Free ebooks ==> www.Ebook777.com www.Ebook777.com Free ebooks ==> www.Ebook777.com www.Ebook777.com TO THE STUDENT You have the potential to make a difference! WileyPLUS is a powerful online system packed with features to help you make the most of your potential, and get the best grade you can! With WileyPLUS you get: A complete online version of your text and other study resources Study more effectively and get instant feedback when you practice on your own Resources like self-assessment quizzes, tutorials, and animations bring the subject matter to life, and help you master the material Problem-solving help, instant grading, and feedback on your homework and quizzes You can keep all of your assigned work in one location, making it easy for you to stay on task Plus, many homework problems contain direct links to the relevant portion of your text to help you deal with problem-solving obstacles at the moment they come up 74% The ability to track your progress and grades throughout the term A personal gradebook allows you to monitor your results from past assignments at any time You’ll always know exactly where you stand If your instructor uses WileyPLUS, you will receive a URL for your class If not, your instructor can get more information about WileyPLUS by visiting www.wileyplus.com or by viewing a WileyPLUS demo at www.wileyplus.com/experience “It has been a great help, and I believe it has helped me to achieve a better grade.” Michael Morris, Columbia Basin College of students surveyed said it helped them get a better grade * *Based on a fall 2006 survey of 519 accounting student users of WileyPLUS Free ebooks ==> www.Ebook777.com SECOND EDITION INTERMEDIATE ACCOUNTING: PRINCIPLES AND ANALYSIS TERRY D WARFIELD, Ph.D Associate Professor Director, Andersen Center for Financial Reporting and Control University of Wisconsin Madison, Wisconsin JERRY J WEYGANDT, Ph.D., C.P.A Arthur Andersen Alumni Professor of Accounting University of Wisconsin Madison, Wisconsin DONALD E KIESO, Ph.D., C.P.A KPMG Emeritus Professor of Accounting Northern Illinois University DeKalb, Illinois JOHN WILEY & SONS, Inc www.Ebook777.com Dedicated to our wives, Mary, Enid, and Donna, and to our children, Andrew, Lauren, and Katie; Matt, Erin, and Lia; and Douglas and Debra EXECUTIVE PUBLISHER Donald Fowley EXECUTIVE EDITOR Christopher DeJohn SENIOR MARKETING MANAGER Julia Flohr PROJECT EDITOR Ed Brislin DEVELOPMENT EDITOR Ann Torbert EDITORIAL ASSISTANT Kathryn Fraser DESIGN DIRECTOR Harry Nolan SENIOR DESIGNER Madelyn Lesure SENIOR PRODUCTION EDITOR Patricia McFadden SENIOR ILLUSTRATION EDITOR Elle Wagner SENIOR PHOTO EDITOR Anna Melhorn SENIOR MEDIA EDITOR Allison Morris OUTSIDE PROJECT MANAGEMENT Ingrao Associates COVER IMAGE Gavin Hellier/Image Bank/Getty Images This book was set in Times Roman by Aptara and printed and bound by R R Donnelley, Jefferson City, MO The cover was printed by R R Donnelley, Jefferson City, MO This book is printed on acid free paper ϱ Copyright © 2008 John Wiley & Sons, Inc All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, website http://www.wiley.com/go/permissions To order books or for customer service, please call 1-800-CALL WILEY (225-5945) ISBN-13 978 0471737933 Printed in the United States of America 10 ABOUT THE AUTHORS Terry D Warfield, Ph.D., is associate professor of accounting at the University of Wisconsin—Madison He received a B.S and M.B.A from Indiana University and a Ph.D in accounting from the University of Iowa Professor Warfield’s area of expertise is financial reporting, and prior to his academic career, he worked for five years in the banking industry He served as the Academic Accounting Fellow in the Office of the Chief Accountant at the U.S Securities and Exchange Commission in Washington, D.C from 1995–1996 Professor Warfield’s primary research interests concern financial accounting standards and disclosure policies He has published scholarly articles in The Accounting Review, Journal of Accounting and Economics, Research in Accounting Regulation, Review of Accounting Studies, and Accounting Horizons, and he has served on the editorial boards of The Accounting Review, Accounting Horizons, and Issues in Accounting Education He has served as president of the Financial Accounting and Reporting Section, the Financial Accounting Standards Committee of the American Accounting Association (Chair 1995–1996), the AAA-FASB Research Conference Committee and the AAA Regulation Committee, and is a member of the Financial Accounting Standards Advisory Council to the FASB Professor Warfield has received teaching awards at both the University of Iowa and the University of Wisconsin, and he was named to the Teaching Academy at the University of Wisconsin in 1995 Professor Warfield has developed and published several case studies based on his research for use in accounting classes These cases have been selected for the AICPA Professor-Practitioner Case Development Program and have been published in Issues in Accounting Education Jerry J Weygandt, Ph.D., C.P.A., is Arthur Andersen Alumni Professor of Accounting at the University of Wisconsin—Madison He Holds a Ph.D in accounting from the University of Illinois Articles by Professor Weygandt have appeared in the Accounting Review, Journal of Accounting Research, Accounting Horizons, Journal of Accountancy, and other academic and professional journals These articles have examined such financial reporting issues as accounting for price-level adjustments, pensions, convertible securities, stock option contracts, and interim reports Professor Weygandt is author of other accounting and financial reporting books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Wisconsin Society of Certified Public Accountants He has served on numerous committees of the American Accounting Association and as a member of the editorial board of the Accounting Review; he also has served as President and Secretary-Treasurer of the American Accounting Association In addition, he has been actively involved with the American Institute of Certified Public Accountants and has been a member of the Accounting Standards Executive Committee (AcSEC) of that organization He has served on the FASB task force that examined the reporting issues related to accounting for income taxes and as a trustee of the Financial Accounting Foundation Professor Weygandt has received the Chancellor’s Award for Excellence in Teaching and the Beta Gamma Sigma Dean’s Teaching Award He is on the board of directors of M & I Bank of Southern Wisconsin He is the recipient of the Wisconsin Institute of CPA’s Outstanding Educator’s Award and the Lifetime Achievement Award In 2001 he received the American Accounting Association’s Outstanding Accounting Educator Award Donald E Kieso, Ph.D., C.P.A., received his bachelor’s degree from Aurora University and his doctorate in accounting from the University of Illinois He has served as chairman of the Department of Accountancy and is currently the KPMG Emeritus Professor of Accounting at Northern Illinois University He has public accounting experience with Price Waterhouse & Co (San Francisco and Chicago) and Arthur Andersen & Co (Chicago) and research experience with the Research Division of the American Institute of Certified Public Accountants (New York) He has done postdoctorate work as a Visiting Scholar at the University of California at Berkeley and is a v vi About the Authors recipient of NIU’s Teaching Excellence Award and four Golden Apple Teaching Awards Professor Kieso is the author of other accounting and business books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Illinois CPA Society He has served as a member of the Board of Directors of the Illinois CPA Society, the AACSB’s Accounting Accreditation Committees, the State of Illinois Comptroller’s Commission, as Secretary- Treasurer of the Federation of Schools of Accountancy, and as Secretary-Treasurer of the American Accounting Association Professor Kieso served as a charter member of the national Accounting Education Change Commission He is the recipient of the Outstanding Accounting Educator Award from the Illinois CPA Society, the FSA’s Joseph A Silvoso Award of Merit, and the NIU Foundation’s Humanitarian Award for Service to Higher Education P R E FA C E Intermediate Accounting: Principles and Analysis, Second Edition, provides a solid foundation for instructors whose goal is to help accounting students build an understanding of the principles, concepts, and methods of financial accounting and reporting To that end, we address the following key themes that users have identified as important in their intermediate accounting courses • Go “beyond the numbers” The importance of accounting to the capital market and the business community in general has never been more important In Intermediate Accounting, Second Edition, boxed stories entitled “What Do the Numbers Mean?” convey the excitement and ever-changing nature of accounting, highlighting its importance We have found that when introduced to the issues involved in the financial reporting of real companies, students genuinely enjoy the subject area • “What’s the principle?” An important instructional objective in Intermediate Accounting, Second Edition, is to reinforce students’ understanding of the principles and concepts that are fundamental to financial reporting Most students quickly forget procedural details, but they can internalize principles and concepts that will serve as important cornerstones for decision making throughout their careers Concepts are especially important in a world in which the details are frequently changing Furthermore, a conceptual orientation is consistent with the evolving orientation toward principles-based, as opposed to rules-based, accounting standards • Active learning_“Try it out!” Students learn best when they are actively engaged An overriding pedagogical approach for the book is to provide students opportunities for active learning Each chapter contains strategically placed “Try it out!”exercises (with worked-out solutions) that give added opportunities for active learning • “You need to decide” All business people and accounting professionals must make decisions Decision making involves critical evaluation and analysis of information A new review exercise in each chapter, titled “Accounting, Analysis, Principles,” helps students evaluate and analyze information from the chapter They review the accounting introduced in the chapter (“Accounting”), consider how the information provided by the accounting is useful to investors and creditors (“Analysis”), and reflect on how the accounting is related to accounting principles and concepts (“Principles”) Such exercises, reinforced with end-of-chapter homework activities, give students the practice they will need to build decision-making skills using the accounting concepts and procedures they are learning • “What can you do?” Students need to develop competencies that will be useful in their careers As described above, the book provides multiple opportunities for students to develop the critical thinking and analysis skills that will be the backbone of career competency In addition, explicit writing components in end-of-chapter assignments require students to practice communication skills Other assignments for use by students working in groups help develop facility in group problem solving, a skill useful in the working world In addition, for those students who will eventually sit for the CPA exam, we offer interactive integrative problems at the book’s companion website that mirror the new computerized exam Finally, each chapter also contains stand-alone financial accounting research cases using the Financial Accounting Research System (FARS) database vii Free ebooks ==> www.Ebook777.com viii Preface BOOK RATIONALE AND ORGANIZATION Some instructors have expressed a desire for a slightly different type of book for the intermediate accounting course They asked for something that would enable them to have more time to develop various professional competencies, such as analysis and communication skills, and to place more emphasis on applying accounting concepts in various settings, such as in oral and written presentations and with introduction of more technology and other enhancements Still others have expressed a need for a book that will better help students cope with the complexity and rigor of the intermediate course Intermediate Accounting: Principles and Analysis, Second Edition, is intended to address those stated needs With 18 chapters, this book meets the needs of various audiences Instructors who intend to use the textbook over two semesters can enhance the book with additional readings, cases, exercises, or other professional-competency activities Instructors who wish to cover the book in a single semester can so, by omitting some subject material, but still have complete treatment of the topics covered Because the book provides the core concepts that must be covered in intermediate accounting, instructors can use this textbook in graduate, masters, and MBA courses The 18-chapter book also provides additional flexibility to instructors who are interested in teaching a corporate reporting course For an overview of the chapter sequence, see the Brief Contents list on page xxi The underlying theme around which each chapter is based is to learn the accounting for various transactions (accounting), to use the accounting in various decision-making contexts (analysis), and to develop understanding of the concepts or principles underlying the accounting treatment (principles) Organization The book’s organization offers an integrated framework in which to study the essential concepts of intermediate accounting The first two chapters discuss the standard-setting process, starting with the institutional structure and following with the conceptual framework A review of the accounting process then follows in Chapter 3, as a refresher on basic understanding of the recording process, which is intended to bring all students up to the same level The next three chapters address the three major financial statements—the balance sheet, the income statement, and (in a separate chapter) the statement of cash flows Revenue recognition is moved up in the “batting order” (relative to its position in Kieso, Intermediate Accounting, Twelfth Edition) and appears next, as Chapter Chapters and represent a change from the first edition, where cash flows and revenue recognition were covered in a single chapter (Chapter 6) Separation of these important topics into two chapters makes possible a more complete discussion of the statement of cash flows and income measurement concepts that are important to subsequent chapter topics What then follows, in Chapters through 14, is a discussion of the basic issues related to cash and receivables, inventories, plant assets, intangible assets, liabilities, stockholders’ equity, and investments Following these basic-issues chapters are chapters (Chapters 15 through 17) on the important topics of income taxes, compensation (including pensions and stock options), and leases We complete the chapter-length coverage with discussion in Chapter 18 of other reporting and disclosure issues, including accounting changes and earnings per share Two end-of-book appendices address time value of money concepts and applications (Appendix A) and reporting cash flows (Appendix B) Another seven appendices dealing with more specialized accounting topics are available at the book’s companion website See the Brief Contents on page xxi for the complete list of online appendices www.Ebook777.com Index Raw materials inventory, 420 R&D activities, see Research and development activities R&D (research and development) costs, 574–577 Reacquisition of shares, 679–684 with buybacks, 679–680 with treasury stock, 680–684 Real (permanent) accounts, 78 Real estate investment trusts (REITs), 505n Realization, 304–305 Realized revenues, 307 Rearrangement: accounting for, 500 costs for, 499 defined, 497 Reasonable estimate, 622 Reasonbly possible, 621 Receipts: cash, 1063 from customers, 1063 operating cash, 1061 Receivables, 362–384 accounts receivable, 364–371 cash discounts, 364–365 disposition of, 377–382 and interest revenue, 365 recognition of, 364–365 trade discounts, 364 uncollectible, 366–371 valuation of, 365–371 analysis of, 383 in borrowing transactions, 377–378 classification of, 361 current, 362 as current asset, 151 defined, 362 factoring, 378 hedging, 383 noncurrent, 362 nontrade, 363 notes, 363 notes receivable, 371–382 disposition of, 377–382 recognition of, 371–376 valuation of, 376–377 presentation of, 382–383 with recourse, 380–381 sales of, 378–381 with recourse, 380–381 without recourse, 379–380 and secured borrowing, 377–378, 381–382 securitizing, 260 trade, 363 valuation of, 149 without recourse, 379–380 Receivables turnover, 277 Reclassification, of securities, 760 Reclassification adjustments, 751–753 Recognition, 44–45 See also Revenue recognition of accounts receivables, 364–365 and asset retirement obligation, 627 of notes receivable, 371–376 realization vs., 304n Reconciliation, 866 Record, date of, 689 Recourse: defined, 379 receivables with, 380–381 receivables without, 379–380 Recoverability tests, 570 Redeemable preferred stock, 686 Reeve, James M., 435n Refunding, 619 Reg G, see Regulation G Registered bonds, 613 Registers, 673 Regulation, 322 See also Standards Regulation G (Reg G), 42, 198, 965–966 Reinstallation: accounting for, 500 costs for, 499 defined, 497 REITs (real estate investment trusts), 505n Relevance, 5, 40 of accounting information, 40 reliability vs., 446, 868 Reliability, 5, 40, 577 of accounting information, 40–41 relevance vs., 446, 868 Rents: computation of, 1016–1017, 1022–1023 period, 1017 Rental payments, 899 Repairs: accounting for, 500 costs for, 499 defined, 497 major, 499 ordinary, 499 Replacements: accounting for, 500 costs for, 498–499 defined, 497 Report form, 160 Reporting, 4, 5, 15–20, 46 annual, audit, 18 available-for-sale securities, 758 cash, 359–361 bank overdrafts, 360–361 restricted cash, 360 cash equivalents, 360–361 cash flows, 1050–1065 direct method for, 1060–1066 indirect method for, 1050–1060 changes in accounting principle, 945–946 changes in principle, 215, 945–946 for comprehensive income, 222–224 in balance sheet, 224 combined statement of, 223 with statement of stockholders’ equity, 223–224 two-statement format for, 223 correction of errors, 953–957 current liabilities, 156 earnings per share, 959–973 for complex capital structures, 964–972 disclosure, 970–971 presentation of, 970–971 for simple capital structures, 960–964 for EPS, 220–221 equity method, 758 held-to maturity securities, 758 international issues with, 6, 18 for intraperiod tax allocation, 218–219 for irregular items, 208–218 changes in accounting principle, 215 changes in estimates, 215–216 corrections of errors, 216 I-16 discontinued operations, 210–211 extraordinary items, 211–213 summary of, 216 unusual gains and losses, 213–214 objectives of, 6–7, 38–39 pensions, 864–869 within financial statements, 864–866 within notes to the financial statements, 866–867 preferred stock, 686 with retained earnings statement, 221–222 trading securities, 758 on Web, Repossessions, 334 Representational faithfulness, 40 Representationally faithful, 19 Requisition price, 618 Research activities, 574 Research and development (R&D) activities: accounting for, 575–576 identifying, 574–575 presentation of, 579–580 Research and development (R&D) costs, 574–577 Reserves: “cookie jar,” 201, 202 LIFO, 432–433 as term, 170 Residual interest, 674 Residual value, 899 Restatements, 955 due to revenue recognition, 304 of taxes, 955 Restricted amounts, 158 Restricted cash, 360 Restrictions, 612, 695 Restructuring charges, 213–213 Retained earnings, 674 cash flows from, 1053 defined, 158 increase in, 265 restrictions of, 222 Retained earnings adjustments, 946–947 Retained earnings statement, 221–222 Retrospective accounting change, 943–945 Retrospective adjustment, 215 Return on plan assets, expected, 861 Revenue(s): accrued, 92, 97–98 defined, 43, 202 gains vs., 203 interest, 365, 491, 907 realized, 307 taxable, 792 unearned, 92, 96, 307, 610–611 Revenue bonds, 613 Revenue recognition, 6, 302–325, 955 after delivery, 316–321 with cost-recovery method, 320 with deposit method, 320–321 with installment-sales method, 317–319 and cash, 49 and channel stuffing, 308 completed-contract method for, 314–315, 321, 330 completion-of-production basis, 321 under completion-of-production basis, 315 cost-recovery method for, 320, 321 in current environment, 304–306 I-17 Index Revenue recognition, (Continued) before delivery, 310–316 with completed-contract method, 314–315 under completion-of-production basis, 315 with percentage-of-completion method, 311–313 and departures from the sale basis, 305–306 deposit method for, 320–321 guidelines for, 304–305 and Hollywood accounting, 50 installment-sales method for, 49, 317–319, 321 and installment-sales transactions, 331–337 on financial statements, 336–337 problems of, 333–336 for long-term contracts: with completed-contract method, 330 with percentage-of-completion method, 326–330 percentage-of-completion method for, 311–313, 321, 326–330 at point of sale, 307–310 channel stuffing, 308 sales when right of return exists, 307–308 sales with buyback agreements, 307 trade loading, 308 regulation of, 322 restatements due to, 304 and sales when right of return exists, 307–308 and sales with buyback agreements, 307 timing of, 305 and trade loading, 308 Revenue recognition principle, 48–49, 304, 315 Reversal dates, expected, 805 Reversing differences, 793 Reversing entries, 107, 115–117 accruals, 115–116 prepayments, 116–117 Right of return, 307–308 Rights: accumulated, 845 preemptive, 673 vested, 845 ROA, see Rate of return on assets “Round trip” transactions, 302 Rule 23 (Code of Professional Conduct), 14 “Rules-based” accounting, 36, 918 Salaries, 99 Sale(s): with buyback agreements, 307 of equipment, 264, 1053 gross profit on, 205 guaranteed, 307 lump-sum, 676–677 of plant assets, 510 of receivables, 378–381 with recourse, 380–381 without recourse, 379–380 secured borrowing vs., 381–382 of treasury stock, 682–683 when right of return exists, 307–308 Sale discounts, see Cash discounts Sales or Revenue Section, of income statement, 204 Sales transactions, 306 Sales-type leases, 913 Sales-warranty approach, 625 Sarbanes Oxley Act of 2002 (SOX, Sarbox), 16–17 and accounting information systems, 113 and cost-benefit relationships, 53 on financial reporting, 304n on internal controls, 17 and revenue recognition, 302 Section 404, 17 Schedules, supporting, 169–170 SEC, see Securities and Exchange Commission Second objectives, 786 Second year of operations: net cash provided by financing activities in, 264–265 net cash provided by operating activities in, 263–265 net increase in cash in, 263 statement of cash flows in, 262–266 Section 404 (SOX), 17 Secured bonds, 613 Secured borrowing, 381–382 and receivables, 377–378 sales vs., 381–382 Securities See also specific types, e.g.: Available-for-sale securities antidilutive, 965 available-for-sale, 1056 convertible, 966–967 debt, 755 defined, 732n dilutive, 964 equity, 755 held-to maturity, see Held-to maturity securities reclassification of, 760 short-term available-for-sale, 1056 trading, see Trading securities Securities and Exchange Commission (SEC), 7–9 and AICPA, and annual reports, 630 on contractual situations, 164 on disclosure, 628 enforcement by, 8–9 on environmental liabilities, 628 on fair value, 739 and FASB, and GAAP, on Internet companies, 304 oversight of, on principles-based accounting, 36 on public/private partnership, on quality of earnings, 201 on realized revenue, 307n on receivables, 678 Regulation G, 42 and revenue recognition, 304, 322, 323 and sales-type leases, 913 on securities, 739 on taxes, 780 Securities Exchange Act of 1934, 7–8 Securities Fair Value Adjustment (Available-for-Sale) accounts, 737 Securitization, 1020 Securitizing receivables, 260 Self-constructed assets, 490 Self-insurance, 100, 628–629 Seligman, Joel, 21 Selling Expenses, on income statement, 204 September 11, 2001 terrorist attacks: effect on airlines, 146–147, 212 extraordinary items after, 212 Serial bonds, 613 Services, notes receivable for, 375 Service lives, 501–502 Service period, 850 Settlements, for litigation, 165 75% (economic life) test, 898 SFAC, see under Statement of Financial Accounting Concepts SFAC No 3, 304n SFAS, see Statement of Financial Accounting Standards SFAS Interpretation No 46(R), 730 SFAS No 13, 916, 918 SFAS No 28, 960n SFAS No 34, 425n SFAS No 43, 845 SFAS No 58, 959n SFAS No 69, 516n SFAS No 87, 864 SFAS No 102, 253n SFAS No 106, 864 SFAS No 107, 382n SFAS No 109, 801n SFAS No 116, 494n SFAS No 123(R), 849, 850n., 971n., 1058n SFAS No 128, 968n SFAS No 130, 225 SFAS No 132, 866n SFAS No 140, 380n SFAS No 141, 564n., 566n SFAS No 144, 211n SFAS No 150, 686n SFAS No 151, 425n SFAS No 153, 519 SFAS No 154, 943n SFAS No 157, 166n., 493n SFAS No 158, 864, 873 SFAS No 159, 166n Share-based compensation plans, 1058n Shatner, William, 306 Short-term available-for-sale securities, 1056 Short-term borrowing, 360 Short-term investments: classification of, 361 as current asset, 150–151 valuation of, 149 Short-term paper, 358 Sick pay, 845 Significant influence, 746 Significant noncash activities: indirect method for, 1059–1060 on statement of cash flows, 254 Simple capital structures, EPS in, 960–964 earnings per share for, 960–964 example of, 963–964 preferred stock dividends, 960–961 stock dividends, 962–963 stock splits, 962, 963 weighted-average number of shares outstanding, 961–962 Simple interest, 1002–1003 compound interest vs., 1003 defined, 1031 Single-period statements, 956–957 Single-step income statements, 203–204 Single-sums, 1007–1012 future value of, 1007–1008, 1031 interest rates for, 1011–1012 periods for, 1011 present value of, 1009–1010, 1031 Sinking funds, 1001 Index Small (ordinary) stock dividends, 691 Social Security tax, 842 Social security taxes, 842 Soft assets, Solvency, 146, 270–271 Solvency ratios, 271 SOP (Statements of Position), 13 South America, 46 SOX, see Sarbanes Oxley Act of 2002 SPE, see Special purpose entity Special assessments, 489 Special Committee on Financial Reporting (AICPA), 217 Special journals, 85 Special purpose entity (SPE), 630, 749 Specific-goods approach, 433 Specific-goods pooled-LIFO approach, 434 Specific identification cost flow assumption, 427–428 Splits, see Stock splits Spreadsheets (Excel), Standards, 7–22 and AICPA, 9, 13 and ethics, 19 and expectations gap, 17–18 and FASB, 9–12 for financial reporting, 15–19 and GAAP, 14–15 and GASB, 12 international, 18–19 international issues with, need for, politics affecting, 15–16 Sarbanes Oxley Act, 16–17 and SEC, 7–9 Stanga, Keith G., 435n Stated interest rate, 372n., 615 Stated value, 676 Stated-value method (par-value method), 681 Statements, consolidated, 742, 748 Statement of cash flows, 250–268 classification of, 252–253 defined, 79 direct method for, 256–257, 1060–1066 example of, 1061–1064 and indirect method, 1061 format of, 254–255 indirect method for, 256–257, 1051–1060 and accounts receivable, 1055–1056 and depreciation expense, 1054–1055 and extraordinary items, 1059 and gains, 1057–1058 and losses, 1057–1058 and net losses, 1057 and postretirement benefit costs, 1059 problems with, 1054–1060 and significant noncash transactions, 1059–1060 steps for, 1052–1054 and stock options, 1058 and working capital changes, 1056–1057 limitations of, 272 net cash provided by financing activities in, 1053 net cash provided by investing activities in, 1053 net cash provided by operating activities in, 1052–1053 net increase in cash in, 1052 preparation of, 257–268 direct method for, 1060–1066 in first year of operations, 257–262 indirect method for, 1051–1060 in second year of operations, 262–266 purpose of, 252 significant noncash activities on, 254 Statement of earnings, see Income statement(s) Statement of Financial Accounting Concepts No 1, 37 Statement of Financial Accounting Concepts No 2, 37, 54n Statement of Financial Accounting Concepts No 3, 37 Statement of Financial Accounting Concepts No 5, 37, 44–46, 209 Statement of Financial Accounting Concepts No 6, 37 Statement of Financial Accounting Concepts No 7, 37 Statement of Financial Accounting Standards (SFAS), 10–11 See also under SFAS Statement of Financial Concepts No 6, 786 Statement of financial position, see Balance sheet Statement of income, see Income statement(s) Statement of recognized income and expense (SoRIE), 225, 701 Statement of retained earnings, 79 Statement of stockholders’ equity, 223–224, 698 Statement on Auditing Standards No 1, 166n Statements of Financial Accounting Concepts, 11 Statements of Position (SOP), 13 Stock See also Common stock callable, 685–686 capital, see Capital stock common, 960 convertible, 685 in corporations, 672–684 capital stock, 673 issuance of, 675–679 lump-sum sales, 676–677 noncash transactions, 677–679 no-par stock, 675–676 ownership interests in, 673 par value stock, 675 cumulative, 685 dividends, 687–697, 962–963 cash dividends, 689 disclosure of, 695–696 distribution of, 687–688 liquidating dividends, 690–691 property dividends, 690 stock dividends, 691–693 types of, 688 issuance of, 493 issuing, 675–679 no-par, 675–676 participating, 685 par value, 675 potential common, 960 preferred, 673, 675, 684–686 accounting for, 686 callable, 685–686 convertible, 685 cumulative, 685 dividends for, 960–961 participating, 685 redeemable, 686 reporting, 686 reacquisition of shares, 679–684 with buybacks, 679–680 with treasury stock, 680–684 I-18 redeemable, 686 reporting, 686 as term, 170 treasury, 680–684 purchase of, 680–682 retiring, 683–684 sale of, 682–683 unissued capital, 680 Stock compensation plans, 846–854 accounting for, 850 disclosure of, 852 employee stock purchase plans, 851 example of, 850–851 and fair value method, 848, 850 fair-value method for, 853 Stock dividends, 691–693 defined, 691 and fair value, 691 large, 694 ordinary, 691 in simple capital structures, 960–963 small, 691 stock split vs., 694–695 Stockholders’ (owner’s) equity, 158–160, 670–703 additional paid-in capital, 158 analysis of, 699–700 on balance sheet, 148 capital stock, 158 in corporations, 672–684 capital stock, 673 ownership interests in, 673 presentation of, 697–698 on balance sheet, 697–698 on statement of stockholders’ equity, 698 reacquisition of shares, 679–684 with buybacks, 679–680 with treasury stock, 680–684 retained earnings, 158 statement of, 223–224 Stock options: controversy over, 853 indirect method for, 1058 Stock right (warrant), 673n Stock splits, 691–693 in simple capital structures, 962, 963 stock, 693 stock dividend vs., 694–695 “Stop orders,” Straight-line method, 503, 902 Study Group on Establishment of Accounting Principles (Wheat Committee), Subsequent events, see Post—balance-sheet disclosures Subsidiary, 748 Subsidiary ledgers, 79 Substantially enacted tax rates, 814 Substitution approach, 498 Summers, Lawrence, 18 Sum-of-the-years’-digits method, 504 Superfund legislation, 626 Supersession, 501 Supplementary information, 51–52 Suppliers: cash payments to, 1063 payments to, 1063 Supplies, 93–94 Supporting schedules, on balance sheet, 169–170 Surplus, 170 Switzerland, 39 I-19 Index T-accounts, 84 Take-or-pay contract, 630 Tax(es): deferred tax assets, 787–789 deferred tax liability, 784–786 general contingencies, 628 income, 205, 780–814, 1064 asset-liability method for, 809–811 deferred taxes, 783–791 and net operating losses, 796–803 objective of accounting for, 786–787 and permanent differences, 793–795 presentation of, 791–792, 803–809 tax rates for, 795–796 and temporary differences, 792–795 withholding, 843 intraperiod tax allocation: and extraordinary gains, 219 and extraordinary losses, 219 reporting, 218–219 restatement of, 955 social security taxes, 842 unemployment taxes, 842–843 Taxable amounts, 783 Taxable gains, 792 Taxable income, 782, 811 Taxable revenue, 792 Taxable temporary difference, 811 Tax amount, deferred, 783, 787 Tax assets, deferred, 783, 787, 802, 809, 811 Tax benefits (tax effect), 798 current, 799, 810 deferred, 788, 799 Tax consequences: deferred, 811 future, 809 Tax effect, see Tax benefits Tax expenses: current, 785, 810 deferred, 785, 811 Tax incentives, 907 Tax liabilities, deferred, 783, 786, 809, 811 Tax-planning strategies, 801, 811 Tax rates, enacted, 795 Tax savings, future, 798 Technology-related intangible assets, 561–563 Temporary accounts, 106 Temporary (nominal) accounts, 78 Temporary difference: deductible, 810 taxable, 811 Temporary differences, 783, 792–795 defined, 811 examples of, 794–795 originating, 793 Term bonds, 613 Third-party guarantors, 917n Third-party trustee, 855 Threatened litigation, 622 Time, 1002 Timeliness, 5, 40 Time period assumption, see Periodicity assumption Time period (periodicity) assumption, 165 Time period reasonable estimate, 622 Times interest earned, 278 Times interest earned ratio, 635 Time value of money, 1000–1029 annuities, 1012–1025 annuity due, 1015–1016, 1020–1021 deferred, 1023–1025 future value of, 1012–1018, 1023–1024 interest rate for, computation of, 1022 ordinary, 1012–1015, 1018–1019, 1021–1022 period rents, computation of, 1017, 1022–1023 present value of, 1018–1025 rents, computation of, 1016–1017, 1022–1023 annuity due, 1015–1016, 1020–1021 future value of, 1015–1016 present value of, 1020–1021 with bonds, 1025–1027 bond discounts/premiums, 1026–1027 long-term bonds, 1025–1026 compound interest, 1003–1007 fundamental variables for, 1006–1007 tables, 1004–1006 deferred annuities, 1023–1025 future value of, 1023–1024 present value of, 1024–1025 interest, 1001–1007 compound, 1003–1007 simple, 1002–1003 ordinary annuities, 1012–1015, 1018–1019, 1021–1022 future value of, 1012–1015 present value of, 1018–1019, 1021–1022 present value measurements, 1027–1029 for annuities, 1018–1025 for annuity due, 1020–1021 and cash flow, 1029 for deferred annuities, 1024–1025 interest rates for, 1028–1029 of ordinary annuities, 1018–1019, 1021–1022 of single-sums, 1009–1010 single-sums, 1007–1012 future value of, 1007–1008 interest rates for, 1011–1012 periods for, 1011 present value of, 1009–1010 Trade accounts payable, see Accounts payable Trade discounts, 364 Trade loading, 308 Trademarks (trade names), 558 Trade notes payable, see Notes payable Trade receivables, 363 Trading on the equity, 699 Trading securities, 733, 743, 1057 defined, 150, 732 reporting, 758 Transaction approach, 202 Transactions, 84 after balance sheet date, 165–166 analyzing, 84 defined, 78 “round trip,” 302 Transfer agents, 673 Transfer of ownership test, 897 Transfers, 756 Transit: deposits in, 390 goods in, 423 Transitory (inventory, paper) profits, 439 Treasury bills, 358 Treasury stock (treasury shares), 680–684 above cost, 683 and assets, 680 below cost, 683 defined, 680 issuance of, 677 purchase of, 680–682 reacquisition of shares with, 680–684 retiring, 683–684 sale of, 682–683 and unissued capital stock, 680 Treasury-stock method, 967–969 Trial balance, 89–91 adjusted, 101, 119 defined, 79 post-closing, 106–107 preparing, 89 in worksheets, 118 Trial entries, 91 Trust bonds, collateral, 613 Trustees, independent third-party, 855 Turner, Lynn, 304 Turnover: asset, 277 inventory, 277 receivables, 277 Turnover ratios: accounts receivable turnover ratio, 383 asset turnover ratio, 517–518 inventory turnover ratio, 449 Tweedie, David, Sir, 974 24/7 accounting, 104 Unappropriated amounts, 158 Uncollectibles, 366–371 balance sheet approach for, 367–370 direct-write off approach for, 370 percentage-of-receivables approach for, 367–370 percentage-of-sales approach for, 367 Uncollectible accounts: of installment contracts, 334 recording, 366 Unconditional promise, 494 Understandability, 40, 168 Underwriting, 613 Unearned revenues, 92, 96, 307, 610–611 Unemployment taxes, 842–843 Uniform Commercial Code, 673 Uniform Stock Transfer Act, 673 Unissued capital stock, 680 U.S Department of Justice, 8–9 U.S economy, 21 U.S Patent and Trademark Office, 558 Unknown future value, 1007 Unknown present value, 1007 Unrealized Holding Gain or Lass, 701 Unsecured bonds, 613 Unusual gains or losses, 217 Useful life, 94 User groups, 15–16 Valuation: of accounts receivables, 365–371 of bonds payable, 614–620 of cash, 149 of intangibles, 556 of notes receivable, 376–377 of PPE, 488–496 and cash discounts, 492 and contributions, 494 cost of buildings, 489 cost of equipment, 489–490 cost of land, 488–489 interest costs during construction, 490–492 Index and issuance of stock, 493 and lump-sum purchases, 492–493 self-constructed assets, 490 Valuation allowance, 801, 811 Value: feedback, 40 impairments of, 754–755 predictive, 40 Vendor allowances (promotional payments), 424 Verifiability, 40 Vested rights, 845 Virtual companies, 45n W Warrants: and earnings per share, 967 incremental method for, 708 proportional method for, 707 Warranty costs, 623–625 Weighted-average accumulated expenditures, 523, 524 Weighted-average number of shares outstanding, 961–962 Wheat, Francis, Wheat Committee (Study Group on Establishment of Accounting Principles), Working capital (net working capital), 156 Working capital changes, 1056–1057 Working capital ratio, 634 Work-in-process inventory, 420 Worksheets: for accounting cycle, 118–120 adjustments in, 118–120 columns of, 118 trial balance columns of, 118 adjustments in, 118–120 columns of, 118 I-20 financial statement preparation with, 120 for pensions, 858–860 trial balance columns of, 118 World Trade Center, attack on, see September 11, 2001 terrorist attacks World Wide Web, Write-downs, 572 Write-offs, 209, 567, 572 XBRL (extensible business reporting language), zero-interest-bearing notes, 371, 373–374 Zero-interest (deep discount) debenture bonds, 613 Z-scores, 162 P-1 Official Accounting Pronouncements OFFICIAL ACCOUNTING PRONOUNCEMENTS The following list of official accounting pronouncements constitutes the major part of generally accepted accounting principles (GAAP) and represents the authoritative source documents for much of the discussion contained in this book Date Issued No Title June 1953 Oct Oct Feb Sept Jan April Oct Aug 1954 1955 1956 1956 1957 1958 1958 1959 Accounting Research Bulletins (ARB’s), Committee on Accounting Procedures, AICPA (1953–1959) No 43 Restatement and Revision of Accounting Research Bulletins Nos 1–42, and Accounting Terminology Bulletin No (originally issued 1939–1953) (amended) No 44 Declining-Balance Depreciation; Revised July, 1958 (amended) No 45 Long-term Construction-type Contracts (unchanged) No 46 Discontinuance of Dating Earned Surplus (unchanged) No 47 Accounting for Costs of Pension Plans (superseded) No 48 Business Combinations (superseded) No 49 Earnings Per Share (superseded) No 50 Contingencies (superseded) No 51 Consolidated Financial Statements (amended and partially superseded) Aug Mar Aug July 1953 1955 1956 1957 No No No No Nov Dec Oct Mar Sept Oct May Nov Dec Dec Dec Dec Mar Mar May Aug Aug Mar Mar July Aug April April April Oct Oct Nov May May June June 1962 1962 1963 1964 1964 1965 1966 1966 1966 1966 1967 1967 1969 1969 1969 1970 1970 1971 1971 1971 1971 1972 1972 1972 1972 1972 1972 1973 1973 1973 1973 No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Dec Oct Dec Mar Mar May June Oct 1973 1974 1974 1975 1975 1975 1975 1975 No No No No No No No No Accounting Terminology Bulletins, Committee on Terminology, AICPA Review and Résumé (of the eight original terminology bulletins) (amended) Proceeds, Revenue, Income, Profit, and Earnings (amended) Book Value (unchanged) Cost, Expense, and Loss (amended) Accounting Principles Board (APB) Opinions, AICPA (1962–1973) New Depreciation Guidelines and Rules (amended) Accounting for the “Investment Credit” (amended) The Statement of Source and Application of Funds (superseded) Accounting for the “Investment Credit” (amending No 2) Reporting of Leases in Financial Statements of Lessee (superseded) Status of Accounting Research Bulletins (partially superseded) Accounting for Leases in Financial Statements of Lessors (superseded) Accounting for the Cost of Pension Plans (superseded) Reporting the Results of Operations (amended and partially superseded) Omnibus Opinion_1966 (amended and partially superseded) Accounting for Income Taxes (superseded) Omnibus Opinion_1967 (partially superseded) Amending Paragraph of APB Opinion No 9, Application to Commercial Banks (unchanged) Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants (unchanged) Earnings per Share (superseded) Business Combinations (superseded) Intangible Assets (superseded) The Equity Method of Accounting for Investments in Common Stock (amended) Reporting Changes in Financial Position (amended) Accounting Changes (superseded) Interest on Receivables and Payables (amended and partially superseded) Disclosure of Accounting Policies (amended) Accounting for Income Taxes_Special Areas (superseded) Accounting for Income Taxes_Equity Method Investments (unchanged) Accounting for Stock Issued to Employees (unchanged) Early Extinguishment of Debt (amended) Accounting for Lease Transactions by Manufacturer or Dealer Lessors (superseded) Interim Financial Reporting (amended and partially superseded) Accounting for Nonmonetary Transactions (amended) Reporting the Results of Operations (amended) Disclosure of Lease Commitments by Lessees (superseded) Financial Accounting Standards Board (FASB), Statements of Financial Accounting Standards (1973–2007) Disclosure of Foreign Currency Translation Information (superseded) Accounting for Research and Development Costs (amended) Reporting Accounting Changes in Interim Financial Statements (superseded) Reporting Gains and Losses from Extinguishment of Debt (superseded) Accounting for Contingencies (amended) Classification of Short-term Obligations Expected to be Refinanced Accounting and Reporting by Development Stage Enterprises Accounting for the Translation of Foreign Currency Transactions and Foreign Financial Statements (superseded) Official Accounting Pronouncements Date Issued No Oct Oct Dec Dec Nov Dec June June Nov Nov Dec Dec April 1975 1975 1975 1975 1976 1976 1977 1977 1977 1977 1977 1977 1978 No No No No No No No No No No No No No 10 11 12 13 14 15 16 17 18 19 20 21 June 1978 No 22 Aug Dec 1978 1978 No 23 No 24 Feb April May May June Aug Sept Sept 1979 1979 1979 1979 1979 1979 1979 1979 No No No No No No No No 25 26 27 28 29 30 31 32 Sept Oct Mar May July Sept Oct Nov 1979 1979 1980 1980 1980 1980 1980 1980 No No No No No No No No 33 34 35 36 37 38 39 40 Nov 1980 No 41 Nov Nov Dec Mar Mar Mar June June Nov Nov Dec Dec Jan Feb Feb 1980 1980 1980 1981 1981 1981 1981 1981 1981 1981 1981 1981 1982 1982 1982 No No No No No No No No No No No No No No No Mar April 1982 1982 No 57 No 58 April 1982 No 59 June June June 1982 1982 1982 No 60 No 61 No 62 June 1982 No 63 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 Title Accounting for Income Taxes_Oil and Gas Producing Companies (superseded) Extension of “Grandfather” Provisions for Business Combinations (superseded) Accounting for Contingencies_Transition Method Accounting for Certain Marketable Securities (superseded) Accounting for Leases (amended, interpreted, and partially superseded) Financial Reporting for Segments of a Business Enterprise (amended) Accounting by Debtors and Creditors for Troubled Debt Restructurings (amended) Prior Period Adjustments (amended) Accounting for Leases_Initial Direct Costs Financial Reporting for Segments of a Business Enterprise_Interim Financial Statements Financial Accounting and Reporting by Oil and Gas Producing Companies (amended) Accounting for Forward Exchange Contracts (superseded) Suspension of the Reporting of Earnings per Share and Segment Information by Nonpublic Enterprises (amended) Changes in the Provisions of Lease Agreements Resulting from Refundings of Tax-Exempt Debt (amended) Inception of the Lease Reporting Segment Information in Financial Statements That Are Presented in Another Enterprise’s Financial Report Suspension of Certain Accounting Requirements for Oil and Gas Producing Companies Profit Recognition on Sales-Type Leases of Real Estate Classification of Renewals or Extensions of Existing Sales-Type or Direct Financing Leases Accounting for Sales with Leasebacks Determining Contingent Rentals Disclosure of Information about Major Customers Accounting for Tax Benefits Related to U.K Tax Legislation Concerning Stock Relief Specialized Accounting and Reporting Principles and Practices in AICPA Statements of Position and Guides on Accounting and Auditing Matters (amended and partially superseded) Financial Reporting and Changing Prices (amended and partially superseded) Capitalization of Interest Cost (amended) Accounting and Reporting by Defined Benefit Pension Plans (amended) Disclosure of Pension Information (superseded) Balance Sheet Classification of Deferred Income Taxes (amended) Accounting for Preacquisition Contingencies of Purchased Enterprises (superseded) Financial Reporting and Changing Prices: Specialized Assets_Mining and Oil and Gas Financial Reporting and Changing Prices: Specialized Assets_Timberlands and Growing Timber Financial Reporting and Changing Prices: Specialized Assets_Income-Producing Real Estate Determining Materiality for Capitalization of Interest Cost Accounting for Compensated Absences (amended) Accounting for Intangible Assets of Motor Carriers (superseded) Accounting for Franchise Fee Revenue (amended) Financial Reporting and Changing Prices: Motion Picture Films Disclosure of Long-Term Obligations (amended) Revenue Recognition When Right of Return Exists Accounting for Product Financing Arrangements Financial Reporting in the Record and Music Industry Financial Reporting by Cable Television Companies (amended) Foreign Currency Translation (amended) Financial Reporting by Producers and Distributors of Motion Picture Films (superseded) Financial Reporting and Changing Prices: Investment Companies (superseded) Determining Whether a Convertible Security is a Common Stock Equivalent (superseded) Designation of AICPA Guide and SOP 81-1 on Contractor Accounting and SOP 81-2 on Hospital-Related Organizations as Preferable for Applying APB Opinion 20 (superseded) Related Party Disclosures (amended) Capitalization of Interest Cost in Financial Statements that Include Investments Accounted for by the Equity Method Deferral of the Effective Date of Certain Accounting Requirements for Revision Plans of State and Local Governmental Units Accounting and Reporting by Insurance Enterprises (amended) Accounting for Title Plant (amended) Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings and Certain Gifts and Grants Financial Reporting by Broadcasters (amended) P-2 P-3 Official Accounting Pronouncements Date Issued No Sept Sept Oct Oct Oct Nov Dec Dec Feb Aug Aug Nov 1982 1982 1982 1982 1982 1982 1982 1982 1983 1983 1983 1983 No No No No No No No No No No No No 64 65 66 67 68 69 70 71 72 73 74 75 Nov Dec Dec Feb 1983 1983 1983 1984 No No No No 76 77 78 79 Aug Nov Nov Mar 1984 1984 1984 1985 No No No No 80 81 82 83 Mar Mar 1985 1985 No 84 No 85 Aug Dec Dec 1985 1985 1985 No 86 No 87 No 88 Dec Dec Dec 1986 1986 1986 No 89 No 90 No 91 Aug Aug Oct Nov Dec Dec 1987 1987 1987 1987 1987 1987 No No No No No No June 1988 No 98 Sept Dec Dec 1988 1988 1988 No 99 No 100 No 101 Feb 1989 No 102 Dec Dec 1989 1989 No 103 No 104 Mar 1990 No 105 Dec 1990 No 106 Dec Dec Feb Aug Nov Nov Dec May May 1991 1991 1992 1992 1992 1992 1992 1993 1993 No 107 No 108 No 109 No 110 No 111 No 112 No 113 No 114 No 115 92 93 94 95 96 97 Title Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements (superseded) Accounting for Certain Mortgage Bank Activities (amended) Accounting for Sales of Real Estate (amended) Accounting for Costs and Initial Rental Operations of Real Estate Projects (amended) Research and Development Arrangements (amended) Disclosures about Oil and Gas Producing Activities Financial Reporting and Changing Prices: Foreign Currency Translation Accounting for the Effects of Certain Types of Regulation (amended) Accounting for Certain Acquisitions of Banking or Thrift Institutions (amended) Reporting a Change in Accounting for Railroad Track Structures Accounting for Special Termination Benefits Paid to Employees Deferral of the Effective Date of Certain Accounting Requirements for Pension Plans of State and Local Governmental Units (superseded) Extinguishment of Debt (superseded) Reporting by Transferors for Transfers of Receivables with Recourse (superseded) Classifications of Obligations that Are Callable by the Creditor Elimination of Certain Disclosures for Business Combinations by Nonpublic Enterprises (superseded) Accounting for Futures Contracts (superseded) Disclosure of Postretirement Health Care and Life Insurance Benefits Financial Reporting and Changing Prices: Elimination of Certain Disclosures Designation of AICPA Guides and Statement of Position on Accounting by Brokers and Dealers in Securities, by Employee Benefit Plans, and by Banks as Preferable for Purposes of Applying APB Opinion 20 Induced Conversions of Convertible Debt Yield Test for Determining Whether a Convertible Security Is a Common Stock Equivalent (superseded) Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed Employers’ Accounting for Pensions (amended) Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (amended and partially superseded) Financial Reporting and Changing Prices (amended) Regulated Enterprises_Accounting for Abandonments and Disallowances of Plant Costs Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases Regulated Enterprises_Accounting for Phase-in Plans Recognition of Depreciation by Not-for-Profit Organizations Consolidation of All Majority-Owned Subsidiaries Statement of Cash Flows (amended) Accounting for Income Taxes (superseded) Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments Accounting for Leases; Sale-Leaseback Transactions Involving Real Estate; Sales-Type Leases of Real Estate; Definition of the Lease Term; Initial Direct Costs of Direct Financing Leases Deferral of the Effective Date of Recognition of Depreciation by Not-for-Profit Organizations Accounting for Income Taxes_Deferral of the Effective Date of FASB Statement No 96 Regulated Enterprises_Accounting for the Discontinuation of Application of FASB Statement No 71 (amended) Statement of Cash Flows_Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale (amended) Accounting for Income Taxes_Deferral of the Effective Date of FASB Statement No 96 Statement of Cash Flows_Net Reporting of Certain Cash Receipts and Cash Payments and Classification of Cash Flows from Hedging Transactions Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk (superseded) Employers’ Accounting for Postretirement Benefits Other Than Pensions (amended and partially superseded) Disclosures about Fair Value of Financial Instruments (amended) Accounting for Income Taxes_Deferral of the Effective Date of FASB Statement No 96 Accounting for Income Taxes (amended and partially superseded) Reporting by Defined Benefit Pension Plans of Investment Contracts Rescission of FASB Statement No 32 and Technical Corrections Employers’ Accounting for Postemployment Benefits Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts Accounting by Creditors for Impairment of a Loan (amended) Accounting for Certain Investments in Debt and Equity Securities (amended and partially superseded) Official Accounting Pronouncements Date Issued No June 1993 No 116 June Oct Oct 1993 1994 1994 No 117 No 118 No 119 Jan Mar May Oct Nov 1995 1995 1995 1995 1995 No No No No No June 1996 No 125 Dec 1996 No 126 Dec Feb Feb June June Feb 1996 1997 1997 1997 1997 1998 No No No No No No June 1998 No 133 Oct 1998 No 134 Feb June 1999 1999 No 135 No 136 June 1999 No 137 June 2000 No 138 June 2000 No 139 Sept 2000 No 140 June June June Aug 2001 2001 2001 2001 No No No No April 2002 No 145 June 2002 No 146 Oct 2002 No 147 Dec April May 2002 2003 2003 No 148 No 149 No 150 Nov Dec Dec May 2004 2004 2004 2005 No No No No Feb 2006 No 155 Mar 2006 No 156 Sept Sept 2006 2006 No 157 No 158 Feb 2007 No 159 120 121 122 123 124 127 128 129 130 131 132 141 142 143 144 151 152 153 154 Title Accounting for Contributions Received and Contributions Made (amended and partially superseded) Financial Statements of Not-for-Profit Organizations (amended) Accounting by Creditors for Impairments of a Loan_Income Recognition and Disclosures Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments (superseded) Accounting and Reporting by Mutual Life Insurance Enterprises Accounting for the Impairment of Long-Lived Assets (superseded) Accounting for Mortgage Servicing Rights (superseded) Accounting for Stock-Based Compensation (revised) Accounting for Certain Investments Held by Not-for-Profit Organizations (amended and partially superseded) Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities (superseded) Exemption from Certain Required Disclosures about Financial Instruments for Certain Nonpublic Entities Deferral of the Effective Date of Certain Provisions of FASB Statement No 125 Earnings per Share (amended) Disclosure of Information about Capital Structure Reporting Comprehensive Income (amended and partially superseded) Reporting Disaggregated Information about a Business Enterprise Employers’ Disclosures about Pensions and Other Postretirement Benefits – an amendment of FASB Statements No 87, 88, and 106 (revised) (amended and partially superseded) Accounting for Derivative Instruments and Hedging Activities (amended and partially superseded) Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise (an amendment of FASB Statement No 65) Rescission of FASB Statement No 75 and Technical Corrections (amended) Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions for Others (amended) Accounting for Derivative Instruments and Hedging Activities_Deferral of the Effective Date for FASB Statement No 133 (an amendment of Statement No 133) Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB Statement No 133) Rescission of FASB Statement No 53 and amendments to FASB Statements No 63, 89, and 121 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement 125) (amended and partially superseded) Business Combinations (amended) Goodwill and Other Intangible Assets (amended and partially superseded) Accounting for Asset Retirement Obligations (amended and partially superseded) Accounting for the Impairment or Disposal of Long-Lived Assets (amended and partially superseded) Rescission of FASB Statements No 4, 44, and 64, Amendment of FASB Statement No 13, and Technical Corrections Accounting for Costs Associated with Exit or Disposal Activities (amended and partially superseded) Acquisitions of Certain Financial Institutions, an Amendment of FASB Statements No 72 and 144 and FASB Interpretation No Accounting for Stock-Based Compensation—Transition and Disclosure Amendment of Statement 133 on Derivative Instruments and Hedging Activities Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (amended) Inventory Costs – an amendment of ARB No 43, Chapter Accounting for Real Estate Time-Sharing Transactions Exchanges on Non-Monetary Assets – an amendment of APB Opinion No 29 Accounting Changes and Error Corrections – a replacement of APB Opinion No 20 and FASB Statement No Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No 133 and 140 Accounting for Servicing of Financial Assets—an amendment of FASB Statement No 140 (amended) Fair Value Measurements Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No 87, 88, 106, and 132R The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No 115 P-4 P-5 Official Accounting Pronouncements Date Issued No June June 1974 1974 No No Dec 1974 No Feb Feb Feb Oct Jan 1975 1975 1975 1975 1976 No No No No No Feb 1976 No Sept 1976 No 10 Sept Sept Sept 1976 1976 1976 No 11 No 12 No 13 Sept Sept 1976 1976 No 14 No 15 Feb 1977 No 16 Feb 1977 No 17 Mar Oct Nov April April Aug 1977 1977 1977 1978 1978 1978 No No No No No No Sept Sept Sept 1978 1978 1978 No 24 No 25 No 26 Nov 1978 No 27 Dec 1978 No 28 Feb 1979 No 29 Sept 1979 No 30 Feb 1980 No 31 Mar 1980 No 32 Aug 1980 No 33 Mar May 1981 1981 No 34 No 35 Oct July 1981 1983 No 36 No 37 Aug 1984 No 38 Mar 1992 No 39 Apr 1993 No 40 18 19 20 21 22 23 Title Financial Accounting Standards Board (FASB), Interpretations (1974–2006) Accounting Changes Related to the Cost of Inventory (APB Opinion No 20) Imputing Interest on Debt Arrangements Made Under the Federal Bankruptcy Act (APB Opinion No 21) (superseded) Accounting for the Cost of Pension Plans Subject to the Employee Retirement Income Security Act of 1974 (APB Opinion No 8) Applicability of FASB Statement No to Purchase Business Combinations (amended) Applicability of FASB Statement No to Development Stage Enterprises (superseded) Applicability of FASB Statement No to Computer Software Applying FASB Statement No in Statements of Established Enterprises Classification of a Short-Term Obligation Repaid Prior to Being Replaced by a Long-Term Security (FASB Statement No 6) Applying APB Opinion No 16 and 17 when a Savings and Loan or Similar Institution is Acquired in a Purchase Business Combination (APB Op No 16 & 17 ) (amended) Application of FASB Statement No 12 to Personal Financial Statements (FASB Statement No 12) Changes in Market Value after the Balance Sheet Date (FASB Statement No 12) Accounting for Previously Established Allowance Accounts (FASB Statement No 12) Consolidation of a Parent and Its Subsidiaries Having Different Balance Sheet Dates (FASB Statement No 12) Reasonable Estimation of the Amount of a Loss (FASB Statement No 5) Translation of Unamortized Policy Acquisition Costs by Stock Life Insurance Company (FASB Statement No 8) (amended and partially superseded) Clarification of Definitions and Accounting for Marketable Equity Securities That Become Nonmarketable (FASB Statement No 12) Applying the Lower of Cost or Market Rule in Translated Financial Statements (FASB Statement No 8) (superseded) Accounting for Income Taxes in Interim Periods (APB Op No 28) (amended) Lessee Guarantee of the Residual Value of Leased Property (FASB Statement No 13) Reporting Accounting Changes under AICPA Statements of Position (APB Op No 20) Accounting for Leases in a Business Combination (FASB Statement No 13) (amended) Applicability of Indefinite Reversal Criteria to Timing Differences (APB Op No 11 and 23) Leases of Certain Property Owned by a Governmental Unit or Authority (FASB Statement No 13) Leases Involving Only Part of a Building (FASB Statement No 13) Accounting for an Unused Investment Tax Credit (APB Op No 2, 4, 11, and 16) Accounting for Purchase of a Leased Asset by the Lessee During the Term of the Lease (FASB Statement No 13) Accounting for a Loss on a Sublease (FASB Statement No 13 and APB Op No 30) (amended) Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans (APB Op No 15 and 25) (amended) Reporting Tax Benefits Realized on Disposition of Investments in Certain Subsidiaries and Other Investees (APB Op No 23 and 24) Accounting for Involuntary Conversions of Nonmonetary Assets to Monetary Assets (APB Op No 29) Treatment of Stock Compensation Plans in EPS Computations (APB Op No 15 and Interp 28) (superseded) Application of Percentage Limitations in Recognizing Investment Tax Credit (APB Op No 2, 4, and 11) Applying FASB Statement No 34 to Oil and Gas Producing Operations (FASB Statement No 34) Disclosure of Indirect Guarantees of Indebtedness of Others (FASB Statement No 5) Criteria for Applying the Equity Method of Accounting for Investments in Common Stock (APB Op No 18) Accounting for Exploratory Wells in Progress at the End of a Period Accounting for Translation Adjustments upon Sale of Part of an Investment in a Foreign Entity (Interprets FASB Statement No 52) Determining the Measurement Date for Stock Option, Purchase, and Award Plans Involving Junior Stock (Interprets APB Opinion No 25 ) Offsetting of Amounts Related to Certain Contracts (Interprets APB Opinion No 10 and FASB Statement No 105) (amended) Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises (Interprets FASB Statements No 12, 60, 97, and 113) Official Accounting Pronouncements Date Issued No Title Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements Accounting for Transfers of Assets in Which a Not-for-Profit Organization is Granted Variance Power Real Estate Sales (Interprets FASB Statement No 66) (amended) Accounting for Certain Transactions involving Stock Compensation (an interpretation of APB Opinion No 25 ) (amended) Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (amended) Consolidation of Variable Interest Entities (an interpretation of ARB No 51, revised) (amended) Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No 143 Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No 109 Dec 1994 No 41 Sept 1996 No 42 June 1999 No 43 No 44 Nov 2002 No 45 Jan 2003 No 46 March 2005 No 47 June No 48 2006 Dec Dec Dec Dec Dec 1979 1979 1979 1979 1979 No No No No No 79-1 79-2 79-3 79-4 79-5 Dec Dec 1979 1979 No 79-6 No 79-7 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 1979 1979 1979 1979 1979 1979 1979 1979 1979 1979 1979 No 79-8 No 79-9 No 79-10 No 79-11 No 79-12 No 79-13 No 79-14 No 79-15 No 79-16 No 79-17 No 79-18 Dec 1979 No 79-19 Dec 1980 No 80-1 Dec Feb Feb 1980 1981 1981 No 80-2 No 81-1 No 81-2 Feb Feb Feb Nov Jan Mar 1981 1981 1981 1981 1982 1982 No No No No No No July 1983 No 83-1 Mar 1984 No 84-1 Sept 1984 No 84-2 Sept 1984 No 84-3 Oct Mar 1984 1985 No 84-4 No 85-1 Mar 1985 No 85-2 81-3 81-4 81-5 81-6 82-1 82-2 Financial Accounting Standards Board (FASB), Technical Bulletins (1979–2002) Purpose and Scope of FASB Technical Bulletins and Procedures for Issuance (revised) Computer Software Costs Subjective Acceleration Clauses in Long-Term Debt Agreements Segment Reporting of Puerto Rican Operations Meaning of the Term ‘Customer’ as it Applies to Health Care Facilities under FASB Statement No 14 Valuation Allowances Following Debt Restructuring Recoveries of a Previous Writedown under a Troubled Debt Restructuring Involving a Modification of Terms Applicability of FASB Statements 21 and 33 to Certain Brokers and Dealers in Securities Accounting in Interim Periods for Changes in Income Tax Rates Fiscal Funding Clauses in Lease Agreements Effect of a Penalty on the Term of a Lease Interest Rate Used in Calculating the Present Value of Minimum Lease Payments Applicability of FASB Statement No 13 to Current Value Financial Statements Upward Adjustment of Guaranteed Residual Values Accounting for Loss on a Sublease Not Involving the Disposal of a Segment Effect on a Change in Income Tax Rate on the Accounting for Leveraged Leases (revised) Reporting Cumulative Effect Adjustment from Retroactive Application of FASB No 13 Transition Requirements of Certain FASB Amendments and Interpretations of FASB Statement No 13 Investor’s Accounting for Unrealized Losses on Marketable Securities Owned by an Equity Method Investee Early Extinguishment of Debt through Exchange for Common or Preferred Stock (amended) Classification of Debt Restructuring by Debtors and Creditors Disclosure of Interest Rate Futures Contracts and Forward and Standby Contracts Accounting for Unused Investment Tax Credits Acquired in a Business Combination Accounted for by the Purchase Method Multiemployer Pension Plan Amendments Act of 1980 Classification as Monetary or Nonmonetary Items Offsetting Interest Cost to be Capitalized with Interest Income Applicability of Statement 15 to Debtors in Bankruptcy Situations Disclosure of the Sale or Purchase of Tax Benefits through Tax Leases (amended) Accounting for the Conversion of Stock Options into Incentive Stock Options as a Result of the Economic Recovery Tax Act of 1981 Accounting for the Reduction in the Tax Basis of an Asset Caused by the Investment Tax Credit (ITC) Accounting for Stock Issued to Acquire the Results of a Research and Development Arrangement (amended) Accounting for the Effects of the Tax Reform Act of 1984 on Deferred Income Taxes Relating to Domestic International Sales Corporations Accounting for the Effects of the Tax Reform Act of 1984 on Deferred Income Taxes of Stock Life Insurance Enterprises In-Substance Defeasance of Debt Accounting for the Receipt of Federal Home Loan Mortgage Corporation Participating Preferred Stock Accounting for Collateralized Mortgage Obligations (CMOs) (superseded) P-6 P-7 Official Accounting Pronouncements Date Issued No Title Nov Nov Dec Dec Oct Dec April Dec Dec Dec Dec Dec Apr 1985 1985 1985 1985 1986 1986 1987 1987 1987 1988 1988 1990 1994 No No No No No No No No No No No No No Dec 1997 No 97-1 July 2001 No 01-1 Nov May Dec Dec Dec Dec Feb 1978 1980 1980 1980 1984 1985 2000 No No No No No No No 85-3 85-4 85-5 85-6 86-1 86-2 87-1 87-2 87-3 88-1 88-2 90-1 94-1 Accounting for Operating Leases with Scheduled Rent Increases Accounting for Purchases of Life Insurance (superseded) Issues Relating to Accounting for Business Combinations (amended) Accounting for a Purchase of Treasury Shares Accounting for Certain Effects of the Tax Reform Act of 1986 Accounting for an Interest in the Residual Value of a Leased Asset (amended) Accounting for a Change in Method of Accounting for Certain Postretirement Benefits Computation of a Loss on an Abandonment Accounting for Mortgage Servicing Fees and Rights (amended) Issues Relating to Accounting for Leases Definition of a Right of Setoff Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts Application of Statement 115 to Debt Securities Restructured in a Troubled Debt Restructuring Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back Option Effective Date for Certain Financial Institutions of Certain Provisions of Statement No 140 Related to the Isolation of Transferred Financial Assets Financial Accounting Standards Board (FASB), Statements of Financial Accounting Concepts (1978–2006) Objectives of Financial Reporting by Business Enterprises Qualitative Characteristics of Accounting Information Elements of Financial Statements of Business Enterprises Objectives of Financial Reporting by Nonbusiness Organizations Recognition and Measurement in Financial Statements of Business Enterprises Elements of Financial Statements Using Cash Flow Information and Present Value in Accounting Measurements NATIONAL ACCOUNTING BOARDS AND ORGANIZATIONS American Accounting Association (AAA) 5717 Bessie Drive Sarasota, FL 34233-2399 (941) 921-7747 www.aaahq.org American Institute of Certified Public Accountants (AICPA) 1211 Avenue of the Americas New York, NY 10036-8775 (212) 596-6200 www.aicpa.org Association of Government Accountants (AGA) 2208 Mount Vernon Ave Alexandria, VA 22301-1314 (703) 684-6931 www.agacgfm.org Financial Accounting Standards Board (FASB) 401 Merritt P.O Box 5116 Norwalk, CT 06856-5116 (203) 847-0700 www.fasb.org Financial Executives International (FEI) 200 Campus Drive Florham Park, NJ 07932-0674 (973) 765-1000 www.fei.org Governmental Accounting Standards Board (GASB) 401 Merritt P.O Box 5116 Norwalk, CT 06856-5116 (203) 847-0700 www.gasb.org International Accounting Standards Board (IASB) 30 Cannon Street London EC4M 6XH, United Kingdom Telephone: +44 (0)20 7246 6410 www.iasb.org Institute of Internal Auditors (IIA) 247 Maitland Avenue Altamonte Springs, FL 32701-4201 (407) 937-1100 www.theiia.org Institute of Management Accountants (IMA) 10 Paragon Drive Montvale, NJ 07645-1718 (201) 573-9000 www.imanet.org Securities and Exchange Commission (SEC) 100 F Street, NE Washington, DC 20549 (202) 551-6551 www.sec.gov Success in Accounting is just a click away With WileyPLUS, students and instructors will experience success in the classroom When students succeed—when they stay on-task and make the breakthrough that turns confusion into confidence—they are empowered to realize the possibilities for greatness that lie within each of them Our goal is to create an environment where students reach their full potential and experience the exhilaration of academic success that will last them a lifetime WileyPLUS can help you reach that goal WileyPLUS is an online suite of resources—including the complete text—that will help your students: • come to class better prepared for your lectures • get immediate feedback and context-sensitive help on assignments and quizzes • track progress throughout the course “I just wanted to say how much this program helped me in studying… I was able to actually see my mistakes and correct them … I really think that other students should have the chance to use WileyPLUS.” Ashlee Krisko, Oakland University www.wileyplus.com 87% of students surveyed said it improved their understanding of the material.* *Based on a fall 2006 survey of 519 accounting student users of WileyPLUS TO THE INSTRUCTOR WileyPLUS is built around the activities you perform Prepare & Present Create outstanding class presentations using a wealth of resources, such as PowerPoint™ slides, interactive simulations, and more Plus you can easily upload any materials you have created into your course, and combine them with the resources contained in WileyPLUS Create Assignments Automate the assigning and grading of homework or quizzes by using the provided question banks, or by writing your own Student results will be automatically graded and recorded in your gradebook WileyPLUS also links homework problems to relevant sections of the online text, hints, or solutions— context-sensitive help where students need it most! in your class each day With WileyPLUS you will: Track Student Progress Keep track of your students' progress via an instructor's gradebook, which allows you to analyze individual and overall class results This gives you an accurate and realistic assessment of your students’ progress and level of understanding Now Available with WebCT and desire2learn! Now you can seamlessly integrate all of the rich content and resources available with WileyPLUS with the power and convenience of your WebCT or desire2learn course You and your students get the best of both worlds with single sign-on, an integrated gradebook, list of assignments and roster, and more If your campus is using another course management system, contact your local Wiley Representative “I studied more for this class than I would have without WileyPLUS.” Melissa Lawler, Western Washington Univ For more information on what WileyPLUS can to help your students reach their potential, please visit TM www.wileyplus.com/experience 82% of students surveyed said it made them better prepared for tests * *Based on a fall 2006 survey of 519 accounting student users of WileyPLUS ... information provided by the accounting is useful to investors and creditors ( Analysis ), and reflect on how the accounting is related to accounting principles and concepts ( Principles ) Such exercises,... financial accounting standards and disclosure policies He has published scholarly articles in The Accounting Review, Journal of Accounting and Economics, Research in Accounting Regulation, Review of Accounting. .. Regulation, Review of Accounting Studies, and Accounting Horizons, and he has served on the editorial boards of The Accounting Review, Accounting Horizons, and Issues in Accounting Education He has served