Chapter 1 - Introduction. 1
What is GAAP?. 1
How this Book is Organized. 3
How to Use this Book. 3
Accounting Principles. 4
Chapter 2 - Presentation of
Financial Statements. 7
Overview of the Presentation of
Financial Statements. 7
Presentation Disclosures. 7
Liquidation Basis of Accounting. 8
Liquidation Basis Disclosures. 9
Going Concern Disclosures. 9
Discontinued Operations. 10
Discontinued Operations Disclosures. 12
Chapter 3 - Balance Sheet 14
Overview of the Balance Sheet 14
The Common Size Balance Sheet 17
The Comparative Balance Sheet 18
How to Construct the Balance Sheet 19
Offsetting. 21
Treatment of Negative Cash. 21
Balance Sheet Disclosures. 22
Chapter 4 - Comprehensive Income. 25
Overview of Comprehensive Income. 25
Comprehensive Income Disclosures. 26
Chapter 5 - Income Statement 32
Overview of the Income Statement 32
The Single-Step Income Statement 35
The Multi-Step Income Statement 35
The Condensed Income Statement 36
The Contribution Margin Income
Statement 36
The Multi-Period Income Statement 37
How to Construct the Income
Statement 38
Income Statement Disclosures. 40
Chapter 6 - Statement of Cash Flows. 43
Overview of the Statement of Cash
Flows. 43
The Direct Method. 44
The Indirect Method. 46
How to Prepare the Statement of Cash
Flows. 47
Disclosures for the Statement of
Cash Flows. 50
Chapter 7 - Notes to Financial
Statements. 52
Overview of Notes to Financial
Statements. 52
Chapter 8 - Accounting Changes and
Error Corrections. 56
Changes in Accounting Principle. 56
Changes in Accounting Estimate. 57
Changes in Reporting Entity. 57
Correction of an Error in Previously
Issued Financial Statements. 57
Corrections Related to Prior Interim
Periods. 58
The Materiality of an Error. 58
Accounting Changes and Error
Corrections Disclosures. 58
Change in Accounting Principle. 58
Change in Accounting Estimate. 59
Change in Reporting Entity. 59
Error Corrections. 59
Historical Summaries. 59
Chapter 9 - Changing Prices. 63
Overview of Changing Prices. 63
Inventory and Fixed Assets. 63
Specialized Assets. 64
Recoverable Amounts. 64
Income from Continuing Operations. 64
Restatement of Current Cost
Information. 64
Translation Adjustments. 65
Purchasing Power Gains and Losses. 65
Restatement Steps. 65
Changing Prices Disclosures. 66
Five-Year Summary. 66
Other Current Year Disclosures. 67
Other Disclosures for Mineral
Resources Assets. 68
Chapter 10 - Earnings per Share. 70
Basic Earnings per Share. 70
Diluted Earnings per Share. 71
Treasury Stock and Reverse Treasury
Stock Methods. 75
Treasury Stock Method. 75
Reverse Treasury Stock Method. 76
Disclosure of Earnings per Share. 77
Chapter 11 - Interim Reporting. 80
Overview of Interim Reporting. 80
General Interim Reporting Rule. 80
Variations from the Interim
Reporting Rule. 81
Changes in Accounting Principle in
Interim Periods. 82
Changes in Accounting Estimate in
Interim Periods. 83
Error Correction in Interim Periods. 83
Adjustments to Prior Interim Periods. 83
The Integral View.. 84
The Discrete View.. 85
Comparison of the Integral and
Discrete Views. 85
Disclosures for Interim Reporting. 85
Chapter 12 - Risks and Uncertainties. 89
Overview of Risks and Uncertainties. 89
Risks and Uncertainties Disclosures. 90
Chapter 13 - Segment Reporting. 93
Overview of Segment Reporting. 93
Segment Disclosure. 95
Segment Disclosure. 96
Products, Services, and Customer Disclosure. 98
Geographic Area Disclosure. 98
Chapter 14 - Receivables. 101
Notes Receivable. 101
Acquisition, Development, and
Construction Arrangements. 103
Nonrefundable Fees and Other Costs. 104
Loans and Debt Securities Acquired
with Deteriorated Credit Quality. 106
Troubled Debt Restructurings by
Creditors. 108
Classification of
Government-Guaranteed Loans. 108
Receivables Presentation. 109
Receivables Disclosures. 109
Chapter 15 - Investments Debt and
Equity Securities. 117
Overview of Investments Debt and
Equity Securities. 117
Accounting for Investments. 117
Impairment of Investments. 119
Equity Securities without Readily
Determinable Fair Values. 120
Dividend and Interest Income. 120
Investment Disclosures. 120
Chapter 16 - Investments Equity
Method and Joint Ventures. 125
The Equity Method. 125
Partnerships, Joint Ventures, and Limited
Liability Entities. 127
Investment Disclosures. 128
Chapter 17 - Inventory. 130
Overview of Inventory. 130
The Periodic Inventory System.. 132
The Perpetual Inventory System.. 133
Inventory Costing. 134
The First In, First Out Method. 134
The Last In, First Out Method. 135
The Weighted Average Method. 137
Standard Costing. 138
The Retail Inventory Method. 139
The Gross Profit Method. 140
Overhead Allocation. 141
The Lower of Cost or Market Rule. 144
Work in Process Accounting. 146
Accounting for Obsolete Inventory. 146
Consignment Accounting. 148
Goods in Transit 148
Inventory Disclosures. 149
Chapter 18 - Other Assets and
Deferred Costs. 151
Overview of Other Assets and
Deferred Costs. 151
Prepaid Expenses. 151
Preproduction Costs for Long-Term
Supply Arrangements. 151
Capitalized Advertising Costs. 152
Insurance Contracts that Do Not
Transfer Insurance Risk. 153
Other Assets and Deferred Costs
Disclosures. 154
Preproduction Costs for Long-Term
Supply Arrangements. 154
Capitalized Advertising Costs. 154
Insurance Contracts that Do Not
Transfer Insurance Risk. 155
Chapter 19 - Intangibles Goodwill
and Other. 158
Goodwill 158
Goodwill Amortization. 162
General Intangibles Other than
Goodwill 163
Internal-Use Software. 165
Website Development Costs. 166
Intangibles Disclosures. 167
Chapter 20 - Property, Plant, and
Equipment 172
Overview of Fixed Assets. 172
Initial Fixed Asset Recognition. 174
Fixed Assets Acquired through a
Business Combination. 174
Nonmonetary Exchanges. 175
Depreciation and Amortization. 178
Straight-Line Method. 179
Sum-of-the-Years Digits Method. 180
Double-Declining Balance Method. 181
Depletion Method. 182
Units of Production Method. 183
Land Depreciation. 184
Land Improvement Depreciation. 184
Depreciation Accounting Entries. 185
Fixed Asset Impairment 187
Fixed Asset Disposal 189
Assets Held for Sale. 189
Abandoned Assets. 193
Idle Assets. 193
Fixed Asset Disposal Accounting. 194
Fixed Asset Disclosures. 195
General Fixed Asset Disclosures. 195
Change in Estimate Disclosures. 196
Intangible Asset Impairment
Disclosures. 196
Intangible Asset Disclosures. 197
Not-for-Profit Fixed Asset
Accounting. 198
Initial Recognition of Fixed Assets. 198
Restrictions on Contributed Assets. 199
Valuation of Contributed Assets. 200
Valuation of Contributed Services. 200
Valuation of Art, Historical
Treasures, and Similar Items. 201
Depreciation of Fixed Assets. 201
Chapter 21 - Liabilities. 204
Extinguishments of Liabilities. 204
Joint and Several Liability
Arrangements. 204
Insurance-Related Assessments. 205
Prepaid Stored-Value Products. 206
Liabilities Disclosures. 207
Chapter 22 - Asset Retirement and
Environmental Obligations. 209
Overview of Asset Retirement
Obligations. 209
The Initial Measurement of an Asset
Retirement Obligation. 210
Subsequent Measurement of an Asset
Retirement Obligation. 211
Settlement of an Asset Retirement
Obligation. 212
Overview of Environmental
Obligations. 213
Measurement of Environmental
Obligations. 214
Recoveries Related to Environmental
Obligations. 216
Asset Retirement and Environmental
Obligations Disclosures. 216
Asset Retirement Obligations. 216
Environmental Obligations. 217
Chapter 23 - Exit or Disposal Cost
Obligations. 220
Overview of Exit or Disposal Cost
Obligations. 220
Exit or Disposal Cost Obligation
Disclosures. 222
Chapter 24 - Commitments. 224
Overview of Commitments. 224
Chapter 25 - Contingencies. 227
Loss Contingencies. 227
Gain Contingencies. 228
Contingency Disclosures. 228
Chapter 26 - Guarantees. 231
Overview of Guarantees. 231
Guarantee Disclosures. 232
Chapter 27 - Debt 235
General Debt Topics. 235
Sales of Future Revenues. 235
Increasing Rate Debt 235
Debt with Conversion and Other
Options. 236
Debt Instruments with Detachable
Warrants. 236
Convertible Securities. 236
Beneficial Conversion Features. 238
Interest Forfeiture. 240
Induced Conversions. 240
Conversion by Exercise of Call
Option. 240
Convertible Instruments Issued to
Nonemployees as Payment 240
Contingent Conversion Option. 240
Own-Share Lending Arrangements. 241
Participating Mortgage Loans. 241
Product Financing Arrangements. 242
Debt Modifications and
Extinguishments. 243
Troubled Debt Restructurings by
Debtors. 245
Debt Presentation. 246
Callable Debt 246
Classification of Debt that Includes
Covenants. 246
Debt Issuance Costs. 246
Due on Demand Loans. 246
Increasing-Rate Debt 246
Revolving Debt Agreements. 246
Short-Term Obligations to be
Refinanced. 247
Subjective Acceleration Clauses. 247
Own-Share Lending Arrangements. 247
Participating Mortgage Loans. 248
Troubled Debt Restructurings by
Debtors. 248
Debt Disclosures. 248
Long-Term Obligations. 248
Short-Term Obligations to be
Refinanced. 248
Own-Share Lending Arrangements. 249
Participating Mortgage Loans. 249
Other Debt Disclosures. 249
Troubled Debt Restructurings by
Debtors. 249
Chapter 28 - Equity. 252
Overview of Equity. 252
The Sale of Stock. 252
Dividend Payments. 253
Stock Dividends and Stock Splits. 254
Stock Dividend. 254
Stock Split 254
Treasury Stock. 255
Purchase of Treasury Stock. 255
Resale of Treasury Stock. 256
Cost Method. 256
Constructive Retirement Method. 257
Equity-Based Payments to
Non-Employees. 257
Initial Recognition. 257
Spinoffs and Reverse Spinoffs. 259
Equity Disclosures. 260
Rights and Privileges. 260
Preferred Stock. 260
Contingently Convertible Securities. 260
Redeemable Securities. 261
Treasury Stock. 261
Changes in Shareholders Equity. 261
Equity-Based Payments to
Non-Employees. 262
Spinoffs and Reverse Spinoffs. 262
Chapter 29 - Revenue Recognition. 264
The Nature of a Customer. 264
Steps in Revenue Recognition. 264
Step One: Link Contract to Customer. 265
Step Two: Note Performance
Obligations. 267
Step Three: Determine Prices. 269
Variable Consideration. 269
Possibility of Reversal 270
Sales Taxes. 272
Time Value of Money. 272
Noncash Consideration. 274
Payments to Customers. 275
Refund Liabilities. 276
Step Four: Allocate Prices to Obligations. 276
Allocation of Price Discounts. 277
Allocation of Variable Consideration. 278
Subsequent Price Changes. 279
Step Five: Recognize Revenue. 279
Measurement of Progress Completion. 281
Output Methods. 281
Input Methods. 282
Change in Estimate. 283
Progress Measurement 283
Right of Return. 283
Consistency. 284
Contract Modifications. 284
Treatment as Separate Contract 285
Treatment as Continuing Contract 285
Entitlement to Payment 287
Bill-and-Hold Arrangements. 288
Consideration Received from a
Supplier. 289
Customer Acceptance. 290
Customer Options for Additional
Purchases. 291
Licensing. 293
Nonrefundable Upfront Fees. 294
Principal versus Agent 295
Repurchase Agreements. 296
Unexercised Rights of Customers. 297
Warranties. 298
Contract-Related Costs. 299
Costs to Obtain a Contract 299
Costs to Fulfill a Contract 300
Amortization of Costs. 301
Impairment of Costs. 301
Exclusions. 301
Revenue Disclosures. 302
Chapter 30 - Compensation General 307
Overview of Compensation. 307
Compensated Absences. 307
Deferred Compensation Arrangements. 308
Lump-Sum Payments under Union
Contracts. 309
Compensation Disclosures. 309
Chapter 31 - Compensation
Retirement Benefits. 312
Overview of Retirement Benefits. 312
Defined Benefit Plans. 312
Expense Attribution for Delayed
Vesting. 315
Discount Rates. 316
Settlements and Curtailments. 316
Termination Benefits. 318
Combined Pension Plans. 318
Defined Contribution Plans. 318
Presentation of Retirement Benefit
Information. 318
Retirement Benefit Disclosures. 319
Defined Benefit Plan Disclosures for
Public Companies. 319
Defined Benefit Plan Disclosures for
Private Companies. 322
Disclosures for Defined Benefit
Plans in Interim Periods. 323
Disclosures for Defined Contribution
Plans. 323
Chapter 32 - Compensation Stock
Compensation. 326
Overview of Stock Compensation. 326
The Volatility Concept 330
Fair Value Calculation Alternatives. 330
Awards Classified as Equity. 333
Award Measurement Problems. 333
Contingent Features. 333
Award Modifications. 333
Income Tax Effects. 334
Awards Classified as Liabilities. 334
Employee Share Purchase Plans. 335
Stock-Based Compensation Disclosures. 336
Chapter 33 - Other Expenses. 341
Startup Costs. 341
Insurance Costs. 342
Retroactive Contracts. 342
Claims-Made Contracts. 342
Multiple-Year Retrospectively Rated
Contracts. 343
Contributions Made. 344
Real and Personal Property Taxes. 344
Advertising Costs. 345
Electronic Equipment Waste
Obligations. 345
Business and Technology
Reengineering. 345
Other Expenses Disclosures. 346
Insurance Cost Disclosures. 346
Real and Personal Property Tax
Disclosures. 346
Advertising Cost Disclosures. 346
Chapter 34 - Research and
Development 348
Overview of Research and Development 348
Research and Development Disclosures. 350
Chapter 35 - Income Taxes. 352
Overview of Income Taxes. 352
Accounting for Income Taxes. 354
Tax Positions. 354
Deferred Tax Expense. 356
Applicable Tax Rate. 356
Interest and Penalties. 357
Intraperiod Tax Allocation. 357
Taxes Related to Undistributed
Earnings. 358
Interim Reporting. 358
Income Taxes Presentation. 360
Income Taxes Disclosure. 361
Balance Sheet 361
Income Statement 362
Other 362
Chapter 36 - Business Combinations. 365
Overview of Business Combinations. 365
Identifiable Assets and Liabilities,
and Noncontrolling Interests. 367
Goodwill or Gain from Bargain
Purchase. 369
Goodwill Calculation. 369
Bargain Purchase. 369
Reverse Acquisitions. 370
Related Issues. 372
Acquisition of Assets. 372
Transactions between Entities under
Control of Same Parent 372
Pushdown Accounting. 373
Income Taxes. 373
Business Combination Disclosures. 374
General Disclosures. 374
Identifiable Assets and Liabilities,
and any Noncontrolling Interest 376
Goodwill or Gain from Bargain
Purchase. 376
Reverse Acquisitions. 377
Transactions between Entities under
Control of Same Parent 378
Income Taxes. 378
Chapter 37 - Financial Statement
Consolidation. 380
Overview of Consolidations. 380
Recognition of a Consolidation. 381
Consolidation Examples. 383
Recognition of Noncontrolling
Interest 383
Sale of Shares by Subsidiary. 384
Share of Accumulated Other
Comprehensive Income. 384
Full Consolidation Example. 385
Consolidation of Variable Interest
Entities. 386
Initial Consolidation. 388
Subsequent Consolidation. 388
Consolidation of Leasing Entities by
Private Companies. 388
Consolidation of
Contractually-Controlled Entities. 389
Control of Partnerships. 390
Termination of a Consolidation. 390
Consolidation Presentation. 391
Consolidation Disclosures. 393
Chapter 38 - Derivatives and Hedging. 397
Other Comprehensive Income. 397
Derivative Accounting. 399
Hedge Accounting - General 400
Hedge Accounting Fair Value Hedges. 401
Hedge Accounting Cash Flow Hedges. 403
Hedge Accounting Net Investment
Hedges. 406
Embedded Derivatives. 407
Derivative and Hedging Disclosures. 408
General Disclosures. 408
Fair Value Hedge Disclosures. 409
Cash Flow Hedge Disclosures. 410
Chapter 39 - Fair Value Measurement 413
The Fair Value Concept 413
Fair Value Differences from Actual
Prices Paid. 414
Fair Value Measurement Approaches. 415
The Net Asset Value Variation. 417
Fair Value Measurements for
Liabilities. 417
Use of Multiple Measurements. 417
Fair Value Disclosures. 417
Chapter 40 - Financial Instruments. 421
Off-Balance Sheet Credit Risk. 421
Fair Value Option. 421
Registration Payment Arrangements. 422
Financial Instruments Disclosures. 423
Fair Value of Financial Instruments. 423
Concentrations of Credit Risk of
Financial Instruments. 424
Market Risk of Financial Instruments. 424
Fair Value Option. 424
Registration Payment Arrangements. 425
Separate Presentation of Financial
Assets and Financial Liabilities. 426
Chapter 41 - Foreign Currency
Matters. 428
Foreign Currency Transactions. 428
Financial Statement Translation. 429
Determination of Functional Currency. 429
Translation of Financial Statements. 431
Use of Average Exchange Rates. 432
Hyperinflationary Effects. 433
Derecognition of a Foreign Entity
Investment 433
Foreign Currency Disclosures. 433
Chapter 42 - Interest 436
Overview of Capitalized Interest 436
Assets on Which to Capitalize
Interest 437
Assets on Which Interest is not
Capitalized. 437
The Interest Capitalization Period. 437
The Capitalization Rate. 439
Calculating Interest Capitalization. 440
Overview of Imputed Interest 441
Interest Disclosures. 444
Capitalized Interest Disclosures. 444
Imputed Interest Disclosures. 444
Chapter 43 - Leases. 447
The Nature of a Lease. 447
Lease Components (Lessee) 449
Lease Components (Lessor) 450
Initial Direct Costs. 451
Lease Consideration. 451
The Lease Term.. 451
Initial Measurement of Lease
Payments. 452
Subsequent Measurement of Lease
Payments. 452
Types of Leases. 453
Asset and Liability Recognition
(Lessee) 454
Initial Measurement 454
Short-Term Leases. 454
Finance Leases. 455
Operating Leases. 456
Optional Lease Payments. 457
Right-of-Use Asset Impairment 457
Leasehold Improvement Amortization. 457
Subleases. 457
Maintenance Deposits. 458
Derecognition. 458
Lease Recognition Topics (Lessor) 458
Sales-Type Leases. 458
Direct Financing Leases. 460
Operating Leases. 461
Variable Lease Payments. 462
Lease Modifications. 462
Lessee Impact 463
Lessor Impact 464
Elections. 466
Discount Rate. 466
Separation of Non-Lease Components. 466
Sale and Leaseback Transactions. 466
Lease Presentation. 468
Lease Disclosures. 469
Lessee Disclosures. 469
Lessor Disclosures. 471
Sale and Leaseback Transactions. 472
Chapter 44 - Nonmonetary
Transactions. 474
Overview of Nonmonetary Transactions. 474
Purchases and Sales of Inventory
with the Same Counterparty. 476
Barter Transactions. 477
Exchanges Involving Monetary
Consideration. 477
Exchanges of a Nonfinancial Asset
for a Noncontrolling Ownership Interest 480
Nonmonetary Transaction Disclosures. 480
Chapter 45 - Related Party
Disclosures. 483
Overview of Related Parties. 483
Related Party Disclosures. 483
Chapter 46 - Subsequent Events. 486
Overview of Subsequent Events. 486
Subsequent Event Disclosures. 487
Answers to Chapter Questions. 489
Glossary. 541
Index. 553
Final Examination..561