Title Details

About the Authors xi

About the Financial Accounting Professors xiii

Welcome to Financial Accounting and Reporting xv

Conceptual Framework and Financial Reporting 1

Financial Accounting Standards Board (FASB) 2

Overview of U.S. GAAP 2

FASB and Standard Setting 2

Accrual Accounting 6

Financial Statements 12

Financial Accounting Standards Codification 17

Conceptual Framework of Financial Reporting by Business Enterprises 21

Objectives and Qualitative Characteristics 21

Assumptions and Accounting Principles 24

Constraints and Present Value 28

Fair Value Framework 31

Fair Value Framework—Introduction and Definitions 31

Recognition and Measurement 35

Inputs and Hierarchy 38

Disclosure Requirements 40

International Financial Reporting Standards (IFRS) 44

IASB Accounting Standards 44

IASB Framework 49

IFRS for SMEs 52

IFRS—General-Purpose Financial Statements 55

General-Purpose Financial Statements 62

Balance Sheet/Statement of Financial Position 62

Income Statement 70

Statement of Comprehensive Income 76

Statement of Changes in Equity 80

Statement of Cash Flows 83

Sources and Uses of Cash 83

Operating, Investing, and Financing Activities 86

Operating Cash Flows—Indirect Method 94

Notes to Financial Statements 102

Notes to Financial Statements 102

Risks and Uncertainties 108

Subsequent Events 113

Evaluating Financial Statements 116

Ratios—Liquidity/Solvency and Operational 116

Ratios—Profitability and Equity 120

Consolidated Financial Statements 123

Introduction to Consolidated Financial Statements 123

Consolidating Process 127

Consolidation at Acquisition 127

Consolidation Subsequent to Acquisition 134

Consolidation Less than 100% Ownership 139

Intercompany (I/C) Transactions and Balances 144

Intercompany I/C Transactions and Balances—Introduction 144

Intercompany (I/C) Inventory Transactions 147

Intercompany (I/C) Fixed Asset Transactions 156

Intercompany (I/C) Bond Transactions 167

IFRS—Consolidations 175

Combined Financial Statements 180

Variable Interest Entities (VIEs) 182

Exit or Disposal Activities and Discontinued Operations 184

Public Company Reporting Topics (SEC, EPS, Interim, and Segment) 189

U.S. Securities and Exchange Commission (SEC) 189

SEC—Role and Standard-Setting Process 189

SEC Reporting Requirements 192

Earnings per Share 197

Introduction to Earnings per Share 197

Basic Earnings per Share 201

Diluted Earnings per Share 205

Earnings per Share and IFRS 215

Segment Reporting 216

Interim Financial Reporting 221

Interim Reporting Principles 221

Interim Reporting—Details and IFRS 225

Special Purpose Frameworks 230

Cash, Modified Cash, Income Tax 230

Private Company Council 234

Select Financial Statement Accounts 239

Cash and Cash Equivalents 240

Cash 240

Bank Reconciliations 243

Receivables 246

Accounts Receivable—Accounting and Reporting 246

Uncollectible—Direct Write-Off and Allowance 249

Allowance—Income Statement and Balance Sheet Approach 251

Notes Receivable 255

Criteria for Sale of Receivables 259

Factoring, Assignment, and Pledging 262

Notes Receivable—Impairment 265

Inventory 267

Introduction to Inventory 267

Periodic Inventory System and Cost-Flow Assumption 271

Perpetual Inventory System and Cost-Flow Assumption 278

Evaluation of FIFO and LIFO 282

Dollar-Value LIFO 285

Subsequent Measurement of Inventory 289

Gross Margin and Relative Sales Value Method 293

Retail Inventory Method 296

Dollar-Value LIFO Retail 300

Inventory Errors 302

Losses on Purchase Commitments 304

Inventory and IFRS 306

Property, Plant, and Equipment 308

Categories and Presentation 308

Capitalized Costs 309

Valuation 311

Interest Capitalization Basics 314

Interest Capitalization Limits 317

Post-Acquisition Expenditures 322

Non-Accelerated Depreciation Methods 324

Accelerated Depreciation Methods 327

Natural Resources 331

Impairment—Assets for Use and Held-for-Sale 335

Impairment and IFRS 339

PPE and IFRS 341

Nonmonetary Exchange 344

Commercial Substance 344

No Commercial Substance 348

Nonmonetary Exchanges and IFRS 351

Investments 352

Introduction—Equity and Debt Investments 352

Investments in Equity Securities 357

Equity Investments at Fair Value 357

Equity Investments at Cost 361

Equity Investments Using Equity Method Accounting 365

Investments in Debt Securities 373

Debt Investments at Fair Value 373

Debt Investments at Amortized Costs 382

Investor Stock Dividends, Splits, and Rights 386

Comparison and Transfers of Investments 389

IFRS—Investments in Equity and Debt Securities 397

Intangible Assets—Goodwill and Other 402

Introduction to Intangible Assets 402

Goodwill 407

Research and Development Costs 414

Software Costs 417

Intangibles and IFRS 421

Payables and Accrued Liabilities 424

Current Liabilities 424

Specific Current Liabilities 428

Costs and Expenses 431

Compensated Absences 435

Contingencies, Commitments, and Guarantees (Provisions) 437

Contingent Liability Principles 437

Examples of Contingent Liabilities and Additional Aspects 440

IFRS—Contingencies 443

Long-Term Debt (Financial Liabilities) 445

Notes Payable 445

Bonds Payable 451

Bond Accounting Principles 451

Bond Complications 455

Bond Fair Value Option, International 458

Modification and Debt Retirement 461

Refinancing Short-Term Obligations 461

Debt Retirement 463

Troubled Debt 465

Debt Covenant Compliance 472

Distinguishing Liabilities from Equity 477

Equity 481

Owners’ Equity Basics 481

Stock Issuance 490

Preferred Stock 495

Treasury Stock 498

Dividends 503

Stock Dividends and Splits 507

Dividend Allocation 510

Stock Rights, Retained Earnings 514

Book Value per Share 518

Select Transactions 521

Revenue Recognition 521

Five Steps of Revenue Recognition 521

Determining Transaction Price 527

Allocating Transaction Price 532

Special Issues in Revenue Recognition 535

Contract Modifications and Other Considerations 541

Accounting for Construction Contracts 549

Employee/Retiree Benefit Plans 556

Pension Principles, Reporting 556

Pension Expense Basics 561

Pension Expense, Delayed Recognition 564

Pension Plan Reporting, International 573

Postretirement Benefits 576

Share-Based Payments 582

Stock Options 582

Stock Awards 589

Stock Appreciation Rights 593

Income Taxes 596

Income Tax Basics 596

Permanent Differences 599

Temporary Differences 601

Tax Accrual Entry 607

Tax Allocation Process 611

Valuation Allowance for Deferred Tax Assets 615

Uncertain Tax Positions 618

Net Operating Losses 621

Accounting Changes and Error Corrections 628

Types of Changes and Accounting Approaches 628

Retrospective Application 632

Prospective Application 635

Accounting Errors—Restatement 638

Business Combinations 642

Introduction to Business Combinations 642

Acquisition Method of Accounting 646

Introduction to the Acquisition Method of Accounting 646

Determining the Cost of the Business Acquired 650

Recognizing/Measuring Assets, Liabilities, and Noncontrolling Interest 654

Recognizing/Measuring Goodwill or Bargain Purchase Amount 659

Post-Acquisition Issues 662

Disclosure Requirements—Acquisition Method 666

Recording Business Combinations 668

IFRS—Business Combinations 679

Financial Instruments 682

Financial Instruments Introduction 682

IFRS—Financial Instruments 685

Financial Instruments Disclosures 690

Derivatives and Hedging 693

Derivatives Introduction 693

Hedging Introduction 698

Fair Value Hedges 703

Cash-Flow Hedges 706

Foreign Currency Hedges 711

Effectiveness and Disclosure 713

IFRS—Hedging 717

Foreign Currency Denominated Transactions 720

Introduction and Definitions 720

Import Transactions 725

Export Transactions 728

Foreign Currency Hedges 731

Introduction to Forward and Option Contracts 731

Natural (Economic) Hedge 736

Hedging Forecasted Transactions and Firm Commitment 740

Hedging Asset/Liability, Available for Sale, and Foreign Operations 744

Speculation and Summary 747

Conversion of Foreign Financial Statements 749

Introduction to Conversion of Foreign Financial Statements 749

Conversion Using Translation 751

Conversion Using Remeasurement 754

Remeasurement, Translation, and IFRS 758

Leases 760

Background, Operating Leases 760

Capital Lease Basics 763

Direct Financing Leases 768

Sales-Type Leases, International 772

Additional Aspects of Capital Leases 777

Depreciation, BPO, and Residuals 779

Capital Lease Examples 783

Sale Leasebacks and Disclosures 794

Not-for-Profit Organizations 800

Introduction to Types of Not-for-Profit Entities and Standard Setting 800

Financial Reporting 802

Donations, Pledges, Contributions, and Net Assets 810

Special Issues—Recent Developments 817

Special Industries: Healthcare and Colleges 821

Healthcare Organizations 821

Colleges and Universities 827

State and Local Governments 831

State and Local Government Concepts 832

Introduction to Governmental Organizations 832

GASB Concepts Statements 835

Fund Accounting 841

Measurement Focus Basis of Accounting 847

Budgetary Accounting 852

Encumbrance Accounting 855

Deferred Outflows and Deferred Inflows of Resources 860

Net Position and Fund Balance 865

Governmental Funds 869

Proprietary Funds 886

Fiduciary Funds 891

Format and Content of Comprehensive Annual Financial Report (CAFR) 911

The Comprehensive Annual Financial Report 911

Determining the Financial Reporting Entity 926

Major Funds and Fund-Level Reporting 930

Deriving Government-Wide Financial Statements from Fund-Level Financial Statements 932

Typical Items and Specific Types of Transactions and Events 938

Interfund Transactions, Construction Projects, and Infrastructure 938

Long-Term Liabilities Other Than Bonded Debt 944

Terminology and Nonexchange Transactions 948

Special Items—Recent Developments 958

Index 965