Chapter 1 Business Combinations 1
The Form of Business Combinations 2
The Accounting Concept of a Business Combination 3
Note to the Student 8
Application of the Pooling of Interests Method 8
Accounting for Business Combinations Under the Purchase Method 13
Pooling and Purchase Methods Compared 19
Disclosure Requirements for a Pooling 22
Disclosure Requirements for a Purchase 22
Summary 23
Chapter 2 Stock Investments-Investor Accounting and Reporting 37
Accounting for Stock Investments 37
Equity Method of Accounting—A One-Line Consolidation 41
Interim Acquisitions of an Investment Interest 47
Investment in a Step-by-Step Acquisition 49
Sale of an Equity Interest 49
Stock Purchases Directly from the Investee 50
Investee Corporation with Preferred Stock 50
Extraordinary Items,Cumulative-Effect-Type Adjustments,and Other Considerations 51
Disclosures for Equity Investees 52
Summary 54
Note to the Student 54
Chapter 3 An Introduction to Consolidated Financial Statements 67
Business Combinations Consummated Through Stock Acquisitions 67
Consolidated Balance Sheet at Date of Acquisition 70
Consolidated Balance Sheets After Acquisition 74
Allocation of Excess to Identifiable Net Assets and Goodwill 76
Consolidated Income Statement 83
Push-Down Accounting 84
Allocation of the Purchase Price to Total Fair Values of the Subsidiary 85
Pooled Subsidiaries 86
Summary 90
Chapter 4 Consolidation Techniques and Procedures 106
Consolidation Under the Equity Method 106
Consolidation Under an Incomplete Equity Method 113
Consolidation Under the Cost Method 118
Locating Errors 126
Excess Allocated to Identifiable Net Assets 126
Trial Balance Working Paper Format 131
Summary 134
Appendix:Consolidated Statement of Cash Flows 134
Chapter 5 Intercompany Profit Transactions—Inventories 160
Intercompany Inventory Transactions 161
Downstream and Upstream Sales 166
Unrealized Profits from Downstream Sales 168
Unrealized Profits from Upstream Sales 171
Consolidation Example-Intercompany Profits from Downstream Sales 174
Consolidation Example-Intercompany Profits from Upstream Sales 181
Summary 187
Chapter 6 Intercompany Profit Transactions-Plant Assets 205
Intercompany Profits on Nondepreciable Plant Assets 205
Intercompany Profits on Depreciable Plant Assets 210
Plant Assets Sold at Other Than Fair Value 219
Consolidation Example-Upstream and Downstream Sales of PlantAssets 220
Inventory Items Purchased for Use as Operating Assets 228
Summary 229
Chapter 7 Intercompany Profit Transactions-Bonds 245
Intercompany Bond Transactions 245
Constructive Gains and Losses on Intercompany Bonds 246
Parent Company Bonds Purchased by Subsidiary 248
Subsidiary Bonds Purchased by Parent 254
Consolidation in Years After Intercompany Bond Purchase Under Different Assumptions 261
Summary 268
Chapter 8 Consolidations-Changes in Ownership Interests 285
Acquisitions During an Accounting Period 285
Pooling of Interests During an Accounting Period 289
Piecemeal Acquisitions 291
Sale of Ownership Interests 294
Changes in Ownership Interests from Subsidiary Stock Transactions 299
Stock Dividends and Stock Splits by a Subsidiary 304
Summary 306
Chapter 9 Indirect and Mutual Holdings 325
Affiliation Structures 325
Indirect Holdings-Father-Son-Grandson Structure 327
Indirect Holdings—Connecting Affiliates Structure 332
Mutual Holdings—Parent Stock Held by Subsidiary 337
Subsidiary Stock Mutually Held 347
Summary 349
Subsidiaries with Preferred Stock Outstanding 365
Chapter 10 Subsidiary Preferred Stock,Consolidated Earnings per Share,and Consolidated Income Taxation 365
Parent Company and Consolidated Earnings per Share 372
Subsidiary with Convertible Preferred Stock 374
Subsidiary with Options and Convertible Bonds 375
Accounting for Income Taxes of Consolidated Entities 377
Income Tax Allocation 378
Separate Company Tax Returns with Intercompany Gain 380
Effect of Consolidated and Separate Company Tax Returns on Consolidated Procedures 384
Business Combinations 391
Financial Statement Disclosures for Income Taxes 395
Summary 396
Chapter 11 Consolidation Theories,Push-Down Accounting,and Corporate Joint Ventures 412
Comparison of Consolidation Theories 413
Illustration-Consolidation Under Parent Company and Entity Theories 416
Push-Down Accounting and Other Basis Considerations 425
Joint Ventures 432
Summary 436
Appendix:Consolidation Under a Current Cost System 436
Chapter 12 Accounting for Branch Operations 455
Sales Agencies and Branches 455
Sales Agency Accounts 456
Branch Accounting Systems 458
Merchandise Shipments in Excess of Cost 461
Freight Costs on Shipments 466
Home Office-Branch Expense Allocation 467
Reconciliation of Home Office and Branch Accounts 468
Illustration of Home Office and Branch Accounting 469
Summary 473
Chapter 13 Foreign Currency Concepts and Transactions 487
Brief Background on Authoritative Accounting Pronouncements 487
Objectives of Translation and the Functional Currency Concept 488
Foreign Exchange Concepts and Definitions 489
Foreign Currency Transactions Other Than Forward Contacts 493
Foreign CurrencyDerivatives and Hedging Activities 496
Summary 506
Chapter 14 Foreign Currency Financial Statements 519
Application of the Functional Currency Concept 519
Illustration-Translation Under Statement No.52 524
Illustration-Remeasurement Under Statement No.52 531
Illustration-Translation with Minority Interest 536
Accounting for a Foreign Branch 545
Summary 548
Appendix:Statement of Cash Flows 549
Chapter 15 Segment and Interim Financial Reporting 575
Evolution of Segment Reporting Requirements 575
Segment Reporting Under FASB Statement No.131 576
Interim Financial Reporting 581
Guidelines for Preparing Interim Statements 584
Summary 588
Chapter 16 Partnerships-Formation,Operations,and Changes in Ownership Interests 599
Nature of Partnerships 599
Initial Investments in a Partnership 600
Additional Investments and Withdrawals 603
Partnership Operations 604
Profit and Loss Sharing Agreements 605
Changes in Partnership Interests 611
Purchase of an Interest from Existing Partners 612
Investing in an Existing Partnership 615
Dissolution of a Continuing Partnership Through Death or Retirement 619
Limited Partnerships 621
Summary 622
Appendix:Uniform Partnership Act(1914) 634
Chapter 17 Dissolution and Liquidation of a Partnership 645
The Liquidation Process 645
Safe Payments to Partners 649
Installment Liquidations 651
Cash Distribution Plans 657
Insolvent Partners and Partnerships 660
Summary 662
Chapter 18 Corporate Liquidations,Reorganizations,and Debt Restructurings for Financially Distressed Corporations 675
Bankruptcy Reform Act of 1978 675
Liquidation 677
Illustration of a Liquidation Case 679
Reorganization 688
Financial Reporting During Reorganization 691
Financial Reporting for the Emerging Company 693
Illustration of a Reorganization Case 695
Troubled Debt Restructurings 702
Illustration of a Troubled Debt Restructuring 704
Summary 707
Chapter 19 An Introduction to Accounting for State and Local Governmental Units—Part Ⅰ 719
Historical Development of Accounting Principles for State and Local Governmental Units 720
Overview of Basic Governmental Accounting Models and Principles 722
The Role of the Budget,Budgetary Accounting,and Budgetary Reporting 734
Budgeting 735
The General Fund and Special Revenue Funds 736
Accounting for the General Fund 737
Summary 745
Chapter 20 An Introduction to Accounting for State and Local Governmental Units—Part Ⅱ 759
Capital Projects Funds 759
Debt Service Funds 765
Account Groups 768
Special Assessment Activities 768
General Fixed Assets Account Group 769
General Long-Term Debt Account Group 771
Accounting for Leases in Governmental Funds 773
Proprietary Funds 774
Internal Service Funds 775
Enterprise Funds 780
Combining Financial Statements 781
Fiduciary Funds 781
Agency Funds 783
Trust Funds 784
Pension Trust Funds 788
Combined Financial Statements 789
Proposed Reporting Model Changes 797
Summary 800
Chapter 21 Voluntary Health and Welfare Organizations,Health Care Entities,and Colleges and Universities 817
Sources ofAccounting Principles for Nongovernmental,Not-for-Profit Entities 817
Accounting Principles Applicable to Most Nongovernmental,Not-for-Profit Entities 818
Voluntary Health and Welfare Organizations 825
Hospitals and Other Health Care Organizations 833
Colleges and Universities 842
AICPA College Guide Model 843
Summary 856
Appendix A SEC Influence on Accounting 867
The 1933 Securities Act 867
The Securities Exchange Act of 1934 868
The Integrated Disclosure System 869
The Registration Statement for Security Issues 869
SEC Developments 871
Summary 872
Appendix B Estates and Trusts 873
Creation of an Estate 873
Probate Proceedings 874
Administration of the Estate 874
Accounting for the Estate 876
Illustration of Estate Accounting 876
Accounting for Trusts 881
Summary 881
Glossary 883
Index 891