Intermediate Accounting (Loose Leaf, 17)

1 Financial Accounting and Accounting Standards 1-1

Exciting Times 1-2

Financial Reporting Environment 1-3

Parties Involved in Standard-Setting 1-7

Generally Accepted Accounting Principles 1-12

Major Challenges in Financial Reporting 1-14

FAS B Codification and Exercises 1-28

IFRS Insights 1-28

2 Conceptual Framework for Financial Reporting 2-1

What Is It? 2-1

Conceptual Framework 2-3

Fundamental Concepts 2-6

Assumptions 2-14

Measurement, Recognition, and Disclosure Concepts 2-16

FAS B Codification and Exercises 2-37

IFRS Insights 2-38

3 The Accounting Information System 3-1

Needed: A Reliable Information System 3-2

Accounting Information System 3-3

Record and Summarize Basic Transactions 3-9

Adjusting Entries 3-19

Preparing Financial Statements 3-30

Financial Statements for a Merchandising Company 3-35

Appendix 3A: Cash-Basis Accounting versus Accrual-Basis Accounting 3-38

Conversion from Cash Basis to Accrual Basis 3-40

Theoretical Weaknesses of the Cash Basis 3-43

Appendix 3B: Using Reversing Entries 3-43

Illustration of Reversing Entries—Accruals 3-43

Illustration of Reversing Entries—Deferrals 3-44

Summary of Reversing Entries 3-45

Appendix 3C: Using a Worksheet: The Accounting Cycle Revisited 3-46

Worksheet Columns 3-46

Adjustments Entered on the Worksheet 3-48

Preparing Financial Statements from a Worksheet 3-49

Analytics in Action 3-73

FAS B Codification and Exercises 3-73

IFRS Insights 3-73

4 Income Statement and Related Information 4-1

Financial Statements Are Changing 4-2

Income Statement 4-3

Content and Format of the Income Statement 4-6

Reporting Various Income Items 4-11

Accounting Changes and Errors 4-18

Related Stockholders’ Equity Statements 4-21

FAS B Codification and Exercises 4-42

IFRS Insights 4-43

5 Balance Sheet and Statement of Cash Flows 5-1

Hey, It Doesn’t Balance! 5-1

Balance Sheet 5-3

Preparation of the Balance Sheet 5-15

Statement of Cash Flows 5-16

Additional Information 5-24

Appendix 5A: Ratio Analysis—A Reference 5-30

Using Ratios to Analyze Performance 5-30

Analytics in Action 5-57

FAS B Codification and Exercises 5-58

IFRS Insights 5-58

6 Accounting and the Time Value of Money 6-1

How Do I Measure That? 6-1

Basic Time Value Concepts 6-3

Single-Sum Problems 6-8

Annuities (Future Value) 6-13

Annuities (Present Value) 6-20

Other Time Value of Money Issues 6-24

Analytics in Action 6-45

FAS B Codification and Exercises 6-45

7 Cash and Receivables 7-1

Is Your Cash Trapped? 7-1

Cash 7-3

Receivables 7-7

Valuation of Accounts Receivable 7-11

Notes Receivable 7-17

Other Issues 7-21

Appendix 7A: Cash Controls 7-30

Using Bank Accounts 7-31

The Imprest Petty Cash System 7-31

Physical Protection of Cash Balances 7-32

Reconciliation of Bank Balances 7-33

Appendix 7B: Collectibility Assessment Based on Expected Cash Flows 7-35

Measurement of Collectibility 7-36

Analytics in Action 7-62

FAS B Codification and Exercises 7-62

IFRS Insights 7-63

8 Valuation of Inventories: A Cost-Basis Approach 8-1

To Switch or Not to Switch 8-2

Inventory Issues 8-3

Goods and Costs Included in Inventory 8-7

Which Cost Flow Assumption to Adopt? 8-12

Special Issues Related to LIFO 8-16

Effect of Inventory Errors 8-29

FAS B Codification and Exercises 8-56

9 Inventories: Additional Valuation Issues 9-1

Not What It Seems to Be 9-2

Lower-of-Cost-or-Net Realizable Value 9-3

Lower-of-Cost-or-Market 9-7

Other Valuation Approaches 9-11

The Gross Profit Method of Estimating Inventory 9-15

Retail Inventory Method 9-18

Presentation and Analysis 9-24

Appendix 9A: LIFO Retail Methods 9-26

Stable Prices—LIFO Retail Method 9-26

Fluctuating Prices—Dollar-Value LIFO Retail Method 9-27

Subsequent Adjustments Under Dollar-Value LIFO Retail 9-29

Changing from Conventional Retail to LIFO 9-29

Analytics in Action 9-53

FAS B Codification and Exercises 9-53

IFRS Insights 9-54

10 Acquisition and Disposition of Property, Plant, and Equipment 10-1

Watch Your Spending 10-2

Property, Plant, and Equipment 10-3

Interest Costs During Construction 10-6

Valuation of Property, Plant, and Equipment 10-12

Costs Subsequent to Acquisition 10-20

Disposition of Property, Plant, and Equipment 10-24

Appendix 10A: Accounting for Contributions 10-25

Conditional Contribution 10-26

Unconditional Contribution 10-27

Exchange Transactions 10-27

FAS B Codification and Exercises 10-52

11 Depreciation, Impairments, and Depletion 11-1

Here Come the Write-Offs 11-2

Depreciation—A Method of Cost Allocation 11-3

Special Depreciation Methods and Other Issues 11-9

Impairments 11-14

Depletion 11-17

Presentation and Analysis 11-22

Appendix 11A: Income Tax Depreciation 11-25

Modified Accelerated Cost Recovery System 11-25

Optional Straight-Line Method 11-27

Tax versus Book Depreciation 11-27

Analytics in Action 11-49

FAS B Codification and Exercises 11-49

IFRS Insights 11-50

12 Intangible Assets 12-1

Is This Sustainable? 12-1

Intangible Asset Issues 12-3

Types of Intangible Assets 12-6

Impairment and Presentation of Intangible Assets 12-14

Research and Development Costs 12-19

Analytics in Action 12-42

FAS B Codification and Exercises 12-42

IFRS Insights 12-43

13 Current Liabilities and Contingencies 13-1

Now You See It, Now You Don’t 13-2

Current Liabilities 13-3

Short-Term Obligations Expected to Be Refinanced 13-15

Contingencies 13-17

Presentation and Analysis 13-28

Analytics in Action 13-53

FAS B Codification and Exercises 13-53

IFRS Insights 13-54

14 Long-Term Liabilities 14-1

Going Long 14-1

Bonds Payable 14-3

Extinguishment of Debt 14-13

Long-Term Notes Payable 14-14

Reporting and Analyzing Liabilities 14-20

Appendix 14A: Troubled-Debt Restructuring 14-26

Settlement of Debt 14-27

Modification of Terms 14-28

Concluding Remarks 14-33

FAS B Codification and Exercises 14-51

IFRS Insights 14-52

15 Stockholders’ Equity 15-1

It’s a Global Market 15-1

Corporate Capital 15-3

Reacquisition of Shares 15-12

Dividend Policy 15-17

Presentation and Analysis of Stockholders’ Equity 15-25

Appendix 15A: Dividend Preferences and Book Value per Share 15-29

Dividend Preferences 15-29

Book Value per Share 15-30

Analytics in Action 15-51

FAS B Codification and Exercises 15-52

IFRS Insights 15-52

16 Dilutive Securities and Earnings per Share 16-1

Kicking the Habit 16-1

Dilutive Securities 16-3

Stock Warrants 16-6

Stock Compensation Plans 16-10

Basic Earnings per Share 16-18

Diluted Earnings per Share 16-22

Appendix 16A: Accounting for Stock-Appreciation Rights 16-30

SARs—Share-Based Equity Awards 16-31

SARs—Share-Based Liability Awards 16-31

Stock-Appreciation Rights Example 16-32

Appendix 16B: Comprehensive Earnings per Share Example 16-33

Diluted Earnings per Share 16-34

FAS B Codification and Exercises 16-57

IFRS Insights 16-58

17 Investments 17-1

Winners and Losers 17-1

Investments in Debt Securities 17-2

Investments in Equity Securities 17-11

Other Financial Reporting Issues 17-17

Appendix 17A: Accounting for Derivative Instruments 17-26

Defining Derivatives 17-27

Who Uses Derivatives, and Why? 17-27

Basic Principles in Accounting for Derivatives 17-29

Derivatives Used for Hedging 17-32

Other Reporting Issues 17-37

Comprehensive Hedge Accounting Example 17-40

Controversy and Concluding Remarks 17-43

Appendix 17B: Fair Value Disclosures 17-43

Disclosure of Fair Value Information: Financial Instruments 17-44

Disclosure of Fair Values: Impaired Assets or Liabilities 17-46

Conclusion 17-47

FAS B Codification and Exercises 17-70

IFRS Insights 17-71

18 Revenue Recognition 18-1

It’s Back 18-1

The Five-Step Process Revisited 18-9

Accounting for Revenue Recognition Issues 18-19

Presentation and Disclosure 18-30

Appendix 18A: Long-Term Construction Contracts 18-36

Revenue Recognition over Time 18-36

Appendix 18B: Revenue Recognition for Franchises 18-46

Franchise Accounting 18-47

Recognition of Franchise Rights Revenue over Time 18-49

FAS B Codification and Exercises 18-76

19 Accounting for Income Taxes 19-1

Taxes Are A-Changing 19-1

Additional Considerations 19-12

Accounting for Net Operating Losses 19-18

Financial Statement Presentation 19-23

Appendix 19A: Comprehensive Example of Interperiod Tax Allocation 19-30

First Year—2019 19-30

Second Year—2020 19-34

Appendix 19B: Accounting for Net Operating Loss Carrybacks 19-36

Loss Carryback 19-37

FAS B Codification and Exercises 19-59

IFRS Insights 19-60

20 Accounting for Pensions and Postretirement Benefits 20-1

Where Have All the Pensions Gone? 20-2

Fundamentals of Pension Plan Accounting 20-3

Using a Pension Worksheet 20-11

Prior Service Cost (PSC) 20-13

Gains and Losses 20-17

Reporting Pension Plans in Financial Statements 20-25

Appendix 20A: Accounting for Postretirement Benefits 20-34

Accounting Guidance 20-34

Differences Between Pension Benefits and Healthcare Benefits 20-35

Postretirement Benefits Accounting Provisions 20-36

Illustrative Accounting Entries 20-38

Disclosures in Notes to the Financial Statements 20-41

Actuarial Assumptions and Conceptual Issues 20-43

FAS B Codification and Exercises 20-67

IFRS Insights 20-68

21 Accounting for Leases 21-1

Times Are A-Changing 21-1

The Leasing Environment 21-3

Accounting for Finance Leases 21-11

Accounting for Operating Leases 21-18

Special Lease Accounting Problems 21-22

Appendix 21A: Sale-Leasebacks 21-35

Accounting Issues in Sale-Leaseback Transactions 21-35

Sale-Leaseback Example 21-37

Appendix 21B: Direct Financing Lease (Lessor) 21-39

Direct Finance Lease Accounting 21-39

Direct Financing Lease Example 21-40

Appendix 21C: Comprehensive Examples 21-44

Lease Terms: Scenario 1 21-44

Lease Terms: Scenario 2 21-46

FAS B Codification and Exercises 21-79

IFRS Insights 21-80

22 Accounting Changes and Error Analysis 22-1

In the Dark 22-2

Accounting Changes 22-3

Other Accounting Changes 22-15

Accounting Errors 22-19

Error Analysis 22-24

Appendix 22A: Changing from or to the Equity Method 22-33

Change from the Equity Method 22-33

Change to the Equity Method 22-34

FAS B Codification and Exercises 22-60

IFRS Insights 22-61

23 Statement of Cash Flows 23-1

Show Me the Money! 23-1

Statement of Cash Flows 23-3

Preparing the Statement of Cash Flows 23-6

Special Problems in Statement Preparation 23-24

Use of a Worksheet 23-32

FAS B Codification and Exercises 23-69

IFRS Insights 23-70

24 Full Disclosure in Financial Reporting 24-1

High-Quality Financial Reporting—Always in Fashion 24-2

Full Disclosure Principle 24-3

Disclosure Issues 24-8

Auditor’s and Management’s Reports 24-21

Current Reporting Issues 24-26

Appendix 24A: Basic Financial Statement Analysis 24-32

Perspective on Financial Statement Analysis 24-32

Ratio Analysis 24-33

Comparative Analysis 24-36

Percentage (Common-Size) Analysis 24-37

FAS B Codification and Exercises 24-58

IFRS Insights 24-59

Appendix A Private Company Accounting A-1

The Private Company Council (PCC) A-1

Private Company Alternatives for Intangible Assets and Goodwill A-2

Summary A-6

Appendix B Specimen Financial Statements: The Procter & Gamble Company B-1

Appendix C Specimen Financial Statements: The Coca-Cola Company C-1

Appendix D Specimen Financial Statements: PepsiCo, Inc. D-1

Appendix E Specimen Financial Statements: Marks and Spencer plc E-1

Index I-1