Chapter
1 - Introduction. 1
What
is GAAP?. 1
How
this Book is Organized. 3
How
to Use this Book. 4
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
Treatment
of Credit Losses. 109
Receivables
Presentation. 109
Receivables
Disclosures. 110
Chapter
15 - Investments Debt and Equity Securities. 117
Overview
of Investments Debt and Equity Securities. 117
Accounting for Investments. 117
Credit Losses on Investments. 119
Equity Securities without Readily Determinable Fair
Values. 119
Dividend and Interest Income. 119
Investment
Disclosures. 120
Chapter
16 - Investments Equity Method and Joint Ventures. 124
The
Equity Method. 124
Partnerships,
Joint Ventures, and Limited Liability Entities. 126
Investment
Disclosures. 127
Chapter
17 - Inventory. 129
Overview
of Inventory. 129
The
Periodic Inventory System.. 131
The
Perpetual Inventory System.. 132
Inventory
Costing. 133
The First In, First Out Method. 133
The Last In, First Out Method. 134
The Weighted Average Method. 136
Standard Costing. 137
The Retail Inventory Method. 138
The Gross Profit Method. 139
Overhead
Allocation. 140
The
Lower of Cost or Market Rule. 143
Work
in Process Accounting. 145
Accounting
for Obsolete Inventory. 145
Consignment
Accounting. 147
Goods
in Transit 147
Inventory
Disclosures. 148
Chapter
18 - Other Assets and Deferred Costs. 150
Overview
of Other Assets and Deferred Costs. 150
Prepaid Expenses. 150
Preproduction Costs for Long-Term Supply Arrangements. 150
Capitalized Advertising Costs. 151
Insurance Contracts that Do Not Transfer Insurance Risk. 152
Other
Assets and Deferred Costs Disclosures. 153
Preproduction Costs for Long-Term Supply Arrangements. 153
Capitalized Advertising Costs. 153
Insurance Contracts that Do Not Transfer Insurance Risk. 154
Chapter
19 - Intangibles Goodwill and Other. 157
Goodwill 157
Goodwill
Amortization. 161
General
Intangibles Other than Goodwill 162
Internal-Use
Software. 164
Website
Development Costs. 165
Intangibles
Disclosures. 166
Chapter
20 - Property, Plant, and Equipment 171
Overview
of Fixed Assets. 171
Initial
Fixed Asset Recognition. 173
Fixed Assets Acquired through a Business Combination. 173
Nonmonetary Exchanges. 174
Depreciation
and Amortization. 177
Straight-Line Method. 178
Sum-of-the-Years Digits Method. 179
Double-Declining Balance Method. 180
Depletion Method. 181
Units of Production Method. 182
Land Depreciation. 183
Land Improvement Depreciation. 183
Depreciation Accounting Entries. 184
Fixed
Asset Impairment 186
Fixed
Asset Disposal 188
Assets Held for Sale. 188
Abandoned Assets. 192
Idle Assets. 192
Fixed Asset Disposal Accounting. 193
Fixed
Asset Disclosures. 194
General Fixed Asset Disclosures. 194
Change in Estimate Disclosures. 195
Intangible Asset Impairment Disclosures. 195
Intangible Asset Disclosures. 196
Not-for-Profit
Fixed Asset Accounting. 197
Initial Recognition of Fixed Assets. 197
Restrictions on Contributed Assets. 198
Valuation of Contributed Assets. 199
Valuation of Contributed Services. 199
Valuation of Art, Historical Treasures, and Similar Items. 200
Depreciation of Fixed Assets. 200
Chapter
21 - Liabilities. 203
Extinguishments
of Liabilities. 203
Joint
and Several Liability Arrangements. 203
Insurance-Related
Assessments. 204
Prepaid
Stored-Value Products. 205
Liabilities
Disclosures. 206
Chapter
22 - Asset Retirement and Environmental Obligations. 208
Overview
of Asset Retirement Obligations. 208
The
Initial Measurement of an Asset Retirement Obligation. 209
Subsequent
Measurement of an Asset Retirement Obligation. 210
Settlement
of an Asset Retirement Obligation. 210
Overview
of Environmental Obligations. 212
Measurement
of Environmental Obligations. 213
Recoveries
Related to Environmental Obligations. 215
Asset
Retirement and Environmental Obligations Disclosures. 215
Asset Retirement Obligations. 215
Environmental Obligations. 216
Chapter
23 - Exit or Disposal Cost Obligations. 219
Overview
of Exit or Disposal Cost Obligations. 219
Exit
or Disposal Cost Obligation Disclosures. 221
Chapter
24 - Commitments. 223
Overview
of Commitments. 223
Chapter
25 - Contingencies. 226
Loss
Contingencies. 226
Gain
Contingencies. 227
Contingency
Disclosures. 227
Chapter
26 - Guarantees. 230
Overview
of Guarantees. 230
Guarantee
Disclosures. 231
Chapter
27 - Debt 234
General
Debt Topics. 234
Sales of Future Revenues. 234
Increasing Rate Debt 234
Debt
with Conversion and Other Options. 235
Debt Instruments with Detachable Warrants. 235
Convertible Securities. 235
Beneficial Conversion Features. 237
Interest Forfeiture. 239
Induced Conversions. 239
Conversion by Exercise of Call Option. 239
Convertible Instruments Issued to Nonemployees as Payment 239
Contingent Conversion Option. 239
Own-Share Lending Arrangements. 240
Participating
Mortgage Loans. 240
Product
Financing Arrangements. 241
Debt
Modifications and Extinguishments. 242
Troubled
Debt Restructurings by Debtors. 244
Debt
Presentation. 245
Callable Debt 245
Classification of Debt that Includes Covenants. 245
Debt Issuance Costs. 245
Due on Demand Loans. 245
Increasing-Rate Debt 245
Revolving Debt Agreements. 245
Short-Term Obligations to be Refinanced. 246
Subjective Acceleration Clauses. 246
Own-Share Lending Arrangements. 246
Participating Mortgage Loans. 247
Troubled Debt Restructurings by Debtors. 247
Debt
Disclosures. 247
Long-Term Obligations. 247
Short-Term Obligations to be Refinanced. 247
Own-Share Lending Arrangements. 248
Participating Mortgage Loans. 248
Other Debt Disclosures. 248
Troubled Debt Restructurings by Debtors. 249
Chapter
28 - Equity. 251
Overview
of Equity. 251
The
Sale of Stock. 251
Dividend
Payments. 252
Stock
Dividends and Stock Splits. 253
Stock Dividend. 253
Stock Split 253
Treasury
Stock. 254
Purchase of Treasury Stock. 254
Resale of Treasury Stock. 255
Cost Method. 255
Constructive Retirement Method. 256
Equity-Based
Payments to Non-Employees. 256
Initial Recognition. 256
Spinoffs
and Reverse Spinoffs. 258
Equity
Disclosures. 259
Rights and Privileges. 259
Preferred Stock. 259
Contingently Convertible Securities. 259
Redeemable Securities. 260
Treasury Stock. 260
Changes in Shareholders Equity. 260
Equity-Based Payments to Non-Employees. 261
Spinoffs and Reverse Spinoffs. 261
Chapter
29 - Revenue Recognition. 263
The
Nature of a Customer. 263
Steps
in Revenue Recognition. 263
Step
One: Link Contract to Customer. 264
Step
Two: Note Performance Obligations. 266
Step
Three: Determine Prices. 268
Variable
Consideration. 268
Possibility
of Reversal 270
Sales
Taxes. 271
Time
Value of Money. 271
Noncash
Consideration. 274
Payments
to Customers. 274
Refund
Liabilities. 275
Step
Four: Allocate Prices to Obligations. 275
Allocation
of Price Discounts. 276
Allocation
of Variable Consideration. 278
Subsequent
Price Changes. 278
Step
Five: Recognize Revenue. 278
Measurement
of Progress Completion. 280
Output
Methods. 281
Input
Methods. 281
Change
in Estimate. 282
Progress
Measurement 282
Right
of Return. 283
Consistency. 284
Contract
Modifications. 284
Treatment
as Separate Contract 284
Treatment
as Continuing Contract 284
Entitlement
to Payment 286
Bill-and-Hold
Arrangements. 287
Consideration
Received from a Supplier. 288
Customer
Acceptance. 290
Customer
Options for Additional Purchases. 290
Licensing. 292
Nonrefundable
Upfront Fees. 294
Principal
versus Agent 294
Repurchase
Agreements. 295
Unexercised
Rights of Customers. 297
Warranties. 298
Contract-Related
Costs. 299
Costs
to Obtain a Contract 299
Costs
to Fulfill a Contract 299
Amortization
of Costs. 300
Impairment
of Costs. 300
Exclusions. 301
Revenue
Disclosures. 301
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. 434
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. 482
Overview
of Related Parties. 482
Related
Party Disclosures. 482
Chapter
46 - Subsequent Events. 485
Overview
of Subsequent Events. 485
Subsequent
Event Disclosures. 486
Answers
to Chapter Questions. 488
Glossary. 540
Index. 552
Final Examination.560