中级会计学 英文版 第4版PDF电子书下载

CONTENTSPART ⅠFOUNDATION AND REVIEW 1

Company Name Index 1

Annual Report—The Coca-Cola Company AR- 1

1 The Environment of Accounting 2

Introduction 2

Subject Index 4

Objective of Financial Reporting for ExternalDecision Makers 4

External versus Internal Accountinglnformation 4

The Nature of Financial Accounting 4

Professional Accounting 5

The Interaction of Financial Accounting with ltsEnvironment 7

The Need for Financial ReportingStandards 8

The Evolution of the Current Standard-SettingProcess 10

The Financial Accounting Standards Board 10

Board Pronouncements 11

What Are GAAP? 13

Official Accounting Pronouncements Related toGAAP 13

The Hierarchy of Accounting Standards forFinancial Reporting 14

The Internal Revenue Service 14

Impact of Other Organizations on GAAP 14

American Institute of Certified PublicAccountants 15

Securities and Exchange Commission 16

American Accounting Association 16

Financial Executives Institute and Institute ofManagement Accountants 17

Attaining Consensus in a PoliticalEnviromnent 17

Governmental Accounting StandardsBoard 17

Other Groups 17

Ethics and Financial Reporting 21

Summary of Key Points 22

Review Problem 23

2 The FASB s Conceptual Framework ofAccounting 29

Introduction 29

The FASB s Conceptual Framework 30

Overview of the FASB s Conceptual Frameworkof Accounting 31

SFAC No.1:Objectives of Financial Reporting byBusiness Enterprises 32

Users of Financial Statements 32

Financial Reporting Objectives 33

SFAC No.2:Qualitative Characteristics ofAccounting Information 34

Environmental Assumptions 36

Measurement Criteria 36

SFAC No.5:Recognition and Measurement inFinancial Statements of BusinessEnterprises 36

Recognition Criteria 36

Implementation Guidelines 38

Implementation Constraints 42

SFAC No.6:Elements of Financial Statements ofBusiness Enterprises 44

Acceptance of SFAC No.5 44

General-Purpose Financial Statements 44

Summary of Key Points 48

Review Problem 48

Appendix:Comprehensive Income(not currentlyGAAP) 49

3 Review:The Accounting InformationProcessing System 61

Introduction 61

Accounts and Transaction Recording 62

The AIS and the Accounting Cycle 64

Step 1:ldentify Transactions or Events to BeRecorded 64

Step 2:Journalize Transactions andEvents 66

Step 3:Post from Joumals to Ledger 66

Step 4:Prepare Unadjusted Trial Balance 67

Step 5:Journalize and Post Adiusting JournalEntries 69

Deferrals 69

Other Adjusting Entries 71

Accruals 71

Step 6:Prepare Adjusted Trial Balance 75

Step 7:Prepare Financial Statements 76

Step 8:Journalize and Post Closing JournalEntries 77

lncome Statement Accounts 77

Dividends 79

Step 9:Prepare Post-Closing Trial Balance 79

Step 10:Journalize and Post Reversing JournalEntries 79

Accrued Item 80

Deferred Item-Expedient Method 80

The Management Discussion and AnalysisSection 81

Beyond the Primary Financial Statements 81

Summary of Key Points 82

Review Problem 83

Appendix 3A:Worksheets,the Accounting Cycle,and Interim Reporting 86

Appendix 3B:Control Accounts.SubsidiaryLedgers.and Special Journals 90

Introduction 113

4 Review:The Income Statement and theRetained Earnings Statement 113

What the Income Statement Represents 115

Format Issues Evolving from GeneralPractice 117

General Formats of the IncomeStatement 117

The Choice between Single -and Multiple-StepFormats 119

Format Issues Govemed by AccountingPronouncements 121

Reporting Extraordinary Items 122

Reporting Unusual or Infrequent Gains andLosses 124

Reporting Discontinued Operations 124

Reporting Accounting Changes 131

Disclosure Guidelines for the IncomeStatement 134

Earnings per Share 134

Retained Earnings Statement 136

Appropriations of and Restrictions on RetainedEarnings 137

Prior Period Adjustments 137

Summary of Key Points 139

Revlew Problem 139

Appendix:Conceptual Issues in the Determinationof Income 141

5 Review:The Balance Sheet and theStatement of Cash Flows 163

Introduction 163

The Balance Sheet 165

Format of the Balance Sheet 165

Basic Definitions and Classifications 167

Assets 169

Liabilities 172

Owners Equity 173

Offsetting Assets and Liabilities 175

Additional Reporting Issues 175

Loss and Gain Contingencies 175

Valuations Reported in the Balance Sheet 176

Terminology 177

Comparative Statements 177

Subsequent Events 178

Disclosure Notes 179

The Auditors Report 179

Usefulness of the Balance Sheet 181

Limitations of the Balance Sheet 182

The Statement of Cash Flows 183

Basic Definitions 183

Statement Formats 186

Ratio Analysis 188

Usefulness of the Statement of Cash Flows 188

Ratios that Mcasure Liquidity(Solvency) 189

Ratios that Measure Efficiency(Activity) 190

Ratios that Measure Equity Position andCoverage 190

Ratios that Measure Profitability 190

Summary of Key Points 192

Review Problem 192

6 Interest:Concepts of Future andPresent Value 216

Introduction 216

Time Value of Money 217

Basic Interest Concepts 217

Concept of Interest 217

Consistent Interest Periods andRates 218

Simple versus Compound Interest 218

Overview of Future Value and PresentValue 219

Future Value and Present Value Tables andFormulas 220

Single Principal Amount 220

The Ordinary Annuity and the AnnuityDue 220

Annuity Amount 220

Future Value of 1 221

Values of a Single Payment 221

Future Value and Present Value of 1:CalculationMethods Compared and Computed 222

Presen tValue of 1 222

Accounting Applications of a SinglePayment 224

Future Value of a Single Payment 224

Determining an Unknown Interest Rate orUnknown Number of Periods 225

Interpolation of Table Values 225

Present Value of a Single Payment 226

Determining the Interest Rate 227

Values of an Annuity 227

Future Value of an Ordinary Annuity 227

Present Value of an Ordinary Annuity 228

Future Value of an Annuity Due 229

Accounting Applications of an Annuity 230

Present Value of an Annuity Due 230

Future Value of an Annuity 231

Present Value of an Annuity 233

Determination of Other Values Related to theFuture Value of an Annuity 233

Using Multiple Present and FutureValues 235

Determination of Other Values Related to thePresent Value of an Annuity 235

Summary Table 237

Summary of Key Points 238

Review Problem 239

Appendix:Present and Future Value InterestTables 240

PART ⅡASSET RECOGNITION ANDMEASUREMENT 261

7 Revenue and Expense Recognition 262

Introduction 262

The Concepts of Revenue and Expense 264

The Earnings Process 264

The Recognition Process 265

The Revenue Principte 266

Revenue Recognized at Delivery(Point of Sale) 268

Revenue Recognition before Delivery 268

Guidance on the Choice between the TwoMethods 269

Measuring Progress toward Completion 269

Illustration of Altemative Methods of Accountingfor Long-Term Contracts 270

Revenue Recognition When Right of ReturnExists 270

Review Problem:Revenue Recognition afterDelivery 278

Installment Sales Method of RevenueRecognition 281

The Cost Recovery Method 288

Review Problem 290

Alternative Methods ot Revenue Recognition beforeDelivery 292

Completion of Production 292

Discovery Basis 292

Accretion Basis 292

Specific Performance Method 293

Revenue Recognition for Service Sales 293

Proportional Performance Method 294

Completed-Performance Method 294

Collection Method 294

Matching:An Implementation Principle 295

Expense Recognition 295

Direct Expenscs 296

Indirect Expenses 296

Recognition of Gains and Losses 296

Ethical Considerations 297

Summary of Key Points 298

8 Cash and Receivables 311

Introduction 311

Accounting for Cash 312

Characteristic of Cash and CashEquivalents 312

Internal Controls for Cash 313

Petty Cash Funds 314

Control of Cash through Bank Accounts 315

Accounting for Receivables 319

Recognition and Measurement ofAccounts Receivable 319

Events and Accounting Entries for UncollectibleAccounts—The Allowance Method 322

Measurement of Uncollectible AccountsReceivable 322

Estimating Bad Debt Expense—The AllowanceMethod 323

Direct Write-Off of Uncollectible Accounts 327

Use of Accounts Receivable to Obtain ImmediateCash 327

Factoring Accounts Receivable 328

Assignment and Pledging of AccountsReceivable 332

Recognition and Measurement of NoresReceivable 334

Disclosure of Accounts Receivable FinancingArrangements 334

Notes Receivable Accounting Illustrations 336

Accounting for Loan Impairments 339

Discounting Nores Receivable 343

Dishonored Notes 345

Summary of Key Points 346

Review Problem 347

9 Inventory:Basic Valuation Methods 374

The Importance of Inventories 374

Introduction 374

Inventory Categories 376

Items Included in Inventory 377

Periodic Inventory System 379

Inventory Recording Methods 379

Purchase Discounts(Cash Discounts on CreditPurchases) 379

Components of Inventory Cost 379

Freight-In(Freight on Purchases) 379

Perpetual Inventory System 381

Accounting for Periodic and PerpetualSystems 381

Allocation of Costs to Inventory and Cost ofGoods Sold 385

Measurement of Inventory Values for AccountingPurposes 385

Inventory Cost Flow Methods 386

Underlying Concepts of Cost Flow 386

Reporting Inventories 387

Specific Cost Identification Method 387

Average Cost Method 388

First-In,First-Out Cost Method 390

Last-In.First-Out Method 392

Comparison of LIFO with FIFO 393

LIFO:Special Topics 395

Adoption of LIFO 395

LIFO Liquidation 396

Management Selection of LIFO versus FIFO 397

Pooled LIFO 399

Dollar Value LIFO Concepts 401

Dollar Value LIFO Method 401

Applying the DV LIFO Method:A SimpleExample 402

Dollar Value LIFO:Complications 403

Comprehensive Dollar-Value LIFO:Example 403

Decreases in the Value of the Inventorv Valued atBase-Year Prices 404

Advantages of DVLIFO 405

Summary of Key Points 406

Review Problem 406

Introduction 430

10 Inventory:Alternative Valuation Methods 430

LCM Inventory Valuation Method 431

Net Realizable Value and Net Realizable ValueLess a Normal Profit Margin 432

Establishing Inventory Valuations underLCM 433

Applications of the LCM Rule 435

Accounting Problems in Applying LCM 435

The Use of LCM for Tax Reporting 440

Review Problem 440

Gross Margin Method and InventoryEstimation 441

The Retail Inventory Method and InventoryEstimation 443

Markups and Markdowns 444

Application of the Retail InventoryMethod 445

Retail Method. FIFO with LCM,Illustrated 446

Retail Method.Average Cost with LCM.Illustrated 446

Special Items Related to the Retail Method 447

Using the Retail Inventory Method with DVLIFO 449

Review Problem 449

The Need for a Physical Count ofInventory 450

Evaluation of the Retail Inventory Method 450

Uses of the Retail Inventoy Method 452

Review Problem 453

Methods of Inventory Valuation 454

Additional Inventory Issues 454

Relative Sales Value Method 456

Losses on Purchase Commitments 456

Effects of Inventory Errors 458

Review Problem 460

Summary of Key Points 460

11 Operational Assets:Acquisition,Disposal,and Exchange 486

Introduction 486

Valuation of Plant Assets at Acquisition 487

Classifying Operational Assets 487

General Principles for the Valuation of PlantAssets 488

Plant Assets Purchased on Credit 494

Accounting for Noncash Acquisitions of PlantAssets 494

Plant Assets Acquired in Exchange for EquitySecurities 495

Donated Assets 496

Self-Constructed Assets 497

Capitalization of Interest during Construction 499

Qualifying Assets 500

Avoidable Interest 500

Conditions for Capitalizing Interest 501

Qualifying Expenditures 501

Calculating Capitalized Interest 501

Effect of Interest Capitalization on FinancialRatios 504

Accounting for Disposals of Plant Assets 504

Disposal by Donation 505

A General Valuation Principle 506

Reclassification of Plant Assets Removed fromService 506

Accounting for Exchanges of NonmonetaryAssets 506

Gain or Loss on Exchange 507

Recognition of Gains and Losses onExchange 507

Fair Value Determination 508

Examples of Nonmonetary Asset Exchanges 508

Evaluation of Accounting for NonmonetaryExchanges 511

General Accounting Principles 511

Post-Acquisition Expenditures 511

Improvements.Replacements.and ExtraordinaryRepairs 512

Maintenance and Ordinary Repairs 512

Additions 513

Rearrangements and Other Adjustments 514

Summary of Key Points 514

Review Problem 515

Appendix:Interest Capitalization Complications 516

12 Operational Assets:Depreciation andImpairment 540

Introduction 540

Depreciation Concepts 541

Terminology 541

Nature of Depreciation 542

Factors in Determining Depreciation Expense 543

Depreciation Methods 544

Straight-Line Method 545

Methods Based on Inputs and Outputs 545

Accelerated Depreciation Methods 547

Tax Depreciation Methods 549

Present-Value-Based Depreciation Methods 551

Effect of Depreciation on Financial Ratios 552

Depreciation Disclosures and Policy 552

Diversity of Practice 553

Early Warning Disclosures 554

Depreciation,Cash Flow,and DividendPolicy 554

Depreciation and Price-Level Changes 556

Fractional-Year Depreciation 556

Additional Depreciation Issues 556

Depreciation of Post-Acquisition Costs 558

Depreciation Systems 559

Impairment of Plant Assets 561

Accounting Guidelmes of SFAS No.121 562

Implementation of SFAS No.121 566

Restructuring Charges 567

Summary of Key Points 569

Review Problem 570

Appendix 12A:Casualty Insurance 571

Appendix 12B:Effects of Price-Level Changes 574

13 Intangible Assets and Natural Resources 593

Introduction 593

Intangible Assets 594

Classification of Intangible Assets 594

Basic Principles of Accounting for IntangibleAssets 595

Exchangeable Intangible Assets 597

Patents 597

Copyrights 598

Trademarks and Trade Names 598

Deferred Charges 599

Separately Identifiable but Not ExchangeableIntangible Assets 599

Franchise Rights 599

Leasehold Improvements 599

Startup Costs 600

Organization Costs 600

Stock Issuance Costs 600

Measuring Goodwill 601

Conceptual Nature of Goodwill 601

Goodwill:An Unidentifiable Intangible Asset 601

Negative Goodwill 604

Amortizing Goodwill 605

Disclosures and Reporting of Intangible Assets 606

Research and Development Costs 607

Accounting for Computer Software Costs 609

Capitalization of Computer Software Costs 609

Amortization for Capitalized Computer SoftwareCosts 611

Disclosures of Computer Software Costs 612

Accounting for Natural Resources 613

Depletion Base 613

Depletion Base and Depletion Rate 615

Determining Exploration Costs to Capitalize forOil and Gas Companies 616

Change in Estimate 616

Depletion for Income Tax Reporting 616

Summary of Key Points 620

Review Problem 621

Appendix:Estimating Goodwill 622

Introduction 647

14 Investments in Debt and EquitySecurities 647

Why Invest in Financial Instruments? 648

Accounting Issues 649

Overview:Classifying Investments 649

Debt or Equity? 650

Classification of Investments in EquitySecurities 651

Classification of Investments in DebtSecurities 652

Definitions 653

Fair Value Method:Trading Securities andSecurities Available for Sale 653

Acquisition of Trading Securities and SecuritiesAvailable for Sale 653

Basket Purchases of Securities 654

Recording Fair Value as Post-Acquisition CarryingValue 655

Recording Investment Income 656

RecIassifications of TS and SASInvestments 657

Rationale for Different Treatments of HoldingGains or Losses 657

Impairments of TS and SASInvestments 659

Sales of TS and SAS Investments 659

Investment Income of Debt Securities Acquired ata Premium or Discount 660

Disclosures for Investments Accounted for by theFair Value Method 661

Tax Effects 661

Review Problem 662

Cost and Amortized Cost Methods 664

Cost Method:For Investments in EquitySecurities with No Readily DeterminableFair Value 664

Amortized Cost Method:For Held-to-MaturityDebt Securities 665

Equity Method:Investments in Equity SecuritiesResulting in Significant Influence over theInvestee 666

Conceptual Basis Underlying the EquityMethod 667

Equity Method Illustrated 668

Summary of the Equity Method 671

Changing between the Fair Value Method and theEquity Method 672

Definition of FinanciaIInstrument 674

Disclosures Required for Investments Accountedfor by the Equity Method 674

Disclosures of Fair Values of Other FinancialInstruments 674

Disclosures Regarding Risks of Off-Balance-SheetFinancial Instruments 675

Special Problems in Accounting for EquityInvestments 676

Investment Revenue 676

Stock Rights on Investment Shares 678

Stock Split of Investment Shares 678

Summary of Key Points 680

Review Problem 681

Appendix 14A:FinancialInstruments 683

Appendix 14B:Other Investments and Funds 689

PART ⅢLIABILITIES 713

Introduction 714

15 Short-Term Liabilities 714

What Is a Liability? 715

Accounts Payable 717

Short-Term Notes Payable 717

What Is a Current Liability? 717

Cash and Scrip Dividends Payable 720

Accrued Liabilities 720

Advances and Returnable Deposits 720

Uneamed Revenues 721

Taxes 721

Conditional Payments 724

Current Maturities of Long-Term Debt 726

Obligations Callable on Demand by theCreditor 726

Short-Term Obligations Expected to BeRefinanced 727

Accounting for Contingencies 728

Loss Contingencies That Require Accrual and theRecognition of a Liability 729

Loss Contingencies that Are Disclosed Onlyin Notes 731

Executory Contracts 731

Gain Contingencies 731

Accounting for Environmental Liabilities 732

Summary of Key Points 733

Review Problem 734

Appendix:SFAS NO.112—Employers Accountingfor Postemployment Benefits 735

16 Long-Term Liabilities 758

Introduction 758

Characteristics and Valuation of Long-TermLiabilities 759

The Measurement and Valuation of Long-TermLiabilities 760

Bonds Payable 760

C1assification of Bonds 762

Valuation of Bonds Payable 762

Fundamental Bond Accounting Principles 765

Review Problem 770

Bond Issue Costs 771

Additionat Issues in Accounting for Bonds 771

Bonds Issued between Interest Dates 772

Review Problem 774

Debt Securities with Equity Rights 775

Bonds with Detachable Stock PurchaseWarrants 775

Convertible Bonds 776

Accounting and Reporting for ConvertibleBonds 777

Induced Conversion of Convertible Debt 778

Debt Extinguishment 779

Extinguishment of Bonds by Open-MarketPurchase or Exercise of Call Privilege 781

Extinguishment of Bonds by Refunding 783

Summary of Gain and Loss Classification 784

Review Problem 784

Long-Term Notes 785

Off-Balance-Sheet Financing and Disclosures forLong-Term Liabilities 787

Unconditional Purchase Obligations 787

Disclosures for Financial Instrumeuts 787

Summary of Key Points 790

Review Problem 791

Appendix 16A:Troubled Debt Restructure 792

Appendix 16B:Accounting for Serial Bonds 798

Appendix 16C:Accounting Principles forInvestments in Debt Securities Held toMaturity 800

17 Accounting for Leases 821

Introduction 821

Basic Lease Accounting Issnes 822

The Lease from the Lessee s Viewpoint 823

The Lease from the Lessor s Viewpoint 825

Advantages of Leasing 826

Disadvantages of Leasing 826

Accounting for Operating Leases 827

Accounting for Capital Leases 828

Accounting for Capital Leases:Lessee 829

Accounting for Capital Leases:Lessor 833

Review Problem 833

Termination of Lease Agreements 835

Lease Entries under an Ordinary Annuity 836

Review Problem 837

Special Issues in Accounting for Capital Leases 838

Bargain Purchase Options 838

Bargain Renewal Options 840

Residual Values 840

Different Interest Rates 847

Depreciation of a Leased Asset by theLessee 849

Executory and Initial Direct Costs 849

Review Problem 851

Sale-Leaseback Arrangements 851

Classification of Lease Receivables andPayables 854

Lease Disclosure Requirements 856

A Continuing Issue 857

Summary of Key Points 858

Review Problem 859

Appendix:Other Types of Leases 861

18 Accouunting for Pensions and OtherPostemplnyment Benefits 886

Introduction 886

Pension Plan Fundamentals 887

Types of Pension Plans 888

Vesting of Benefits 889

Pension Plan Funding 889

Role of Actuaries 889

Regulation of Private Pension PlanFunding 890

Minimum Funding Standards 890

Summary of Current Pension Accounting 890

Minimum Vesting Standards 890

Measuring Pension Expense in DefinedBenefit Plans 891

Recognizing Pension Liabilities in DefinedBenefit Plans 891

Measuring Pension Expense and PensionObligations 891

Discount Rate 891

Pension Expense 893

Service Cost:Component 1 of PensionExpense 893

Interest Cost and Actual Return:Components2 and 3 of Pension Expense,SecondYear 896

Review Problem 899

Components 4,5,and 6 of Pension Expense;General Considerations 900

Prior Service Cost:Component 4 of PensionExpense 901

Gains and Losses:Component 5 of PensionExpense 904

Review Problem 910

Transition Amount:Component 6 of PensionExpense 911

Additional Minimum Pension Liability 913

Coca-Cola s Pension Expense 913

Additional Minimum Pension Liability 914

Total Minimum Liability 914

Adiusting the Accounts 916

Coca-Cola s Pension Liabilities 917

Review Problem 917

SFAS No.87:A Compromise 918

Additional Issues in PensionAccounting 918

Settlements,Curtailments,Termination Benefitsand Asset Reversions 919

Comprehensive Case and PensionDisclosures 920

Comprehensive Case 920

Required Footnote Disclosures for Defined BenefitPlans 926

Other Pension Disclosures 927

Review Problem 928

Summary of Key Points 928

Appendix:Accounting for Postretirement BenefitsOther than Pensions 931

Introduction 970

19 Accounting for Income Taxes 970

Two Types of Differences 971

Defining Taxable Income and Pretax AccountingIncome 971

Why Income Taxes? 971

Conceptual Issues 971

The No-Allocation Method 976

The Allocation Method of Accounting for TemporaryDifferences 977

Asset/Liability Method 977

Terminology and Definitions 979

Implementation Procedures 980

Identifying Future Taxable and DeductibleAmounts 983

Illustrations of Deferred Tax Assets and DeferredTax Liabilities 984

Review Problem 989

Net Operating Losses 990

Carrybacks and Carryforwards of Net OperatingLosses 990

Accounting for NOLs 991

A Limitation on Deferred Tax Assets 993

Evidence to Consider in Determining Whether aValuation Allowance Is Needed 993

Tax-Planning Strategies 998

Review Problem 999

Financial Statement Presentation andDisclosures 1001

Intrapefiod Tax Allocation 1004

Summary of Key Points 1004

Additioual Disclosures 1004

Review Problem 1005

Appendix:Investment Tax Credit and AdditionalConceptual Issues 1008

PART ⅣOWNER S EQUITY 1025

20 Corporations:Contributed Capital 1026

Introduction 1026

Formation of a Corporation 1027

Contributed Capital at the Formation of aCorporation 1027

Characteristics of Capital Stock 1028

Concepts and Definitions Fundamental toCorporate Equity Accounting 1029

Stockholders Equity:TerminologyIssues 1030

Advantages and Disadvantages of the CorporateForm of Organization 1031

Par Value Stock 1032

Nopar Stock 1032

Features of Equity Securities 1032

Legal Capital 1033

Common Stock 1033

Preferred Stock 1033

Accounting for the Issuance of Par ValueStock 1038

Accounting for the Issuance of NoparStock 1038

Capital Stock Sold on a SubscriptionBasis 1038

Issuance of Capital Stock for NoncashAssets 1041

Special Sa les of Capital Stock 1042

Unrealized Capital 1043

Stock Issue Costs 1043

Assessments on Capital Stock 1043

Accounting for Reacquisition ofStock 1044

Treasury Stock 1044

Recording and Reporting Treasury StockTransactions 1045

Formal Retirement of Treasury Stock 1049

Retirement of Callable and RedeemableStock 1049

Restriction of Retained Earnings for TreasuryStock 1049

Accounting for Conversions,Changes in Par Value,and Contributed Capital 1051

Concersion of Convertible PreferredStock 1051

Stockholders Equity and Financial StatementAnalysis 1052

Additional Contributed Capital 1052

Changing Par Value 1052

Summary of Key Points 1054

Review Problem 1055

21 Corporations:Retained Earningsand Stock Options 1073

Introduction 1073

Disposition of Earnings 1074

Characteristics of Retained Earnings 1075

Nature of Dividends 1075

Relevant Dividend Rates 1075

Legality of Dividends 1076

Property Dividends 1077

Types of Dividends 1077

Cash Dividends 1077

Liquidating Dividends 1078

Scrip Dividends 1079

Stock Dividends 1080

Dividends and Treasury Stock 1082

Special Stock Dividends 1082

Fractional Share Rights 1083

Cash Payments in Lieu of Fractional ShareRights 1084

Stock Splits 1084

Appropriations and Restrictions of RetainedEarnings 1085

Retained Earnings Statements 1086

Stock Rights and Warrants 1086

Accounting for Stock Rights 1088

Review Problem 1089

Stock-Based Compensation Plans 1092

Overview of Accounting Issues 1092

Accounting for Noncompensatory Stock OptionPlans 1094

Accounting for Compensatory Stock Option Plansunder APB Opinion No.25 1095

Lapse of Stock Options 1099

Stock Appreciation Rights under APB OpinionNo.25 1102

Overview:Measuring the Fair Value of FixedStock Options 1104

Accounting for Stock Options under SFASNo.123 1104

Total Compensation Cost under SFASNo.123 1105

Accounting for Fixed Stock Options under SFASNo.23 1106

Accounting for Performance Options under SFASNo.123 1110

Required Disclosures 1113

Summary of Key Points 1116

Rev iew Problem 1117

Appendix 21A:Quasi Reorganizations 1119

Appendix 21B:Determining Fair Value ofOptions 1120

22 Earnings per Share 1142

Introduction 1142

Significance of Earnings per Share 1143

A Framework for Calculating EPS 1144

Types of Capital Structures 1144

Calculations for Earnings per Share 1146

EPS Disclosures 1146

Computing Earnings per Share for Simple CapitalStructures:Basic Earnings per Share 1147

Adiustments to the Numerator 1147

Adjustments to the Denominator:The Weighted-Average Calculation 1148

Stock Dividends and Splits 1149

Contingent Shares 1150

Review Problem 1151

Computing Earnings per Share for Complex CapitalStructures:Diluted Earnings per Share 1152

Potentially Issuable Shares 1153

Review Problem 1155

Review Problem 1160

Dilution-Antidilution Method 1160

Review Problem 1163

Earnings per Share and Related Disclosures 1163

A Final Comment 1165

Summary of Key Points 1166

Review Problem 1167

Appendix:A Closer Look at the Treasury StockMethod 1167

PART ⅤSpecial Topics 1185

23 Statement of Cash Flows 1186

Introduction 1186

The Trend toward Cash Flows 1187

Cash Flow Reporting:Development andUsefulness 1187

UsefuIness of Cash Flow Information 1188

The Statement of Cash Flows and the Requirementsof SFAS NO.95 1189

Cash and Cash Equivalents 1191

Cash Flow Categories 1192

Noncash Activities 1194

Gross and Nel Cash Flows 1195

Cash Flow per Share 1195

Review Problem 1195

Preparing the SCF 1196

Format-Free Approach:Direct Method 1196

Additional Examples of OperatingCash Flows:Direct Method 1200

Format-Free Approach:Indirect Method andReconciliation of Net Income and OperatingCash Flow 1201

Additional Examples of ReconcilingAdjustments 1203

Comparison of Direct and IndirectMethods 1204

Disclosure Requirements of SFAS No.95 1205

Review Problem 1206

The Spreadsheet Approach 1206

Spreadsheet Approach Example:The SimpleCompany 1207

Analyzing More Complex Situations 1209

Issues in Cash Flow Reporting 1214

Cash or AccruaI Information 1214

Classification of Cash Flows 1214

Direct or Indirect Method? 1215

Summary of Key Points 1216

Review Problem 1217

Appendix:Comprehensive Example 1220

24 Accounting Changes and ErrorCorrections 1259

Introduction 1259

Accounting Changes:Reporting Issues andApproaches 1260

Types of Accounting Changes 1260

Objectives of Reporting AccountingChanges 1261

Accounting Principle Changes 1261

Approaches to Reporting AccountingChanges 1262

General Application of the ThreeApproaches 1265

Changes in Reporting Entity 1265

Justification for Accounting Changes 1266

Comparative Statements 1267

Summary of Accounting Changes 1267

Correction of Accounting Errors 1267

Classification of Accounting Errors 1268

The All-Inclusive Concept of Income and PriorPeriod Adiustments 1271

Correcting Entries and Analysis 1271

Detailed Reporting Guidelines andExamples 1273

Current Approach 1273

Retroactive Approach 1277

Prospective Approach 1282

Analysis and Reporting of Prior PeriodAdiustments 1283

Accounting Changes:An Evaluation 1284

Motivations for Accounting Changes 1285

Stock Prices and EconomicConsequences 1286

Summary of Key Points 1287

Review Problem 1287

25 Disclosures,Segment Reporting,andInterim Reporting 1303

Introduction 1303

Full Disclosure 1304

Financial Reporting Requirements of theSEC 1305

Management Discussion and Analysis 1306

Form 10-K 1306

Summary of Significant AccountingPolicies 1307

Notes to Financial Statements 1307

Disagreements on Accounting Disclosures 1307

Other Notes to Financial Statements 1308

Special Transactions and Events 1308

Fraudulent Financial Reporting 1310

Segment Reporting 1311

Definition of Reportable OperatingSegments 1312

Required Segment Disclosures 1314

Other Firm-Wide Disclosures 1316

Interim Reports 1318

Interim Reporting and Segment Reporting 1318

Issues in Interim Reporting 1318

Interim Reporting Illustrated 1320

Summary of Key Points 1321

Accounting for Stock Issuance and RelatedTransactions 10037