You are previewing Advanced Accounting, 5th Edition.
O'Reilly logo
Advanced Accounting, 5th Edition

Book Description

Building upon previous editions of Advanced Accounting, author Debra C. Jeter continues to deliver a balanced and detailed approach to the conceptual and technical aspects of advanced accounting. This new and enhanced edition features more in-depth information about international accounting, the upcoming globalization of accounting standards, changes with FASB's, and the latest developments and differences between U.S. GAAP and IFRS. As always, the text also includes comprehensive coverage of all three methods of consolidated financial reporting (cost, partial equity, complete equity).

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. ABOUT THE AUTHORS
  5. PREFACE
  6. Contents
  7. 1 INTRODUCTION TO BUSINESS COMBINATIONS AND THE CONCEPTUAL FRAMEWORK
    1. LEARNING OBJECTIVES
    2. PLANNING M&A IN A CHANGING ENVIRONMENT AND UNDER CHANGING ACCOUNTING REQUIREMENTS
    3. NATURE OF THE COMBINATION
    4. BUSINESS COMBINATIONS: WHY? WHY NOT?
    5. BUSINESS COMBINATIONS: HISTORICAL PERSPECTIVE
    6. TERMINOLOGY AND TYPES OF COMBINATIONS
    7. TAKEOVER PREMIUMS
    8. AVOIDING THE PITFALLS BEFORE THE DEAL
    9. DETERMINING PRICE AND METHOD OF PAYMENT IN BUSINESS COMBINATIONS
    10. ALTERNATIVE CONCEPTS OF CONSOLIDATED FINANCIAL STATEMENTS
    11. FASB'S CONCEPTUAL FRAMEWORK
    12. FASB CODIFICATION (SOURCE OF GAAP)
    13. Summary
    14. APPENDIX Evaluating Firm Performance
    15. QUESTIONS
    16. ANALYZING FINANCIAL STATEMENTS
    17. EXERCISES
    18. ASC (Accounting Standards Codification) Exercises
  8. 2 ACCOUNTING FOR BUSINESS COMBINATIONS
    1. LEARNING OBJECTIVES
    2. HISTORICAL PERSPECTIVE ON BUSINESS COMBINATIONS
    3. PRO FORMA STATEMENTS AND DISCLOSURE REQUIREMENT
    4. EXPLANATION AND ILLUSTRATION OF ACQUISITION ACCOUNTING
    5. CONTINGENT CONSIDERATION IN AN ACQUISITION
    6. LEVERAGED BUYOUTS
    7. IFRS VERSUS U.S. GAAP
    8. Summary
    9. APPENDIX A Deferred Taxes in Business Combinations
    10. QUESTIONS
    11. ANALYZING FINANCIAL STATEMENTS
    12. EXERCISES
    13. ASC Exercises
    14. PROBLEMS
  9. 3 CONSOLIDATED FINANCIAL STATEMENTS—DATE OF ACQUISITION
    1. LEARNING OBJECTIVES
    2. DEFINITIONS OF SUBSIDIARY AND CONTROL
    3. REQUIREMENTS FOR THE INCLUSION OF SUBSIDIARIES IN THE CONSOLIDATED FINANCIAL STATEMENTS
    4. REASONS FOR SUBSIDIARY COMPANIES
    5. CONSOLIDATED FINANCIAL STATEMENTS
    6. INVESTMENTS AT THE DATE OF ACQUISITION
    7. CONSOLIDATED BALANCE SHEETS: THE USE OF WORKPAPERS
    8. A COMPREHENSIVE ILLUSTRATION—MORE THAN ONE SUBSIDIARY COMPANY
    9. LIMITATIONS OF CONSOLIDATED STATEMENTS
    10. Summary
    11. APPENDIX A Deferred Taxes on the Date of Acquisition
    12. ACCOUNTING FOR UNCERTAIN TAX POSITIONS
    13. APPENDIX B Consolidation of Variable Interest Entities
    14. QUESTIONS
    15. ANALYZING FINANCIAL STATEMENTS
    16. EXERCISES
    17. ASC Exercises
    18. PROBLEMS
  10. 4 CONSOLIDATED FINANCIAL STATEMENTS AFTER ACQUISITION
    1. LEARNING OBJECTIVES
    2. ACCOUNTING FOR INVESTMENTS BY THE COST, PARTIAL EQUITY, AND COMPLETE EQUITY METHODS
    3. CONSOLIDATED STATEMENTS AFTER ACQUISITION—COST METHOD
    4. RECORDING INVESTMENTS IN SUBSIDIARIES—EQUITY METHOD (PARTIAL OR COMPLETE)
    5. ELIMINATION OF INTERCOMPANY REVENUE AND EXPENSE ITEMS
    6. INTERIM ACQUISITIONS OF SUBSIDIARY STOCK
    7. CONSOLIDATED STATEMENT OF CASH FLOWS
    8. ILLUSTRATION OF PREPARATION OF A CONSOLIDATED STATEMENT OF CASH FLOWS—YEAR OF ACQUISITION
    9. COMPARE U.S. GAAP AND IFRS REGARDING EQUITY METHOD
    10. Summary
    11. APPENDIX A Alternative Workpaper Format
    12. APPENDIX B Deferred Tax Consequences When Affiliates File Separate Income Tax Returns—Undistributed Income
    13. Consolidated Tax Returns—Affiliated Companies (80% or More Ownership Levels)
    14. Separate Tax Returns—Deferred Tax Consequences Arising Because of Undistributed Subsidiary Income
    15. The Cost Method—Separate Tax Returns
    16. Undistributed Income Is Expected to Be Realized When the Subsidiary Is Sold
    17. The Partial and Complete Equity Methods—Separate Tax Returns
    18. QUESTIONS
    19. ANALYZING FINANCIAL STATEMENTS
    20. EXERCISES
    21. ASC Exercises
    22. PROBLEMS
  11. 5 ALLOCATION AND DEPRECIATION OF DIFFERENCES BETWEEN IMPLIED AND BOOK VALUES
    1. LEARNING OBJECTIVES
    2. ALLOCATION OF THE DIFFERENCE BETWEEN IMPLIED AND BOOK VALUES TO ASSETS AND LIABILITIES OF SUBSIDIARY—ACQUISITION DATE
    3. EFFECT OF ALLOCATION AND DEPRECIATION OF DIFFERENCES BETWEEN IMPLIED AND BOOK VALUES ON CONSOLIDATED NET INCOME—YEAR SUBSEQUENT TO ACQUISITION
    4. CONSOLIDATED STATEMENTS WORKPAPER—INVESTMENT RECORDED USING THE COST METHOD
    5. COST METHOD ANALYSIS OF CONTROLLING AND NONCONTROLLING INTERESTS IN CONSOLIDATED NET INCOME AND RETAINED EARNINGS
    6. CONSOLIDATED STATEMENTS WORKPAPER—INVESTMENT RECORDED USING PARTIAL EQUITY METHOD
    7. PARTIAL EQUITY METHOD ANALYSIS OF CONTROLLING AND NONCONTROLLING INTERESTS IN CONSOLIDATED NET INCOME AND RETAINED EARNINGS
    8. CONSOLIDATED STATEMENTS WORKPAPER—INVESTMENT RECORDED USING COMPLETE EQUITY METHOD
    9. COMPLETE EQUITY METHOD ANALYSIS OF CONTROLLING INTEREST IN CONSOLIDATED NET INCOME AND RETAINED EARNINGS
    10. ADDITIONAL CONSIDERATIONS RELATING TO TREATMENT OF DIFFERENCE BETWEEN IMPLIED AND BOOK VALUES
    11. PUSH DOWN ACCOUNTING
    12. IFRS vs U.S. GAAP ON RESEARCH & DEVELOPMENT COSTS
    13. Summary
    14. QUESTIONS
    15. ANALYZING FINANCIAL STATEMENTS
    16. EXERCISES
    17. ASC Exercises
    18. PROBLEMS
  12. 6 ELIMINATION OF UNREALIZED PROFIT ON INTERCOMPANY SALES OF INVENTORY
    1. LEARNING OBJECTIVES
    2. EFFECTS OF INTERCOMPANY SALES OF MERCHANDISE ON THE DETERMINATION OF CONSOLIDATED BALANCES
    3. COST METHOD: CONSOLIDATED STATEMENTS WORKPAPER—UPSTREAM SALES
    4. COST METHOD—ANALYSIS OF CONSOLIDATED NET INCOME AND CONSOLIDATED RETAINED EARNINGS
    5. CONSOLIDATED STATEMENTS WORKPAPER—PARTIAL EQUITY METHOD
    6. PARTIAL EQUITY METHOD—ANALYSIS OF CONSOLIDATED NET INCOME AND CONSOLIDATED RETAINED EARNINGS
    7. CONSOLIDATED STATEMENTS WORKPAPER—COMPLETE EQUITY METHOD
    8. COMPLETE EQUITY METHOD—ANALYSIS OF CONSOLIDATED NET INCOME AND CONSOLIDATED RETAINED EARNINGS
    9. SUMMARY OF WORKPAPER ENTRIES RELATING TO INTERCOMPANY SALES OF INVENTORY
    10. INTERCOMPANY PROFIT PRIOR TO PARENT–SUBSIDIARY AFFILIATION
    11. Summary
    12. APPENDIX Deferred Taxes and Intercompany Sales of Inventory
    13. DEFERRED TAX CONSEQUENCES ARISING BECAUSE OF UNREALIZED INTERCOMPANY PROFIT
    14. INTERCOMPANY SALES OF INVENTORY—COST AND PARTIAL EQUITY METHOD
    15. UNDISTRIBUTED SUBSIDIARY INCOME—IMPACT OF UNREALIZED INTERCOMPANY PROFIT ON THE CALCULATION OF DEFERRED TAXES
    16. QUESTIONS
    17. ANALYZING FINANCIAL STATEMENTS
    18. EXERCISES
    19. ASC Exercises
    20. PROBLEMS
  13. 7 ELIMINATION OF UNREALIZED GAINS OR LOSSES ON INTERCOMPANY SALES OF PROPERTY AND EQUIPMENT
    1. LEARNING OBJECTIVES
    2. INTERCOMPANY SALES OF LAND (NONDEPRECIABLE PROPERTY)
    3. INTERCOMPANY SALES OF DEPRECIABLE PROPERTY (MACHINERY, EQUIPMENT, AND BUILDINGS)
    4. CONSOLIDATED STATEMENTS WORKPAPER—COST AND PARTIAL EQUITY METHODS
    5. CALCULATION OF CONSOLIDATED NET INCOME AND CONSOLIDATED RETAINED EARNINGS
    6. CONSOLIDATED STATEMENTS WORKPAPER—COMPLETE EQUITY METHOD
    7. CALCULATION AND ALLOCATION OF CONSOLIDATED NET INCOME; CONSOLIDATED RETAINED EARNINGS: COMPLETE EQUITY METHOD
    8. SUMMARY OF WORKPAPER ENTRIES RELATING TO INTERCOMPANY SALES OF EQUIPMENT
    9. INTERCOMPANY INTEREST, RENTS, AND SERVICE FEES
    10. Summary
    11. APPENDIX Deferred Tax Consequences Related to Intercompany Sales of Equipment
    12. IMPACT OF UNREALIZED INTERCOMPANY PROFIT ON THE CALCULATION OF DEFERRED TAX CONSEQUENCES RELATED TO UNDISTRIBUTED SUBSIDIARY INCOME
    13. CALCULATIONS (AND ALLOCATION) OF CONSOLIDATED NET INCOME AND CONSOLIDATED RETAINED EARNINGS
    14. QUESTIONS
    15. ANALYZING FINANCIAL STATEMENTS
    16. EXERCISES
    17. ASC Exercises
    18. PROBLEMS
  14. 8 CHANGES IN OWNERSHIP INTEREST
    1. LEARNING OBJECTIVES
    2. PARENT ACQUIRES SUBSIDIARY STOCK THROUGH SEVERAL OPEN-MARKET PURCHASES—COST METHOD
    3. PARENT SELLS SUBSIDIARY STOCK INVESTMENT ON THE OPEN MARKET—COST METHOD
    4. EQUITY METHOD—PURCHASES AND SALES OF SUBSIDIARY STOCK BY THE PARENT
    5. PARENT SELLS SUBSIDIARY STOCK INVESTMENT ON THE OPEN MARKET—COST METHOD
    6. SUBSIDIARY ISSUES STOCK
    7. Summary
    8. QUESTIONS
    9. ANALYZING FINANCIAL STATEMENTS
    10. EXERCISES
    11. ASC Exercises
    12. PROBLEMS
  15. 9 INTERCOMPANY BOND HOLDINGS AND MISCELLANEOUS TOPICS—CONSOLIDATED FINANCIAL STATEMENTS
    1. LEARNING OBJECTIVES
    2. INTERCOMPANY BOND HOLDINGS
    3. ACCOUNTING FOR BONDS—A REVIEW
    4. CONSTRUCTIVE GAIN OR LOSS ON INTERCOMPANY BOND HOLDINGS
    5. ACCOUNTING FOR INTERCOMPANY BONDS ILLUSTRATED
    6. BOOK ENTRY RELATED TO BOND INVESTMENT
    7. INTERIM PURCHASE OF INTERCOMPANY BONDS
    8. NOTES RECEIVABLE DISCOUNTED
    9. STOCK DIVIDENDS ISSUED BY A SUBSIDIARY COMPANY
    10. DIVIDENDS FROM PREACQUISITION EARNINGS
    11. SUBSIDIARY WITH BOTH PREFERRED AND COMMON STOCK OUTSTANDING
    12. CONSOLIDATING A SUBSIDIARY WITH PREFERRED STOCK OUTSTANDING
    13. Summary
    14. QUESTIONS
    15. ANALYZING FINANCIAL STATEMENTS
    16. EXERCISES
    17. ASC Exercises
    18. PROBLEMS
  16. 10 INSOLVENCY—LIQUIDATION AND REORGANIZATION
    1. LEARNING OBJECTIVES
    2. CONTRACTUAL AGREEMENTS
    3. BANKRUPTCY
    4. LIQUIDATION (CHAPTER 7)
    5. REORGANIZATION UNDER THE REFORM ACT (CHAPTER 11)
    6. TRUSTEE ACCOUNTING AND REPORTING
    7. REALIZATION AND LIQUIDATION ACCOUNT
    8. Summary
    9. QUESTIONS
    10. ANALYZING FINANCIAL STATEMENTS
    11. EXERCISES
    12. ASC Exercises
    13. PROBLEMS
  17. 11 INTERNATIONAL FINANCIAL REPORTING STANDARDS
    1. LEARNING OBJECTIVES
    2. THE INCREASING IMPORTANCE OF INTERNATIONAL ACCOUNTING STANDARDS
    3. THE ROAD TO CONVERGENCE—U.S. GAAP AND IFRS
    4. SIGNIFICANT SIMILARITIES AND DIFFERENCES BETWEEN U.S. GAAP AND IFRS
    5. GAAP HIERARCHY—U.S. VERSUS IFRS
    6. LONG-TERM CONVERGENCE ISSUES—FASB AND IASB
    7. LEASE ACCOUNTING CONVERGENCE
    8. Revenue Recognition Convergence
    9. Financial Statement Presentation
    10. CURRENT AND POTENTIAL CHANGES TO FINANCIAL STATEMENTS
    11. INTERNATIONAL CONVERGENCE ISSUES
    12. AMERICAN DEPOSITORY RECEIPTS: AN OVERVIEW
    13. Summary
    14. Appendix A: List of Current International Financial Reporting Standards, Issued by IASC and IASB
    15. QUESTIONS
    16. ANALYZING FINANCIAL STATEMENTS
    17. EXERCISES
    18. ASC Exercises
    19. PROBLEMS
  18. 12 ACCOUNTING FOR FOREIGN CURRENCY TRANSACTIONS AND HEDGING FOREIGN EXCHANGE RISK
    1. LEARNING OBJECTIVES
    2. EXCHANGE RATES—MEANS OF TRANSLATION
    3. MEASURED VERSUS DENOMINATED
    4. FOREIGN CURRENCY TRANSACTIONS
    5. USING FORWARD CONTRACTS AS A HEDGE
    6. Summary
    7. QUESTIONS
    8. ANALYZING FINANCIAL STATEMENTS
    9. EXERCISES
    10. ASC Exercises
    11. PROBLEMS
  19. 13 TRANSLATION OF FINANCIAL STATEMENTS OF FOREIGN AFFILIATES
    1. LEARNING OBJECTIVES
    2. ACCOUNTING FOR OPERATIONS IN FOREIGN COUNTRIES
    3. TRANSLATING FINANCIAL STATEMENTS OF FOREIGN AFFILIATES
    4. OBJECTIVES OF TRANSLATION— SFAS No. 52 [ASC 830–30]
    5. TRANSLATION METHODS
    6. IDENTIFYING THE FUNCTIONAL CURRENCY
    7. TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS
    8. TRANSLATION OF FOREIGN FINANCIAL STATEMENTS ILLUSTRATED
    9. FINANCIAL STATEMENT DISCLOSURE
    10. HISTORICAL DEVELOPMENTS OF ACCOUNTING STANDARDS
    11. Summary
    12. APPENDIX Accounting for a Foreign Affiliate and Preparation of Consolidated Statements Workpaper Illustrated
    13. DATE OF ACQUISITION
    14. ACCOUNTING FOR AN INVESTMENT IN A FOREIGN AFFILIATE—AFTER ACQUISITION
    15. CONSOLIDATION WHEN THE TEMPORAL METHOD OF TRANSLATION IS USED
    16. REMEASUREMENT AND TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS
    17. INTERCOMPANY RECEIVABLES AND PAYABLES
    18. ELIMINATION OF INTERCOMPANY PROFIT
    19. LIQUIDATION OF A FOREIGN INVESTMENT
    20. QUESTIONS
    21. ANALYZING FINANCIAL STATEMENTS
    22. EXERCISES
    23. ASC Exercises
    24. PROBLEMS
  20. 14 REPORTING FOR SEGMENTS AND FOR INTERIM FINANCIAL PERIODS
    1. LEARNING OBJECTIVES
    2. NEED FOR DISAGGREGATED FINANCIAL DATA
    3. STANDARDS OF FINANCIAL ACCOUNTING AND REPORTING
    4. INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) POSITION ON SEGMENT REPORTING
    5. INTERIM FINANCIAL REPORTING
    6. Summary
    7. APPENDIX GE Segmental Disclosures, 2010 Annual Report (partial)
    8. Basic for Presentation
    9. QUESTIONS
    10. ANALYZING FINANCIAL STATEMENTS
    11. EXERCISES
    12. ASC Exercises
    13. PROBLEMS
  21. 15 PARTNERSHIPS: FORMATION, OPERATION, AND OWNERSHIP CHANGES
    1. LEARNING OBJECTIVES
    2. PARTNERSHIP DEFINED
    3. REASONS FOR FORMING A PARTNERSHIP
    4. CHARACTERISTICS OF A PARTNERSHIP
    5. PARTNERSHIP AGREEMENT
    6. ACCOUNTING FOR A PARTNERSHIP
    7. SPECIAL PROBLEMS IN ALLOCATION OF INCOME AND LOSS
    8. FINANCIAL STATEMENT PRESENTATION
    9. CHANGES IN THE OWNERSHIP OF THE PARTNERSHIP
    10. SECTION A: ADMISSION OF A NEW PARTNER
    11. SECTION B: WITHDRAWAL OF A PARTNER
    12. Summary
    13. QUESTIONS
    14. EXERCISES
    15. ASC Exercises
    16. PROBLEMS
  22. 16 PARTNERSHIP LIQUIDATION
    1. LEARNING OBJECTIVES
    2. STEPS IN THE LIQUIDATION PROCESS
    3. PRIORITIES OF PARTNERSHIP AND PERSONAL CREDITORS
    4. SIMPLE LIQUIDATION ILLUSTRATED
    5. INSTALLMENT LIQUIDATION
    6. INCORPORATION OF A PARTNERSHIP
    7. Summary
    8. QUESTIONS
    9. EXERCISES
    10. ASC Exercises
    11. PROBLEMS
  23. 17 INTRODUCTION TO FUND ACCOUNTING
    1. LEARNING OBJECTIVES
    2. CLASSIFICATIONS OF NONBUSINESS ORGANIZATIONS
    3. DISTINCTIONS BETWEEN NONBUSINESS ORGANIZATIONS AND PROFIT-ORIENTED ENTERPRISES
    4. FINANCIAL ACCOUNTING AND REPORTING STANDARDS FOR NONBUSINESS ORGANIZATIONS
    5. FUND ACCOUNTING
    6. REPORTING INVENTORY AND PREPAYMENTS IN THE FINANCIAL STATEMENTS
    7. Summary
    8. APPENDIX City of Atlanta Partial Financial Statements
    9. QUESTIONS
    10. ANALYZING FINANCIAL STATEMENTS
    11. EXERCISES
    12. ASC Exercises
    13. PROBLEMS
  24. 18 INTRODUCTION TO ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS
    1. LEARNING OBJECTIVES
    2. THE HISTORY OF GENERALLY ACCEPTED GOVERNMENTAL ACCOUNTING STANDARDS
    3. THE STRUCTURE OF GOVERNMENTAL ACCOUNTING
    4. GOVERNMENTAL FUND ENTITIES
    5. PROPRIETARY FUNDS
    6. FIDUCIARY FUNDS
    7. CAPITAL ASSETS AND LONG-TERM DEBT
    8. EXTERNAL REPORTING REQUIREMENTS ( GASB STATEMENT No. 34 )
    9. GOVERNMENT FUND-BASED REPORTING
    10. GOVERNMENT-WIDE REPORTING
    11. MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
    12. INTERFUND ACTIVITY
    13. Summary
    14. APPENDIX A Government-wide Financial Statements City of Atlanta
    15. QUESTIONS
    16. ANALYZING FINANCIAL STATEMENTS
    17. EXERCISES
    18. ASC Exercises
    19. PROBLEMS
  25. 19 ACCOUNTING FOR NONGOVERNMENT NONBUSINESS ORGANIZATIONS: COLLEGES AND UNIVERSITIES, HOSPITALS AND OTHER HEALTH CARE ORGANIZATIONS
    1. LEARNING OBJECTIVES
    2. SOURCES OF GENERALLY ACCEPTED ACCOUNTING STANDARDS FOR NONGOVERNMENT NONBUSINESS ORGANIZATIONS
    3. FUND ACCOUNTING
    4. ACCRUAL BASIS OF ACCOUNTING
    5. CLASSIFICATION OF REVENUE AND EXPENSE
    6. ACCOUNTING FOR CURRENT FUNDS
    7. CONTRIBUTIONS
    8. ACCOUNTING FOR PLANT FUNDS
    9. ACCOUNTING FOR ENDOWMENT FUNDS
    10. ACCOUNTING FOR INVESTMENTS
    11. ACCOUNTING FOR LOAN FUNDS
    12. ACCOUNTING FOR AGENCY (CUSTODIAL) FUNDS
    13. ACCOUNTING FOR ANNUITY AND LIFE INCOME FUNDS
    14. ISSUES RELATING TO COLLEGES AND UNIVERSITIES
    15. ISSUES RELATING TO HOSPITALS
    16. Summary
    17. APPENDIX Sample Financial Statements for Private Educational Institutions
    18. QUESTIONS
    19. ANALYZING FINANCIAL STATEMENTS
    20. EXERCISES
    21. ASC Exercises
    22. PROBLEMS
  26. GLOSSARY
  27. APPENDIX ASC: RESEARCHING THE FASB CODIFICATION
    1. CODIFICATION OPENING PAGE
  28. APPENDIX PV: TABLES OF PRESENT VALUES
  29. INDEX