17e INTERMEDIATE ACCOUNTING Earl K Stice, PhD Brigham Young University James D Stice, PhD Brigham Young University K Fred Skousen, PhD, CPA Brigham Young University Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Intermediate Accounting, 17E Earl K Stice, James D Stice, K Fred Skousen Vice President of Editorial, Business: Jack W Calhoun Editor-in-Chief: Rob Dewey © 2010, 2007 South-Western, Cengage Learning ALL RIGHTS RESERVED No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, Web distribution, information storage and retrieval systems, or in any other manner—except as may be permitted by the license terms herein Senior Acquisitions Editor: Matthew Filimonov Developmental Editor: Leslie Kauffman/LEAP Publishing Services, Inc Editorial Assistant: Lauren Athmer Marketing Manager: Steven E Joos Marketing 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13 12 11 10 09 PREFACE Clear, Connected, Complete: The Big Picture of Accounting From the smallest mom-and-pop retailer to the largest multinational corporation, businesses of all sizes are recognizing that accounting professionals are no longer simply “number crunchers” but rather essential partners in achieving the fundamental goals of their organization Intermediate Accounting, 17e provides a powerful connection to accounting careers with: • A Clear organization based around the essential interrelationship between accounting procedures and the activities of business The order of the text chapters flows with a traditional balance sheet presentation without sacrificing links to business activities The result is a more balanced treatment of coverage for instructors and students alike • Connected and relevant coverage that examines the issues that are driving accounting in today’s business environment, such as fair value, valuation, and International Financial Reporting Standards • Complete and engaging pedagogy that enhances the learning experience and prepares students for an evolving accounting profession Each learning objective in the text is supplemented with a Why and How framework This feature provides students with a snapshot of why things are accounted for the way they are before being asked how the information is used in making decisions • Superior technology, which allows instructors to pick and choose precisely the educational resources they want to accompany this text CengageNOWTM Express offers a complete technology solution with interactive homework assignments that help students tackle the course’s most difficult concepts CLEAR and Forward-Thinking Organization No other text works this hard to demonstrate accounting’s integral importance to an organization’s decision-making capabilities The innovative structure is unsurpassed in preparing students to serve as trusted advisors on the front lines of business In an effort to streamline the sequence of chapters in the text, the table of contents accounts for a more traditional balance sheet order of topics while still maintaining the structure of covering topics as they relate to business activities The investing chapters fall before the financing chapters, which results in a more familiar order of presentation for instructors and students Part 1—Foundations of Financial Accounting provides students with the fundamentals of financial accounting and concludes with a module that covers the Time Value of Money as well as a new module on Fair Value Part 2—Routine Activities of a Business gets down to business, integrating accounting into management by exploring operating and investing activities Part 3—Additional Activities of a Business examines financing activities, leases, income taxes, and employee compensation Part 4—Other Dimensions of Financial Reporting rounds out the comprehensive coverage with earnings per share; derivatives, contingencies, business segments, and interim reports; accounting changes; and financial statement analysis, as well as the addition of a new chapter, Accounting in a Global Market iii iv Preface Stice_CH07_pp0319-0381.indd 341 CONNECTED to Current and Relevant Coverage One look at the business pages of any newspaper shows how illusory long-term success can be Yesterday’s runaway successes can quickly find themselves derailed by the new realities of today’s business world This is the first text to provide a real-world perspective that links accounting functions to the activities of business Completely updated to reflect the latest changes in accounting standards, practices, and techniques The real company information has been revised to account for recent changes in financial statements and other company reports EXHIBIT 7-7 McDonald’s Notes to Consolidated Financial Statements Segment and geographic information (In millions) 2007 2006 2005 U.S Europe APMEA Other Countries & Corporate $ 7,905.5 8,926.2 3,598.9 2,356.0 $ 7,464.1 7,637.7 3,053.5 2,739.9 $ 6,955.1 7,071.8 2,815.8 2,274.6 Total revenues $22,786.6 $20,895.2 $19,117.3 $ 2,841.9 2,125.4 616.3 (1,704.6) $ 2,657.0 1,610.2 364.4 (198.6) $ 2,421.6 1,449.3 345.1 (232.0) Total operating income $ 3,879.0 $ 4,433.0 $ 3,984.0 U.S Europe APMEA Other Countries & Corporate Businesses held for sale Discontinued operations $10,031.8 11,380.4 4,145.3 3,834.2 $ 9,477.4 10,413.9 3,727.6 3,529.4 1,631.5 194.7 $ 8,968.3 9,424.6 3,596.5 5,891.0 1,517.6 590.8 Total assets $29,391.7 $28,974.5 $29,988.8 U.S Europe APMEA Other Countries & Corporate International Financial Reporting Standards topics, indicated by this symbol throughout the text, help students understand how accounting practices differ from country to country and reflect the increasingly global nature of business The international environment of business is dramatically changing the land1/27/09 scape of accounting The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are working together to develop one set of accounting standards to be used by companies in countries around the world No longer is the United States making the rules for the rest of the world to follow Instead, the FASB and the IASB are working hand-in-hand as financial accounting standards converge at a pace that was not dreamed of even five years ago These events have affected this textbook Every chapter discusses relevant accounting standards and developments from both a U.S and a global perspective Each chapter begins with a discussion of the accounting standards and procedures used by companies complying with U.S GAAP Then those areas where U.S GAAP and international accounting standards are significantly different are discussed so that the reader can understand how accounting standards around the world are similar and how they are different A new chapter on Accounting in a Global Market further emphasizes the role of international financial reporting standards The objective of this approach is to develop in students the ability to see beyond the borders of the United States and understand that the global business environment is leading to global accounting standards Users of this text will understand that they are not just learning U.S GAAP Instead, they are being prepared to be players in a 12:33:18 PM Preface global accounting environment with the ability to understand and apply international accounting standards as well as U.S accounting standards Fair Value Accounting is another major topic affecting the accounting environment The credit crisis of 2008 is blamed by some on the inappropriate use of fair value accounting A new module details the “why,” “when,” “where,” and “how” for using fair values in financial statements Because this concept of fair value accounting is so important and affects so many of the principles and topics discussed later in the text, it has been placed near the front of the text following the discussion of the financial statements Opening Scenario Questions are critical-thinking questions that follow the real company chapter openers, with solutions provided at the end of each chapter so that students can check their answers as they think about how they would answer accounting-related issues businesses face QUESTIONS What would be the consequences to a customer if their bank could not tell them if their paycheck (which is direct deposited) had in fact been deposited? What would be the consequences to the bank? Suppose the Internal Revenue Service and employers had no system established to track the amount of income tax withheld from employee salaries How would taxpayers demonstrate to the U.S government that they had paid taxes? How would the government verify tax payments? Answers to these questions can be found on page 70 A Chapter on Earnings Management in Part establishes a framework for the remainder of the course Students come to understand the importance and ramifications of earnings management through current, real-world examples, extracts from SEC enforcement actions, business press analysis, and the extensive use of academic research findings COMPLETE Pedagogy to Connect to the Big Picture of Accounting Just one glance tells you this accounting text is different Refreshingly rich in color, appealing graphics, and icons, this text energizes students’ imaginations with a visually stimulating look they prefer Why and How Framework Following each learning objective, the authors provide additional reinforcement of the critical concepts by highlighting both the procedural aspects (the “how”) as well as the context (or “why”) for which they are applied As they move through the chapter, students gain a greater understanding of both elements and can rationalize why businesses account for things the way they Overview of the Accounting Process Identify and explain the basic steps in the accounting process (accounting cycle) WHY It is important to understand how accounting information flows through an organization and how that information is captured by the accounting information system HOW The accounting process, often referred to as the accounting cycle, generally includes the following steps: analyze business documents, journalize transactions, post to ledger accounts, prepare a trial balance, prepare adjusting entries, prepare financial statements, close the nominal accounts, and prepare a post-closing trial balance v vi Preface Statement of Cash Flows “Revisited” Chapter 21 provides coverage of the statement of cash flows in the second semester of the course The book continues to provide a full chapter early in the text (Chapter 5) addressing the statement of cash flows and integrates this financial statement throughout the text, which results in the most comprehensive treatment of this important subject available stop&think Consider these four organizations: FASB, AICPA, SEC, and IASB Which one you think will be making U.S GAAP twenty years from now? Stop & Think Multiple-choice questions have been written by the authors to accompany the Stop & Think boxed features These critical-thinking boxes, found in every chapter, allow students to test their knowledge and then consult the answer found at the end of the chapter a) FASB b) AICPA c) SEC d) IASB fyi FYI These margin boxes often provide additional context to an important topic by emphasizing additional points of interest In 2001, the IASB restructured itself as an independent body with closer links to national standard-setting bodies At that time, the IASB adopted its current name and dropped its original name of the International Accounting Standards Committee (IASC) caution Don’t think that the conceptual framework is a useless exercise in accounting theory Since its completion, the framework has significantly affected the nature of many accounting standards Caution Crucial cautions provide students with important points to consider when thinking about more complex concepts and topics Chapter Updates and Enhancements Chapter • Update on the standard-setting process • Introduction of the revised GAAP hierarchy Stice_CH01_pp0001-0047.indd 21 12/18/08 4:09:55 PM • Introduction to the convergence of U.S GAAP and IASB standards Preface Chapter • Updated opening case on Coca-Cola • New coverage on minority interest as related to the consolidated balance sheet NEW! Fair Value Module • Defines “fair value” and describes the valuation concepts used in determining fair value • Explains the need for fair values in financial reporting and identifies where fair values are used in the financial statements • Demonstrates a variety of valuation models and the preparation of fair value disclosures required under SFAS No 157 Chapter • New discussion on the transfer and derecognition of receivables as addressed in IAS 39 Chapter • Expanded discussion of internal controls • Expanded discussion of EITF 00-21, “Revenue Arrangements with Multiple Deliverables” • New discussion on the asset-and-liability approach to revenue recognition that is currently being developed as a joint effort of the FASB and the IASB Chapter • New discussion on accounting for declines in inventory values as addressed in IAS Chapter 10 • New discussion on the capitalization of interest as addressed in IAS 23 • New discussion on the recognition of increases and decreases in the value of property from growth or discovery as addressed in IAS 41 • New discussion on acquired in-process R&D as addressed in SFAS No 141R • Updated coverage on accounting for a bargain purchase • Updated coverage on international accounting for intangibles as addressed in IAS 38 and IFRS Chapter 12 • New discussion on the use of the fair value option for the reporting of financial assets and liabilities • New discussion on the consolidation of special purposes entities as addressed in SIC 12 Chapter 13 • New discussion on the current developments in the accounting for preferred stock • New discussion on the current developments in the accounting for stock options • New discussion on noncontrolling interest as defined under SFAS No 160 Chapter 14 • New discussion on the use of the fair value option for the reporting of financial assets and liabilities as addressed in SFAS No 159 vii viii Preface • New discussion on the classification of investment securities according to IFRS • New discussion on equity method accounting according to IFRS • New discussion on derecognition Chapter 15 • New guidance on distinguishing between operating and finance leases as described in IAS 17 • New discussion on the deferral of sale profits on a sale-leaseback that results in a finance (capital) lease according to IAS 17 Chapter 16 • Comparison of the use of future tax rates under U.S GAAP and IAS 12 • New discussion on deferred tax classification under IFRS • New discussion on valuation allowance under IAS 12 • Expanded discussion of accounting for uncertain tax provisions Chapter 17 • Updated coverage of prior service cost, including discussion of IAS 19, “Employee Benefits” • Updated discussion of amortization of prior service cost • New discussion on plan contributions • Added examples of financial statement reporting for various components of employee compensation Chapter 18 • New discussion on participating securities and the two-class method Chapter 19 • Added discussion of how IFRS affects derivatives, contingencies, business segments, and interim reports • Introduction to the FASB’s Exposure Draft on improved loss contingency disclosure Chapter 21 • New comprehensive example of the statement of cash flows using Tesco, one of the largest supermarket chains in the United Kingdom NEW! Chapter 22 • New chapter on accounting in a global market • Explains the importance and potential impact of a common set of accounting standards • Outlines the history of the IASB and identifies the key differences between U.S GAAP and IFRS • Demonstrates the conversion of foreign currency financial statements into U.S dollars using the translation method Chapter 23 • New introduction to equity valuation Preface CONNECT and Reinforce Student Understanding Unmatched End-of-Chapter Material Widely regarded as providing the most varied and expansive set of problem assignments available, Intermediate Accounting, 17e continues to raise the bar to new heights Only Intermediate Accounting features such a diverse set of traditional exercises, problems, and cases: • 15–25 Questions per chapter to help assimilate chapter content • More than 400 Practice Exercises written by the authors • Discussion Cases for homework or class discussion • Exercises to reinforce key concepts or applications • Problems that integrate several concepts or techniques • Sample CPA Exam Questions written to provide students with similar problems commonly found on the CPA exam • Selected Problems marked with a demonstration icon point students to the free Web site to view a visual demonstration of the problem with audio SPREADSHEET DEMO PROBLEM • Selected Exercises or Problems have accompanying spreadsheet templates, marked with an icon Case Materials have been designed to help accelerate the development of essential skills in critical thinking, communication, research, and teamwork Retention and application of key concepts build as future accountants and business professionals take advantage of a wide range of tools found in this innovative section These cases satisfy the skills-based curriculum endorsed by the AICPA’s Core Competency Framework and the recommendations of the Accounting Education Change Commission (AECC) Deciphering Actual Financial Statements Cases enable students to analyze financial data from recent annual reports from companies such as The Walt Disney Company, Coca-Cola, and the Boston Celtics Case 8-63 Deciphering Financial Statements (The Walt Disney Company) Locate the 2007 financial statements for The Walt Disney Company on the Internet Locate Disney’s note on revenue recognition What is Disney’s revenue recognition policy for the various business segments? Relating to video and video game sales, what other points in the revenue cycle (other than when video units are made widely available for sale by retailers) could Disney have used to recognize revenue? Relating to motion pictures, what other points in the revenue cycle (other than when motion pictures are exhibited) could Disney have used to recognize revenue? Researching Accounting Standards Cases ask students to visit the FASB’s Web site to access designated pronouncements as they are applied to each chapter’s 59237_09_CH08_pp0382-0447.indd 443 2/9/09 3:55:58 PM topics Case 2-51 Researching Accounting Standards To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications Access the FASB’s Web site at http://www.fasb.org Click on “Pronouncements & EITF Abstracts.” For this case, we will use Statement of Financial Accounting Concepts No Open Concepts Statement No Read paragraph 137 Based on the information in this paragraph, what is a transaction? Read paragraph 139 What is the difference between transactions with “cash consequences” and transactions involving “cash”? Read paragraph 141 Based on the information in this paragraph, what is the primary difference between an accrual and a deferral? ix I-8 Indexes Subject Index Expense(s), 161 and loss recognition, 165 and losses, other, 171 depreciation, 231 failure to record accrued, 1200 failure to record prepaid, 1201 operating, 171 or capitalize, 565–571 prepaid, 61 recognized, schedule of, 919 wages, 231 Expense account, debit to, 62 Expense recognition, 165 Exposure draft, 14 External expectations, meet, 286–288 Extinguishment of debt prior to maturity, 706–712 Extraordinary items, 176 Face amount, 349 Face value, 695 Factor, 344 Factoring, accounts receivable, 344 FAF, see Financial Accounting Foundation Failed earnings, 222 Failure to record accrued expense, 1200 accrued revenue, 1201 depreciation, 1202 merchandise purchases, 1200 merchandise sales, 1200 prepaid expense, 1201 unearned revenue, 1202 Fair value, 28, FV-1–16 adjusted replacement cost, FV-13–14 cost approach, FV-8 defined, FV-5–8 disclosures, FV-14–16 discounted cash flows, finite period, FV-11–12 infinite period, FV-12–13 hedge, 1138 highest and best use, FV-7 hypothetical transaction, FV-7 income approach, FV-8 inputs to valuation techniques, FV-8 market approach, FV-8 market multiples, FV-9–10 market participants, FV-7 matrix pricing, FV-10–11 need for, FV-1–3 of an intangible, 574 of the pension fund, 1038 principal market, FV-7 valuation techniques, FV-8 where used in financial statements, FV-3–4 Fair value option, 712–715, 841–842 Faithfulness, representational, 26 FASB, see also Financial Accounting Standards Board FASB Statement No 106, overview, 1060–1061 FASB Statement No 115, compared to equity method, 850 Federal hospital insurance, 1023 Federal Insurance Contributions Act (FICA), 1023, 1030 Federal old-age, survivors’, and disability tax, 1023 Federal Social Security Act, 1024 Federal unemployment insurance, 1024 Federal Unemployment Tax Act (FUTA), 1024 Feedback value, 25 Fictitious transactions, 291 FIFO and LIFO, summary comparison, 475 FIFO taxes payable, 1192 FIFO, LIFO, and average cost compared, 474–477 Financial accounting, careers in, 32–34 Financial Accounting Concepts, Statements of, 13 Financial Accounting Foundation (FAF), 13 Financial accounting standard, need for one worldwide, 1283–1285 Financial Accounting Standards Board (FASB), 12–13, 32 Financial Accounting Standards, Statements of, 13, 14 Financial analysis, inventory information used for, 487–489 Financial and accounting reporting, 8–12 Financial capital maintenance, 157 and income determination, 157–158 Financial income, 968 pretax, 974 Financial instruments, deferred gains and losses on derivative, 185 Financial ratios, 112 summary of selected, 1323 Financial reporting, 10–11 and public relations, 297 other organizations important to, 15–19 transparent, 305–308 Financial reporting objectives, 23–24 economic resources, 24 focus on earnings, 24 future cash values, 24 investors and creditors, 23 target audience, 23 understandability, 23 usefulness, 23 Financial statement(s), analysis of, 1306–1329 common-size, 1310, 1311 comparative, 169 consolidated, 169 disclosing debt in, 721–723 elements of, 27 fair values used in, FV-3–4 foreign currency, 1296–1298 general-purpose, 10 impact of inventory methods, 475 information about items not in, 118 interim, 1157 notes to the, 117–121 preparing, 64–65 presentation of sales and receivables, 341–343 relationship, 243–244 user of, 34 Financial statement analysis, 1308 framework for, 1308–1322 Financial statement presentation, 1102–1103 and disclosure, 990–993 Financial statement reporting, 1047, 1051, 1054 Financing, off-balance-sheet, 715–720 Financing activities, 225 noncash, 226, 1247 Financing arrangements, project, 718 Financing choices, 187 Financing with bonds, 694–712 Finished goods, 453 Finite period, discounted cash flows, FV-11–12 First-in, first-out (FIFO) method, 465 Fixed asset turnover, 1315 Fixed asset turnover ratio, 582 dangers in using, 582–584 Fixed price, 395–398 Floor, 478 FOB (free on board) shipping point, 456 FOB destination, 456 Forecast of balance sheet accounts, 186–188 income statement accounts, 188 Forecasted statement of cash flows, 245–248 Forecasting horizon, 1327 Foreign balance sheets, format of, 110–112 Subject Index Foreign currency financial statements, 1296–1298 inventory transactions, 501–503 transactions, 502 translation adjustment, 106, 184, 798 Form 8-K, 16 Form 10-K, 16 Form 10-Q, 16, 1158 Formal health care plans, 1059 Formulas, use of, TVM-5–6 Forward(s), 1133–1134, 1142–1143 Forward contract, 1133 Framework, conceptual, 22 Franchises, 550 Free cash flow, 1230 discounted, 1327 Full cost method, 569 Full disclosure principle, 30 Full eligibility date, 1060 Full settlement, transfer of assets in, 724–725 Functional currency, 1296 Funded insurance plans, 1059 Funding of defined benefit plans, 1033 Future(s), 1143–1144 Future amounts, calculating annuity-due values for, TVM-19 Future- and present-value techniques, TVM-4–20 Future benefits compared to clearly defined benefits, 1060 Future dividends, constant, 1326 Future growth rates, 1327 Future performance, forecasting, 185–189 Future tax rates, enacted changes in, 978 scheduling for enacted, 989–990 Future value, TVM-1 Future value of a single payment, TVM-9, TVM-21 an annuity, TVM-12 an annuity due, TVM-18, TVM-25 an ordinary annuity, TVM-23 Futures contract, 1134 GAAP, see generally accepted accounting principles defined, 18–19 international differences, 20 GAAP oval, 298 GAAP/IFRS differences, summary of, 1288–1295 Gain(s), 161, 642 contingent, 1146 curtailment, 1058 deferred, 1049 indicated, 645 Gain or loss, deferred pension, 1048 pension, 1050–1052 Gain recognition, revenue and, 161–163 Gains and losses, adjustments, 1237 deferral of, 1048 from changes in market values, 166 unrealized, 859–860 Gains and revenues, other, 171 Gas and oil exploration costs, 569–571 GASB, see Governmental Accounting Standards Board General journal, 56 General ledger, 57 General reserves, 801 Generally accepted accounting principles (GAAP), 12, 569, 576, 579, 635, 646, 773, 780, 788, 842, 853, 936, 978, 981, 983, 1085, 1149, 1155, 1157, 1187, 1248, 1251, 1285, 1287, FV-3, FV-6 defined, 18–19 international differences, 20 General-purpose financial statements, 10 Global economy, 286 Global market, accounting in a, 1280–1298 Going concern, 31 Goods, notes exchanged for, 351 Goods in transit, 456–457 Goods on consignment, 457 Goodwill, 551, 564, 577 impairment of, 639 testing for impairment, 639–641 Governmental Accounting Standards Board (GASB), 13 Grant of equity interest, 726 Gross method, 326, 461 Gross profit, 170 Gross profit method, 482–484 Gross profit percentage, 170, 484 Group depreciation, 626 Group methods, 626 Growth rates, future, 1327 Guaranteed residual value, 909, 928 Half-year convention, 650 Health care plans, formal vs informal, 1059 postretirement, 1059–1060 Indexes Hedge, 713, 723 cash flow, 1138 fair value, 1138 Hedging, 1137 Hedging activities, 1137–1138 accounting for, 1138–1145 Held-to-maturity category, transferring, 864–865 Held-to-maturity securities, 839, 855 Historical cost, 28 Home Depot Scenario (failed earnings), 222 Horizon, forecasting, 1327 Hospital insurance, federal, 1023 Hypothetical transaction, fair value, FV-7 IAS 2, 476, 482 IAS 7, cash flow categories under, 227 IAS 10, 121 IAS 16, 580, 635 IAS 32, convertible debt issuance according to, 710 IAS 36, 635, 641 IAS 38, 579 IAS 39, 348 IASB, 32 history of, 1285–1286 see International Accounting Standards Board IASB standards, 776 Idle cash, 335 If-converted method, 1095 IFRS 3, 579 IFRS 5, 175 IFRS, see International Financial Reporting Standards IFRS/GAAP differences, summary of, 1288–1295 Immediate recognition, 165 Impact of uncollectible accounts on statement of cash flows, 354–356 Impairment, 636 information disclosed, 633 international accounting for intangible, 641 measurement of, 873 testing goodwill for, 639–641 Impairment loss, measurement of, 633 Impairment of goodwill, 639 intangible assets not subject to amortization, 638–639 intangibles, 636–641 intangibles subject to amortization, 637–638 loan, accounting for, 872–875 tangible assets, 632–636 Implicit (effective) interest, 349 Implicit interest rate, 910 I-9 I-10 Indexes Subject Index Imputed interest rate, 353 Incentives, 10 Income, 157 comprehensive, 30, 183–185 defined, 157–159 financial, 968 measure of, 160–166 net, 180–183 operating, 171 other comprehensive, 106 pretax financial, 974 taxable, 968, 974 Income approach, FV-8 Income from continuing operations, 169–173 before income taxes, 172 Income measurement, importance of, 159 method of, 160–166 Income smoothing, 288 Income statement, 155–189 and balance sheet, relationship, 116–117 components of, 169–183 equity items that bypass, 798–800 form of, 166–169 Income statement accounts, forecast of, 188 Income statement presentation of revenue, 398–400 Income tax, 966–999, 1024, 1249 allocation of, intraperiod, 172 cash paid for, 1247 income from continuing operations before, 172 on continuing operations, 172 Income tax assets, deferred, 100 Income tax depreciation, 649–651 Income tax effects, 474 Income tax liability, deferred, 103, 1239 simple deferred, 970–971 Incorrectly capitalizing an expenditure, 1203 Incremental borrowing rate, 910 Indenture, bond, 695 trust, 694 Index, price, 496 use of a, 496–497 Indicated gain, 645 Indicated loss, 645 Indirect and direct methods compared, 232 Indirect materials, 452 Indirect method, 228, 231 rules of thumb, 1241 statement of cash flows, 1240 Industry comparison, 475 Infinite period, discounted cash flows, FV-12–13 Influence, investment for, 837–838 Informal health care plans, 1059 Information about items not in financial statements, 118 Initial direct costs, 923 Initial markup, 491 In-process R&D, acquired, 576 Input measures, 405 Installment sales, 458 complexities of, 419 of merchandise, 418 Installment sales method, 417–420 Insufficient user skepticism, 303–304 Intangible asset(s), 100, 550–552 accounting for acquisition of, 571–580 categories of, 573 franchise, 550 goodwill, 551 not subject to amortization, impairment of, 638–639 order backlog, 551 subject to amortization, impairment and amortization of, 637–638 trademark, 550 Intangible impairment, international accounting for, 641 Intangibles, acquired in acquisition of a business, 576–580 acquired in basket purchase, 573–576 acquired in-process R&D, 576 amortization and impairment of, 636–641 contract-based, 574 estimating fair value of, 574 expected cash flow approach, 575 internally generated, 572 international accounting for, 579 separately tradable, 574 traditional approach, 575 Integral part of the annual period concept, 1158 Interest, TVM-2 and dividends received, 1248 cash paid for, 1247 compound, TVM-3 computing, TVM-2–4 computing compound, TVM-3 during period of construction, 557 effective rate of, TVM-4 implicit (effective), 349 minority, 785 noncontrolling, 785 simple, TVM-3 simple and compound compared, TVM-3–4 Interest cost, 1037, 1043 Interest earned, times, 721 Interest entities, variable (VIEs), 717–718 Interest expense, 237 Interest paid, 1248 Interest rate, determining the, TVM-15 implicit, 910 imputing an, 353 Interest rate risk, 1131 Interest rate swap, 1133 Interest revenue for debt securities, 845–846 Interest-bearing note, 349 Interim financial statement, 1157 Interim LIFO liquidation, 472 Interim reporting, 1156–1159 Internal earnings target, 285 Internal Revenue Service (IRS), 18, 968 Internal targets, meet, 285–286 Internally generated intangibles, 572 International accounting, and inventory valuation, 476 equity reserves, 800–801 of leases, 935–937 International accounting for asset impairment, 635 deferred taxes, 995–997 intangible impairment, IAS 36, 641 intangibles, 579 R&D, 569 subsequent events, 121 International accounting issues, 19–21 International Accounting Standard 7, 1248–1249 International Accounting Standards (IASs), 20 International Accounting Standards Board (IASB), 20–21, 1285–1286 International cash flow statements, 1248–1251 International Financial Reporting Standards (IFRS), 20, 175 International Organization of Securities Commissions (IOSCO), 1286 International reserves, 107 Interperiod tax allocation, 974 asset and liability method, 975 Intraperiod income tax allocation, 172 Inventoriable costs, 459 Inventory, 452 defined, 451–454 effects of errors in recording, 485–487 number of day’s sales in, 488, 1315 ownership of, 456–458 Subject Index required disclosure related to, 489 returned, 481–482 Inventory accounting changes, 476 Inventory and cost of goods sold, 448–503 Inventory cost, defined, 458–462 items included in, 459–460 Inventory cost flow, 453 Inventory errors, analysis of, 486 Inventory information used for financial analysis, 487–489 Inventory methods, bookkeeping costs, 475 impact on financial statements, 475 income tax effects, 474 industry comparison, 475 international accounting, 476 retail, 489–492 periodic, 454 perpetual, 454, 468 Inventory systems, 454–456 Inventory transactions, foreign currency, 501–503 Inventory turnover, 487, 1314 Inventory valuation at other than cost, 477–482 methods, 462–468 comparison of, 466 Inventory value, accounting for declines in, 482 assigned, 481–482 Investing activities, 225 noncash, 226, 1247 Investment for a return, 836–837 influence, 837–838 Investment securities, and statement of cash flows, 866–868 classification according to IFRS, 842 classification of, 838–842 recognition of revenue from, 844–853 Investments, 100 Investments in debt and equity securities, 832–875 noncurrent operating assets— acquisition, 544–584 noncurrent operating assets, utilization and retirement, 614–651 Investors, 10 IPO, window dressing for, 289 Irregular items, 173–180 IRS, see Internal Revenue Service Issuance of bonds, 699–701 capital stock, 763–766 capital stock in a business combination, 766 Issuance or reacquisition of common stock, 1087 Issuers of bonds, 695 Joint ventures, 718, 852 Journal, 55 general, 56 special, 56 Journal entry, 53 basic pension, 1039 Journalizing transactions, 55–56 Junk bonds, 697 Keiretsu, 31 KnowledgeWare Scenario (failed earnings), 222 Land, 549, 1243 Large stock dividend, 793 Last-in, first-out (LIFO) method, 465 Later revenue recognition, 164 Lawsuits, accounting for, 1149–1151 LCM, see lower of cost or market Lease classification criteria, 911 application of, 913–914 Lease expense, 916 Lease impact on statement of cash flows, summary of, 931 Lease obligations, long-term, 102 Lease payments, minimum, 909 operating leases with varying, 915 schedule of, 917, 920 Lease term, 908 Lease(s), 715–716, 902–939 accounting for, 914–988 capital, 555 defined, 904 direct financing, 922, 924–927 disclosure requirements for, 932–934 international accounting of, 935–937 nature of, 908–910 operating, 555, 922 sales-type, 923 simple example, 906–907 with bargain purchase option, 919 Leasing, 555 economic advantages of, 904–906 Ledger, 56 subsidiary, 57 Ledger accounts, posting to, 56–57 Lend-Lease Bill, 912 Lessee, 604, 932 Lessee and lessor, classification criteria, 911–913 Indexes Lessee’s statement of cash flows, treatment of leases on, 921–922 Lessee-guaranteed residual value, accounting for leases with, 920 Lessor, 904 revenue recognition criteria, 913 Lessor’s statement of cash flows, treatment of leases on, 930–932 Leverage, 115 Leverage ratios, 1317 Liabilities, 96, 684 classification of, 685–686 contingent, 103 current, 101–102 defined, 684–685 measurement of, 686–688 noncurrent, 102–104 reporting equity-related items as, 712, 780–785 unrecorded, 61 Liability, deferred income tax, 103 defined, 96 estimated, 103 pension-related, 1039 Liability account, credit to, 63 Liability method of interperiod tax allocation, 975 LIFO and average cost compared, 474–477 and FIFO, summary comparison, 475 and income taxes, 472–474 conformity rule, 472 inventory pools, 474 layers, 40, 469–471 liquidation, 471–472 method, 469–474 pools, 493–494 and dollar-value LIFO, 474 reserve, 470 Line of credit, 690–692 Liquidating dividends, 796 Liquidity, 112 Loan, accounting for impairment of, 872–875 secured, 693 window dressing for, 289 Loan amortization, 693 Loan covenant, 114 Loan impairment, example of accounting for, 873–875 Long-term assets, analysis of, 1243 Long-term debt, 102, 694 and stockholders’ equity, analysis of, 1245 present value of, 692–693 I-11 I-12 Indexes Subject Index Long-term investments, 1243 Long-term lease obligations, 102 Long-term planning, 187 Long-term service contracts, accounting for, 414–416 Loss, 161, 642 contingent, 1146 curtailment, 1058 deferred, 1049 indicated, 645 net, 180–183 Loss and expense recognition, 165 Loss of reputation, massive, 304 Loss on self-construction, 557 Loss or gain, deferred pension, 1048 pension, 1050–1052 Losses and expenses, other, 171 Losses and gains, adjustments, 1237 deferral of, 1048 from changes in market values, 166 unrealized, 859–860 Lower of cost or market (LCM), 477–481 retail inventory method, 491–492 Lower-of-cost-or-market method, applying, 478 Lowest possible EPS figure, 1100 Maintenance, 566 Management accounting, and control of cash, 338 cash, 335–340 meltdowns, elements of earnings, 300–305 Managing earnings, pros and cons, 297–300 Mandatorily convertible securities, 1098 redeemable preferred shares, 781–782 Manual system, 50 Manufacturing overhead, 453 Margin, 1316 Margin vs turnover, 1316 Markdowns, 491 Market, defined, 477 most advantageous, FV-7 principal, FV-7 Market (in lower of cost or market), 477 Market approach, FV-8 Market multiples, FV-9–10 Market participants, FV-7 Market price of bonds, 697–699 Market rate, 698 Market values, changes in, 166 gains and losses from changes in, 166 Market-related value of the pension fund, 1049 Markups, 491 Massive loss of reputation, 304 Matching, 165 Matching method, 161 Materiality, 26, 294 Matrix pricing, FV-10–11 Maturity, retirement of bonds at, 706 Maturity value, 102, 695 Measurement, 28 Measurement issues of debt, 684–688 Measurement model, 401 Measurement of impairment, 873 Measures of activity, other, 1316 Measuring property, plant, and equipment efficiency, 581–584 Measuring the percentage of completion, 405–406 Meet external expectations, 286–288 Meet internal targets, 285–286 Merchandise inventory, 452 understatement of, 1198 purchases, failure to record, 1200 sales, failure to record, 1200 Methods of depreciation, 620–627 Minimum lease payments, 909 Minority interest, 107, 781, 785 Model, customer consideration, 401 measurement, 401, 402 Modified accelerated cost recovery system (MACRS), 649 Monetary units, stable, 31 Moore’s law, 1230 Mortgage, 692 Mortgage amortization, 693 Multiemployer pension plan, 1030 Multiple potentially dilutive securities, 1099–1101 illustration, 1103–1105 Multiple-step form, 166 Municipal debt, 695 National accounting standards, dangers of differing, 1284–1285 Natural increase, 187 Natural resources, 628 depletion of, 628–629 Nature of bonds, 695–697 Negotiable notes, 349 Net income and dividends, 787 and operating cash flow, relationship, 229 or loss, 180–183 standardized distribution of annual, 287 Net method, 460 Net operating loss (NOL) carryback, 986 carryforward, 986 Net periodic pension expense, 1034 Net realizable value, 28, 327 Neutrality, 26 No-deferral approach, 995–996 Nominal (temporary) account, 65 Nominal accounts, closing, 65–67 Noncancelable, 908 Noncash and cash items, classification of, 336 investing and financing activities, 226, 1247 Noncontributory pension plans, 1030 Noncontrolling interest, 579, 785 Noncumulative preferred stock, 762 Noncurrent asset, 100–101 intangible assets, 100 investments, 100 other assets, 100 property, plant, and equipment, 100 Noncurrent liabilities, 102–104 contingent liabilities, 103 deferred tax liability, 103 long-term debt, 102 long-term lease, 102 other, 103 Noncurrent operating assets, 544–584 defined, 548 investments in, 614–651 utilization and retirement, 614–651 Nondetachable conversion feature, 708 warrants, 771 Nonfunded insurance plans, 1059 Non-GAAP accounting, 291 Non-interest bearing note, 349 Nonmonetary assets, exchange of, 555 retirement by exchange, 643 Nonmonetary exchange without commercial substance, 644–647 Nonpay-related and pay-related benefits, 1060 Nonreciprocal transfer to owners, 792 Nonroutine employee compensation issues, 1027–1029 Subject Index Non-sufficient-funds (NSF) check, 339 Nontrade notes payable, 688 receivables, 325 Norwalk Agreement, 1287 Note, interest-bearing, 349 negotiable, 349 non-interest bearing, 349 promissory, 348, 688 Note receivable, selling a, 352 value of, 352 Notes exchanged for cash, 351 property, goods, or services, 351 Notes payable, 688 nontrade, 688 trade, 688 Notes receivable, 324, 348–354 valuation of, 349–350 Notes to financial statements, 92–123 supplemental information, 119 Notional amount, 1140 Number of day’s sales in inventory, 488, 1315 Objective acceleration clauses, 102 Objectives of financial reporting, 23–24 Obligation, asset retirement, 563 callable, 101 short-term expected to be refinanced, 689–690 Obligation discount rate, 1037 Obligation to issue shares of a certain dollar value, 783–784 Observable input, FV-8 Off-balance-sheet financing, 683, 715–720 reasons for, 719 Offsets on the balance sheet, 107 Oil and gas exploration costs, 569–571 Operating activities, 224 illustration, 229–233 Operating assets, noncurrent, 548 Operating cash flow, and net income, relationship, 229 equity method securities and, 868 Operating cycle, 99 of a business, 323–325 Operating expenses, 171 Operating income, 171 Operating leases, 555, 715, 922 accounting for, 915 with varying lease payments, 915 Operating liabilities, short-term, 688 Operating losses, carryback and carryforward of, 985–988 Operations, discontinued, 173 reporting requirements for, 174 income from continuing, 169–173 reporting cash flow from, 227–233 Opinions, audit, 11 Option(s), 1135, 1144–1145 stock, 1093 warrants, and rights, 1092–1094 writer of the, 1136 Order backlog, 551 Ordinary annuity, TVM-16 vs annuity due, TVM-16–20 Original retail, 491 Other comprehensive income, 106 Output measures, 406 Outstanding checks, 339 Overall leverage, 115 Overall profitability, 116 Overdraft, cash, 336 Overhead chargeable to self-construction, 556 manufacturing, 453 Owner’s equity, 104–107 available-for-sale securities, 106 contributed capital, 104 derivatives, 106 foreign currency translation adjustments, 106 international reserves, 107 minority interest, 107 other comprehensive income, 106 other equity, 105 retained earnings, 105 statement of changes in, 29 time line of issues associated with, 758 treasury stock, 106 unrealized gains and losses, 106 Paid-in capital, 104, 757 additional, 104, 764 nature and classification of, 758–763 Par value, 695, 760 and share premium, 800 of publicly traded stock, 761 of stock, 760 Par (or stated) value method, 767 evaluating, 769 Parent company, 847 Partial periods, depreciation for, 647–648 Partial recognition approach, 996–997 Indexes Participating preferred stock, 762 securities and two-class method, 1090–1091 Partnerships, 104 Passing of title, 456 Patents, 1244 Pattern of use, 619 Pay-as-you-go accounting, 1059 Pay-fixed swap, 1133 Payment(s), and cash receipts by category, 224 determining the amount of, TVM-15 of dividends, 791 Payroll and payroll taxes, 1023–1025 Payroll taxes, accounting for, 1025 PCAOB, see Public Company Accounting Oversight Board Pension, accounting for, 1029–1040 comprehensive illustration, 1040–1054 postretirement benefits other than, 1030 Pension accounting, illustration of, 1034–1040 Pension benefits, vesting of, 1033 Pension expense, computation of, 1037 net periodic, 1034 Pension fund, 1031 actual return on, 1044 difference between actual and expected return, 1049 expected return on, 1049 fair value of the, 1038 market-related value of the, 1049 return on, 1037 Pension gain or loss, deferred, 1048 deferred net, 1050 Pension journal entries, basic, 1039 Pension obligation, estimation of, 1034 Pension plan, 1029 contributions, 1046 contributory, 1030 curtailment of, 1057 defined benefit, 1031 defined contribution, 1030 disclosure of, 1054–1058 employer, 1030–1033 funding of, 1030 multiemployer, 1030 noncontributory, 1030 settlement of, 1055 single-employer, 1030 I-13 I-14 Indexes Subject Index Pension Protection Act, 1046 Pension settlements and curtailments, 1055–1058 Pension-related asset, 1039 Pension-related liability, 1039 computation of, 1039 Percentage of completion, measuring the, 405–406 Percentage-of-completion accounting, 403 concepts of, 404 conditions for, 404–405 cost-to-cost method, 408–410 other methods, 410 Percentage-of-completion method, anticipated contract loss, 413 Percentage of sales, uncollectibles based on, 329 Performance, forecasting future, 185–189 Performance of services, revenue recognition after, 416–421 revenue recognition prior to, 403–414 Performance-based plans, accounting for, 776–778 stock option plan, 776 Period costs, 459 Periodic depreciation, recording, 619 Periodic depreciation charge, factors affecting, 618–619 Periodic inventory system, 454 Periods, determining the number of, TVM-13–15 Period-specific effects, determining, 1194 Permanent account, 65 Permanent differences, 972 illustration, 974 Perpetual inventory system, 454 complications with, 467 inventory valuations methods and, 468 Perpetuity, 1326 Personal ethics, 299–300 importance of, 34 Persuasive evidence of an arrangement, 389–390 Physical capital maintenance, 158 and income determination, 158 Plan contributions, 1046 Planning, long-term, 187 Pooling of interests, 577 Pooling-of-interests method, 766 Possible contingencies, accounting for, 1146–1152 Postacquisition expenditures, 566–567 Post-balance sheet events, 120 Post-closing trial balance, 68 preparing, 68 Postemployment benefits, 1028–1029 Posting, 56 to ledger accounts, 56–57 Postretirement benefits other than pensions, 1030, 1058–1061 health care plans, 1059–1060 Predictive value, 25 Preferred shares for common shares, 786 mandatorily redeemable, 781–782 Preferred stock, 104, 759, 760–763 callable, 762 convertible, 762 cumulative, 761 included in capital structure, 1088–1090 noncumulative, 762 participating, 762 redeemable, 762 Prepaid expenses, 61 failure to record, 1201 Present (or discounted) value, 29 Present value, 327, TVM-1 actuarial, 1033 calculating annuity-due values for, TVM-19 Present value of a single payment, TVM-10, TVM-22 an annuity, TVM-12 an annuity due, TVM-18, TVM-26 an ordinary annuity, TVM-24 long-term debt, 692–693 series of unequal payments, TVM-11 Present- and future-value techniques, TVM-4–20 Pressure to meet expectations, 302 Pretax financial income, 974 subject to tax, 974 Price, effects of changing, 179 fixed or determinable, 395–398 Price index, 496 Price risk, 1131 Price-earnings multiple, 1326 Price-earnings (P/E) ratio, 182, 1321 Principal, TVM-3 Principal (face amount), 349 Principal market, FV-7 Prior service cost (PSC), 1042, 1045 amortization of, 1045 Prior-period adjustments, 185, 788–789 Pro forma cash flow statement, 223 disclosures after business combination, 1194–1196 earnings, 295–296 earnings number, 295 Probable contingencies, accounting for, 1146–1152 Product (inventoriable) costs, 459 Production, change in estimated units of, 630–631 Productive-output depreciation, 625 Profit, gross, 170 Profitability, overall, 116 Profitability ratio, 1313 Project benefit obligation (PBO), 1035 Project financing arrangements, 719 Promissory note, 348, 688 Property, notes exchanged for, 351 plant, and equipment, 100 efficiency, measuring, 581–584 evaluating level of, 582 Property dividend, 792 Proportional cost approach, 410 performance method, 403 long-term service contracts, 414–416 Proprietorships, 104 Prospective application, 1194 Public accounting, 33 Public Company Accounting Oversight Board (PCAOB), 17 Public relations, financial reporting as part of, 297 Purchase commitments, 500–501 failure to record merchandise, 1200 for control, 838 method, 577, 766 returns and allowances, 461–462 Purchase of asset during lease term, accounting for, 920 debt securities, 843 equity securities, 843–844 securities, 842–844 Put option, 1135 Qualitative characteristics of accounting information, 24–27 Quick ratio, 114 R&D accounting, future of, 569 Ratio(s), acid-test, 114 book-to-market, 122, 1321 cash flow adequacy, 242, 1319 cash-flow-to-net-income, 241 cash times interest earned, 242 current, 113, 1319 Subject Index debt, 115, 1317 debt-to-equity, 720, 1318 dividend payout, 1083, 1321 earnings-price, 1321 efficiency, 1313 financial, 112 summary of selected, 1323 fixed asset turnover, 582 leverage, 1317 other common, 1319–1322 price-earnings (P/E), 182, 1321 profitability, 1313 quick, 114 selected, 114 Rational allocation, 165 Raw materials, 452 Reacquisition of common stock, 1087 Real (permanent) account, 65 Receivable, notes, 348–354 Receivables, 324 aging, 330 and sales in financial statements, presentation of, 341–343 as source of cash, 343–348 assignment of, 346 derecognition of, 348 sale without recourse, 345–346 selling with recourse, 345 unrecorded, 60 Receive-variable swap, 1133 Recognition, 28, 386 Recognition and payment of dividends, 791 Recognition approach, comprehensive, 995–996 partial, 996–997 Recognition criteria, 28 Recognition of revenue from debt securities, 844–846 equity securities, 846–853 investment securities, 844–853 Reconciliation, bank, 338 Reconciliation schedule, 1247 Recording inventory, effects of errors in, 485–487 periodic depreciation, 619 phase, 51, 53–57 Recoverable amount, 635 Redeemable preferred stock, 762 Redemption by exercise of call provision, 707 purchase of bonds in the market, 707 Reductions in cost, discounts as, 460–461 Refinancing, bond, 711 Registered bonds, 696 Regulatory investigation, 304 Relevance, 24 Reliability, 25 Remeasurement, 1296 Remote contingencies, accounting for, 1146–1152 Renewals, 567 Repairs, 566 Replacement(s), 567 warranties for, 332–333 Replacement cost, 477 adjusted, FV-13–14 current, 28 Reporting cash flow from operations, 227–233 Reporting phase, 51 accounting cycle, 57–68 Representational faithfulness, 26 Repurchase agreements, 458 Repurchased shares, retirement of, 770 Reputation, massive loss of, 304 Required disclosure for error restatements, 1203–1205 related to inventory, 489 Research, 567 Research and development (R&D), 567 arrangements, 719 expenditures, 567–568 Residual (salvage) value, 618, 909 guaranteed, 928 third-party guarantees of, 929 unguaranteed, 929 Residual value guarantee, accounting for sales-type lease with, 928 Restoration costs at retirement, and acquisition of asset, 563–564 Restructuring charge, 172 Restructuring, troubled debt, 723 Retail inventory method, 489–492 defined, 490 lower of cost or market, 491–492 Retained earnings, 104, 105, 757, 1192 appropriated, 790 factors affecting, 787–790 other changes in, 789 restrictions, 789–790 Retirement, asset, 641–647 Retirement obligation, asset, 563 of bonds at maturity, 706 of repurchased shares, 770 Return, investment for a, 836–837 Return on assets, 116 equity, 116 pension fund, 1037 actual, 1044 sales, 180 the pension fund, expected, 1049 Returned inventory, 481–482 Indexes Returns and allowances, purchase, 461–462 sales, 327 Revalued asset, recording disposal of, 636 Revenue, 161, 170, 323 and gain recognition, 161–163 and gains, other, 171 failure to record accrued, 1201 failure to record unearned, 1202 for classified securities, 849 unearned, 62 Revenue account, credit to, 63 Revenue from debt securities, recognition of, 844–846 equity securities, recognition of, 846–853 investment securities, recognition of, 844–853 Revenue recognition, 161, 294, 382–421, 386–388 after delivery of goods or performance of services, 416–421 asset-and-liability approach, 400–402 earlier, 163 later, 164 prior to delivery of goods, 403–414 prior to performance of services, 403–414 time line and criteria, 387 Revenue recognition criteria, lessor, 913 Revenue/receivables/cash cycle, 320–356 Reverse recognition accounting (RRA), 570 Revision of estimates, 410–412 Rights, options, and warrants, 1092–1094 stock, 1093 Risk, credit, 1131 exchange rate, 1131 interest rate, 1131 price, 1131 types of, 1131–1132 Routine employee compensation issues, 1022–1027 SAB, see Staff Accounting Bulletins SAB 101, question 1, 389 question 2, 390 question 3, 391 question 4, 391 question 5, 392 I-15 I-16 Indexes Subject Index question 6, 392 question 7, 395 question 8, 396 question 9, 397 question 10, 398 SAB 101/104, 388–400 Safety cushion, 835 Sale, short, 1130 Sale of asset during lease term, 930 receivables without recourse, 345–346 securities, 858–862 impact on unrealized gains and losses, 859–860 Sale-leaseback, 937 transactions, 937–939 Sales, 231 and cash collected from customers, 230 and receivables in financial statements, presentation of, 341–343 complexities of installment, 419 conditional, 458 failure to record merchandise, 1200 installment, 458 of merchandise, installment, 418 return on, 180 uncollectibles based on percentage of, 329 Sales discount, 326 Sales returns and allowances, 327 Sales revenue, accounting for, 325–333 Sales-type leases, 923 accounting for, 927–930 illustrative entries for, 927 with bargain purchase option, accounting for, 928 with guarantee of residual value, accounting for, 928 with unguaranteed residual value, accounting for, 929 Salvage value, 618 Sarbanes-Oxley Act, 6, 286, 390 Savings or loss on selfconstruction, 557 Scheduling for enacted future tax rates, 989–990 SEC, see Securities and Exchange Commission SEC Form 8-K filing, 16 SEC Form 10-K filing, 16 SEC Form 10-Q filing, 16 Secured bonds, 696 borrowing, 346–347 loan, 693 Securities, accounting for change in value of, 853–857 accounting for temporary changes in value of, 854–856 acquisition by issuing, 556 antidilutive, 1085 available-for-sale, 798, 840, 855, 866–867 categories of, 841 convertible, 1095–1097 convertible debt, 708 debt, 839, 843, 844–846 declines in the fair value of, 856–857 dilutive, 1084 equity, 839, 843, 846–853 equity method, 840, 856, 868 financial statement disclosure of, 855 held-to-maturity, 839, 855 investment, 844–853 investment and statement of cash flows, 866–868 mandatorily convertible, 1098 multiple potentially dilutive, 1099–1101, 1103–1105 participating, and two-class method, 1090–1091 purchase of, 842–844 revenue for classified, 849 sale of, 858–862 trading, 99, 840, 854, 867 transferring between categories, 862–865 Securities and Exchange Commission (SEC), 12, 16 Segment reporting, 1152–1156 Segments, business, 1153–1156 Self-constructed assets, 556 Self-construction, 556–561 overhead chargeable to, 556 savings or loss on, 557 Selling receivables with recourse, 345 Separately tradable intangibles, 574 Serial bonds, 696 Service, warranties for, 332–333 Service cost, 1037, 1043 amortization of prior, 1045 Service period, expected, 1045 Services, future transfer of, 684 notes exchanged for, 351 Services rendered, 391 Service-hours depreciation, 624 Settlement, 1057 of a pension plan, 1055 Share premium, 800 Share-based compensation, accounting for, 773–780 Shareholders’ equity, 104 Shares of a certain dollar value, obligation to issue, 783–784 Short sale, 1130 Shortcut test for antidilution, 1097 Short-term debt, 688–689 Short-term debt obligations, accounting for, 688–692 Short-term obligations expected to be refinanced, 689–690 Short-term operating liabilities, 688 Shrinkage, 455 Significant influence, 847 Simple and complex capital structures, 1084–1086 capital structure, 1086 deferred income tax liability, 970–971 deferred tax asset, 971 interest, TVM-3 Single-employer pension plans, 1030 Sinking fund, 101, 336 Sixteenth Amendment, 617 Small stock dividend, 793 Social security, 1021, 1022, 1024 Software, development of successful, 568 Software development costs, 568 SOP 98-5, 574 Source document, 55 Special journal, 56 Special reserves, 801 Special valuation problems, 350–354 Special-purpose entity (SPE), 346 Specific identification, 463–464 Specific identification method, 463 Spot rate, 502, 1134 Spreadsheet, using a, 65 Stable monetary units, 31 Staff Accounting Bulletins (SABs), 16 Stakeholder groups, internal and external, Stakeholders, Standardized distribution of annual net income, 287 Standard-setting process, 13–15 State unemployment insurance, 1024 Stated rate, 698 Stated value, 760 Stated value method, 767 Stated value method of accounting for treasury stock, 768 Stated value of stock, 760 Statement of cash flows, 223, 1228–1266 and absence of detailed transaction data, 1234–1236 and articulation, 218–248 computation of change in cash balance, 1237 Subject Index deferred taxes and, 994–995 direct and indirect methods, 1240 expanded illustration of, 1251–1256 forecasted, 245–248 illustration of 6-step process, 1237–1247 impact of uncollectible accounts, 354–356 investment securities and, 866–868 lessor’s, 930–932 preparing a complete, 233–239, 1232–1248 preparing a formal, 1246 preparing supplemental disclosure, 1247 6-step process for, 1236 summary of lease impact on, 931 treatment of leases, 921–922 Statement of changes in owner’s equity, 29 stockholders’ equity, 802 Statement of stockholders’ equity, 185 Statements of Financial Accounting Concepts, 13 Statements of Financial Accounting Standards, 13, 14 Stock, callable preferred, 762 capital, 104, 763–766 common, 104, 759 convertible preferred, 762 cumulative preferred, 761 noncumulative preferred, 762 par value of, 760 par value of publicly traded, 761 participating preferred, 762 preferred, 104, 759, 760–763, 1088–1090 redeemable preferred, 762 stated value of, 760 treasury, 106, 767–770, 1245 Stock appreciation rights (SARs), 778 Stock conversions, 785–786 Stock dividend(s), 792–796, 1087–1088 as signals, 796 large, 793 small, 793 vs stock splits, 794, 795 Stock option compensation plan, basic, 774–776 plan, performance-based, 776 Stock options, 770 current developments in accounting for, 779–780 diluted earnings per share, 1094 warrants, and rights, 1093 Stock repurchases, 766–770 Stock rights, 770, 771 warrants, and options, 770–773 Stock split, 794, 1087–1088 Stock warrants, 770, 771–773 Stock-based compensation and bonuses, 1027–1028 Stockholders’ (shareholders’) equity, 104 statement of, 183–185 statement of changes in, 802 Straight-line depreciation, 620 Straight-line method, 702 Strategic matching, 290 Subjective acceleration clause, 102 Subscription, 764 capital stock sold on, 764–765 Subscription defaults, 765 Subsequent event interval, 120 Subsequent events, 120 international accounting for, 121 Subsidiaries, unconsolidated, 716 Subsidiary company, 847 ledger, 57 Successful efforts method, 569 Sum-of-the-years’-digits depreciation, 621 Supplemental disclosure, preparation of, 1247 Supplementary information, 119 Support summary totals, additional information to, 118 Swap, 1133, 1140–1141 pay-fixed, 1133 receive-variable, 1133 Systematic allocation, 165 Tables, use of, TVM-6–7 Tangible asset(s), 549 buildings, 549 equipment, 549 impairment of, 632–636 land, 549 Tax, federal old-age, survivors’ and disability, 1023 income, 1024 pretax financial income subject to tax, 974 Tax allocation, interperiod, 974 Tax asset(s), deferred, 979–980 deferred income, 100 simple deferred, 971 valuation allowance for deferred, 981–985 Tax benefit, unrecognized, 985 Tax classification, deferred, 981 Indexes Tax liability, and assets, deferred, 980–981 deferred income, 1239 deferred, example, 976–979 deferred tax, 103 Tax positions, uncertain, 984 Tax rates, effective, 993 enacted changes in future, 978 scheduling for enacted future, 989–990 Tax Reform Act of 1986, 405, 967 Taxable income, 968, 974 Taxable temporary differences, 972 Taxes, deferred and statement of cash flows, 994–995 payroll, 1023–1025 Taxes payable, FIFO, 1192 Technological feasibility, 569 Temporary account, 65 Temporary changes in value of securities, accounting for, 854–856 Temporary differences, 972 deductible, 973 examples of, 973 illustration, 974 taxable, 972 Temporary investments, 336 Term bonds, 696 Terminal year, 1327 Third-party guarantees of residual value, 929 TIAA/CREF, 1031 Time deposits, 336 Time value of money review, TVM-1–26 Time-factor depreciation, 620 Time-factor methods, 620 depreciation patterns compared, 623 evaluation of, 623 Timeliness, 25 Times interest earned, 721, 1319 Time-value-of-money concept, TVM-1–2 Title, passing of, 456 Total information spectrum, 30 Trade discount, 326, 460 notes payable, 688 receivables, 324 Trademark, 550 Trading securities, 99, 840, 841, 854 cash flows from, 867 Trading security category, transferring, 864 Traditional approach, 575 Traditional assumptions of the accounting model, 31–32 Transaction approach, 160 I-17 I-18 Indexes Subject Index Transactions, 53 arm’s-length, 31 fictitious, 291 involving estimates, 63–64 past, 684 where cash has been exchanged in a prior period, 61–63 where cash will be exchanged in a future period, 60–61 Transfer of assets in full settlement, 724–725 Transfer to owners, nonreciprocal, 792 Transferring debt and equity securities, 863–865 securities between categories, 862–865 Transitory, irregular, and extraordinary items, 173–180 Translation, 1296 Translation adjustment, 1297 foreign currency, 106, 184, 798 Transparent financial reporting, 305–308 Treasury stock, 106, 767–770, 1245 cost method of accounting for, 768 par value method of accounting for, 768 Treasury stock method, 1093 Trial balance, 57 post-closing, 68 preparing, 57–58 Troubled debt restructuring, 723, 724 accounting for, 723–728 Trust indenture, 694 Turnover, 1316 accounts receivable, 333, 1313 fixed asset, 1315 vs margin, 1316 Two-class method, 1090 participating securities and, 1090–1091 U.S Constitution, Sixteenth Amendment, 617 U.S Treasury bonds, 695 Uncertain tax positions, 984 accounting for, 983 Uncollectible account(s), impact on statement of cash flows, 354–356 writing off, 328 Uncollectible accounts receivable, 327 Uncollectibles, estimating, 329, 330 Uncollectibles based on percentage of sales, 329 Unconsolidated subsidiaries, 716 Undelivered element, 394 Understatement of merchandise inventory, 1198 Unearned revenues, 62 failure to record, 1202 Unemployment insurance, federal, 1024 state, 1024 Unguaranteed residual value, 909, 929 Unit depreciation, 626 United Kingdom cash flow standard FRS 1, 1249–1251 Units of production, change in estimated, 630–631 Unobservable input, FV-8 Unrealized gains, 798 Unrealized gains and losses, impact of sale of securities on, 859–860 on available-for-sale securities, 106, 184 on derivatives, 106 Unrealized losses, 798 Unrecognized tax benefit, 985 Unrecorded liabilities, 61 receivables, 60 Unsecured bonds, 696 Upward asset revaluations, accounting for, 635–636 recognizing, 635 Use-factor depreciation, 624 Use-factor methods, evaluation of, 625 Useful life, 618 User of financial statements, 34 Valuation allowance, 981 under IAS 12, 983 Valuation methods, comparison of, 1329 inventory, 462–468 Valuation model, adjusted replacement cost, FV-13–14 discounted cash flows, finite period, FV-11–12 discounted cash flows, infinite period, FV-12–13 examples of, FV-9–14 market multiples, FV-9–10 matrix pricing, FV-10–11 Valuation of assets at fair values, 580–581 Valuation techniques, FV-8 inputs to, FV-8 Value, face, 695 fair, 28 feedback, 25 maturity, 695 net realizable, 28 par, 695 predictive, 25 present (or discounted) value, 29 Value of securities, accounting for change in, 853–857 accounting for temporary changes in, 854–856 Value of the pension fund, market-related, 1049 Variable interest entities (VIEs), 717–718 Verifiability, 26 Vested benefits, 1033 Vesting, 1033 Wages expense, 231, 237 and cash paid for wages, 230 Warranties, 332 for service or replacement, 332–333 Warrants, detachable, 771 nondetachable, 771 options, and rights, 1092–1094 stock, 770, 771–773, 1093 Wasting assets, 628 Weighted-average cost of capital, 306 Window dressing, 289 With recourse, sale of receivables, 345–346 Without recourse, sale of receivables, 345–346 Work in progress, 453 Working capital, 98 Writing off uncollectible account, 328 Written put options, 782–783 Yield rate, 698 Zero-interest bonds, 696 INDEX COMPANY INDEX AAA, see American Accounting Association ABC, see American Broadcasting Company Accounting Principles Board (APB), 12, 350, 351, 353, 567, 572, 711, 771, 772, 904, 967, 988, 1085, 1158, 1187, 1309 AES, 549 AICPA, see American Institute of Certified Public Accountants Aimco Properties, 630 Airbus, 903 Albertson’s Inc., 103, 150 Alimentation Couche-Tard, 220 Altra Holdings, Inc., 181 Altria, 1151 Altria Group, 750 Amazon.com, 464, 697 America Online, 1195 America West Airlines, 1188 American Accounting Association (AAA), 17, 21, 35, 302 American Airlines, 903 American Broadcasting Company (ABC), 833 American Electric Power, American Express, 323, 755, 833, 1131 American Institute of Certified Public Accountants (AICPA), 17, 69, 306, 405, 409, 473, 574, 624, 915, 1152, 1153 American Telephone and Telegraph Company, see AT&T Americans Physicians Service Group, 781 Ameritech, 156 Anheuser-Busch, 1282 AOL Time Warner, 172, 1195 APB, see Accounting Principles Board Apollo Group, 788 Apple Inc., 215–216, 549 Arthur Andersen, 45, 299, 303 Association for Investment Management and Research (AIMR), 1153 Aston Martin Lagonda Group Limited, 121 AT&T, 146, 155, 156, 169, 171, 174, 180, 550, 561, 770, 795, 988, FV-20, FV-26 Atlantic Richfield, 699 Automobile Protection Corporation, 121 AutoNation, 615 Bank of America, 146, 321, 322, 329, 550, 720, 721, 769, 770 Bank of Italy, 321 BankAmerica, 146 Barings PLC, 1128 Batelle Memorial Institute, 281 Bausch & Lomb Inc., 1225 Bear Stearns, 615, 616 Bell Atlantic, 156, 1184 Bell Labs, 281 Bell Telephone Company, 155 Bell-Atlantic-GTE, 177 BellSouth, 156, 699, 988 Ben & Jerry’s Homemade, Inc., 444 Berkshire Hathaway, 755, 759, 769, 770, 773, 833, 834, 836, 837, 838, 860, 868, 869, 870, 973, 974, 993, 1016–1017, 1083 Blockbuster Entertainment, 1225 Blockbuster Video, 615, 616 BOC (Bank of China), 581 Boeing Capital Corporation, 903 Boeing Company, 19, 164, 226, 551, 675, 903 Boston Celtics, 149–150, 749 Brinker International, 1327 Bristol-Myers, 576 British Petroleum (BP), 19, 541 British Petroleum Amoco (BP Amoco), 541 British Telecommunications (BT), 110–112, 124, 176 Buick Motor Company, 1281 Busicom, 1229 Business Roundtable, 1156 Cadbury Schweppes, 1123, 1283 Caltex, 853 Canon, 282 CAP, 967 Caterpillar, Inc., 334, 342, 343, 471, 540 Cathay Pacific Airways, 801 Celtics Basketball Holdings Limited Partnership, 749 Cerberus Capital Management, 1282 Chambers Development Company, 611 Chevron Corporation, 227, 562, 718, 770, 853 Chevron Texaco, 718 Chicago Bulls, 149 China Mobile Communications Corp., FV-25 China Mobile Ltd., FV-25 China Network Communications Corporation, FV-25 China Satellite Communications Corporation, FV-25 China Telecom Corporation, FV-25 China Tietong Telecommunications Corporation, FV-25 China Unicom Ltd’s Corporation, FV-25 Chrysler Motor Company, 923, 1281 Circle K Corporation, 219, 220, 221, 222, 241, 539, 540, 674 Cisco Systems, 5, 480 Citibank, 691 Citicorp, 334, 380 Citigroup, 105, 146, 321, 761, 833 Clear Channel Communications, 220 Coca-Cola Amatil, 848 I-19 I-20 Indexes Company Index Coca-Cola Company, 93–95, 108, 114, 116, 117, 120, 123, 124, 152, 183, 184, 185, 213, 219, 277, 384, 390, 550, 572, 687, 716, 748, 755, 759, 766, 833, 837, 838, 848, 856, 897, 898, 1152, 1156, 1184, 1320, 1344 Coca-Cola Enterprises, 93, 856, 897 Coinmach Service Corp., 789 College Bound Inc., 442 College Retirement Equities Fund (CREF), 833, 834 Columbia Pictures, 219 Columbus Savings & Loan Association, 321 ConocoPhillips, 220 Consolidated Edison, 108–110, 115, 146, 152 Continental Airlines, Inc., 611 Corning, 295 Critical Path, 781 Daimler Motor Company, 1281 Daimler-Benz AG, 302, 610, 1281, 1282, 1283, 1285, 1287 DaimlerChrysler, 610, 1282 Dallas Cowboys, 545–547, 552 Darden Restaurants, 1327 Deere & Co., 471, 487, 488 Dell Computer, 489, 750, 782, 1128 Deloitte & Touche, 33 Delta Air Lines, 291, 675, 676, 686, 687, 903, 932, 933, 1188, 1191, 1320 Deutsche Telekon, 1283 Diageo, 45, 151 Dimeco Inc., 789 Discover, 1131 Disney, see Walt Disney Company Dow Chemical, 550, 687 Duane Reade, 476 Duke Energy, Dun & Bradstreet, 1309 DuPont, 383, 449–450, 470, 576, 1312 eBay, 114, 115, 117 EITF, see Emerging Issues Task Force El Paso Corporation, Eli Lilly, 632 Eller Media, 220 Emerging Issues Task Force (EITF), 14–15 Enron, 3–6, 7, 45, 119, 123, 291, 299, 300, 301, 303, 304, 399, 717, 791, 1239 Environmental Protection Agency (EPA), 1151 Ernst & Young, 33, 1188 Euro Disney, 961 Exxon, 967, 1150, 1151 ExxonMobil, 105, 146, 233, 321, 334, 541, 560, 561, 569, 570, 692, 770, 973, 991, 992, 1028, 1150–1152 FAF, see Financial Accounting Foundation Fairchild Semiconductor, 1229 Fannie Mae, 1128 FASB, see Financial Accounting Standards Board FDA, 576 Federal Home Loan Bank, 695 Federal National Mortgage Association, 695 Federal Trade Commission, 580, FV-1 FedEx, 962 FEI, see Financial Executives International Financial Accounting Foundation (FAF), 13 Financial Accounting Standards Board (FASB), 12–13, 15, 68, 90, 101, 117, 119, 120, 152, 157, 159, 166, 175, 183, 225, 229, 294, 306, 335, 343, 345, 346, 380, 386, 397, 398, 400, 449, 473, 547, 551, 560, 565, 567, 568, 569, 570, 571, 572, 573, 574, 576, 578, 579, 580, 646, 684, 685, 689, 701, 706, 707, 709, 712, 714, 716, 717, 718, 719, 724, 726, 762, 763, 773, 774, 776, 777, 779, 780, 781, 782, 784, 785, 797, 798, 834, 840, 841, 847, 860, 862, 864, 865, 870, 872, 873, 904, 910, 911, 912, 919, 935, 936, 937, 967, 968, 975, 978, 981, 983, 986, 988, 989, 990, 994, 1026, 1028, 1030, 1036, 1041, 1043, 1045, 1048, 1049, 1054, 1057, 1058, 1060, 1084, 1085, 1086, 1092, 1093, 1098, 1128, 1130, 1138, 1139, 1143, 1145, 1146, 1147, 1148, 1149, 1151, 1152, 1153, 1154, 1155, 1156, 1158, 1183, 1184, 1187, 1189, 1190, 1194, 1196, 1205, 1246, 1247, 1248, 1249, 1258, 1283, 1285–1287, FV-1–FV-3, FV-5, FV-6, FV-11, FV-14, TVM-20 Financial Executives International (FEI), 296 Forbes, 545 Ford Motor Company, 121, 162, 163, 216, 233, 471, 489, 540, 676, 718, 838, 899, 923, 973 Ford North America, 121 Freddie Mac, 300 Frito Lay, 579, 1152 Frito-Lay North America, 1155, 1180 Gannett, 219 GASB, see Governmental Accounting Standards Board GE Capital Services, 289, 303, 582, 716 Geico, 755, 838 Genentech, Inc., 394 General Electric, 50, 105, 146, 233, 287, 289, 290, 310, 471, 550, 560, 561, 572, 582, 692, 720, 721, 766, 770, 903, 967, 973, 1184, FV-25 General Electric Capital Services, 692 General Growth Properties, Inc., 417, 1345–1346 General Motors (GM), 170, 224, 471, 489, 509, 630, 848, 923, 1021, 1022, 1055, 1056–1057, 1059, 1079, 1183, 1186, 1227, 1281, FV-2 General Motors Acceptance Corporation (GMAC), 224, 848 Getty Oil, 1146, 1147 Gibson Greetings, 1128 Gillette Company, 609, 837 Goldman Sachs, 233 Google, 759, 1090 Governmental Accounting Standards Board (GASB), 13 Great Atlantic & Pacific Tea Company (A&P), 150 GTE, 156 Gyrodyne Company of America, 557 Company Index H J Heinz Company, 1083, 1102, 1103, 1187, 1188 Haloid Company, 281 Harley-Davidson, Inc., 379–380 HealthSouth, 300 Hewlett-Packard, 699, 750, TVM-7 Home Depot, 6, 222, 302, 334, 549, 1239, 1307, 1308, 1309, 1316, 1317, 1320 Hospital Corp of America (HCA), 828 Houston Natural Gas, IAS, 101 IASB, see International Accounting Standards Board IBM Corp., 49, 50, 166, 167, 170, 171, 172, 180, 181, 194, 281, 282, 489, 550, 572, 681–683, 687, 690, 692, 695, 720, 721–723, 755, 802, 803, 848, 967, 988, 991, 992, 1178, 1179, 1184, 1219, 1229, 1230, 1296 IBM Credit Corporation, 716, 848 IFRS, 307, 842, 978, 981, 983 InBev, 1283 InfoSonics Corporation, 274 InfoSpace, 304 Intel, 95, 228, 550, 572, 837, 1229, 1230, 1231, 1247 Interbrand, 93, 610 Internal Revenue Service (IRS), 18, 44, 50, 159, 307, 328, 449, 473, 493, 494, 968, 983 International Accounting Standards Board (IASB), 20–21, 121, 227, 306, 307, 348, 399, 400, 561, 563, 569, 577, 579, 627, 629, 690, 710, 712, 716, 718, 763, 773, 776, 785, 842, 853, 862, 872, 912, 913, 935, 936, 978, 981, 983, 995, 996, 1035, 1042, 1051, 1085, 1145, 1147, 1148, 1149, 1154, 1155, 1158, 1186, 1248, 1283, 1285–1287, 1288–1295, FV-3 International Accounting Standards Committee (IASC), 1085 International Business Machines Corporation, see IBM Corp International Lease Finance Corporation (ILFC), 903, 934, 961 International Organization of Securities Commissions (IOSCO), 1286 Internorth, IRS, see Internal Revenue Service ITT Educational Services, 393 J.P Morgan Capital, 303 JDS Uniphase, 105 Jerry’s Famous Deli, Inc., 1187 Johnson & Johnson, 146, 770 JP Morgan Chase Bank, 691 K Swiss, 489 Kelly Services, 146 KFC, 1152 Kimco Realty, 397 Kinross Gold Corporation, 163, 164 Kirby, 755 KnowledgeWare, 222 KPMG, 33, 283, 284 Kraft Foods, 755 Indexes Levitz Furniture, 392 LG, 274 Little Traverse Bay Band of Odawa Indians, 697 Lockheed Martin Corporation, 90, 275–276, 444 Los Angeles Olympics Committee, 759 Lowe’s, 549 Major League Baseball, 759 Marriott Corporation, 748 Mars, 766 MasterCard 323, 364, 1131 Mazda, 718, 838 McDonald’s Corporation, 46, 114, 115, 146, 179, 180, 186, 334, 341, 383, 549, 551, 561, 572, 687, 691, 720, 837, 962, 963, 1122, 1187, 1188, 1317, 1320, 1326, 1327, 1328, 1329, 1343–1344 MemberWorks, 396 Mercedes-Benz, 572 Merck, 720 Merrill Lynch, 233, 303, 304 MGM Mirage, 549 Microsoft, 95, 114, 115, 116, 146, 180, 294, 334, 415, 572, 579, 681, 686, 687, 720, 755–757, 769, 770, 797, 833, 834, 835, 837, 1083, 1230, 1238, 1307, 1317, 1327, FV-7, FV-25 MicroStrategy, 294, 302, 383–385, 387, 389, 390, 399 Miniscribe, 285 Minnesota Mining and Manufacturing (3M), 540, 610 Mitsubishi, 445 Moody’s Corporation, 755 Morgan Stanley, 233, 303 Motorola, FV-20, FV-26 NASDAQ, 839, 843, FV-7 National Center for Continuing Education, 290 National Investor Relations Institute, 296 NBA, 149–150 NCR, 174, 384, 1029 Nebo Products, 765 Neiman Marcus, Inc., 324 New York Bond Exchange, 839 New York Stock Exchange (NYSE), 19, 49, 839, 843, 1282, 1283 Nextel, FV-20, FV-26 NFL, 552 Nike, Inc., 489, 549, 550, 1088, 1089 NN, Inc., 457 Nokia, 19, 572 Northrup Grumman, 1078–1079 Novatel, 274 Nynex, 156 Oracle, 1083 Orange County, 1128 Pacific Telesis, 156 Palm, 398 Palo Alto Research Center (PARC), 282 PCAOB, see Public Company Accounting Oversight Board I-21 I-22 Indexes Company Index PCS Health Systems, 632 Peabody Energy, 549 Pennzoil, 1146, 1147, 1148, 1174 Pension Benefit Guaranty Corporation (PBGC), 1032, 1033 PepsiCo, 120, 184, 579, 1152, 1153, 1155, 1156, 1180, 1184, 1344 PepsiCo Beverages North America, 1155, 1180 PepsiCo International, 1155, 1180 Pfizer, 146, 212, 213 Philip Morris, 750 Phillips Petroleum, 220 Pixar, 675 Pizza Hut, 1152 PricewaterhouseCoopers (PwC), 33, 162, 163, 384, 1188 Procter & Gamble (P&G), 6, 146, 550, 770, 1128, 1138 Public Company Accounting Oversight Board (PCAOB), 17 Quaker Foods North America, 1155, 1180 Quaker Oats, 1152 Quantum Corporation, 296 Qwest Communications, 105, 156, 550 Reebok, 237 Rent-A-Center, 164, 165 Ricoh, 282 Rite Aid, 632 RJR Nabisco, 682 Rolls Royce, 1230 Rouse Company, 610, 1345 Royal/Dutch Shell Group, 563 Safeway, 150, 583, 1157, 1317, 1346 Samsung, 274 Sara Lee Corporation, 1015–1016 Saudi Refining, Inc., 718 SBC Communications, 156, 988 Sears, 6, 198, 334, 346, 691, 692 Securities and Exchange Commission (SEC), 12, 50, 59, 68, 117, 119, 120, 172, 179, 282, 283, 292, 294, 296, 300, 302, 303, 304, 306, 337, 383–385, 389, 458, 562, 568, 570, 580, 759, 782, 857, 915, 1028, 1128, 1138, 1152, 1156, 1157, 1282, 1287, 1309, FV-1 Securities Industry and Financial Markets Association, 695 See’s Candles, 755 7-Eleven, 219 Siskon Gold Corporation, 444 Sony, 19, 219, 1283 Southern Pacific Railroad, FV-20 Southwestern Bell, 156 Sprint, FV-20, FV-26 Sprint Nextel, FV-20–FV-25 Standard & Poor’s, 681, FV-10, FV-11, FV-17 Starbucks, 1327 Sterling Software, 222 Swire Pacific Limited, 801, 829 SwissAir, 903 Taco Bell, 1152 Target, 6, 489, 549 Taser International, 337 Tesco, 1249, 1250, 1251 Texaco, 718, 853, 1146, 1147, 1148, 1174 Thor Power Tool, 18, 968 3M, see Minnesota Mining and Manufacturing TIAA/CREF, 1031 Tiffany & Co., 1184 Time Warner, 105, 172, 550, 641, 1195, 1237 T-Mobile, FV-20, FV-26 Tosco, 220 Toyota, 572, 1283 Toys “R” Us, 690, 774, 836, 1158, 1159, 1180 Trump Hotels & Casino Resorts, 296 Tyson Foods, 181 U.S Department of Energy, 570 U.S International Trade Commission (ITC), 289 U.S West, 156 Ulta Salon, Cosmetics & Fragrance, Inc., 762 Unilever, 444 Union Pacific, 973 United Airlines, 903 United Auto Workers (UAW), 1059 United Heritage, 570 USA Today, 219 ValueLine, 1309 Verizon, 156, 177, 233, 549, 550, 833, 988, FV-20, FV-26 Viacom, 615 VISA, 323, 364, 1131 Voicestream, 1283 W.T Grant, 274 Wal-Mart Stores, Inc., 146, 171, 378–379, 383, 489, 549, 686, 687, 769, 770, 1083, 1247, 1317, 1320 Walt Disney Company, 19, 46, 59, 65, 114, 116, 118, 149, 162, 180, 213, 275, 316, 341, 378, 387, 443, 539, 561, 572, 610, 639, 675, 720, 749, 828, 833, 899, 961, 994, 1015, 1077, 1122, 1170, 1178, 1225, 1283, 1304, 1343 Washington Post Company, 755, 837 Waste Management Inc., 295, 615 Wells Fargo & Company, 214–215, 755, 833, 871 Western Union Telegraph Company, 155 Whitehall Jewelers, 391 World Book, 755 World Trade Organization (WTO), 286 WorldCom, 6, 291, 298, 300, 301, 303, 304, 565 Wrigley, 766 Xerox Corporation, 282–284, 285, 291, 300, 302, 304, 305, 306, 308, 317, 1203–1205 Xerox Mexico, 283, 291 Yahoo!, 146, 550, 720, 721 Yum! 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