and Correction of Errors......Page 1350
Error Analysis......Page 1352
Balance Sheet and Income Statement Errors......Page 1353
Comprehensive Example: Numerous Errors......Page 1356
What Do the Numbers Mean? Guard the Financial Statements!......Page 1358
Preparation of Financial Statements with Error Corrections......Page 1359
Dividends in Excess of Earnings......Page 1361
Change to the Equity Method......Page 1362
FASB Codification and Exercises......Page 1388
IFRS Insights......Page 1389
Show Me the Money!......Page 1393
Usefulness of the Statement of Cash Flows......Page 1395
Classification of Cash Flows......Page 1396
What Do the Numbers Mean? How’s My Cash Flow?......Page 1397
Preparing the Statement of Cash Flows......Page 1398
Illustrations—Tax Consultants Inc.......Page 1399
What Do the Numbers Mean? Earnings and Cash Flow Management?......Page 1401
Net Cash Flow from Operating Activities—Direct Method......Page 1409
Evolving Issue Direct versus Indirect......Page 1414
Adjustments to Net Income......Page 1416
Accounts Receivable (Net)......Page 1419
Other Working Capital Changes......Page 1421
Net Losses......Page 1422
Significant Noncash Transactions......Page 1423
Use of a Worksheet......Page 1424
Preparation of the Worksheet......Page 1426
Analysis of Transactions......Page 1429
Preparation of Final Statement......Page 1432
FASB Codification and Exercises......Page 1461
IFRS Insights......Page 1462
24 Full Disclosure in Financial Reporting......Page 1469
High-Quality Financial Reporting—Always in Fashion......Page 1470
Full Disclosure Principle......Page 1471
Increase in Reporting Requirements......Page 1472
Differential Disclosure......Page 1473
Notes to the Financial Statements......Page 1474
Related Parties......Page 1476
Post-Balance-Sheet Events (Subsequent Events)......Page 1477
Reporting for Diversified (Conglomerate) Companies......Page 1479
Interim Reports......Page 1483
Evolving Issue It’s Faster but Is It Better?......Page 1488
Auditor’s Report......Page 1489
Management’s Reports......Page 1492
Fraudulent Financial Reporting......Page 1494
Internet Financial Reporting......Page 1497
Reporting on Financial Forecasts and Projections......Page 1498
Criteria for Making Accounting and Reporting Choices......Page 1499
Perspective on Financial Statement Analysis......Page 1500
Ratio Analysis......Page 1501
Limitations of Ratio Analysis......Page 1503
Comparative Analysis......Page 1504
Percentage (Common-Size) Analysis......Page 1505
FASB Codification and Exercises......Page 1526
IFRS Insights......Page 1527
Private Company Decision-Making Framework......Page 1535
Accounting for Identifiable Intangible Assets......Page 1536
Accounting for Goodwill......Page 1538
Summary......Page 1540
Appendix B Specimen Financial Statements: The Procter & Gamble Company......Page 1541
Appendix C Specimen Financial Statements: The Coca-Cola Company......Page 1547
Appendix D Specimen Financial Statements: PepsiCo, Inc.......Page 1551
Appendix E Specimen Financial Statements: Marks and Spencer plc......Page 1555
Index......Page 1559
EULA......Page 1584