《中级会计学 英文版 第4版》求取 ⇩

CONTENTSPART ⅠFOUNDATION AND REVIEW1

Company Name Index1

Annual Report—The Coca-Cola Company AR-1

1 The Environment of Accounting2

Introduction2

Subject Index4

Objective of Financial Reporting for ExternalDecision Makers4

External versus Internal Accountinglnformation4

The Nature of Financial Accounting4

Professional Accounting5

The Interaction of Financial Accounting with ltsEnvironment7

The Need for Financial ReportingStandards8

The Evolution of the Current Standard-SettingProcess10

The Financial Accounting Standards Board10

Board Pronouncements11

What Are GAAP?13

Official Accounting Pronouncements Related toGAAP13

The Hierarchy of Accounting Standards forFinancial Reporting14

The Internal Revenue Service14

Impact of Other Organizations on GAAP14

American Institute of Certified PublicAccountants15

Securities and Exchange Commission16

American Accounting Association16

Financial Executives Institute and Institute ofManagement Accountants17

Attaining Consensus in a PoliticalEnviromnent17

Governmental Accounting StandardsBoard17

Other Groups17

Ethics and Financial Reporting21

Summary of Key Points22

Review Problem23

2 The FASB s Conceptual Framework ofAccounting29

Introduction29

The FASB s Conceptual Framework30

Overview of the FASB s Conceptual Frameworkof Accounting31

SFAC No.1:Objectives of Financial Reporting byBusiness Enterprises32

Users of Financial Statements32

Financial Reporting Objectives33

SFAC No.2:Qualitative Characteristics ofAccounting Information34

Environmental Assumptions36

Measurement Criteria36

SFAC No.5:Recognition and Measurement inFinancial Statements of BusinessEnterprises36

Recognition Criteria36

Implementation Guidelines38

Implementation Constraints42

SFAC No.6:Elements of Financial Statements ofBusiness Enterprises44

Acceptance of SFAC No.544

General-Purpose Financial Statements44

Summary of Key Points48

Review Problem48

Appendix:Comprehensive Income(not currentlyGAAP)49

3 Review:The Accounting InformationProcessing System61

Introduction61

Accounts and Transaction Recording62

The AIS and the Accounting Cycle64

Step 1:ldentify Transactions or Events to BeRecorded64

Step 2:Journalize Transactions andEvents66

Step 3:Post from Joumals to Ledger66

Step 4:Prepare Unadjusted Trial Balance67

Step 5:Journalize and Post Adiusting JournalEntries69

Deferrals69

Other Adjusting Entries71

Accruals71

Step 6:Prepare Adjusted Trial Balance75

Step 7:Prepare Financial Statements76

Step 8:Journalize and Post Closing JournalEntries77

lncome Statement Accounts77

Dividends79

Step 9:Prepare Post-Closing Trial Balance79

Step 10:Journalize and Post Reversing JournalEntries79

Accrued Item80

Deferred Item-Expedient Method80

The Management Discussion and AnalysisSection81

Beyond the Primary Financial Statements81

Summary of Key Points82

Review Problem83

Appendix 3A:Worksheets,the Accounting Cycle,and Interim Reporting86

Appendix 3B:Control Accounts.SubsidiaryLedgers.and Special Journals90

Introduction113

4 Review:The Income Statement and theRetained Earnings Statement113

What the Income Statement Represents115

Format Issues Evolving from GeneralPractice117

General Formats of the IncomeStatement117

The Choice between Single -and Multiple-StepFormats119

Format Issues Govemed by AccountingPronouncements121

Reporting Extraordinary Items122

Reporting Unusual or Infrequent Gains andLosses124

Reporting Discontinued Operations124

Reporting Accounting Changes131

Disclosure Guidelines for the IncomeStatement134

Earnings per Share134

Retained Earnings Statement136

Appropriations of and Restrictions on RetainedEarnings137

Prior Period Adjustments137

Summary of Key Points139

Revlew Problem139

Appendix:Conceptual Issues in the Determinationof Income141

5 Review:The Balance Sheet and theStatement of Cash Flows163

Introduction163

The Balance Sheet165

Format of the Balance Sheet165

Basic Definitions and Classifications167

Assets169

Liabilities172

Owners Equity173

Offsetting Assets and Liabilities175

Additional Reporting Issues175

Loss and Gain Contingencies175

Valuations Reported in the Balance Sheet176

Terminology177

Comparative Statements177

Subsequent Events178

Disclosure Notes179

The Auditors Report179

Usefulness of the Balance Sheet181

Limitations of the Balance Sheet182

The Statement of Cash Flows183

Basic Definitions183

Statement Formats186

Ratio Analysis188

Usefulness of the Statement of Cash Flows188

Ratios that Mcasure Liquidity(Solvency)189

Ratios that Measure Efficiency(Activity)190

Ratios that Measure Equity Position andCoverage190

Ratios that Measure Profitability190

Summary of Key Points192

Review Problem192

6 Interest:Concepts of Future andPresent Value216

Introduction216

Time Value of Money217

Basic Interest Concepts217

Concept of Interest217

Consistent Interest Periods andRates218

Simple versus Compound Interest218

Overview of Future Value and PresentValue219

Future Value and Present Value Tables andFormulas220

Single Principal Amount220

The Ordinary Annuity and the AnnuityDue220

Annuity Amount220

Future Value of 1221

Values of a Single Payment221

Future Value and Present Value of 1:CalculationMethods Compared and Computed222

Presen tValue of 1222

Accounting Applications of a SinglePayment224

Future Value of a Single Payment224

Determining an Unknown Interest Rate orUnknown Number of Periods225

Interpolation of Table Values225

Present Value of a Single Payment226

Determining the Interest Rate227

Values of an Annuity227

Future Value of an Ordinary Annuity227

Present Value of an Ordinary Annuity228

Future Value of an Annuity Due229

Accounting Applications of an Annuity230

Present Value of an Annuity Due230

Future Value of an Annuity231

Present Value of an Annuity233

Determination of Other Values Related to theFuture Value of an Annuity233

Using Multiple Present and FutureValues235

Determination of Other Values Related to thePresent Value of an Annuity235

Summary Table237

Summary of Key Points238

Review Problem239

Appendix:Present and Future Value InterestTables240

PART ⅡASSET RECOGNITION ANDMEASUREMENT261

7 Revenue and Expense Recognition262

Introduction262

The Concepts of Revenue and Expense264

The Earnings Process264

The Recognition Process265

The Revenue Principte266

Revenue Recognized at Delivery(Point of Sale)268

Revenue Recognition before Delivery268

Guidance on the Choice between the TwoMethods269

Measuring Progress toward Completion269

Illustration of Altemative Methods of Accountingfor Long-Term Contracts270

Revenue Recognition When Right of ReturnExists270

Review Problem:Revenue Recognition afterDelivery278

Installment Sales Method of RevenueRecognition281

The Cost Recovery Method288

Review Problem290

Alternative Methods ot Revenue Recognition beforeDelivery292

Completion of Production292

Discovery Basis292

Accretion Basis292

Specific Performance Method293

Revenue Recognition for Service Sales293

Proportional Performance Method294

Completed-Performance Method294

Collection Method294

Matching:An Implementation Principle295

Expense Recognition295

Direct Expenscs296

Indirect Expenses296

Recognition of Gains and Losses296

Ethical Considerations297

Summary of Key Points298

8 Cash and Receivables311

Introduction311

Accounting for Cash312

Characteristic of Cash and CashEquivalents312

Internal Controls for Cash313

Petty Cash Funds314

Control of Cash through Bank Accounts315

Accounting for Receivables319

Recognition and Measurement ofAccounts Receivable319

Events and Accounting Entries for UncollectibleAccounts—The Allowance Method322

Measurement of Uncollectible AccountsReceivable322

Estimating Bad Debt Expense—The AllowanceMethod323

Direct Write-Off of Uncollectible Accounts327

Use of Accounts Receivable to Obtain ImmediateCash327

Factoring Accounts Receivable328

Assignment and Pledging of AccountsReceivable332

Recognition and Measurement of NoresReceivable334

Disclosure of Accounts Receivable FinancingArrangements334

Notes Receivable Accounting Illustrations336

Accounting for Loan Impairments339

Discounting Nores Receivable343

Dishonored Notes345

Summary of Key Points346

Review Problem347

9 Inventory:Basic Valuation Methods374

The Importance of Inventories374

Introduction374

Inventory Categories376

Items Included in Inventory377

Periodic Inventory System379

Inventory Recording Methods379

Purchase Discounts(Cash Discounts on CreditPurchases)379

Components of Inventory Cost379

Freight-In(Freight on Purchases)379

Perpetual Inventory System381

Accounting for Periodic and PerpetualSystems381

Allocation of Costs to Inventory and Cost ofGoods Sold385

Measurement of Inventory Values for AccountingPurposes385

Inventory Cost Flow Methods386

Underlying Concepts of Cost Flow386

Reporting Inventories387

Specific Cost Identification Method387

Average Cost Method388

First-In,First-Out Cost Method390

Last-In.First-Out Method392

Comparison of LIFO with FIFO393

LIFO:Special Topics395

Adoption of LIFO395

LIFO Liquidation396

Management Selection of LIFO versus FIFO397

Pooled LIFO399

Dollar Value LIFO Concepts401

Dollar Value LIFO Method401

Applying the DV LIFO Method:A SimpleExample402

Dollar Value LIFO:Complications403

Comprehensive Dollar-Value LIFO:Example403

Decreases in the Value of the Inventorv Valued atBase-Year Prices404

Advantages of DVLIFO405

Summary of Key Points406

Review Problem406

Introduction430

10 Inventory:Alternative Valuation Methods430

LCM Inventory Valuation Method431

Net Realizable Value and Net Realizable ValueLess a Normal Profit Margin432

Establishing Inventory Valuations underLCM433

Applications of the LCM Rule435

Accounting Problems in Applying LCM435

The Use of LCM for Tax Reporting440

Review Problem440

Gross Margin Method and InventoryEstimation441

The Retail Inventory Method and InventoryEstimation443

Markups and Markdowns444

Application of the Retail InventoryMethod445

Retail Method. FIFO with LCM,Illustrated446

Retail Method.Average Cost with LCM.Illustrated446

Special Items Related to the Retail Method447

Using the Retail Inventory Method with DVLIFO449

Review Problem449

The Need for a Physical Count ofInventory450

Evaluation of the Retail Inventory Method450

Uses of the Retail Inventoy Method452

Review Problem453

Methods of Inventory Valuation454

Additional Inventory Issues454

Relative Sales Value Method456

Losses on Purchase Commitments456

Effects of Inventory Errors458

Review Problem460

Summary of Key Points460

11 Operational Assets:Acquisition,Disposal,and Exchange486

Introduction486

Valuation of Plant Assets at Acquisition487

Classifying Operational Assets487

General Principles for the Valuation of PlantAssets488

Plant Assets Purchased on Credit494

Accounting for Noncash Acquisitions of PlantAssets494

Plant Assets Acquired in Exchange for EquitySecurities495

Donated Assets496

Self-Constructed Assets497

Capitalization of Interest during Construction499

Qualifying Assets500

Avoidable Interest500

Conditions for Capitalizing Interest501

Qualifying Expenditures501

Calculating Capitalized Interest501

Effect of Interest Capitalization on FinancialRatios504

Accounting for Disposals of Plant Assets504

Disposal by Donation505

A General Valuation Principle506

Reclassification of Plant Assets Removed fromService506

Accounting for Exchanges of NonmonetaryAssets506

Gain or Loss on Exchange507

Recognition of Gains and Losses onExchange507

Fair Value Determination508

Examples of Nonmonetary Asset Exchanges508

Evaluation of Accounting for NonmonetaryExchanges511

General Accounting Principles511

Post-Acquisition Expenditures511

Improvements.Replacements.and ExtraordinaryRepairs512

Maintenance and Ordinary Repairs512

Additions513

Rearrangements and Other Adjustments514

Summary of Key Points514

Review Problem515

Appendix:Interest Capitalization Complications516

12 Operational Assets:Depreciation andImpairment540

Introduction540

Depreciation Concepts541

Terminology541

Nature of Depreciation542

Factors in Determining Depreciation Expense543

Depreciation Methods544

Straight-Line Method545

Methods Based on Inputs and Outputs545

Accelerated Depreciation Methods547

Tax Depreciation Methods549

Present-Value-Based Depreciation Methods551

Effect of Depreciation on Financial Ratios552

Depreciation Disclosures and Policy552

Diversity of Practice553

Early Warning Disclosures554

Depreciation,Cash Flow,and DividendPolicy554

Depreciation and Price-Level Changes556

Fractional-Year Depreciation556

Additional Depreciation Issues556

Depreciation of Post-Acquisition Costs558

Depreciation Systems559

Impairment of Plant Assets561

Accounting Guidelmes of SFAS No.121562

Implementation of SFAS No.121566

Restructuring Charges567

Summary of Key Points569

Review Problem570

Appendix 12A:Casualty Insurance571

Appendix 12B:Effects of Price-Level Changes574

13 Intangible Assets and Natural Resources593

Introduction593

Intangible Assets594

Classification of Intangible Assets594

Basic Principles of Accounting for IntangibleAssets595

Exchangeable Intangible Assets597

Patents597

Copyrights598

Trademarks and Trade Names598

Deferred Charges599

Separately Identifiable but Not ExchangeableIntangible Assets599

Franchise Rights599

Leasehold Improvements599

Startup Costs600

Organization Costs600

Stock Issuance Costs600

Measuring Goodwill601

Conceptual Nature of Goodwill601

Goodwill:An Unidentifiable Intangible Asset601

Negative Goodwill604

Amortizing Goodwill605

Disclosures and Reporting of Intangible Assets606

Research and Development Costs607

Accounting for Computer Software Costs609

Capitalization of Computer Software Costs609

Amortization for Capitalized Computer SoftwareCosts611

Disclosures of Computer Software Costs612

Accounting for Natural Resources613

Depletion Base613

Depletion Base and Depletion Rate615

Determining Exploration Costs to Capitalize forOil and Gas Companies616

Change in Estimate616

Depletion for Income Tax Reporting616

Summary of Key Points620

Review Problem621

Appendix:Estimating Goodwill622

Introduction647

14 Investments in Debt and EquitySecurities647

Why Invest in Financial Instruments?648

Accounting Issues649

Overview:Classifying Investments649

Debt or Equity?650

Classification of Investments in EquitySecurities651

Classification of Investments in DebtSecurities652

Definitions653

Fair Value Method:Trading Securities andSecurities Available for Sale653

Acquisition of Trading Securities and SecuritiesAvailable for Sale653

Basket Purchases of Securities654

Recording Fair Value as Post-Acquisition CarryingValue655

Recording Investment Income656

RecIassifications of TS and SASInvestments657

Rationale for Different Treatments of HoldingGains or Losses657

Impairments of TS and SASInvestments659

Sales of TS and SAS Investments659

Investment Income of Debt Securities Acquired ata Premium or Discount660

Disclosures for Investments Accounted for by theFair Value Method661

Tax Effects661

Review Problem662

Cost and Amortized Cost Methods664

Cost Method:For Investments in EquitySecurities with No Readily DeterminableFair Value664

Amortized Cost Method:For Held-to-MaturityDebt Securities665

Equity Method:Investments in Equity SecuritiesResulting in Significant Influence over theInvestee666

Conceptual Basis Underlying the EquityMethod667

Equity Method Illustrated668

Summary of the Equity Method671

Changing between the Fair Value Method and theEquity Method672

Definition of FinanciaIInstrument674

Disclosures Required for Investments Accountedfor by the Equity Method674

Disclosures of Fair Values of Other FinancialInstruments674

Disclosures Regarding Risks of Off-Balance-SheetFinancial Instruments675

Special Problems in Accounting for EquityInvestments676

Investment Revenue676

Stock Rights on Investment Shares678

Stock Split of Investment Shares678

Summary of Key Points680

Review Problem681

Appendix 14A:FinancialInstruments683

Appendix 14B:Other Investments and Funds689

PART ⅢLIABILITIES713

Introduction714

15 Short-Term Liabilities714

What Is a Liability?715

Accounts Payable717

Short-Term Notes Payable717

What Is a Current Liability?717

Cash and Scrip Dividends Payable720

Accrued Liabilities720

Advances and Returnable Deposits720

Uneamed Revenues721

Taxes721

Conditional Payments724

Current Maturities of Long-Term Debt726

Obligations Callable on Demand by theCreditor726

Short-Term Obligations Expected to BeRefinanced727

Accounting for Contingencies728

Loss Contingencies That Require Accrual and theRecognition of a Liability729

Loss Contingencies that Are Disclosed Onlyin Notes731

Executory Contracts731

Gain Contingencies731

Accounting for Environmental Liabilities732

Summary of Key Points733

Review Problem734

Appendix:SFAS NO.112—Employers Accountingfor Postemployment Benefits735

16 Long-Term Liabilities758

Introduction758

Characteristics and Valuation of Long-TermLiabilities759

The Measurement and Valuation of Long-TermLiabilities760

Bonds Payable760

C1assification of Bonds762

Valuation of Bonds Payable762

Fundamental Bond Accounting Principles765

Review Problem770

Bond Issue Costs771

Additionat Issues in Accounting for Bonds771

Bonds Issued between Interest Dates772

Review Problem774

Debt Securities with Equity Rights775

Bonds with Detachable Stock PurchaseWarrants775

Convertible Bonds776

Accounting and Reporting for ConvertibleBonds777

Induced Conversion of Convertible Debt778

Debt Extinguishment779

Extinguishment of Bonds by Open-MarketPurchase or Exercise of Call Privilege781

Extinguishment of Bonds by Refunding783

Summary of Gain and Loss Classification784

Review Problem784

Long-Term Notes785

Off-Balance-Sheet Financing and Disclosures forLong-Term Liabilities787

Unconditional Purchase Obligations787

Disclosures for Financial Instrumeuts787

Summary of Key Points790

Review Problem791

Appendix 16A:Troubled Debt Restructure792

Appendix 16B:Accounting for Serial Bonds798

Appendix 16C:Accounting Principles forInvestments in Debt Securities Held toMaturity800

17 Accounting for Leases821

Introduction821

Basic Lease Accounting Issnes822

The Lease from the Lessee s Viewpoint823

The Lease from the Lessor s Viewpoint825

Advantages of Leasing826

Disadvantages of Leasing826

Accounting for Operating Leases827

Accounting for Capital Leases828

Accounting for Capital Leases:Lessee829

Accounting for Capital Leases:Lessor833

Review Problem833

Termination of Lease Agreements835

Lease Entries under an Ordinary Annuity836

Review Problem837

Special Issues in Accounting for Capital Leases838

Bargain Purchase Options838

Bargain Renewal Options840

Residual Values840

Different Interest Rates847

Depreciation of a Leased Asset by theLessee849

Executory and Initial Direct Costs849

Review Problem851

Sale-Leaseback Arrangements851

Classification of Lease Receivables andPayables854

Lease Disclosure Requirements856

A Continuing Issue857

Summary of Key Points858

Review Problem859

Appendix:Other Types of Leases861

18 Accouunting for Pensions and OtherPostemplnyment Benefits886

Introduction886

Pension Plan Fundamentals887

Types of Pension Plans888

Vesting of Benefits889

Pension Plan Funding889

Role of Actuaries889

Regulation of Private Pension PlanFunding890

Minimum Funding Standards890

Summary of Current Pension Accounting890

Minimum Vesting Standards890

Measuring Pension Expense in DefinedBenefit Plans891

Recognizing Pension Liabilities in DefinedBenefit Plans891

Measuring Pension Expense and PensionObligations891

Discount Rate891

Pension Expense893

Service Cost:Component 1 of PensionExpense893

Interest Cost and Actual Return:Components2 and 3 of Pension Expense,SecondYear896

Review Problem899

Components 4,5,and 6 of Pension Expense;General Considerations900

Prior Service Cost:Component 4 of PensionExpense901

Gains and Losses:Component 5 of PensionExpense904

Review Problem910

Transition Amount:Component 6 of PensionExpense911

Additional Minimum Pension Liability913

Coca-Cola s Pension Expense913

Additional Minimum Pension Liability914

Total Minimum Liability914

Adiusting the Accounts916

Coca-Cola s Pension Liabilities917

Review Problem917

SFAS No.87:A Compromise918

Additional Issues in PensionAccounting918

Settlements,Curtailments,Termination Benefitsand Asset Reversions919

Comprehensive Case and PensionDisclosures920

Comprehensive Case920

Required Footnote Disclosures for Defined BenefitPlans926

Other Pension Disclosures927

Review Problem928

Summary of Key Points928

Appendix:Accounting for Postretirement BenefitsOther than Pensions931

Introduction970

19 Accounting for Income Taxes970

Two Types of Differences971

Defining Taxable Income and Pretax AccountingIncome971

Why Income Taxes?971

Conceptual Issues971

The No-Allocation Method976

The Allocation Method of Accounting for TemporaryDifferences977

Asset/Liability Method977

Terminology and Definitions979

Implementation Procedures980

Identifying Future Taxable and DeductibleAmounts983

Illustrations of Deferred Tax Assets and DeferredTax Liabilities984

Review Problem989

Net Operating Losses990

Carrybacks and Carryforwards of Net OperatingLosses990

Accounting for NOLs991

A Limitation on Deferred Tax Assets993

Evidence to Consider in Determining Whether aValuation Allowance Is Needed993

Tax-Planning Strategies998

Review Problem999

Financial Statement Presentation andDisclosures1001

Intrapefiod Tax Allocation1004

Summary of Key Points1004

Additioual Disclosures1004

Review Problem1005

Appendix:Investment Tax Credit and AdditionalConceptual Issues1008

PART ⅣOWNER S EQUITY1025

20 Corporations:Contributed Capital1026

Introduction1026

Formation of a Corporation1027

Contributed Capital at the Formation of aCorporation1027

Characteristics of Capital Stock1028

Concepts and Definitions Fundamental toCorporate Equity Accounting1029

Stockholders Equity:TerminologyIssues1030

Advantages and Disadvantages of the CorporateForm of Organization1031

Par Value Stock1032

Nopar Stock1032

Features of Equity Securities1032

Legal Capital1033

Common Stock1033

Preferred Stock1033

Accounting for the Issuance of Par ValueStock1038

Accounting for the Issuance of NoparStock1038

Capital Stock Sold on a SubscriptionBasis1038

Issuance of Capital Stock for NoncashAssets1041

Special Sa les of Capital Stock1042

Unrealized Capital1043

Stock Issue Costs1043

Assessments on Capital Stock1043

Accounting for Reacquisition ofStock1044

Treasury Stock1044

Recording and Reporting Treasury StockTransactions1045

Formal Retirement of Treasury Stock1049

Retirement of Callable and RedeemableStock1049

Restriction of Retained Earnings for TreasuryStock1049

Accounting for Conversions,Changes in Par Value,and Contributed Capital1051

Concersion of Convertible PreferredStock1051

Stockholders Equity and Financial StatementAnalysis1052

Additional Contributed Capital1052

Changing Par Value1052

Summary of Key Points1054

Review Problem1055

21 Corporations:Retained Earningsand Stock Options1073

Introduction1073

Disposition of Earnings1074

Characteristics of Retained Earnings1075

Nature of Dividends1075

Relevant Dividend Rates1075

Legality of Dividends1076

Property Dividends1077

Types of Dividends1077

Cash Dividends1077

Liquidating Dividends1078

Scrip Dividends1079

Stock Dividends1080

Dividends and Treasury Stock1082

Special Stock Dividends1082

Fractional Share Rights1083

Cash Payments in Lieu of Fractional ShareRights1084

Stock Splits1084

Appropriations and Restrictions of RetainedEarnings1085

Retained Earnings Statements1086

Stock Rights and Warrants1086

Accounting for Stock Rights1088

Review Problem1089

Stock-Based Compensation Plans1092

Overview of Accounting Issues1092

Accounting for Noncompensatory Stock OptionPlans1094

Accounting for Compensatory Stock Option Plansunder APB Opinion No.251095

Lapse of Stock Options1099

Stock Appreciation Rights under APB OpinionNo.251102

Overview:Measuring the Fair Value of FixedStock Options1104

Accounting for Stock Options under SFASNo.1231104

Total Compensation Cost under SFASNo.1231105

Accounting for Fixed Stock Options under SFASNo.231106

Accounting for Performance Options under SFASNo.1231110

Required Disclosures1113

Summary of Key Points1116

Rev iew Problem1117

Appendix 21A:Quasi Reorganizations1119

Appendix 21B:Determining Fair Value ofOptions1120

22 Earnings per Share1142

Introduction1142

Significance of Earnings per Share1143

A Framework for Calculating EPS1144

Types of Capital Structures1144

Calculations for Earnings per Share1146

EPS Disclosures1146

Computing Earnings per Share for Simple CapitalStructures:Basic Earnings per Share1147

Adiustments to the Numerator1147

Adjustments to the Denominator:The Weighted-Average Calculation1148

Stock Dividends and Splits1149

Contingent Shares1150

Review Problem1151

Computing Earnings per Share for Complex CapitalStructures:Diluted Earnings per Share1152

Potentially Issuable Shares1153

Review Problem1155

Review Problem1160

Dilution-Antidilution Method1160

Review Problem1163

Earnings per Share and Related Disclosures1163

A Final Comment1165

Summary of Key Points1166

Review Problem1167

Appendix:A Closer Look at the Treasury StockMethod1167

PART ⅤSpecial Topics1185

23 Statement of Cash Flows1186

Introduction1186

The Trend toward Cash Flows1187

Cash Flow Reporting:Development andUsefulness1187

UsefuIness of Cash Flow Information1188

The Statement of Cash Flows and the Requirementsof SFAS NO.951189

Cash and Cash Equivalents1191

Cash Flow Categories1192

Noncash Activities1194

Gross and Nel Cash Flows1195

Cash Flow per Share1195

Review Problem1195

Preparing the SCF1196

Format-Free Approach:Direct Method1196

Additional Examples of OperatingCash Flows:Direct Method1200

Format-Free Approach:Indirect Method andReconciliation of Net Income and OperatingCash Flow1201

Additional Examples of ReconcilingAdjustments1203

Comparison of Direct and IndirectMethods1204

Disclosure Requirements of SFAS No.951205

Review Problem1206

The Spreadsheet Approach1206

Spreadsheet Approach Example:The SimpleCompany1207

Analyzing More Complex Situations1209

Issues in Cash Flow Reporting1214

Cash or AccruaI Information1214

Classification of Cash Flows1214

Direct or Indirect Method?1215

Summary of Key Points1216

Review Problem1217

Appendix:Comprehensive Example1220

24 Accounting Changes and ErrorCorrections1259

Introduction1259

Accounting Changes:Reporting Issues andApproaches1260

Types of Accounting Changes1260

Objectives of Reporting AccountingChanges1261

Accounting Principle Changes1261

Approaches to Reporting AccountingChanges1262

General Application of the ThreeApproaches1265

Changes in Reporting Entity1265

Justification for Accounting Changes1266

Comparative Statements1267

Summary of Accounting Changes1267

Correction of Accounting Errors1267

Classification of Accounting Errors1268

The All-Inclusive Concept of Income and PriorPeriod Adiustments1271

Correcting Entries and Analysis1271

Detailed Reporting Guidelines andExamples1273

Current Approach1273

Retroactive Approach1277

Prospective Approach1282

Analysis and Reporting of Prior PeriodAdiustments1283

Accounting Changes:An Evaluation1284

Motivations for Accounting Changes1285

Stock Prices and EconomicConsequences1286

Summary of Key Points1287

Review Problem1287

25 Disclosures,Segment Reporting,andInterim Reporting1303

Introduction1303

Full Disclosure1304

Financial Reporting Requirements of theSEC1305

Management Discussion and Analysis1306

Form 10-K1306

Summary of Significant AccountingPolicies1307

Notes to Financial Statements1307

Disagreements on Accounting Disclosures1307

Other Notes to Financial Statements1308

Special Transactions and Events1308

Fraudulent Financial Reporting1310

Segment Reporting1311

Definition of Reportable OperatingSegments1312

Required Segment Disclosures1314

Other Firm-Wide Disclosures1316

Interim Reports1318

Interim Reporting and Segment Reporting1318

Issues in Interim Reporting1318

Interim Reporting Illustrated1320

Summary of Key Points1321

Accounting for Stock Issuance and RelatedTransactions10037