ffirs.fm Page iii Thursday, October 7, 2004 3:32 PM THE ULTIMATE ACCOUNTANTS’ REFERENCE INCLUDING GAAP, IRS & SEC REGULATIONS, LEASES, AND MORE STEVEN M BRAGG JOHN WILEY & SONS, INC www.ebook3000.com ffirs.fm Page vi Thursday, October 7, 2004 3:32 PM www.ebook3000.com ffirs.fm Page i Thursday, October 7, 2004 3:32 PM THE ULTIMATE ACCOUNTANTS’ REFERENCE INCLUDING GAAP, IRS & SEC REGULATIONS, LEASES, AND MORE www.ebook3000.com ffirs.fm Page ii Thursday, October 7, 2004 3:32 PM Update Service BECOME A SUBSCRIBER! Did you purchase this product from a bookstore? 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printed on acid-free paper Copyright © 2005 by John Wiley & Sons, Inc All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada 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 Section 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, 978-750-8400, fax 978-646-8600, or on the web at 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, 201-748-6011, fax 201-748-6008 Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Bragg, Steven M The ultimate accountants’ reference : including GAAP, IRS & SEC regulations, leases, pensions, and more / Steven M Bragg p cm Includes bibliographical references and index ISBN 0-471-67813-9 (cloth : alk paper) Accounting— Standards— United States Corporations— United States— Accounting Financial statements— United States I Title HF5616.U5B713 2005 657'.0973— dc22 2004007662 Printed in the United States of America 10 www.ebook3000.com ffirs.fm Page v Thursday, October 7, 2004 3:32 PM To the many adventures still to come with Melissa— and not all involving children www.ebook3000.com ffirs.fm Page vi Thursday, October 7, 2004 3:32 PM www.ebook3000.com ftoc.fm Page vii Thursday, October 7, 2004 3:16 PM CONTENTS About the Author xxiii Acknowledgments xxv Preface xxvii Part One Overview of Accounting and Its Role in the Organization 1 Introduction The Role of Accounting 2.1 2.2 2.3 2.4 2.5 Tasks of the Accounting Function Role of the Accounting Function Impact of Ethics on the Accounting Role Accounting Job Descriptions Summary The Corporate Structure 17 3.1 3.2 3.3 3.4 3.5 3.6 3.7 17 17 19 20 21 23 24 Introduction The Corporate Organizational Structure The Cash Disbursements Cycle The Sales Cycle The Order Fulfillment Cycle Other Topical Areas Summary Part Two Accounting Rules and Regulations 10 13 16 25 Standard-Setting Organizations 27 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 27 27 28 28 28 30 30 31 31 Introduction The Committee on Accounting Procedure The Accounting Principles Board The Financial Accounting Foundation The Financial Accounting Standards Board Public Company Accounting Oversight Board (PCAOB) The Government Accounting Standards Board The International Accounting Standards Board Summary Accounting Standards 32 5.1 5.2 32 33 Introduction Accounting Research Bulletins vii www.ebook3000.com ftoc.fm Page viii Thursday, October 7, 2004 3:16 PM viii Contents 5.3 5.4 5.5 5.6 5.7 5.8 Opinions—Accounting Principles Board Interpretations—FASB Statements of Financial Accounting Standards—FASB Statements of Financial Accounting Concepts—FASB Technical Bulletins—FASB Summary 33 35 38 48 49 52 The Securities and Exchange Commission 53 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17 6.18 6.19 6.20 6.21 53 53 54 58 59 60 61 61 62 62 62 63 63 64 64 65 66 72 73 73 74 Introduction Overview of the SEC Organization of the SEC EDGAR The Securities Act of 1933 The Securities Exchange Act of 1934 The Public Utility Holding Company Act of 1935 The Trust Indenture Act of 1939 The Investment Company Act of 1940 The Investment Advisers Act of 1940 Regulation FD Regulation D Regulation M-A Regulation S-B Regulation S-K Regulation S-T Regulation S-X (Requirements for Financial Statement Reporting) Staff Accounting Bulletin 99: Materiality Forms to be Filed with the SEC Going Private Transactions (Rule 13e-3) Summary Laws Impacting Accounting 75 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 Introduction Ethics Employment Eligibility Garnishments Health Insurance Pensions Securities Taxes Wages and Overtime Summary 75 75 77 78 79 80 81 83 85 87 Part Three Accounting Reports 89 The Balance Sheet and Statement of Stockholders’ Equity 91 8.1 8.2 Introduction Uses of the Balance Sheet and Statement of Stockholders’ Equity www.ebook3000.com 91 91 bapp06.fm Page 761 Thursday, October 7, 2004 4:07 PM F.4 Capitalization and Significant Subsidiaries 761 • If there has been a change in accountants during the past five years, find out why • Review any reports of outside consultants or analysts concerning the company • Review any correspondence during the past five years with the EPA, FTC, OSHA, EEOC, or IRS Determine if there are any ongoing investigations or suggestions of violations by any of these agencies • Research any press releases or articles about the company within the past year (see Bloomberg.com, NEXIS, Equifax, etc.) • Review all contracts that are important to operations Also review any contracts with shareholders or officers In particular, look for the following provisions: ⅙ ⅙ ⅙ ⅙ ⅙ ⅙ ⅙ Default or termination provisions Restrictions on company action Consent requirements Termination provisions in employment contracts Ownership of technology Cancellation provisions in major supply and customer contracts Unusual warranties or the absence of protective provisions • Review any required regulatory compliance and verify that necessary licenses • • • • • • • and permits have been maintained, as well as ongoing filings and reports Review all current patent, trademark, service mark, trade name, and copyright agreements, and note renewal dates Review all related party transactions for the past three years Review the terms of any outbound or inbound royalty agreements Establish if any company software (either used internally or resold) was obtained from another company If so, what are the terms under which the code is licensed? Are there any associated royalty payments? Review all legal invoices for the past two years Obtain a copy of any factoring agreements Obtain copies of all outsourcing agreements F.4 CAPITALIZATION AND SIGNIFICANT SUBSIDIARIES • Review all board resolutions authorizing the issuance of stock to ensure that all shares are validly issued • Review debt agreements to which the company or any subsidiary is a party, as well as all debt guarantees Note any restrictions on dividends, on incurring extra debt, and on issuing additional capital stock Note any unusual consent or default provisions If subordinated debt securities are being issued, compare new subordination provisions with the provisions for other agreements for compatibility Review the latest borrowing base certificates Inquire whether there are any defaults or potential defaults • Review any disclosure documents used in the private placement of securities or loan applications during the preceding five years • Review all documents affecting ownership, voting, or rights to acquire the company’s stock for required disclosure and significance to the purchase transactions, bapp06.fm Page 762 Thursday, October 7, 2004 4:07 PM 762 App F Due Diligence Checklist such as warrants, options, security holder agreements, registration rights agreements, shareholder rights, or poison pill plans F.5 EMPLOYEES • Obtain copies of any employment agreements • Obtain copies of any noncompete agreements • Obtain copies of any salesperson compensation agreements • Obtain copies of any director compensation agreements • Obtain copies of any option plans • Summarize any loan amounts and terms to officers, directors, or employees • Obtain any union labor agreements • Determine the number of states to which payroll taxes must be paid • Obtain a copy of the employee manual • Obtain a list of all employees, their current compensation, and compensation for the prior year • Summarize the names, ages, titles, education, experience, and professional biog- raphies of the senior management team • Obtain copies of employee resumes • Establish the employee turnover rate for the past two years • Obtain a copy of the organization chart F.6 REVENUE • Summarize sales by customer for the current and past year • Summarize sales by product for the current and past year • Summarize the backlog by customer • Summarize the backlog by custom work and standard products • Determine how much staffing is required to complete the existing backlog of cus- tom work • Determine the seasonality of revenue • Determine the amount of ongoing maintenance revenue from standard software products • Obtain copies of all outstanding proposals, bids, and offers pending award • Obtain copies of all existing contracts for products or services, including war- ranty and guarantee work F.7 ASSETS • Obtain copies of all asset leases, and review them for term, early payment, and bargain purchase clauses • Obtain copies of all office space lease agreements, and review them for term and renewal provisions • Review the title insurance for any significant land parcels owned by the company • Obtain current detail of accounts receivable bapp06.fm Page 763 Thursday, October 7, 2004 4:07 PM F.10 Internet 763 • Obtain a list of all accounts and notes receivable from employees • Obtain a list of all inventory items, and discuss the obsolescence reserve • Obtain the current fixed asset listing, as well as depreciation calculations • Review the bad debt reserve calculation • Obtain an itemized list of all assets that are not receivables or fixed assets • Obtain any maintenance agreements on company equipment • Is there an upcoming need to replace assets? • Discuss whether there are any plans to close, relocate, or expand any facilities • Itemize all capitalized R&D or software development expenses F.8 LIABILITIES • Verify wage and tax remittances to all government entities, and that there are no • • • • • • unpaid amounts Obtain a list of all accounts payable to employees Review the sufficiency of accruals for wages, vacation time, legal expenses, insurance, property taxes, and commissions Review the terms of any lines of credit Review the amount and terms of any other debt agreements Review the current accounts payable listing Obtain copies of all unexpired purchasing commitments (purchase orders, etc.) F.9 FINANCIAL STATEMENTS • Obtain audited financial statements for the last three years • Obtain monthly financial statements for the current year • Establish the revenues and profits per employee • Establish the direct labor expense as a percentage of revenue • Obtain copies of federal tax returns for the last three years • Verify the most recent bank reconciliation • Determine profitability by product, by customer, and by segment • Obtain a copy of the business plan and budget F.10 INTERNET • Does the company use the Internet for internal use as an interactive part of opera• • • • tions? What functions are used in this manner? Has the company’s firewall ever been penetrated, and how sensitive is the information stored on the company network’s publicly available segments? Does the company provide technical support information through its Web site? Are Web site usage statistics tracked? If so, how are they used for management decisions? In what way could operational costs decrease if the company’s customers interacted with it through the Internet? bapp06.fm Page 764 Thursday, October 7, 2004 4:07 PM 764 App F Due Diligence Checklist F.11 DEVELOPMENT • Who are the key development personnel involved with the creation, coding, and • • • • • • • • • • F.12 evaluation of software products? What is their tenure and educational background? How much money is invested annually in development? As a proportion of sales? What is the strategic plan for the development of new products? What is the timeline for their introduction? To what markets are they targeted? How many patches were required to make the last major software release stable and commercially viable? What was the average time required to resolve customer software problems? How many customer accounts have been lost due to a software upgrade? What reasons did they give for dropping maintenance? What operating system platforms are the target for the company’s software products? Is there a plan to port any company products to other platforms? For what proportion of existing products has this been done? Does the company use structured programming techniques that allow for easy software updating, maintenance, and enhancement? What development languages and tools does the development staff use now? Are there plans to change to other languages and tools? What are the attributes that make the company’s products unique? What is the company’s strategy in designing new products (e.g., quality, support, special features) MARKETING • What types of advertising and promotion are used? • Does the company have a Web site? Who owns the site and how is it hosted? • Does the company use e-mail for marketing notifications to customers? • What are the proportions of sales by distribution channel? • How many customers can the company potentially market its products to? What would be the volume by customer? • What is the company’s market share? What is the trend? • Are there new markets in which the products can be sold? F.13 SALES • What is the sales strategy (e.g., add customers, increase support, increase pene• • • • • • tration into existing customer base, pricing, etc.)? What is the structure of the sales organization? Are there independent sales representatives? Obtain the sales organization chart How many sales personnel are in each sales position? What is the sales force’s geographic coverage? What is the sales force’s compensation, split by base pay and commission? What was the sales per salesperson for the past year? bapp06.fm Page 765 Thursday, October 7, 2004 4:07 PM F.14 Other 765 • What was the sales expense per salesperson for the past year? • What is the sales projection by product for the next 12 months? • Into what category customers fall—end users, retailers, OEMs, wholesalers, • • • • • • • • F.14 and/or distributors? Who are the top 10 customers, based on sales volume? What is the historical sales volume to all customers for the past three years? How many customers are there for each product, industry, and geographic region? What is the average order size? Does the company have an Internet store? Does the site accept online payments and orders? What percentage of total sales come through this medium? How many customers have current subscriptions or maintenance for the company’s software? What is the dollar amount per customer? What is the growth rate in the number of customers? What is the structure of the technical support group? How many people are in it, and what is their compensation? Obtain a list of all customers who have stopped doing business with the company in the last three years OTHER • Discuss revenue recognition policies • Construct a cash forecast through the end of the year • Obtain a copy of the chart of accounts • Determine risk management strategies and insurance coverage • Is there a 401(k) plan? Any company contribution? Who manages it? Are contri- bution payments current? • Evaluate the company benefit plan to determine its cost, as well as the amount of employee participation • Obtain a list of all significant accounting policies ffirs.fm Page vi Thursday, October 7, 2004 3:32 PM bindex.fm Page 767 Thursday, October 7, 2004 4:05 PM INDEX 401(k) plan, 656 403(b) plan, 656 Accounting changes Disclosure, 117 Tax impact of, 622–625 Treatment of, 105–106 Accounting function Role of, 9–10 Tasks, 7–9 Accounting policies Disclosure, 117 Accounting Principles Board Description of, 28 Opinions, 33–35 Accounting Research Bulletins, 33 Accounts payable Best practices, 309–315 Controls over, 395–396 Payment delay, 519–520 Software criteria, 462–463 Transaction flow, 238–239 Accounts receivable Controls over, 389–390 Definition of, 214 Journal entries, 709–711 Long-term, 217–218 Ownership of, 219 Software criteria, 464–465 Transaction flow, 215 Accretion, revenue recognition for, 291 Accrual Journal entries, 683–685 Method, 279, 640 Accumulated earnings tax, 616 Acquisition Consolidation method, 580–581 Contingent payments, 582–583 Cost method, 578 Disclosure, 119 Equity method, 578–580 Evaluation, 553–570 Journal entry, 681–682 Purchase method, 574–578 Tax implications of, 647–648 Valuation, 570–574 Activity-based costing, 418, 435–436 767 bindex.fm Page 768 Thursday, October 7, 2004 4:05 PM 768 Index Advances Accounting for, 240 Controls over, 393 Alternative minimum tax, 617–619 Asset Definitions, 94–96 Impairment, 117, 234–235 Intangible, 235–236 Awards, see Bonuses Budgeting Controls, 369–371 Flex, 365–366 Process, 366–369 Sample, 348 System of, 340–348 Buyouts, leveraged, 583–584 By-product costing, 418–419, 438–443 Ethics, 10–13 Bad debts Accounting for, 218–219 Disclosure, 118 Tax implications of, 662–663 Balance sheet Critique of, 98–100 Format, 92–94 Use of, 91–92 Bank reconciliation journal entry, 682 Bank relations, 518–519 Bankruptcy Alternatives to, 613 Events, 606–611 Laws, 603–604 Payment priorities, 605 Players, 604–605 Special rules, 612 Tax liabilities, 611–612 Bar code scanning, 415 Barter Disclosure of, 118 Transactions, 619–620 Benefits, disclosure of, 136 Best practices, 309–338 Bill and hold transactions Accounting for, 280–281 Disclosure, 118 Journal entry, 682 Bonds Accounting for, 248–249 Journal entries, 706–707 Overview of, 246–247, 525–526 Retirement of, 253–254 Bonuses Accounting for, 241 Tax impact of, 620–621 Breakeven analysis, 453–457 Callable obligations, disclosure of, 119 Capital Purchase evaluation, 451–453 Structure, disclosure of, 119 Capitalization limit, 221–222 Cash Accounting for, 175–176 Controls, 386–388 Disclosure of, 120 Forecasting, 529–534 Management, 529–540 Method of accounting, 621–622, 640 Cash balance plan, 657 Cash disbursements Cycle, 19–20 Chart of accounts, 673–679 Clock Electronic, 415 Punch, 415 Closing the books, 373–382 Collateral Disclosure of, 121 Collection method, 285 Collection Acceleration, 520 Best practices, 315–317 Techniques, 513–515 Collective bargaining agreements, disclosure of, 121 Commissions Accounting for, 241 Best practices, 317–318 Commitments, disclosure of, 121 Committee on Accounting Procedure, 27–28 Compensated absences, accounting for, 241 Compensating balances, disclosure of, 122 Compensation, deferred, 631–633 bindex.fm Page 769 Thursday, October 7, 2004 4:05 PM Index Completed performance method, 285 Concept statements, 48–49 Consignment revenue Disclosure of, 122 Tax impact of, 630–631 Consolidated Omnibus Budget Reconciliation Act, 79 Construction contracts In progress, 229–230 Journal entries, 704 Long-term, 283–285 Consumer Credit Protection Act, 78 Contingent asset purchase obligation, 122 Contingent liabilities Accounting for, 244 Disclosure of, 123 Payments, 582–583 Continued existence doubts, disclosure of, 123 Contract revenue recognition, disclosure of, 123–124 Contract Work Hours and Safety Standards Act, 85 Controls Elimination of, 410–411 For accounts payable, 395–396 For accounts receivable, 389–390 For budgeting, 369–371 For cash, 386–388 For cost of goods sold, 403–406 For current liabilities, 396–398 For equity, 400–401 For fixed assets, 393–395 For foreign currency translations, 408–409 For hedging transactions, 408 For inventory, 390–392 For investments, 388–389 For notes payable, 398–400 For occupancy expenses, 407–408 For payroll, 406–407 For prepaid expenses, 392–393 For revenues, 401–403 For travel and entertainment expenses, 406 Need for, 383–384 Cost accounting Purpose of, 412–413 Variances, 443–446 Cost of capital, 447–451 Cost of goods sold Controls over, 403–406 Expenses listed in, 103–104 Cost recovery method, 280 Credit Examination, 510–513 Types of, 507–509 Credit cards Accounts receivable, 215 Use as financing tool, 520–521 Credit facilities, disclosure of, 144–145 Currency, see Foreign currency Current liabilities Controls over, 396–398 Presentation of, 240 Current rate method, 168–169 Current Tax Payment Act, 83 Customers, disclosure of, 124 Cut-off, period-end, 240 Cycle Cash disbursements, 19–20 Order fulfillment, 21–23 Sales, 20–21 Data Collection systems, 413–416 Collection tools, 482–483 Storage tools, 483–485 Summarization systems, 416–419 Davis-Bacon Act, 85–86 Debt Accounting for, 248–257 Asset based, 524–525 Bridge, 526 Classification, 247–248 Controls over, 398–400 Convertible, 254–256 Disclosure of, 134–135, 138 Economic development authority, 526 Journal entries, 685–689 Long-term, 526–527 Small Business Administration, 527 Short-term, 527 Defined benefit plan, 657 Defined contribution plan, 656 Depreciation Base, 231 Double-declining balance, 232 Straight-line, 232 769 bindex.fm Page 770 Thursday, October 7, 2004 4:05 PM 770 Index Sum of the years digits, 233 Tax impact of, 633–635 Units of production, 233–234 Derivatives, disclosure of, 124–125 Dictionary, 734–758 Direct Costing, 418–419, 429–431 Financing lease, 299, 301–303 Labor budget, 344–345 Discontinued operations, 106–107, 125 Distributions, 635–636 Dividends Accounting for, 264–265 Disclosure of, 125–126 Journal entries, 690–691 Dollar value LIFO inventory valuation method, 205–207 Donations, 229 Double declining balance depreciation, 232–233 Due diligence Checklist, 759–765 Dues, tax impact of, 626, 630 Early payment discounts, 217 Earnings per share Disclosure of, 126 Reporting of, 104–105 Economic development authority, 526 EDGAR, 58–59 Effective interest method, 249–250, 691 Electronic data interchange, 487–489 Emerging Issues Task Force, 29 Employee Retirement Income Security Act, 80 Employee stock ownership plan Accounting for, 269–270 Disclosure of, 126 Journal entries, 691–692 Tax implications of, 656 Employee termination, accounting for, 242 Employment Contract liabilities, 126–127 Eligibility laws, 77 Equal Pay Act, 86 Equity, see Stock Equity method, 182–184 Error corrections, disclosure of, 127 Ethics Laws, 75–77 Exchange, stock, 597–601 Extraordinary items, 107 Factoring, 215–216, 521–522 Fair Labor Standards Act, 86 Family and Medical Leave Act, 79–80 Federal Insurance Contributions Act, 84 Federal Unemployment Tax Act, 84 Field warehouse financing, 522 Filing best practices, 318–320 Finance Best practices, 320–322 Management of, 517–518 Financial Accounting Foundation, 28 Financial Accounting Standards Board Concept statements, 48–49 Description of, 28–30 Interpretations, 35–38 Statements, 38–48 Technical Bulletins, 49–52 Financial statements best practices, 322–323 First-in, first-out inventory valuation method, 202–204 Fixed assets Capitalization limit, 221–222 Controls over, 393–395 Disposition, 227–229 Donations, 229 Impairment, 234–235 Improvements, 226–227 Interest capitalization, 227 Journal entries, 694–697 Purchase of, 222–226 Floor planning, 522 Footnotes, 115–146 Forecasting, 459–460, 529–534 Foreign Corrupt Practices Act, 75–76 Foreign currency Controls over, 408–409 Current rate method, 167–168 Exchange rates used for calculations, 173–174 Journal entries, 697–698 Remeasurement method, 169–171 Translation, 173 Foreign earned income, 638–639 bindex.fm Page 771 Thursday, October 7, 2004 4:05 PM Index Forms, see SEC Forms Fraud Types of, 384–385 Fronting program, 547 Gains Disclosure of, 127–128 Treatment of, 105 Garnishment laws, 78–79 General ledger Best practices, 324–325 Software criteria, 465–467 Geographic risk, 128 Gifts, tax treatment of, 639 Going private, 73–74 Goodwill Disclosure of, 128 Tax impact of, 639–640 Government Accounting Standards Board, 30 Health insurance laws, 79–80 Health Insurance Portability and Accountability Act, 80 Heavenly parachute stock option, 665 Hedges Cash flow, 185–186 Controls over, 408 Fair value, 184–185 Foreign currency, 186 Illegal Immigration Reform and Immigrant Responsibility Act, 77 Immigration Reform and Control Act, 77 Incentive stock options, 664–665 Income statement Format of, 101–103 Income taxes Disclosure of, 128–129 Individual retirement annuity, 659 Individual retirement arrangement, 658–660 Industry risk, disclosure of, 129 Inherited IRA, 659 Initial public offering Alternatives to, 596–597 Cost of, 588 Preparing for, 588–590 771 Reasons to go public, 585–586 Reasons to not go public, 586–588 Registering for, 593–595 Initiation fees, 288 Installment method, 279 Installment sales, 129–130, 641–643 Insurance Claims administration, 547–548 Companies, types of, 546–547 Files, 548–549 Life, 645 Intangible assets Accounting for, 235–236 Disclosure of, 130 Tax impact of, 639–640 Inter-company transactions, 581–582 Interest Capitalization, 227 Imputed, 640–641 Tables, 719–725 International Accounting Standards Board, 31 International Anti-Bribery and Fair Competition Act, 76 Interpretations, FASB, 35–38 Inventory Accounting for, 198–213 Best practices, 325–332 Consigned, 199–200 Controls over, 390–392 Counting, 194–197 Disclosure of, 130 In transit, 197–198 Journal entries, 698–700 Reduction of, 522–523 Software criteria, 467–469 Tracking, 192–194 Types of, 191–192 Valuation, 643–645 Investments Accounting for, 176–186 Controls over, 388–389 Disclosure of, 129, 130–132, 135, 137–140 Journal entries, 692–694, 700–701, 704–707 Short-term, 538–540 Investment Company Act, 62, 82–83 Investment Advisers Act, 62, 83 Invoicing best practices, 332–333 bindex.fm Page 772 Thursday, October 7, 2004 4:05 PM 772 Index Job costing, 417, 419–423 Job descriptions Accounts payable supervisor, 15 Assistance controller, 14 Billing and collections supervisor, 15 Controller, 13 General ledger accountant, 15 Payroll supervisor, 15 Joint product costing, 418–419, 438–443 Security, 480–482 Strategy, 461–462 Marketable equity securities, 704–705 McNamara-O’Hara Service Contract Act, 87 Merger, see Acquisition Mileage reimbursement, 647 Modified Accelerated Cost Recovery System, 633–635 Money purchase plan, 657 Land, accounting for, 230 Last-in, first-out inventory valuation method, 204–205 Leasehold improvements, accounting for, 230–231 Leases Accounting for, 296–305 Capital, 296 Disclosure of, 132–133 Extensions, 303–304 Journal entries, 701–703 Operating, 296 Synthetic, 524 Termination of, 303 Use as financing tool, 523–524 Letter of credit, 508 Leveraged Buyouts, 583–584 Lease, 299 Liability definitions, 96–97 Life insurance Proceeds, disclosure of, 133 Tax implications of, 645 Like-kind exchanges, 645–646 Line of credit, 524 Link chain method, 208–209 Litigation, disclosure of, 133 Loans, see Debt Losses Accounting treatment of, 105 Passive activity, 651–652 Tax treatment of, 646–647 Lower of cost or market rule, 200–201 NASDAQ, 598–600 Nexus, 648–649 Notes, see Investments New York Stock Exchange, 600–601 Nonqualified retirement plan, 657–660 Nonqualified stock options, 665–666 Management best practices, 333–335 Management information systems Integration, 485–487 Outsourcing, 489–493 Occupancy expenses, controls over, 407–408 Offsets, treatment of, 98 Options, see Stock options Order fulfillment cycle, 21–23 Organizational Expenses, 649–650 Structure, 17–19 Other comprehensive income, 107–108 Outsourcing of management information systems, 489–493 Overhead Allocation to inventory, 200 Budget, 345 Par value, disclosure of, 136 Parking reimbursement, 647 Partnership, tax considerations, 650–651 Payroll Best practices, 335–338 Controls over, 406–407 Software criteria, 469–470 Pension laws, 80–81 Personal Responsibility and Work opportunity Reconciliation Act, 78 Policies Recordkeeping, 495–500 Risk management, 541–542 Preferred stock, see Stock, preferred Prepaid expenses Accounting for, 176 Controls over, 392–393 bindex.fm Page 773 Thursday, October 7, 2004 4:05 PM Index Prior period adjustments, 108, 136 Private Securities Litigation Reform Act, 83 Procedures Recordkeeping, 495–500 Risk management, 543–546 Process costing, 417, 423–427 Profit sharing plan, 657 Property taxes Accounting for, 242–243 Tax treatment of, 652–653 Proportional performance method, 286 Public Company Accounting Oversight Board, 30 Public Utility Holding Company Act of 1935, 61, 82 Purchasing Budget, 344 Commitments, disclosure of, 136–137 Software criteria, 470–471 Push-down accounting, 583 Qualified retirement plan, 655–657 Rabbi trust, 631–632 Rabbicular trust, 632 Ratios, summary of, 726–733 Receivables, see Accounts receivable Records management, 494–503 Regulation D, 63 FD, 62–63 M-A, 63–64 S-B, 64 S-K, 64–65 S-T, 65–66 S-X, 66–72 Remeasurement method, 169–171 Reports Capacity, 156–158 Cash, 155–156 Graphical layouts, 164–166 Margin, 150–154 Payroll, 158, 162–163 Sales and expense, 158, 159–161 Software criteria, 471–472 Status, 147–150 Repossession of goods, 290 Research and development Accounting for, 293–294 Definition of, 292 Software, 294–295 Tax credit, 653–655 Restructuring costs, 108 Retained earnings, 262–263 Retirement plans, 655–660 Revenue Consignment, 630–631 Controls over, 401–403 Disclosure of, 138–139 Installment, 641–643 Journal entries, 711–713 Recognition, 278–291 Service, 285–288 Right of return, 290–291 Risk Analysis, 457–459 Disclosure of, 141 Management, 541–550 Management report, 549–550 Rollover IRA, 659 Roth IRA, 659–660 Royalties Accounting for, 243 Disclosure of, 139 S corporation, 660–661 Sale-leaseback Accounting for, 304–305 As financing tool, 528 Journal entry, 713 Sales cycle, 20–21 Sales returns Accounting for, 216–217 Disclosure of, 139–140 Tax implications of, 662–663 Sales tax, see Tax, sales Sales-type lease, 299–301 Sarbanes-Oxley Act, 76–77 Savings incentive match plan, 660 Secular trust, 632 Securities, see Investments Securities Act of 1933, 59–60, 81 Securities Exchange Act of 1934, 60, 81 Securities and Exchange Commission EDGAR, 58–59 Forms, 73–74 773 bindex.fm Page 774 Thursday, October 7, 2004 4:05 PM 774 Index Organization of, 54–58 Overview, 53–54 Regulations, 62–72 Staff Accounting Bulletins, 72–73 Segment information, disclosure of, 140 Self-Employment Contributions Act, 84 Selling terms, 509–510 Simplified employee pension, 660 Small Business Administration, 527 Social Security Act, 84–85 Social security tax, see Tax, social security Software Evaluation and selection, 462–475 Installation, 475–478 Testing, 478–480 Specific identification inventory valuation method, 201 Specific performance method, 286 Spin-off transactions, 584 Spousal IRA, 660 Staff Accounting Bulletin 99, 72–73 Standard costing, 417, 427–429 Statement of cash flows, 110–114 Statement of stockholders’ equity Format, 97–98 Uses of, 91–92 Statements, FASB, 38–48 Stock Appreciation rights, 268–269, 663, 715 Controls over, 400–401 Convertible preferred, 260–261 Disclosure of, 141–143 Exchange, 597–601 Journal entries, 713–717 Legal, 259–260 Preferred, 528 Restrictions, 601–602 Splits, 261–262, 143 Subscriptions, 143, 262 Treasury, see Treasury stock Stock options Accounting for, 272–275 Disclosure of, 141–142 Journal entries, 707–709 Measurement of, 276–277 Recordkeeping for, 277 Tax impact of, 663–666 Vesting period, 275 Stock warrants Accounting for, 263–264 Issued with debt, 256–257 Journal entry, 688 Stockholders’ equity definitions, 97 Straight-line depreciation, 232 Subleases, 304 Subsequent events, disclosure of, 143–144 Sum of the years digits depreciation, 233 Target benefit plan, 657 Target costing, 418, 436–438 Tax Disputes, disclosure of, 144 Estimated payments, 636–637 Laws, 83–85 Partnership, 650–651 Planning, 615–616 Property, see Property taxes Rate, corporate, 666 Records, 500–502 Reporting of, 637–638 Sales, 661–662 Social security, 663 Unemployment, 671–672 Year, change of, 625–626 Year, tax treatment of, 666–668 Technical Bulletins, FASB, 49–52 Terminology, 734–758 Throughput accounting, 418, 431–435 Transfer pricing, 668–670 Treasury stock Accounting for, 265, 267–268 Journal entries, 716–717 Trust Indenture Act, 61–62, 82 Underwriter, 591–593 Unemployment tax, see Tax, unemployment Uniform Interstate Family Support Act, 78–79 Uniformed Services Employment and Reemployment Rights Act, 81 Units of production depreciation, 233–234 Variance analysis, 443–446 bindex.fm Page 775 Thursday, October 7, 2004 4:05 PM Index Wages Accounting for, 243 Laws governing, 85–87 Walsh-Healey Public Contracts Act, 87 Warrants Disclosure of, 145 Journal entries, 717–718 Warranties Accounting for, 243–244 Disclosure of, 145 Tax impact of, 672 Weighted average inventory valuation method, 209–210 775 ... enquiry@wiley.com.sg www.ebook3000.com ffirs.fm Page iii Thursday, October 7, 2004 3:32 PM THE ULTIMATE ACCOUNTANTS REFERENCE INCLUDING GAAP, IRS & SEC REGULATIONS, LEASES, AND MORE STEVEN M BRAGG JOHN WILEY...ffirs.fm Page vi Thursday, October 7, 2004 3:32 PM www.ebook3000.com ffirs.fm Page i Thursday, October 7, 2004 3:32 PM THE ULTIMATE ACCOUNTANTS REFERENCE INCLUDING GAAP, IRS & SEC REGULATIONS,. .. Overview of the SEC Organization of the SEC EDGAR The Securities Act of 1933 The Securities Exchange Act of 1934 The Public Utility Holding Company Act of 1935 The Trust Indenture Act of 1939 The Investment