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Details and Demo: www.wileyplus.com 2760T_fm_i-xli.qxd 1/27/09 3:02 PM Page iv Your Trusted Tutor for over 30 Years CPA Exam Review 978-0-470-28605-0, Paperback, 2008, $220.00 978-0-470-28627-2, Software February 2009, $229.00 978-0-471-71939-7, Paperback 172 pages, April 2008, $39.95 www.wiley.com/cpa 978-0-470-19609-0, Paperback 384 pages, 2008, $29.95 978-0-470-45334-6, Paperback 2712 pages, June 2009, $119.90 978-0-470-45002-4, Paperback 240 pages, June 2009, $34.95 978-0-470-27710-2, Spiral-bound 960 pages, 2008, $140.00 2760T_fm_i-xli.qxd 1/27/09 3:02 PM Page v T H I R T E E N T H E D I T I O N I NTE RM EDIATE ACCOU NTI NG DONALD E KIESO PH.D., C.P.A Northern Illinois University DeKalb, Illinois JERRY J WEYGANDT PH.D., C.P.A University of Wisconsin Madison, Wisconsin TERRY D WARFIELD PH.D University of Wisconsin Madison, Wisconsin JOHN WILEY & SONS 2760T_fm_i-xli.qxd 1/27/09 3:02 PM Page vi Dedicated to our wives, Donna, Enid, and Mary, for their love, support, and encouragement PUBLISHER ASSOCIATE PUBLISHER SENIOR ACQUISITIONS EDITOR DEVELOPMENT EDITOR SENIOR PRODUCTION EDITOR SENIOR MARKETING MANAGER EXECUTIVE MARKETING MANAGER SENIOR DESIGNER PRODUCTION MANAGEMENT SERVICES CREATIVE DIRECTOR SENIOR ILLUSTRATION EDITOR MEDIA EDITOR PROJECT EDITOR SENIOR PHOTO EDITOR EDITORIAL ASSISTANT PRODUCTION ASSISTANT COVER PHOTO CHAPTER OPENER PHOTO George Hoffman Christopher DeJohn Jeff Howard Terry Ann Kremer Valerie A Vargas Julia Flohr Amy Scholz Kevin Murphy Ingrao Associates Harry Nolan Anna Melhorn Allie K Morris Ed Brislin Elle Wagner Kara Taylor Matt Winslow Jon Arnold Images/SuperStock, Inc Paul Fawcett/iStockphoto This book was set in Palatino by Aptara®, Inc and printed and bound by RRD-JC The cover was printed by RRD-JC This book is printed on acid-free paper ϱ Copyright © 2010 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) Material from the Uniform CPA Examinations and Unofficial Answers, copyright © 1965, 1966, 1967, 1968, 1969, 1970, 1971, 1972, 1973, 1974, 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1990, 1991, 1992, and 1993 by the American Institute of Certified Public Accountants, Inc., is adapted with permission This book contains quotations from Accounting Research Bulletins, Accounting Principles Board Opinions, Accounting Principles Board Statements, Accounting Interpretations, and Accounting Terminology Bulletins, copyright © 1953, 1956, 1966, 1968, 1969, 1970, 1971, 1972, 1973, 1974, 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982 by the American Institute of Certified Public Accountants, Inc., 1211 Avenue of the Americas, New York, NY 10036 This book contains citations from various FASB pronouncements Copyright © by Financial Accounting Standards Board, 401 Merritt 7, P.O Box 5116, Norwalk, CT 06856 U.S.A Reprinted with permission Copies of complete documents are available from Financial Accounting Standards Board Material from the Certificate in Management Accounting Examinations, copyright © 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, and 1993 by the Institute of Certified Management Accountants, 10 Paragon Drive, Montvale, NJ 07645, is adapted with permission Material from the Certified Internal Auditor Examinations, copyright © May 1984, November 1984, May 1986 by The Institute of Internal Auditors, 249 Maitland Ave., Altemonte Springs, FL 32701, is adapted with permission The financial statements and accompanying notes reprinted from the 2007 Annual Report of Procter & Gamble Company are courtesy of P&G, copyright © 2007, all rights reserved ISBN-13 978-0-470-37494-8 ISBN-10 0-470-128763 Printed in the United States of America 10 2760T_fm_i-xli.qxd 1/27/09 3:02 PM Page vii A B O UT TH E AUTH O R S 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 Accountancy 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 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 is currently serving on the Board of Trustees and Executive Committee of Aurora University, as a member of the Board of Directors of Kishwaukee Community Hospital, and as Treasurer and Director of Valley West Community Hospital From 1989 to 1993 he 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, the NIU Foundation’s Humanitarian Award for Service to Higher Education, a Distinguished Service Award from the Illinois CPA Society, and in 2003 an honorary doctorate from Aurora University Jerry J Weygandt, Ph.D., C.P.A., is Arthur Andersen Alumni Emeritus 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 SecretaryTreasurer 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 served 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 vii 2760T_fm_i-xli.qxd 1/27/09 3:02 PM Page viii viii · About the Authors Terry D Warfield, Ph.D., is the Robert and Monica Beyer 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, 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), and on the AAA-FASB Research Conference Committee He currently serves on the Financial Accounting Standards Advisory Council of the Financial Accounting Standards Board 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 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-11 Index · I-11 International Paper Co., 16, 195, 538, 550, 560, 823 International stock exchanges, 740 International Thoroughbred Breeders, 321 Internet financial reporting, 1343 Intraperiod tax allocation, 148–149 Intrinsic value, 887 Intuit Inc., 182–183 Inventory(-ies), 382–386 See also related headings, e.g.: Periodic inventory system alternative method for estimating, 449n.10 analysis of, 459 average days to sell, 459 on balance sheets, 183–184 basis of valuation of, 181 control, 383–386 costs included in, 391–393 defined, 382 disclosure of, 1319 estimating, using gross profit percentage, 449n.10 GAAP/iGAAP standards, 1212 gross profit method for, 449–451 increase in, 1256–1257 land as, 491 management of, 436–437 method selection for, 409–411 misstated, 390–391 at net realizable value, 445 presentation of, 457–459 purchases of, 406n.11 valuation of, 386, 410–411, 445–448 as worksheet entry, 1278 Inventory cost flow, 383 Inventory errors, 389–391, 1198 Inventory methods, 385.1, 408n.18 Inventory turnover ratio, 459 Investing activities, 198, 201, 1245, 1246 Investment(s), 856–881 available-for sale securities, 861–865, 868–870 in common stock, 1267 in debt securities, 858–865 derivatives, 884–900 equity method for accounting, 870–872 equity securities, 866–872 fair value controversy, 880 and FASB interpretation No 46(R), 903, 904, 908 held-to-maturity securities, 859–861 holdings of less than 20%, 867–870 impairment of value, 875 long-term, 184–185 PPE, 491 security, 858n.1 short-term, 181–183 in stock, as worksheet entry, 1278 trading securities, 865–866, 870 transfers between categories, 879 variable-interest entities, 902–904 Investment accounting approaches, 858 Investment carrying amount, 1215–1216 Investor groups, 769 Investors’ expectations, 1357 IOSCO (International Organization of Securities Commissions), 1358 I.O.U.s, 320 Ip, Grep, 187 iPhone, 593 Irregular items analyzing, 141 categories of, 141 and FASB, 139 in income statement, 148 on income statement, 139–140 summary of, 147–148 IRS (Internal Revenue Service), 66 Issue costs, 748 J Crew, J P Morgan Chase, 608 Jack in the Box, 49, 1128 Jaenicke, Henry R., 934n.9 Japan, 1053, 1122, 1360 Japan Airlines (JAL), 1178 JCPenney Company, 409, 436, 691 Jenkins, Edmund L., 1357n.32, 1358n.33 Jiambalvo, James, 1198n.7 Jiffy Lube International, 963n.30 Jim Walter’s Corporation, 498 Job Creation and Worker Assistance Act of 2002, 564n.1 John Deere and Company, 172, 259, 337, 410, 604, 1051 John Deere Credit, 337 Johnson, L Todd, 877n.9 Johnson Controls, 16 Johnson & Johnson, 534–535, 604, 633, 749, 886, 1329 Jones, S D., 49, 1128 Journal(s), 69, 75–76 Journal entry, general, 75–76 Journalizing, 75–76 JPMorgan Chase & Co., 187, 1116 Judgments and estimates, 179 Junk bonds, 694 Kahn, Jeremy, 933 Kaiser Aluminum, 1079 Kardous, D., 451 Kazenski, Paul M., 495n.3 Kellogg Company, 35, 127–128, 459, 490, 604, 745, 766, 791, 852–853, 1078, 1332 Kelly, Kate, 187 Kelly Services, 962 Kerwin, K., 1005 Keystone Consolidated Industries, 144 KFC, 962 Kiley, David, 597, 608 Kimberly-Clark Corp., 904, 1164 Kimco Realty, 547, 585–586 King, Thomas E., 505n.9 Kirk, Donald, 617 KLM Royal Dutch Airlines, 1178 Kmart, 437 Kmart Holding, 1015 Knutson, Peter H., 1120n.2 Kohls, 326 Krispy Kreme, 5, 176, 709, 1016, 1114–1115, 1118 Kroger, 177, 561 Kurzweil Applied Intelligence Inc., 389 Kyowa Hakko Kogyo Co., Ltd., 1112 Labaton, S., 557 Laboratory Corp of America, 689 Lafley, A G., 212, 215 Lahart, J., 749 Land cost of, 491 decrease in, 1258 expenditures for, 498 increase in, 1254 as worksheet entry, 1278 Landsman, Wayne, 802n.6 Largay, James A., III, 1243 Large stock dividends, 761n.15 Larson, R K., 938n.17 Last-in, first-out (LIFO) See also LIFO entries adoption of, for inventory valuation, 1194n.4 advantages of, 406–407 approach comparisons, 405–406 and cost flow assumption, 397–398 disadvantages of, 407–408 external indexes computations, 405n.10 and FIFO, 398–399 and future earning hedge, 407 specific-goods, 400–401 tax benefits, 406–407, 409 Lavelle, Louis, 795n.1 Lawsuits, 1341n.18 Layers, 399–400 LBO (leveraged buyout), 750 LCM see Lower-of-cost-or-market Leach, Jim, 27 Lease accounting and bargain purchase option, 1144 current vs noncurrent classification in, 1145–6 and disclosing lease data, 1146–1148 and initial direct costs, 1145 by lessee, 1120–1129 by lessor, 1130–1135 and residential values, 1136–1141 for sales-type leases, 1141–1144 special problems in, 1135–1148 unsolved problems in, 1148–1150 Leases and leasing, 1116–1160 accounting for (see Lease accounting) advantages of, 1118–1119 classifications of, 1131–1132 conceptual nature of, 1119–1120 and disclosure, 1320 economics of, 1130 environment for, 1116–1120 examples of, 1153–1157 GAAP/iGAAP standards, 1151 lessor types in, 1116–1117 operating leases, 710 term of lease, 1118, 1122, 1136n.13 Lease receivable, 1132–1135, 1142 LeClere, Marc J., 409n.19 Ledger, 69 Lee Enterprises Inc., 603 Legally restricted deposits, 322 Lennard, A., 1149n.20 Leone, M., 1181 LePeep Restaurants, Inc., 963n.30 Leslie Fay (company), 391 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-12 I-12 · Index Lessee accounting, 1120–1129 of assets vs liabilities, 1124 for bargain purchase option, 1144 capitalization criteria for, 1121–1124 capital lease method of, 1124–1127 capital vs operating, 1128–1129 operating method of, 1127–1128 for residual value, 1137–1140 for sale-leasebacks, 1158 Lessor accounting, 1130–1135 benefits of, 1130 and classification of leases, 1131–1132 direct-financing method of, 1132–1135 and economics of leasing, 1130 for initial direct costs, 1145 operating method of, 1135 for residual value, 1140–1141 for sale-leasebacks, 1158 for sales-type leases, 1141–1144 Lev, Baruch, 609n.16 Level Systems, 47 Leveraged buyout (LBO), 750 Leverage ratios, 1350n.28 Levitt, A., 133n.4 Lewent, Judy, 1312 Liability(-ies), 638 on balance sheets, 180, 186–188 contingent (see Loss contingencies) current vs noncurrent lease, 1145–1146 defined, 638 employee-related, 646–651 environmental, 660 and fair value option, 874 in lessee accounting, 1124, 1129 long-term, 188 pension, 1064 Liability approach, 1017 Liability awards, share-based, 827–828 Liability measurements, 714 Liability valuation account, 700 Liberty International, 585–586 Licenses, 595 Liesman, S., 15, 140, 999 LIFO see Last-in, first-out LIFO conformity rule, 409 LIFO liquidations, 399–401, 408n.15, 443n.3 LIFO matches, 406 LIFO method, dollar-value, 401–406 LIFO reserve, 398–399 LIFO retail methods, 452, 462–466 changing from conventional retail method to, 465–466 and stable prices, 462–463 Limited Brands Inc., 990–991 Limited-life intangibles, 591, 1266 accounting treatment for, 593 fair value tests for, 601 impairment of, 601 Lipe, Robert C., 1352n.30 Liquidating dividends, 557, 758, 760 Liquidity, 178, 199 Liquidity evaluation, 400–401 Liquidity ratios, 208, 1350, 1351 Litigation, 654–655, 1341–1343 Lloyd’s of London, 1149n.18 Loans, 352n.17, 1246n.2 Loans.com, 593 Lobbyists, 1204n.13 Lockbox accounts, 347 Loews Corporation, 1076 Logarhythmics, 269n.4 Long Island Railroad (LIRR), 66 Long-term assets, 264 Long-term bonds, valuation of, 288–289 Long-term borrowing, 322 Long-term contract losses, 944–947 Long-term debt, 690 analysis of, 713 current maturities of, 641 on financial statements, 690 off-balance-sheet financing, 709–711 presentation of, 711–712 reporting, 709–713 and SAF Opinions No 5, 709 and SAF Opinions No 6, 709 Long-term investments, 184–185 Long-term liabilities, 688–713 on balance sheets, 188 bonds payable, 690–703 long-term notes payable, 703–708 and reporting and analysis of debt, 709–713 Long-term notes payable, 703–708 Loomis, Carol J., 603 Loss(es) accumulated other comprehensive loss, 765n.19 from continuing operations, 834n.21 on financial statements, 135 in income statement, 137 on pension plans, 1063–1067 and postretirement expense, 1086 in sale-leasebacks, 1158 on sale of equipment, 1257 and SFAS No 6, 135n.7 Loss carrybacks, 1006 Loss carryforwards, 1006 deferred tax assets recognized as, 1008n.4 example, 1007–1011 operating, 1008–1009 period length for, 1007n.3 with valuation allowance, 1009–1010 without valuation allowance, 1008–1009 Loss contingencies, 352, 652–666 coupons, 657 environmental liabilities, 659–660 and FASB, 323, 652 guarantee and warranty costs, 655–657 litigations, claims, and assessments, 654–655 of no-par stock, 745–746 premiums, 657–658 self-insurance, 661–662 Loss measurement, 144 Loudder, Martha L., 609n.16 Lower (floor), 439–440 Lower-of-cost-or-market (LCM) applying, 441–442 and net realized value, 439–440 in practice, 445n.5 and recording market instead of cost, 442–444 Lower-of-cost-or-market (LCM) rule, 439, 440, 444, 445 LTV Corporation, 755, 1079 Lubore, Seth, 1115 Lucent Technologies, 763, 823, 937, 1064 Lump-sum exchange, 747 Lump-sum price, 500 Lump-sum purchases, 500 McConnell, Pat, 1015n.8 McDermott, D., 141n.11 MacDonald, Elizabeth, 1115 McDonald’s Corporation, 4, 20, 49, 81, 135, 584–585, 595, 885, 962, 1116, 1356 McGregor, Warren, 1120n.2 MacKay, Archibald E., 963n.29 McKay, P., 749 Mack Trucks, Inc., 183 McLean, Bethany, 319 McNamee, M., 694 MACRS see Modified Accelerated Cost Recovery System McTauge, R., 49 Maher, Kris, 489 Mahoney, Jeff, 337 Major repair, 510–511 Maker, 331 Mallorca Ltd, 769 Management, 1338–1340, 1349 Management’s discussion and analysis (MD&A), 1338–1340 Managerial accounting, Mandel, M., 589 Manufacturers Hanover Trust Co., 347 Manufacturing, 382, 392 Maremont, M., 1144 Marginal principle approach, 1332 Markdowns, 451, 453 Markdown cancellations, 453 Market(s) (GAAP/iGAAP definition), 438 Marketable securities, 320n.2 Market approach, 500n.4 Marketing-related intangible assets, 593 Market rate, 331n.9, 693 Market-related asset value, 1063 Market value, and accounting quality, 134 Markup, 451, 453 Marriott, 595, 962 Martha Stewart Living, 744 Masco Corporation, 1324 MasterCard, 338, 339n.12 MasterNet, 67 Master valuation accounts, 598 Master valuation approach, 599–600 Matching principle, 45n.13 Mattel, Inc., 185 Maturity value (bonds), 692 Maxwell House, 325 May Department Stores, 436 Maytag Corp., 1116 Mbagwu, C., 131 MD&A see Management’s discussion and analysis Means, Grady, 489 Means, Kathryn, 495n.3 Medicare, 646–647 Mehring, James, 703 Meineke Mufflers, 962 Mellors, F., 1078n.19 Mercedes-Benz, 608 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-13 Index · I-13 Merchandising concerns, 382 Merck & Co., Inc., 595, 604, 609, 611, 633, 634, 651, 1051, 1118, 1312 Meredith, 744 Mergers and acquisitions, 816n.14, 1356 Merit rating, 647 Mermin, G., 1049 Merrill Lynch, 811 Mesa Limited Partnerships, 558n.12 Metallgesellschaft, 886n.12 Mexico, 1357 M&I Bank, 885 Microsoft Corporation, 4, 5, 18, 133, 265, 323, 377–378, 589, 608, 615, 644, 645, 751, 795 MicroStrategy, 134, 158, 1315, 1319 Midway, 178 Miller, G S., 1011 Miller, Paul B W., 1058n.12, 1272n.9 Minimum lease payments, 1122, 1137 Minimum liability, pension, 1076 Minimum rental payments, 1122 Misclassification errors, 1198 Mobile Telecommunications Company Saudi Arabia, 741 Model Business Corporate Act, 742 Modified Accelerated Cost Recovery System (MACRS), 564–567 example of, 564–566 optional straight-line method vs., 566 property classes, 564 and tax depreciation methods, 565 Modified cash basis, 102 Modified perpetual inventory system, 385 Mohican Company, 686 Molson Coors Brewing, 324, 1051 Monetary assets, 501n.5 Monetary exchange, 504n.8 Money-market funds, 320n.1 Money-market savings certificates, 320n.1 Monsanto Chemical Corporation, 329, 1343 Montavon Winery, 642 Montgomery Ward, 437 Monthly financial statements, 96 Moody’s Investors Service, 694 Moran, M., 823 “More likely than not,” 999 Morgan Stanley, 608, 865 Morgenson, Gretchen, 37, 47, 177, 1321 Mortgages, 708–709 Mortgage notes payable, 708–709 Moses, O Douglas, 1203n.12 Moto Photo, Inc., 963n.30 Motorola Inc., 45, 55, 185, 382 Mott, D., 1015n.8 Moving-average method, 395 Mulford, Charles W., 1079n.20, 1272n.9, 1273 Multinational corporations, 1356 Multiple-step income statements, 136 Mumford of Wyoming, 458 Myers, David, 26–27 Myers, John H., 1120n.2 Nailor, H., 1149n.20 NASDAQ, 740 National Car Rental, 962 National Commission on Fraudulent Financial Reporting, 1322n.6, 1344n.24 National Steel, 1079 Natural expense classification, 137 Natural resources, 559 Navistar, 593, 1005 NBC TV, 1325 NBC Universal, 1325 NEC, 960 Nesco Holdings, Inc., 652 Nestlé Group, 714 Net cash flow direct method of determining, 1250 indirect method of determining, 1250–1251, 1265 from investing/financing activities, 1248, 1251–1252, 1254–1255, 1257–1258 from operating activities, 1249–1251, 1253–1254, 1256–1261, 1270 Net income cash flows vs., 204 and indirect method, 1265 Net increase in cash, 201 Net losses, 137n.9, 1269–1270 Net method, 392–393 Net of cash discounts, 392 Net operating loss (NOL), 1006–1011 Net periodic postretirement benefit cost, 1086 Net realizable value, 445, 460 Net realized value (NRV), 439–440 Net settlement, 889 Net working capital, 187 Neutrality, 1204 New allowance account, 443 New average unit cost, 395–396 New Century, 43 Newmont Gold Company, 458 New York Stock Exchange (NYSE), 740, 1051n.3 The New York Times, 744 Nicholaisen, Don, 49 90% test see Recovery of investment test Nissan (formerly Datsun), 593 Noel, J., 381 Nokia Corporation, 460 NOL see Net operating loss NOL carrybacks see Loss carrybacks NOL carryforwards see Loss carryforwards Nominal accounts, 69 Nominal rate, 269, 692 Noncalculable purchase commitments, 448n.8 Noncash charges/credits, 1280 Noncash transactions, 1272–1273 Non-consolidated subsidiary, 709 Noncontributory pension plans, 1050 Noncounterbalancing errors, 1205, 1207–1208 Noncurrent assets, 184–186 Noncurrent receivables, 323 Nondetachable stock warrants, 802 Nonfinancial measurements, Non-interest bearing notes see Zerointerest-bearing notes Nonmonetary assets, 501–506, 512, 562 Nonpublic enterprise, 812n.12 Nonqualified stock-option plans, 827 Nonreciprocal transfers, 506 Nonrecognized subsequent events, 1323–1324 Nontrade receivables, 323–324 No-par stock, 745–746 Norby, William C., 33n.3 Nordstrom, 436, 438 Norfolk Southern Corporation, 55, 1064 Normal shortages, 456 Normand, Troy, 26–27 Norris, Floyd, 356, 799, 1312 Nortel, 5, 318–319, 488–489 Northern Trust Company, 271 Northland Cranberries, 685 Northwest Airlines, 178, 716, 1048 Northwest Industries, Inc., 868 Note(s) accounting for, 703 bonds vs., 703 choice of interest rate for, 707–708 common, 1319–1321 discount, 705 interest-bearing, 331, 333–335, 705–706 issuance of, at face value, 332, 703–704 issuance of, for property, goods, and services, 335, 706 of noncash investing/financing activities, 1272 not issued at face value, 332–335, 704–706 as present value-based measurement, 264 Notes payable, 639–641, 703n.10, 706–709, 1269 Notes receivable, 323 disposition of, 337–342 fair value option for, 336 impaired, 336–337 recognition of, 331–335 valuation of, 335–336 Notes to the financial statements, 188n.10 accounting policies in, 1316–1319 as disclosure technique, 195 pension plan reporting within, 1058, 1072–1074, 1076 postretirement benefits reporting within, 1090–1091 Notional amount, 887 Not-sufficient funds (NSF) checks, 350 Noven Pharmaceuticals, Inc., 432–433 NRG Energy, 688 NRV see Net realized value NSF (not-sufficient funds) checks, 350 NYSE (New York Stock Exchange), 740, 1051n.3 NYSE Eurotext, 740 O.A.S.D.I (old age, survivor, and disability insurance), 646–647 Obligations (postretirement benefits), 1085 Obsolescence, 541 Occidental Petroleum, 377, 1078 Off-balance-sheet financing, 709–711 disclosure of, 1320 forms of, 709–710 and leases, 1118, 1119, 1129 rationale for, 710 and SEC stance on, 710 Ohio Edison, 1157 Oil and gas industry, depletion issues in, 557–559 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-14 I-14 · Index Old age, survivor, and disability insurance (O.A.S.D.I), 646–647 Olofson, Roy, 506 OMX, 740 On-balance sheet financing, 711 1-800-Flowers, 744 One-time items, 145n.15 Opdyke, Jeff, 756n.10 OPEB see Other postretirement benefits Operating activities cash provided by, 201 net cash flow computation from, 1249–1251, 1253–1254 net income vs net cash flow from, 1249–1250 and securitizing receivables, 1251 on statement of cash flows, 198, 1245, 1246, 1256–1257 Operating cycle, 639 Operating expense computation, 103–104 Operating leases, 710, 1132, 1135, 1145 Operating lease method, 1127–1129, 1135 Operating loss carryforwards, 1008–1009 Operating segments, 1326–1328, 1347 Operations, 132n.2 Opinions of the Accounting Principles Board (APB Opinions), 9, 11 Options see Stock options Optional straight-line method, 566 Option to purchase (franchises), 965 Oracle Corporation, 55, 378 Ordinary annuity, 281–283, 286 Ordinary stock dividends, 760 Original entry, book of, 69 Originating temporary difference, 1002 Other postretirement benefits (OPEB), 1055n.9, 1082n.22, 1084 Outdoor Channel Holdings, 592 Outflows, cash, 1274 Output in depreciation, 543 measures of, 939 Outstanding checks, 350 Outstanding stock, 750, 756n.11 Overfunded pension plans, 1070 Overhead, 492 Overseas National Airways, 760 Overstatement of accrued revenue, 1207 Overstatement of purchases, 1207 Owens Corning, Inc., 182 Owners’ equity see Stockholders’ equity Ownership structure, 72 Oxford Industries, 1251 Ozanian, Michael K., 177, 539 Pacific Lighting, 558n.12 Pacter, Paul A., 1217n.15 Paid-in capital, 745, 765n.18 Paid-in capital in excess of par, 745 Pan American Airlines, 1078n.17, 1079 Panera Bread Company, 40 Paper checks, 349n.16 Parenthetical explanations, 194 Parking transactions, 388 Partial period depreciation, 548–549 Participating preferred stock, 754–755 Participating securities, 820n.21 Par value as basis for fair value, 746 of bonds, 692 of stock issued, 760, 763–764 Par value method, 751 Par-value stock, 745 Passage of title rule, 387 “Past event,” 1193n.3 Patents, business-method, 596 Paychex, 323 Payee, 331 Payment, date of (stock dividends), 758 Payout ratio, 767–768 Payroll deductions, 648 example of, 648 income tax withholding, 647–648 Social Security taxes, 646–647 unemployment taxes, 647 Payroll taxes, 648 PBGC see Pension Benefit Guaranty Corporation PCAOB see Public Company Accounting Oversight Board Pegg, Janet, 1015n.8 Penalty for failure to renew/extend lease, 1123 Penn Central Railroad, 641–642 Pensions, 264, 1320 Pension Benefit Guaranty Corporation (PBGC), 1048, 1053n.6, 1077–1079 Pension obligations, 1053–1054 Pension plan(s), 1050–1082 accounting for (see Pension plan accounting) actuaries’ role in accounting for, 1053 assets in, 1052n.4 defined-benefit, 1051–1052 defined-contribution, 1051 financial health of, 1069 funding of, 1050–1051 nature of, 1050–1052 net funded status of, 1055 reporting (see Pension plan reporting) stock market value of, 1051n.3 trends in, 1048–1049 worksheet for, 1058–1059 Pension plan accounting, 1053–1057 actual return on plan assets, 1057 actuaries’ role in, 1053 employer’s obligation in, 1053–1054 expense components in, 1055–1056 interest on liability, 1057 service cost in, 1056 Pension plan assets, actual return on, 1057 Pension plan gains/losses, 1063–1067 assets, smoothing unexpected gains/losses on, 1063–1064 calculations for, 1066–1067 corridor amortization, 1064–1065 example of unrecognized, 1065–1066 liability, smoothing unexpected gains/losses on, 1064 Pension plan reporting ERISA, 1076–1078 within financial statements, 1069–1079 within notes to financial statements, 1072–1074 terminations, pension, 1078–1079 2013 entries/worksheet example, 1075–1076 Pension poison pills, 1079n.20 Pension Protection Act, 1076n.15 Pension Reform Act (1974), 1076–1078 Pension terminations, 1078–1079 Pension worksheet, 1058–1059 amortization of unrecognized prior service costs, 1060–1061 gain or loss, 1063–1067 2010 entries, 1058–1060 2011 entries, 1062–1063 2012 entries, 1067–1069 2013 entries, 1075–1076 Pep Boys, 904 The Pepsi Bottling Group (PBG), 16 PepsiCo Beverages, 35 PepsiCo, Inc., 35, 64, 127, 144, 172, 186, 257–258, 377, 484–485, 584, 607, 632–633, 641, 685, 738–739, 745, 791, 852, 856, 858, 927, 987, 1013–1015, 1017, 1045, 1111, 1239, 1308–1309, 1338–1340, 1377 PepsiCo International, 35 Percentage analysis, 1354–1355 Percentage markup, 450n.11 Percentage-of-completion accounting method, 937–938, 946–947 Percentage-of-receivables approach, 328–330 Percentage-of-sales approach, 328 Performance approach, current operating, 140 Periods, compounding, 268 Period costs, 1331 interest as, 392 in inventory, 392 Periodic inventory system, 384–385 Periodic rent, 285–286 Permanent accounts, 69, 93 Permanent differences, 1002 Permits, 595 Perpetual inventory system, 383–385, 442 Petroleum Equipment Tools Inc., 512 Petty cash disbursements, imprest system for, 348–349 Petty cash funds, 320, 348–349 Pfizer Inc., 589 PharMor, 1315 Phillips, Michael M., 187 Physical factors, of depreciation, 541 Physical goods included in inventory, 386 consigned goods, 387–388 goods in transit, 387 and sales agreements, 388 Physical inventory count, 385 Pier Imports, 204 Pillsbury, 1332 Pinnacle West Corporation, 1157 Pizza Hut, 962 Plant assets, 490 dispositions of, 511–512 and involuntary conversion, 512 problems with, 512 sale of, 511–512 Pledge, 338n.10 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-15 Index · I-15 Plugs, 598 PNC, 5, 1117 Points (note), 708 Polaroid, 595 Political costs, 1203 Politicization, 24 Polo Ralph Lauren, 744 Pools, 400, 401nn.7–8, 407n.13 Porter, J., 1313 Positive intent, 859 Postage stamps on hand, 320 Post-balance-sheet events (subsequent events), 1323–1324, 1347 Post-closing trial balance, 69, 94 Postdated checks, 320 Postemployment benefits, 648n.8 Posting, 76–80 closing entries, 93–94 defined, 69 Postretirement benefits, 264, 650n.9 disclosures of, 1090–1091 eligibility for, 1085n.26 obligations under, 1085 pension vs healthcare, 1083–1084 Postretirement benefits accounting, 1082–1091 actuarial assumptions/conceptual issues of, 1091 costs, reporting, 1271 expense under, 1086 FASB on, 1082–1083 gains/losses recognition, 1088 illustrative entries of, 1086–1089 provisions of, 1084–1086 2011 entries and worksheet, 1087–1089 2012 amortization of unrecognized net gain/loss, 1089 Postretirement expense, 1086 Potlatch Corporation, 724 PPE see Property, plant, and equipment Prab Command, Inc (U.S.), 485 Prab Limited (U.K.), 485 Prab Robots, Inc., 485–486 Practice Bulletins, 12 Preemptive privilege, 803 Preemptive right, 743 Preferred dividends in arrears, 643 Preferred stock, 743, 745, 754–756, 831 See also Common stock; specific types, e.g.: Convertible preferred stock accounting and reporting of, 755–756 convertible, 798–799 convertible bonds vs., 755 dividends from, 812–813 features of, 754–755 participating, 754–755, 772n.23 redeemable, 755 Preferred stock outstanding, 754n.9, 756 Premier Parks, 542 Premiums, 657–658 Premium amortization, of bonds, 695–696 Premium bonds, 692–696 Prepaid expenses adjusting entries for, 82–83 on balance sheets, 184 basis of valuation of, 181 as class of adjusting entries, 81 decrease in, 1257 failure to record, 1206 increase in, 1254 as worksheet entry, 1278 Preparing financial statements, 91–92 Prepayments as class of adjusting entries, 81 in reversing entries illustration, 106–107 Present value, 262, 263 of annuity, 284–286 of annuity due, 283–286 of annuity due of (table), 267 of an ordinary annuity, 284–285 of an ordinary annuity of (table), 267 of benefits, 1054n.7 computing for unknown, 270–271 of deferred annuity, 287–288 measurement, 290–292 of (table), 267 of ordinary annuity, 281–283 of single sum, 272–274 solving for, 270–271 as variable in compound interest, 270 Present value-based measurements, 264–265 Pretax financial income, 992, 1001–1004 Price index selection, 403–405 Priceline.com, 37, 932–933 PricewaterhouseCoopers, 99, 932n.1, 958, 1052, 1283 Prime Motor Inn, 203 Primerica (formerly American Can), 593 Principal, 265 Principal amount (bonds), 692 Principle-based accounting standards, rulebased vs., 15 Prior period adjustments, 147, 1197 Prior service costs (PSC), 1060–1061, 1086 Probability, degree of, 654 The Procter & Gamble Company, 63, 112, 127, 171–172, 193, 210–238, 257, 305–306, 376, 382, 484, 584, 588–589, 604, 632, 684, 738, 767, 790, 811, 852, 886n.12, 927, 987, 1044–1045, 1111, 1177, 1239, 1308, 1317, 1377 Product costs, 391–392 Product guarantees see Guarantees Production variable method, 547 Profitability ratios, 208, 1350, 1351 Profit margin on sales ratio, 561 Progress Energy, 794 Projected benefit obligation, 1053–1057 Project financing arrangement, 710 Promissory note, 331 Property, goods, or services, 335 Property, plant, and equipment (PPE), 490 acquisition and valuation of, 490–498 analysis of, 560–561 on balance sheets, 185 and cost of buildings, 491–492 and cost of equipment, 492 and cost of land, 491 disclosure of, 1319 and interest costs during construction, 493–498 observations for, 498 presentation of, 559–560 and self-constructed assets, 492–493 valuation of, 498–507 Property dividends, 759 Property-rights approach, 1120, 1149 Proportional method, 746, 800–801 Proposed Statements of Financial Accounting Standards, 13 Pro rata portion, 492 Prorating, 699 Proved reserves, 557 PSC see Prior service costs Public Company Accounting Oversight Board (PCAOB), 17, 1322n.5 Pulitzer Inc., 603 Pulliam, Susan, 381 Purchases, misstatement/overstatement of, 390–391, 1207 Purchase allowances, 456, 456n.13 Purchase commitments, valuation of, 446–448 Purchased goodwill, 598–599 Purchased intangibles, 590 Purchase discounts, 392–393, 456 Purchase returns, 456 Purchases-only-approach, 465n.2 Pure rate of interest, 291 Put option, 887n.15 Quaker Foods, 35 Quaker Oats Company, 1194, 1202 Quaker State Oil Refining Corp., 653 Qualcomm Inc., 595, 596, 762, 823 Qualified opinion, 1337 Qualified pension plans, 1050 Qualifying assets, 494 Quality of earnings, 133 Quality ratings (bonds), 694 Quanex Corporation, 189 Quantum Corporation, 343n.14 Quarterly financial statements, 96 Quest Company, 1087–1089 Questcor Pharmaceuticals Inc., 759 Qwest Communications, 506, 930, 932, 1150 R G Barry & Co., 74 R J Reynolds, 36 Rabigh Refining and Petrochemical Company, 741 Ranchers Exploration and Development Corp., 759 Rate of gross profit, 450n.11 Rate of interest, 270 Rate(s) of return, 388–389 on common stock equity, 767 on sales, 561 Rate of return on assets (ROA), 561 Ratios, 208 See also specific ratios, e.g.: Cash debt coverage ratio activity, 1350, 1351 coverage, 1350, 1351 liquidity, 1350, 1351 profitability, 1350, 1351 Ratio analysis, 208–209, 1350–1352 Raw materials inventory, 382 Raymark Corporation, 664 R&D see Research and development (R&D) costs 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-16 I-16 · Index Reacquisition price, 701–702 Readily determinable fair value, 908 Real accounts, 69 Real economic loss, 1158n.22 Real estate investment trusts (REITs), 547n.7 Realizable revenues, 933 Realized revenues, 933 Really Useful Group, 595 Rearrangements, costs of, 510 Reasonableness test, 1196n.5 Receivables, 323–344 See also Accounts receivable(s) analysis of, 344 on balance sheets, 183 basis of valuation of, 181 classifying, 343 defined, 323 derecognizing, 345 disappearing, 749 impairment of, 352–356 presentation of, 343 with recourse, 340–341 sales of, 339–343 securitizing, 1251 trade, 323 without recourse, 340 Receivables turnover ratio, 344 Reclassification adjustments, 876–879 Recognized subsequent events, 1323 Reconciliation method see Indirect method Reconciliation to international standards, 1357, 1360 Reconciling entry, final, 1280–1281 Reconciling items, 350 Record, date of (stock dividends), 758 Recourse defined, 339n.13 receivables with, 340–341 receivables without, 340 Recoverability tests, 552, 601–602 Recoverable reserves, 556 Recovery of investment test (90% test), 1122–1124, 1149 Recovery periods, 564 Redeemable preferred stock, 755 Reed, Jack, 337 Reeve, James M., 401n.6, 407n.13 Refinancing, 642 Refunding, 702 Regions Bank, 927 Registered bonds, 691 Registrars, 743 Reilly, David, 337 Reinstallation costs, 510 Reither, Cheri L., 877n.9 REITs (real estate investment trusts), 547n.7 Related-party transactions, disclosure of, 1321–1322 Relative sales value, 446 Reliance Power Ltd, 741 Rendleman, Richard, Jr., 802n.6 Rent-Way, Inc., 134 Repairs, 510–511 Replacements, 455n.12, 509 Reported amounts, 993–994 Reporting, 4, 1341–1346 change in entity, 1197 of change in principle, 1186–1187 of correction of error, 1197–1201 criteria for accounting/reporting choices, 1346 on financial forecasts/projections, 1341–1343 fraudulent financial reporting, 1344–1346 Internet financial reporting, 1343 requirements, 1315 Repossessions (installment sales), 953–954 Research and development (R&D) costs, 587–609 accounting for, 605–606 under contractual arrangements, 605n.13 of extractive industries, 605n.12 under GAAP/iGAAP, 612 identifying, 604–605 and investors, 609n.16 presentation of, 609, 611 Reserves, cookie jar, 134 Reserves errors, 1198 Residual interest, 744 Residual value, 1130, 1136–1141 guaranteed vs unguaranteed, 1136 and lease payments, 1136–1137 lessee accounting for, 1137–1140 lessor accounting for, 1140–1141 meaning of, 1136 Restatement, 1199n.8, 1206 Restaurant chains, 1127–1128 Restoration costs, of depletion, 555 Restricted cash, 321 Restricted stock plans, 807–808 Restricted-stock units, 808n.10 Restrictions on retained earnings, 764–765, 1273 Restructuring, 145n.15, 717–722 continuation of debt, 718–722 settlement of debt, 717–718 Restructuring charge, 145 Retail inventory methods, 452–457 concepts of, 453 with conventional method, 453–456 evaluation of, 457 special items relating to, 456–457 Retail methods, 465–466 Retained earnings change in, 1258, 1277 disclosures of restrictions on, 764–765 illustration of statement of, 1276 increase in, 1255 reporting restrictions on, 1273 restrictions of, 152 restrictions on, 764–765 statement of, 97 on statement of stockholders’ equity, 152n.22 as worksheet entry, 1277 Retained earnings adjustment, 1192 Retained earnings statement, 152 Retired shares, 753 Retirement benefits see Postretirement benefits Retirement of convertible debt, 798 Retrospective adjustment, 145 Retrospective changes in accounting principle, 1183–1190 accounting for, 1191 and equity method, 1197n.6 example of, 1188–1190 impracticability of, 1193–1194 reporting of, 1186–1187 Returnable cash deposits, 643–644 Reuters Group, 596 Revaluation model, 206 Revaluation surpluses, 769 Revell, Janice, 173 Revenue(s) on financial statements, 134 in income statement, 137 overstatement of accrued, 1207 understatement of unearned, 1206 Revenue bonds, 691 Revenue expenditures, 508–509 Revenue recognition, 930–966 after delivery, 948–959 for consignments, 965–966 current environment, 932–935 before delivery, 937–948 errors, 1198 for franchises, 962–965 at point of sale (delivery), 935–937 and SFAC No 3, 933n.5 and SFAC No 5, 933n.5, 933n.6, 937n.14, 948n.21–22 for special sales transactions, 962–966 Reverse stock splits, 63 Reversing differences, 1002 Reversing entries, 95, 105–110 Rhone-Poulenc Rorer (RPR), 433 Richard, Christine, 689 Richardson, A W., 1145n.15 Right of return, 935 Risk, 178n.2 cash flow, 893 exchange rate, 890 interest rate, 890 Risk management (derivatives), 884–900 Rite-Aid, 17 RJR Nabisco, 690, 1331 ROA (rate of return on assets), 561 Rohde, L., 596 Romero, Simon, 1150 Royal Dutch/Shell, 557 Rule-based accounting standards, 15 Rural Electrification Corp, 741 Ryder System, 177 S C Johnson, 141 Sack, Robert J., 19, 1346 Safe harbor rule, 1342, 1343 Safeway, 452 St Regis Pulp Co., 868–869 Sales with buyback agreement, 388 conditions for, 341 and FASB, 341 with high rates of return, 388–389 on installment, 389 with recourse, 340–341 secured borrowing vs., 341–342 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-17 Index · I-17 of treasury stock, 752–753 without recourse, 340–341 Sales agreements, 388–389 Sales discounts, 325–326, 456 Sale-leasebacks, 1157–1160 asset use determination in, 1157–1158 example of, 1158–1159 as term, 1157 Sales price of asset, 1142 Sales-type leases, 1131–1132, 1141–1145 Sales-warranty approach, 656–657 Sales tax payable, 645 Sales transactions, 934 Salvage value, 540, 1136n.13 Sampling, statistical, 385.1 Sandberg, Jared, 508 San Diego Gas and Electric (SDGE), 904 SARs see Stock appreciation rights Sarbanes-Oxley Act of 2002, 1322, 1340, 1346 and auditing standards, 13 and “big GAAP versus little GAAP,” 1316n.3 and disclosure, 661 key provisions of, 17 revenue recognition, 932n.2 and SEC, 661 Section 404 of, 17 Sauter, Douglas, 13 Savings certificates, money-market, 320n.1 SBC Communications Inc., 1084 Schiesel, Seth, 1150 Schipper, Katherine, 1315n.2 Schneider, David, 489 Scholtes, S., 694 Scott, Richard A., 949n.23 Scott, Rita K., 949n.23 Scott Paper, 1158 Scribner, Edmund, 764n.17 Seaboard Corporation, 324 Searfoss, D., 1083n.25 Sears Holdings, 326, 385, 437, 452 Sears Roebuck, 326, 436, 1015 Seasonality, 1333–1334 SEC see Securities and Exchange Commission Second income statement, 153 Secret reserves, 748 Secured bonds, 691 Secured borrowing, 338, 341–342 Securities, 858n.1 available-for-sale, 152n.21, 861–865, 868–870 disclosure for, 881 equity, 866–872 held-to-maturity, 859–861 holdings between 20% and 50%, 870–872 holdings of less than 20%, 867–869 holdings of more than 50%, 872 short-term available-for-sale, 1269 on statement of cash flows, 1246n.2 trading, 865–866, 870, 1269 Securities and Exchange Commission (SEC), 26 and American Institute of Certified Public Accountants, on cash flow classification, 1266 and Caterpillar, 1325 on differential disclosure, 1315 and earnings management, 133 enforcement by, 8–9 and FASB, 8, 8n.6 and GAAP standards development, IDEA database, 1344 on interim reporting, 1334–1335 as IOSCO member, 1358 and management’s responsibilities for financial statements, 1340 on MD&A, 1338 and off-balance-sheet financing, 710 in private sector, and Sarbanes-Oxley Act of 2002, 661 on timeliness of information, 1335 Securities Fair Value Adjustment account, 863 Securitization, 283, 339, 341, 353 Securitizing receivables, 1251 Segment disclosures, 1325–1329 disadvantages of, 1325–1326 identifying operating segments for, 1326–1328 illustration of, 1329 measurement principles for, 1328 objectives of, 1326 principles of, 1326 types of information in, 1328–1329 Self-insurance, 661–662 Sender, Henny, 204, 506 Senyak, C., 1015n.8 Sepracor, Inc., 838 September 11, 2001 terrorist attacks, 12 depreciation measures taken after, 564n.1 effect on airlines, 178 reporting extraordinary items after, 143 Serial bonds, 691 Service costs, 1056, 1086 Service lives, 541 Service period, 805 Service revenue, 102–103 Settlement of debt, 717–718 7-Eleven Stores, 962 Seven Bank Ltd, 741 75% test, 1122 Sewer, Andy, 744 Shares, reacquisition of, 749–753 Share price appreciation, 827 Share system, 742–743 Shatner, William, 932 Shaustyuk, K., 823 Sherwin-Williams Company, 258 Short, Daniel G., 408n.17, 410n.22 Short account, 348 Shortages, normal/abnormal, 456 Short-term available-for-sale securities, 1269 Short-term borrowing, 322 Short-term creditors, 1349 Short-term financing, 326n.4 Short-term investments, 181–183 Short-term nontrade notes payable, 1269 Short-term obligations, 641n.5 Short-term paper, 320n.1 Short-term receivables, 323 Showa Shell Sekiyu, 886n.12 Shwiff, K., 1144 Sick pay, 649 Sidel, Robin, 187 Siebel Systems, 1315 Significant influence, 870 Significant noncash activities, 201–202 Significant noncash transactions, 1272–1273 Simple capital structure EPS, 812–816, 824 complex vs., 812–813 comprehensive example of, 815–816 preferred stock dividends, 812–813 stock dividends/stock splits, 814–815 weighted-average number of shares outstanding, 813–814 Simple interest, 266 Simpson, Glenn, 991 Single-period statements, correcting errors on, 1200 Single-step income statements, 135–136 Single sum future value of, 271–272 present value of, 272–274 Single-sum problems, 270–275 and future values of an annuity due, 278–281 and present value of annuity due, 283–286 and present value of ordinary annuity, 281–283 solving for unknown in, 274–275 Skinner, D J., 1011 Small stock dividends, 761, 761n.15 Smart Choice Automotive, 1202 Smith, Alison, 451 Smooth earnings, and change in accounting method, 1203 Smoothing unexpected gains/losses, 1063–1064 Social Security, 267, 646–647 Soft assets, Software costs, 608 accounting for, 614–617 capitalized, 615–616 reporting, 616 Software industry, 614n.17 Solectron Corporation, 55 Solomon, Deborah, 508 Solvency, 179, 199 Solvency ratios, 1350n.28 Sonic Foundry Corporation, 299 SOP (Statements of Position), 12 SoRIE (Statement of recognized income and expense), 769 Sotheby’s Holdings, 387 Sougiannis, Theodore, 609n.16 Southern California Edison, 755 Southwest Airlines, 85, 488–489, 510–511, 885, 1048, 1114, 1115, 1178, 1244 SPEs see Special purpose entities Special assessments, 491 Special journals, 76 Special purpose entities (SPEs), 342–343, 709–710, 902, 1115 Specific-goods LIFO approach, 400–401 Specific-goods pooled approach, 401–406 Specific-goods pooled LIFO approach, 400–401 Specific identification, 868n.6 Specific indexes, 403n.9 Specific items, 148 Speculators, and derivatives, 885 2760T_ndx_I1-I20.qxd 1/28/09 10:12 PM Page I-18 I-18 · Index Sprint Nextel, 633 Staff positions, 11 Standard account form, 76 Standardized cost system, 445n.4 Standard & Poor’s Corporation, 694 Standards-setting government intervention in, 27–28 international, 1356–1360 in political environment, 15–17 Stanga, Keith G., 401n.6, 407n.13 Staples, 439 Starbucks Corp., 55, 490, 859, 911, 1116, 1129 Start-up costs, 606–607 State corporate law, 742 Stated interest rate, 331n.9 Stated rate, 269, 692 Stated value method, 751 Statement of cash flows, 69, 197–205 classification of cash flows on, 1245–1247 content and format of, 198–199 format of, 1247 GAAP/iGAAP standards, 1283 purpose of, 197–198, 1244 usefulness of, 203–204, 1244 Statement of cash flows preparation, 200–202, 1247–1282 and accounts receivable (net), 1267–1269 and adjustments similar to depreciation, 1266–1267 and extraordinary items, 1271–1272 final, 1282 and gains, 1270 indirect vs direct method in, 1259–1266 and net losses, 1269–1270 and postretirement benefit costs, 1271 and significant noncash transactions, 1272–1273 sources for information used on, 1259 steps in, 1247–1248 and stock options, 1270–1271 2009 example of, 1248–1252 2010 example of, 1253–1255 2011 example of, 1255–1258 and working capital changes, 1269 worksheet used for (see Statement of cash flows worksheet) Statement of cash flows worksheet, 1273–1282 accounts receivable (net), 1277 building depreciation and amortization of trademark, 1279 change in retained earnings, 1277 common stock/related accounts, 1280 equipment and accumulated depreciation, 1279 final reconciling entry, 1280 guidelines for using, 1274 illustration of completed, 1281 inventories, 1278 investment in stock, 1278 land, 1278 noncash charges/credits, 1280 prepaid expense, 1278 preparing, 1275–1277 reasons for using, 1273–1274 Statements of Financial Accounting Concepts, 12 No 1, 1314, 1339 No 3, 933n.5 No (“Recognition and Measurement in Financial Statements of Business Enterprises”), 141n.12, 709, 933n.6, 935n.11, 937n.14, 948n.21–22 No (“Elements of Financial Statements of Business Enterprises”), 135n.7, 700n.5, 709, 744 Statements of Financial Accounting Standards, 11, 26, 1148–1150 FASB Standards Statement, 11 No (“Elements of Financial Statements”), 1083n.23 No 13 (“Accounting for Leases”), 1129n.10, 1145, 1151 No 34 (“Capitalization of Interest Cost”), 495n.3 No 58 (“Reports on Audited Financial Statements”), 1202n.10 No 109 (“An Empirical Investigation of Its Incremental Value-Relevance Relative to APB No 11”), 996 No 114 (“Accounting by Creditors for Impairment of a Loan”), 718n.15, 718n.16 No 128 (“Earnings Per Share”), 820n.17 No 130 (“Reporting Comprehensive Income”), 766n.20, 908 No 133 (“Accounting for Derivative Instruments and Hedging Activities”), 900 No 145 (“Recission of FASH Statements No 4, 44, and 64, and Technical Corrections”), 702n.9 Statement of financial position, 178 See also Balance sheet(s) Statement of recognized income and expense (SoRIE), 155, 769 Statement of retained earnings, 97 Statement of stockholders’ equity, 152n.22, 153–154, 766 Statement on Auditing Standards No 54 (“Illegal Acts by Clients”), 1322n.7 No 58 (“Reports on Audited Financial Statements”), 1335n.13 No 99 (“Consideration of Fraud in a Financial Statement Audit”), 1322n.5, 1346n.27 No 101 (“Interim Financial Information”), 1335n.11 Statements of Position (SOP), 12 Statistical sampling, 385.1 Stauffer Chemical Company, 406 Stead, D., 1321 Sterling Construction Corp., 1124–1127, 1130, 1132–1134, 1136–1141, 1144–1146 Sternstein, Aliya, 1315n.1 Stickney, Clyde P., 1243 Stires, David, 811 STMicroelectronics (STM), 799 Stock See also specific types, e.g.: Preferred stock buybacks (see Buyback(s)) change related to investment in common, 1267 costs of issuing, 748 dividend distributions, 757 issuance of, 501, 745 issuance of, below par value, 745n.3 issuance of, in noncash transaction, 747–748 issuance of, with other securities, 746–747 rights and privileges of, 742–743 as worksheet entry, 1280 Stock appreciation rights (SARs), 827–829 equity awards, 827 example of, 828–829 liability awards, 827–828 Stock-based compensation plans, 803–811 accounting for, 811 debate over stock option accounting, 809–811 disclosure of, 09 employee stock purchase plans, 808–809 and fair value, 265 reporting issue with, 804–805 restricted-stock, 807–808 stock appreciation rights, 827–829 Stock dividends, 643, 760–761, 761n.15 in EPS computation, 814–815 and par value, 763–764 reporting, 1273 stock splits vs., 763–764 Stockholders, 743, 1349 Stockholders’ equity, 72, 189, 740–768 analysis of, 767–768 on balance sheet, 765–766 and corporate capital, 744–753 in corporation, 742 presentation of, 765–766 and SFAS No 6, 744n.2 statement of (see Statement of stockholders’ equity) Stock investment, as worksheet entry, 1278 Stock markets, 1316 Stock options, 803, 1270–1271 in diluted EPS computation, 819–820 errors in, 1198 reduced use of, 794–795 Stock right, 743n.1, 803 Stock splits, 762–763 in 1990s, 763 in EPS computation, 814–815 reporting, 1273 reverse, 763 stock dividends vs., 763–764 Stock warrants, 743n.1, 799–803 conceptual questions regarding, 802 in diluted EPS computation, 819–820 incremental method, 801 issued with other securities, 800 proportional method, 800–801 rights to subscribe to additional shares, 803 Storey, Reed K., 32n.1 Storey, Sylvia, 32n.1 Stott, David, 547n.7 Straight-line amortization, 1061 Straight-line method for depreciation, 543–544 Strand, W K., 541n.1 Strict cash basis, 101 Strike price, 887 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-19 Index · I-19 Stroh’s Brewery Co., 1078 Stuart, A., 131 Study Group on Establishment of Accounting Principles, Subprime mortgage crisis, 342–343, 353–354 Subsequent events see Post-balance-sheet events Subsequent events (post-balance-sheet events), 1323–1324 Subsidiary ledger, 69 Substitution approach, 509–510 Successful-efforts concept, 557–558 Sullivan, Scott, 26–27 Summary of Significant Accounting, 192 Summers, Lawrence, 18 Sum-of-the-years’-digits method, 544 Sunbeam, 17, 49, 937, 1202 Sunder, Shyam, 409n.20 Sunshine Mining, 32, 691 SunTrust Banks, 5, 17, 330 Supersession, 541 SUPERVALU Inc., 433 Supporting schedules, 196 Sweden, 1122 Swensen’s, Inc., 963n.30 Swieringa, R J., 1145n.15 Switzerland, 1122 Synthetic lease, 1115, 1118 T-account, 75 Taco Bell, 193 Take-or-pay contract, 710 Takeover protection covenants, 797n.2 Tangreti, Robert, 1346 Target Corporation, 56, 198, 326, 330, 385, 436, 438, 452, 462, 490, 569, 1184 Tastee Freeze, 962 Tasty Baking Company, 1147, 1178 Taxes See also Income taxes, accounting for corporate, 646n.6 disclosure of, 1320 employer payroll, 648 errors in, 1198 and leasing, 1130 Social Security, 646–647 unemployment, 647 Taxable amounts, 994 Taxable income, 992–993, 1001–1004, 1018 Taxable temporary differences, 1001, 1018 Tax depreciation, book depreciation vs., 566–567 Tax-planning strategy, 1018 Tax rates, 1004–1005 Tax Reform Act of 1986, 564 TCBY, 962 Technological feasibility, 615, 617 Technology-related intangible assets, 595–597 Teco Energy, 177 Temporary accounts, 93 Temporary differences, 993, 1001–1002, 1018 examples of, 1003–1004 originating, 1002 originating/reversing aspects of, 1002 and SFAS No 6, 996 Tenet Healthcare, 319 Tenneco, Inc., 800 Tergesen, Ann, 751, 1251 Term bonds, 691 Terminations, pension, 1078–1079 Texaco, 329 TGI Friday’s, 962 TGK-7 (Volzhskaya TGK), 741 TheStreet.com, 689 Third-party guarantors, 1123, 1149 3M, 767 Three-column form of account, 77 Timberland, 177 Time diagram, 270 Timelines, Times interest earned ratio, 713 Time value concepts, 264–270 applications of, 264–265 and compound interest, 266–269 and interest, 265 and simple interest, 266 variables fundamental to, 270 Timex, 438 Timmons, H., 694 T J International, 431–432 Tomkins PLC, 260 Tootsie Roll Industries, 173, 560–561, 759, 1090–1091, 1317–1319, 1330 Total comprehensive income, 766n.20 Townsend, Leah, 17n.12, 68n.1 Toyota, 132, 595 Toys R Us, 1244 Trade accounts payable see Accounts payable(s) Trade accounts receivable, 336 Trade discounts, 324–325 Trade loading, 936 Trademark (trade name), 593, 1279 Trade notes payable see Notes payable Trade receivables, 323 Trading, 182 debt securities, 859 on the equity, 767 Trading securities, 865–866, 870, 1269 Traditional LIFO, 399 Transactions, 68, 75 and cash flows statement, 1248 identifying and recording, 73–75 Transaction approach, 134 Transfer agents, 743 Transfers between investment categories, 879 Transfer of ownership test, 1121 Transfers-in, 456 Transwitch, 444 Travel advances, 320 Treasury bills, 320n.1 Treasury stock (shares), 750 acquisitions of, 751n.8 as assets, 750n.6 buyback of, 756n.11 and capital stock, 750 cash dividends on, 759 under GAAP and iGAAP, 769 purchase of, 751–752 retiring, 753 sale of, 752–753 Treasury-stock method, 820, 831 Trial balance, 63, 80–81 See also specific types, e.g.: Adjusted trial balance Trial balance columns, 108 Triggers, debt-rating, 1321 Triple smoothing, 1067 Troubled debt accounting for, 716–722 restructuring, 717–722 True-Value Hardware, 452 Trump Hotels & Casino Resorts (DJT), 823 Trusts, 1051, 1052 Trustees, 1051 Tucker, Reed, 597 Turner, Lynn, 749 Turner, Ted, 750 Turnover ratios, 1350n.28 TWA, 1079 Twarowski, C., 1343n.22 Tweedie, Sir David, 1347 Two-class common shares, 820n.21 TXU Corp., 1116 Tyco International, 1321n.4, 1345 UAL, Inc., 1178 Unamortized bond issue costs, 700 Uncertain tax positions, 1016–1017, 1019 Uncollectible accounts receivable, 326–331, 953 Underfunded pension plans, 1054, 1070, 1078n.16 Understatement of unearned revenue, 1206 Underwriters Labs Inc., 1195 Unearned revenues, 644 adjusting entries for, 85–86 as class of adjusting entries, 81 understatement of, 1206 Unemployment taxes, 647 Unexpected (deferred) asset gain or loss, 1066 Unfiled suits, 654 Unguaranteed residual value, 1123 in lessee accounting, 1138–1140 in lessor accounting, 1140–1141 for sales-type lease, 1143, 1144 Uniform Commercial Code, 743 Uniform Stock Transfer Act, 743 Union Planters, 927–928 Uniroyal Technology Corporation (UTC), 258 Unisys Corp., 1064 Unit approach, and Accounting Standards Executive Committee (AcSEC), 547n.6 United Airlines, 178, 658, 716, 885, 1048, 1079, 1114, 1115 United Kingdom, 1342, 1357–1360 United Parcel Service (UPS), 36, 552 United States aging population of, 1053 standards in, 1357, 1360 United States Steel, 742 Unit LIFO, 399 Units-of-production approach, 555 Universal Pictures, 1325 Unqualified opinion, 1337 Unrealized holding gain, 336 Unrealized holding loss, 336 Unrecognized gains/losses in pension plan, 1065–1066 in postretirement benefits, 1089 Unsecured bonds, 691 Unusual gains or losses, 144–145, 148 2760T_ndx_I1-I20.qxd 1/27/09 7:51 AM Page I-20 I-20 · Index Upper (ceiling), 439–440 UPS Capital, 1117 Upton, Wayne, Jr., 179n.5 US Airways, 178, 1079 USX Corp., 329 Valuation of accounts receivable, 326–331 of inventories, 386, 445–448 at net realizable value, 445 of notes receivables, 335–336 and purchase commitments, 446–448 and SFAS No 157, 500n.4 using relative sales value, 446 Valuation allowance, 1010–1011, 1018 for deferred tax asset, 999–1000 evidence for, 1010–1011 loss carryforward with, 1009–1010 loss carryforward without, 1008–1009 Vames, Steven, 643, 689 The Vanguard Group, 692 Variable-interest entities (VIEs), 902–904 Variable-rate mortgage, 709 Varshney, A., 1116 Vatter, William J., 326n.5 Verifiable benchmark, 42 Verity, Inc., 1011 Verizon Communications Inc., 1084 Vermont Teddy Bear Co., 1309 Vertical percentage analysis, 1354 Vested (term), 805n.8 Vested benefits, 1053, 1055 Vested rights, 649 Viacom Inc., 1116 Vickrey, Don, 761n.15 VIEs see Variable-interest entities Vincent, Linda, 547n.7 VISA, 338, 339n.12, 741 Vishay Technologies, 444 Visteon, 17 Vivendi Universal Entertainment, 1325 Vodafone/Mannesmann, 20, 1356 W R Grace, 40, 134 W T Grant Company, 198, 203, 1243, 1273 Wachovia, 809 Wages, failure to record accrued, 1206 Walgreen Co., 55, 82, 112, 172, 180, 387, 748, 1129 Wallman, Steven H., 40n.10 Wal-Mart, Inc., 64, 236, 301, 382, 386, 436, 452, 462, 470, 488–489, 491, 645, 749 Walt Disney Company, 35, 591, 594, 744 Want Want China Holdings, 741 Warrants see Stock warrants Warranties, 655–657 See also Guarantees accrual method for, 655 cash-basis method for, 655 tax deduction for, 997 Washington Mutual, 633 The Washington Post, 809, 811 Waste Management, 538 Watered stock, 748 Watts, Ross L., 1203n.11 Webber, Andrew Lloyd, 594 Webber Inc., 416 Weber, R P., 1015n.7 Webvan, 763 Weighted-average accumulated expenditures, 494–495, 495n.3 Weighted-average method, 395 Weighted-average number of shares outstanding, 813–814, 830 Weil, J., 49, 140, 319, 603, 749, 865, 999 Weirton Steel, 1079 Welch, David, 1049 “Welfare benefits,” 1082 Wells Fargo, 1117 Western Airlines, 1078 Westinghouse Electric Corporation, 987 Weyerhaeuser Company, 143, 184, 447 Wheat, Francis, Wheat Committee, Wheeler, J E., 1015n.7 Wherehouse Entertainment Inc., 797n.2 Whole Foods Market, 1129 WHX Corporation, 547 Wiebold, Incorporated, 791 Wilbert, James, R., 1086n.27 Willamette Industries, 195, 551 Williams Companies, 710 Williams-Sonoma Inc., 904 William Wrigley Jr (company), 438 Wingfield, Nick, 593n.3 Wolverton, Troy, 811 Working capital, 187, 1269 Working capital ratio, 665 Work in process inventory, 382 Worksheet(s) adjustments entered on, 108–109 pension (see Pension worksheet) preparation of, 110 statement of cash flows (see Statement of cash flows worksheet) WorldCom, 2, 17, 26–27, 204, 508, 1315, 1345 Wright, David W., 1352n.30 Write-offs, 140–141, 538–539, 999 Written off, accounts receivable, 330–331 XBRL (extensible business reporting language), 1343 Xerox, 17, 331, 595, 1144, 1273 Yahoo, Inc., 47, 55, 323, 795, 1006, 1015, 1016 Year-end-adjustment, expenses subject to, 1332 Years-of-service amortization, 1060–1061 Young, S., 937 Zeff, Stephen A., 17n.10, 761n.14 Zero-interest-bearing notes, 331–333, 640–641, 704–705 Zero-interest debenture bonds, 691 Zimmerman, Jerold L., 1203n.11 Zion, David, 564n.1, 1069, 1116 Z-scores, 191 Zuckerman, G., 703 2760T_bep.qxd 2/9/09 7:59 PM Page Learning Generally Accepted Accounting Principles (GAAP) used to be a daunting task, as the documents that comprise it vary in format, completeness, and structure In some cases, these documents are inconsistent and difficult to interpret As a result, financial statement preparers sometimes are unsure whether they have the right GAAP, which makes determining what is authoritative, and what is not, difficult In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification (or simply, the Codification) The Codification provides in one place all the authoritative literature related to a given topic It explains what GAAP is and eliminates nonessential information, such as redundant document summaries, basis for conclusions sections, and historical content This greatly simplifies user access to GAAP FASB Codification—The New View of Generally Accepted Accounting Principles The Codification – accessible at http://asc.fasb.org/home — is available as an online, real-time database Presently, the Codification is available to use at no cost You simply need to register by clicking on the Registration link, which is located in the area marked “D” on the Codification screenshot shown below Using the FASB Codification In order to use the Codification effectively, you need to understand its structure Four major categories of topics are used to structure all of the topics: 2760T_bep.qxd 2/9/09 7:59 PM Page • Presentation—topics related to financial statement presentation, such as the Balance Sheet and Earnings per Share • Financial Statement Accounts—topics related to specific Assets, Liabilities, Equity, Revenue and Expenses • Broad Transactions: topics related to multiple financial statement accounts, such as Leasing • Industries—all industry-specific guidance For example, suppose you had a question related to the proper accounting for the intangible asset Goodwill You could directly access this information by drilling down into the Codification as follows: Assets>Intangible Assets>Goodwill To navigate in this manner, go to the area marked “A” on the screenshot above However, understanding the overall structure of the Codification is only one of three methods used for accessing its contents A second method is to use the Codification search tool, which works much like common Internet search engines As with most search engines, the more often you use it, the more efficient and effective you will be at locating the information The area to input your search terms is marked “B” in the Codification screenshot above The third method to access specific material in the Codification is through the Codification’s numbering system If you know specific Topic, Subtopic, and Section numbers, you can access them directly For example, if you wanted to review all of the Codification material related to disclosures for operating leases, you could go directly to Topic 840 (Leases), Subtopic 320 (Operating Leases), and Section 50 (Disclosure) This numbering system also provides a way to efficiently reference material in the Codification For example, FASB ASC 840-20-50 would be the reference for the operating lease disclosure material To use this method, enter the information in the boxed area marked “C” in the screenshot above For individuals (like you) attempting to learn GAAP, Using the FASB Codification the Codification will be invaluable It is an in this Textbook outstanding effort by the profession to streamline and simplify how to determine what GAAP is, which will lead to better financial accounting and reporting We provide references to the Codification throughout this textbook using a numbering See the FASB Codification section at system For example, a bracket with a number, such as [1], indicates that the the end of each chapter citation to the FASB Codification can be found in the FASB Codification for Codification references section at the end of the chapter (immediately before the assignment and exercises materials) FASB Codification Exercises have been included at the end of each chapter, to help familiarize you with this useful tool 2760T_fep.qxd 2/9/09 8:01 PM Page Relevant and reliable financial information is a necessity for viable capital markets Unfortunately, companies outside the United States often prepare financial statements using standards different from U.S GAAP As a result, international companies such as Coca-Cola, Microsoft, and IBM have to develop financial information in different ways Beyond the additional costs these companies incur, users of the financial statements often must understand at least two sets of GAAP (understanding one set is hard enough!) It is not surprising, therefore, that there is a growing demand for one set of high-quality international standards Presently, there are two sets of rules accepted for international use— U.S GAAP and the International Financial Reporting Standards (IFRS) Also known as iGAAP, these standards are issued by the London-based International Accounting Standards Board (IASB) U.S companies that list overseas are still permitted to use U.S GAAP, and foreign companies listed on U.S exchanges are permitted to use iGAAP As you will learn, there are many similarities between U.S GAAP and iGAAP Already over 100 countries have adopted iGAAP, plus the European Union now requires all listed companies in Europe (over 7,000 companies) to use it Recently, the U.S SEC proposed that it will allow some U.S companies to adopt iGAAP as early as 2009 International Accounting Standards We agree that, the most important innovation shaping our capital markets was the idea of U.S GAAP It might be said that it would be even better if we had one common set of accounting rules for the whole world, which will make it easier for international investors to compare the financial results of companies from different countries That is happening quickly as U.S GAAP and iGAAP are converging toward one set of international accounting standards (International Financial Reporting Standards, IFRS or iGAAP) to be used by all companies And you have the chance to be on the ground floor as we develop for you the similarities and differences in the two systems that ultimately will be one Convergence of U.S GAAP and International GAAP (iGAAP) 2760T_fep.qxd 2/9/09 8:01 PM Page Because convergence is such an important issue, we provide throughout this textbook a summary page on international accounting called Convergence Corner This feature will help you to understand the changes that are taking place in the financial reporting arena (related to the chapter topics) as we move toward one set of international GAAP Each Convergence Corner, as shown here, consists of four sections: (1) An introduction, which typically lists the international accounting pronouncements related to the chapter topic; (2) “Relevant Facts,” which explains similarities and differences of U.S GAAP and international GAAP (referred to as iGAAP); (3) “About the Numbers,” which generally provides an example of application of iGAAP (in many cases, using real international companies); and (4) “On the Horizon,” which discusses convergence progress and plans related to that topic Each chapter also has assignment material related to international accounting Having a basic understanding of international Other International Coverage accounting is becoming ever more important as the profession moves toward convergence of GAAP and international standards Thus, in addition to the Convergence Corner pages discussed above, we continue to include marginal International Insights, marked with the icon shown here, which we I NTERNATIONAL I NSIGHT updated throughout to reflect changes in international accounting These notes describe or compare iGAAP standards and accounting practices in other countries with U.S GAAP This feature helps you to understand that other countries sometimes use different recognition and measurement principles to report financial information We use this same icon to designate the new international Questions that we added to many of the chapters 2760T_fep.qxd 2/9/09 8:01 PM Page Achieve Positive Learning Outcomes ileyPLUS combines robust course management tools with interactive teaching and learning resources all in one easy-to-use system It has helped over half a million students and instructors achieve positive learning outcomes in their courses W WileyPLUS contains everything you and your students need— and nothing more, including: The entire textbook online—with dynamic links from homework to relevant sections Students can use the online text and save up to half the cost of buying a new printed book Automated assigning & grading of homework & quizzes An interactive variety of ways to teach and learn the material Instant feedback and help for students… available 24/7 “WileyPLUS helped me become more prepared There were more resources available using WileyPLUS than just using a regular [printed] textbook, which helped out significantly Very helpful and very easy to use.” — Student Victoria Cazorla, Dutchess County Community College See and try WileyPLUS in action! Details and Demo: www.wileyplus.com ... contains quotations from Accounting Research Bulletins, Accounting Principles Board Opinions, Accounting Principles Board Statements, Accounting Interpretations, and Accounting Terminology Bulletins,... financial accounting standards and disclosure policies He has published scholarly articles in The Accounting Review, Journal of Accounting and Economics, Research in Accounting Regulation, and Accounting. .. 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