Intermediate Accounting

Front Cover......Page 1
Title Page......Page 2
Copyright......Page 3
Contents......Page 28
PART 1 Financial Reporting: Concepts, Financial Statements, and Related Disclosures......Page 36
1 The Environment of Financial Reporting......Page 37
ACCOUNTING INFORMATION: USERS, USES, AND GAAP......Page 40
THE ESTABLISHMENT OF ACCOUNTING STANDARDS......Page 45
ETHICS IN THE ACCOUNTING ENVIRONMENT......Page 57
CREATIVE AND CRITICAL THINKING IN THE ACCOUNTING ENVIRONMENT......Page 59
APPENDIX: CONVERGENCE OF FASB AND IASB ACCOUNTING STANDARDS......Page 61
KEY FASB INITIATIVES......Page 62
THE SEC AND FUTURE ACCOUNTING STANDARDS......Page 64
2 Financial Reporting: Its Conceptual Framework......Page 71
FASB CONCEPTUAL FRAMEWORK......Page 73
OBJECTIVES OF FINANCIAL REPORTING......Page 75
TYPES OF USEFUL INFORMATION......Page 78
QUALITATIVE CHARACTERISTICS OF USEFUL ACCOUNTING INFORMATION......Page 81
ACCOUNTING ASSUMPTIONS AND PRINCIPLES......Page 86
GAAP AND FINANCIAL STATEMENTS......Page 92
IASB FRAMEWORK......Page 96
OVERVIEW......Page 97
PHASE ONE: OBJECTIVE AND QUALITATIVE CHARACTERISTICS......Page 98
3 Review of a Company's Accounting System......Page 109
THE ACCOUNTING SYSTEM......Page 111
THE ACCOUNTING CYCLE......Page 115
WORKSHEET (SPREADSHEET)......Page 133
REVERSING ENTRIES......Page 135
SUBSIDIARY LEDGERS......Page 137
SPECIAL JOURNALS......Page 138
COMPUTER SOFTWARE......Page 139
APPENDIX: CASH-BASIS ACCOUNTING......Page 140
4 The Balance Sheet and the Statement of Changes in Stockholders’ Equity......Page 161
INTERRELATIONSHIP OF FINANCIAL STATEMENTS......Page 163
PURPOSES OF THE BALANCE SHEET......Page 164
ELEMENTS OF THE BALANCE SHEET......Page 166
MEASUREMENT (VALUATION) OF THE ELEMENTS OF A BALANCE SHEET......Page 168
REPORTING CLASSIFICATIONS ON THE BALANCE SHEET......Page 172
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY......Page 185
OTHER DISCLOSURE ISSUES......Page 186
REPORTING TECHNIQUES......Page 193
INTERNATIONAL BALANCE SHEET......Page 194
ILLUSTRATIVE FINANCIAL STATEMENTS......Page 195
5 The Income Statement and the Statement of Cash Flows......Page 215
CONCEPTS OF INCOME......Page 217
PURPOSES OF THE INCOME STATEMENT......Page 219
CONCEPTUAL REPORTING GUIDELINES......Page 220
ELEMENTS OF THE INCOME STATEMENT......Page 224
INCOME STATEMENT CONTENT......Page 228
INCOME STATEMENT: INCOME FROM CONTINUING OPERATIONS......Page 230
INCOME STATEMENT: RESULTS FROM DISCONTINUED OPERATIONS......Page 236
INCOME STATEMENT: EXTRAORDINARY ITEMS......Page 242
INCOME STATEMENT: EARNINGS PER SHARE......Page 245
INCOME STATEMENT: RELATED ISSUES......Page 248
INTERNATIONAL INCOME STATEMENT......Page 250
STATEMENT OF RETAINED EARNINGS......Page 251
COMPREHENSIVE INCOME......Page 254
STATEMENT OF CASH FLOWS......Page 257
SUMMARY OF DISCLOSURES......Page 261
6 Additional Aspects of Financial Reporting and Financial Analysis......Page 289
MARKET EFFICIENCY......Page 291
AUDITOR'S REPORT (OPINION)......Page 292
AUDIT COMMITTEE AND MANAGEMENT'S REPORT......Page 296
SEGMENT REPORTING......Page 298
INTERIM FINANCIAL REPORTS......Page 303
SEC REPORTS......Page 308
INTERCOMPANY COMPARISONS......Page 310
PERCENTAGE ANALYSES......Page 311
RATIO ANALYSIS......Page 313
Time Value of Money Module......Page 348
SIMPLE INTEREST AND COMPOUND INTEREST......Page 349
FUTURE VALUE OF A SINGLE SUM AT COMPOUND INTEREST......Page 350
PRESENT VALUE OF A SINGLE SUM......Page 354
MEASUREMENTS INVOLVING AN ANNUITY......Page 356
FUTURE VALUE OF AN ORDINARY ANNUITY......Page 357
FUTURE VALUE OF AN ANNUITY DUE......Page 360
PRESENT VALUE OF AN ORDINARY ANNUITY......Page 361
PRESENT VALUE OF AN ANNUITY DUE......Page 365
PRESENT VALUE OF A DEFERRED ORDINARY ANNUITY......Page 367
CONCEPTUAL EVALUATION OF PRESENT VALUE TECHNIQUES IN FINANCIAL REPORTING......Page 370
PART 2 Financial Reporting: Asset Valuation and Income Measurement......Page 388
7 Cash and Receivables......Page 389
CASH......Page 391
RECEIVABLES......Page 394
REVENUE RECOGNITION AND VALUATION OF TRADE RECEIVABLES......Page 395
ACCOUNTS RECEIVABLE......Page 397
VALUATION OF UNCOLLECTIBLE ACCOUNTS RECEIVABLE......Page 400
GENERATING IMMEDIATE CASH FROM ACCOUNTS RECEIVABLE......Page 407
NOTES RECEIVABLE......Page 412
FINANCIAL STATEMENT DISCLOSURES OF RECEIVABLES......Page 416
PETTY CASH......Page 417
BANK RECONCILIATION......Page 418
8 Inventories: Cost Measurement and Flow Assumptions......Page 443
CLASSIFICATIONS OF INVENTORY......Page 445
ALTERNATIVE INVENTORY SYSTEMS......Page 447
ITEMS TO BE INCLUDED IN INVENTORY QUANTITIES......Page 448
DETERMINATION OF INVENTORY COSTS......Page 449
COST FLOW ASSUMPTIONS......Page 452
CONCEPTUAL EVALUATION OF INVENTORY COST FLOW ASSUMPTIONS......Page 459
DOLLAR-VALUE LIFO......Page 465
ADDITIONAL LIFO CONSIDERATIONS......Page 471
DISCLOSURE OF INVENTORY VALUES AND METHODS......Page 473
APPENDIX: FOREIGN CURRENCY TRANSACTIONS INVOLVING INVENTORY......Page 476
9 Inventories: Special Valuation Issues......Page 497
LOWER OF COST OR MARKET......Page 499
CONCEPTUAL EVALUATION OF LOWER OF COST OR MARKET......Page 506
PURCHASE OBLIGATIONS AND PRODUCT FINANCING ARRANGEMENTS......Page 508
VALUATION ABOVE COST......Page 509
GROSS PROFIT METHOD......Page 511
RETAIL INVENTORY METHOD......Page 513
CONCEPTUAL EVALUATION OF THE RETAIL INVENTORY METHOD......Page 519
DOLLAR-VALUE LIFO RETAIL METHOD......Page 522
EFFECTS OF INVENTORY ERRORS......Page 524
SUMMARY OF INVENTORY ISSUES......Page 526
10 Property, Plant, and Equipment: Acquisition and Disposal......Page 543
CHARACTERISTICS OF PROPERTY, PLANT, AND EQUIPMENT......Page 545
ACQUISITION OF PROPERTY, PLANT, AND EQUIPMENT......Page 546
NONMONETARY ASSET EXCHANGES......Page 551
SELF-CONSTRUCTION......Page 554
COSTS AFTER ACQUISITION......Page 560
DISPOSAL OF PROPERTY, PLANT, AND EQUIPMENT......Page 562
DISCLOSURE OF PROPERTY, PLANT, AND EQUIPMENT......Page 565
APPENDIX: OIL AND GAS PROPERTIES......Page 567
11 Depreciation and Depletion......Page 587
FACTORS INVOLVED IN DEPRECIATION......Page 589
METHODS OF COST ALLOCATION......Page 590
RECORDING DEPRECIATION......Page 594
CONCEPTUAL EVALUATION OF DEPRECIATION METHODS......Page 595
DISCLOSURE OF DEPRECIATION......Page 598
ADDITIONAL DEPRECIATION METHODS......Page 600
DEPRECIATION FOR PARTIAL PERIODS......Page 603
IMPAIRMENT OF PROPERTY, PLANT, AND EQUIPMENT......Page 605
DEPRECIATION AND INCOME TAXES......Page 609
CHANGES AND CORRECTIONS OF DEPRECIATION......Page 612
DEPLETION......Page 613
12 Intangibles......Page 633
ACCOUNTING FOR INTANGIBLES......Page 635
RESEARCH AND DEVELOPMENT COSTS......Page 638
IDENTIFIABLE INTANGIBLE ASSETS......Page 642
UNIDENTIFIABLE INTANGIBLES......Page 647
DISCLOSURES FOR INTANGIBLE ASSETS......Page 651
CONCEPTUAL EVALUATION OF ACCOUNTING FOR INTANGIBLES......Page 653
PART 3 Financial Reporting: Valuation of Liabilities and Investments......Page 672
13 Current Liabilities and Contingencies......Page 673
CONCEPTUAL OVERVIEW OF LIABILITIES......Page 675
NATURE AND DEFINITION OF CURRENT LIABILITIES......Page 676
CURRENT LIABILITIES HAVING A CONTRACTUAL AMOUNT......Page 678
CURRENT LIABILITIES WHOSE AMOUNTS DEPEND ON OPERATIONS......Page 686
CURRENT LIABILITIES REQUIRING AMOUNTS TO BE ESTIMATED......Page 691
CONTINGENCIES......Page 697
OTHER LIABILITY CLASSIFICATION ISSUES......Page 703
FINANCIAL STATEMENT PRESENTATION OF CURRENT LIABILITIES......Page 706
14 Long-Term Liabilities and Receivables......Page 725
BONDS PAYABLE......Page 727
RECORDING THE ISSUANCE OF BONDS......Page 730
AMORTIZING DISCOUNTS AND PREMIUMS......Page 732
EXTINGUISHMENT OF LIABILITIES......Page 740
BONDS WITH EQUITY CHARACTERISTICS......Page 742
LONG-TERM NOTES PAYABLE......Page 749
LONG-TERM NOTES RECEIVABLE......Page 754
ACCOUNTING BY THE DEBTOR......Page 763
ACCOUNTING BY THE CREDITOR......Page 766
APPENDIX 2: SERIAL BONDS......Page 769
RECORDING THE ISSUANCE AND INTEREST EXPENSE OF SERIAL BONDS......Page 770
EARLY REDEMPTION OF SERIAL BONDS......Page 772
15 Investments......Page 791
INVESTMENTS: CLASSIFICATION AND VALUATION......Page 793
INVESTMENTS IN AVAILABLE-FOR-SALE DEBT AND EQUITY SECURITIES......Page 795
INVESTMENTS IN HELD-TO-MATURITY DEBT SECURITIES......Page 801
TRANSFERS AND IMPAIRMENTS......Page 807
DISCLOSURES......Page 810
CONCEPTUAL EVALUATION......Page 812
EQUITY METHOD......Page 815
ADDITIONAL ISSUES FOR INVESTMENTS......Page 822
APPENDIX: DERIVATIVES OF FINANCIAL INSTRUMENTS......Page 825
FAIR VALUE HEDGE......Page 826
CASH FLOW HEDGE......Page 830
PART 4 Financial Reporting: Stockholders' Equity......Page 850
16 Contributed Capital......Page 851
CORPORATE FORM OF ORGANIZATION......Page 853
CORPORATE CAPITAL STRUCTURE......Page 855
STOCKHOLDERS' EQUITY......Page 858
ISSUANCE OF CAPITAL STOCK......Page 859
NONCOMPENSATORY SHARE PURCHASE PLANS......Page 866
COMPENSATORY SHARE OPTION PLANS......Page 867
PREFERRED STOCK CHARACTERISTICS......Page 880
CONTRIBUTED CAPITAL SECTION......Page 886
TREASURY STOCK (CAPITAL STOCK REACQUISITION)......Page 888
CAPITAL STOCK TRANSACTIONS AND THE STATEMENT OF CASH FLOWS......Page 893
17 Earnings per Share and Retained Earnings......Page 913
OVERVIEW AND USES OF EARNINGS PER SHARE INFORMATION......Page 915
BASIC EARNINGS PER SHARE......Page 916
DILUTED EARNINGS PER SHARE......Page 919
ADDITIONAL CONSIDERATIONS......Page 925
EPS DISCLOSURE ILLUSTRATION......Page 927
CONTENT OF RETAINED EARNINGS......Page 929
DIVIDENDS......Page 930
PRIOR PERIOD ADJUSTMENTS (RESTATEMENTS)......Page 940
STATEMENT OF RETAINED EARNINGS......Page 941
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY......Page 943
PART 5 Financial Reporting: Special Topics......Page 972
18 Income Recognition and Measurement of Net Assets......Page 973
OVERVIEW OF REVENUE RECOGNITION ALTERNATIVES......Page 975
EXAMPLES OF REVENUE RECOGNITION ALTERNATIVES......Page 976
CONCEPTUAL ISSUES......Page 980
ALTERNATIVE REVENUE RECOGNITION METHODS......Page 981
REVENUE RECOGNITION PRIOR TO THE PERIOD OF SALE......Page 983
REPORTING AND DISCLOSING LONG-TERM CONSTRUCTION CONTRACTS......Page 993
REVENUE RECOGNITION AFTER THE PERIOD OF SALE......Page 997
REVENUE RECOGNITION DELAYED UNTIL A FUTURE EVENT OCCURS......Page 1003
ADDITIONAL ISSUES......Page 1005
SOFTWARE REVENUE RECOGNITION......Page 1006
FRANCHISES......Page 1008
REAL ESTATE SALES......Page 1010
RETAIL LAND SALES......Page 1011
CONSIGNMENT SALES......Page 1012
19 Accounting for Income Taxes......Page 1031
OVERVIEW AND DEFINITIONS......Page 1033
INTERPERIOD INCOME TAX ALLOCATION: BASIC ISSUES......Page 1034
INTERPERIOD INCOME TAX ALLOCATION: CONCEPTUAL ISSUES......Page 1037
INTERPERIOD INCOME TAX ALLOCATION: RECORDING AND REPORTING OF CURRENT AND DEFERRED TAXES......Page 1042
OPERATING LOSS CARRYBACKS AND CARRYFORWARDS......Page 1050
COMPREHENSIVE ILLUSTRATION......Page 1055
INTRAPERIOD INCOME TAX ALLOCATION......Page 1058
FINANCIAL STATEMENT PRESENTATION AND DISCLOSURES......Page 1061
MISCELLANEOUS ISSUES......Page 1063
ILLUSTRATIVE DISCLOSURES......Page 1067
20 Accounting for Postemployment Benefits......Page 1085
CHARACTERISTICS OF PENSION PLANS......Page 1088
HISTORICAL PERSPECTIVE OF PENSION PLANS......Page 1089
ACCOUNTING PRINCIPLES FOR DEFINED BENEFIT PENSION PLANS......Page 1090
EXAMPLES OF ACCOUNTING FOR PENSIONS......Page 1099
CONCEPTUAL ISSUES RELATED TO DEFINED BENEFIT PENSION PLANS......Page 1118
ADDITIONAL ASPECTS OF PENSION ACCOUNTING......Page 1121
OTHER POSTEMPLOYMENT BENEFITS......Page 1125
EXAMPLE: ACCOUNTING FOR OPEBS......Page 1130
CONCEPTUAL EVALUATION OF ACCOUNTING FOR OPEBS......Page 1131
APPENDIX: EXAMPLE OF PRESENT VALUE CALCULATIONS FOR DEFINED BENEFIT PENSION PLANS......Page 1134
SERVICE COST......Page 1135
INTEREST ON PROJECTED BENEFIT OBLIGATION......Page 1136
EXPECTED RETURN ON PLAN ASSETS......Page 1137
AMORTIZATION OF PRIOR SERVICE COST......Page 1138
JOURNAL ENTRIES......Page 1140
21 Accounting for Leases......Page 1157
ADVANTAGES OF LEASING......Page 1160
CLASSIFICATION OF LEASES......Page 1162
ACCOUNTING AND REPORTING BY A LESSEE......Page 1167
ACCOUNTING AND REPORTING BY A LESSOR......Page 1177
ADDITIONAL LEASE ISSUES......Page 1191
LEASE ISSUES RELATED TO REAL ESTATE......Page 1194
SALE-LEASEBACK ISSUES......Page 1197
CHANGES IN LEASE PROVISIONS......Page 1200
22 The Statement of Cash Flows......Page 1219
CONCEPTUAL OVERVIEW AND REPORTING GUIDELINES......Page 1221
CASH INFLOWS AND OUTFLOWS......Page 1225
NET CASH FLOW FROM OPERATING ACTIVITIES......Page 1228
INFORMATION FOR PREPARATION OF STATEMENT......Page 1232
VISUAL INSPECTION METHOD OF ANALYSIS......Page 1233
WORKSHEET (SPREADSHEET) METHOD OF ANALYSIS......Page 1237
SPECIAL TOPICS......Page 1246
APPENDIX: DIRECT METHOD FOR REPORTING OPERATING CASH FLOWS......Page 1256
OPERATING CASH FLOWS......Page 1257
PROCEDURES FOR STATEMENT PREPARATION......Page 1260
EXAMPLE:WORKSHEET (SPREADSHEET) AND DIRECT METHOD......Page 1264
23 Accounting for Changes and Errors......Page 1293
METHODS OF REPORTING AN ACCOUNTING CHANGE......Page 1295
ACCOUNTING FOR A CHANGE IN ACCOUNTING PRINCIPLE......Page 1296
ACCOUNTING FOR A CHANGE IN AN ESTIMATE......Page 1301
ADDITIONAL ISSUES......Page 1302
CONCEPTUAL EVALUATION OF ACCOUNTING FOR A CHANGE IN ACCOUNTING PRINCIPLE AND A CHANGE IN ESTIMATE......Page 1306
ACCOUNTING FOR A CHANGE IN A REPORTING ENTITY......Page 1307
ACCOUNTING FOR A CORRECTION OF AN ERROR......Page 1308
SUMMARY OF EFFECTS ON FINANCIAL STATEMENTS......Page 1319
Appendix A: The Coca-Cola Company 2007 Financial Statements and Supplementary Data......Page 1336
Appendix B: List of the Official Pronouncements of the AICPA and FASB......Page 1404
Appendix C: List of the Official Pronouncements of the IASB......Page 1414
Appendix D: Brief Guide to Key IFRS vs U.S. GAAP Differences by Chapter......Page 1418
Index......Page 1424