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Advanced Accounting, 5th Edition International Student Version

Advanced Accounting, 5th Edition International Student Version

Debra C. Jeter, Paul K. Chaney

ISBN: 978-1-118-37943-1

Jun 2012

904 pages

Select type: E-Book

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Description

Designed for the advanced accounting course, Advanced Accounting, 5th Edition by Debra Jeter and Paul Chaney delivers a balanced and detailed approach to the conceptual and technical aspects of financial accounting and reporting. Reflective of the current state of the international accounting landscape, this new edition discusses the upcoming globalization of accounting standards with frequent references to the FASB's new Codification system and with a "compare and contrast" method for explaining the differences between U.S. GAAP and IFRS.


In addition, Advanced Accounting includes comprehensive coverage of all three methods of consolidated financial reporting (cost, partial equity, complete equity). Authored with both the student and teacher in mind, margin icons and labels distinguish all three methods and other pedagogical features.

Related Resources

1 INTRODUCTION TO BUSINESS COMBINATIONS AND THE CONCEPTUAL FRAMEWORK 1

Learning Objectives 1

Planning M&A in a Changing Environment and Under Changing Accounting Requirements 4

Nature of the Combination 5

Business Combinations: Why? Why Not? 7

Business Combinations: Historical Perspective 10

Terminology and Types of Combinations 14

Takeover Premiums 17

Avoiding the Pitfalls before the Deal 18

Determining Price and Method of Payment in Business Combinations 20

Alternative Concepts of Consolidated Financial Statements 25

FASB’s Conceptual Framework 29

FASB Codification (Source of GAAP) 36

Summary 41

Appendix: Evaluating Firm Performance 42

Questions 49

Analyzing Financial Statements 49

Exercises 51

ASC (Accounting Standards Codification) Exercises 53

2 ACCOUNTING FOR BUSINESS COMBINATIONS 54

Learning Objectives 54

Historical Perspective on Business Combinations 54

Pro Forma Statements and Disclosure Requirement 63

Explanation and Illustration of Acquisition Accounting 65

Contingent Consideration in an Acquisition 70

Leveraged Buyouts 75

IFRS versus U.S. GAAP 76

Summary 77

Appendix A: Deferred Taxes in Business Combinations 79

Questions 81

Analyzing Financial Statements 82

Exercises 84

ASC Exercises 90

Problems 91

3 CONSOLIDATED FINANCIAL STATEMENTS—DATE OF ACQUISITION 96

Learning Objectives 96

Definitions of Subsidiary and Control 98

Requirements for the Inclusion of Subsidiaries in the Consolidated Financial Statements 102

Reasons for Subsidiary Companies 103

Consolidated Financial Statements 103

Investments at the Date of Acquisition 105

Consolidated Balance Sheets: The Use of Workpapers 106

A Comprehensive Illustration—More than One Subsidiary Company 123

Limitations of Consolidated Statements 125

Summary 128

Appendix A: Deferred Taxes on the Date of Acquisition 129

Accounting for Uncertain Tax Positions 130

Appendix B: Consolidation of Variable Interest Entities 132

Questions 134

Analyzing Financial Statements 135

Exercises 136

ASC Exercises 141

Problems 142

4 CONSOLIDATED FINANCIAL STATEMENTS AFTER ACQUISITION 149

Learning Objectives 149

Accounting for Investments by the Cost, Partial Equity, and Complete Equity Methods 150

Consolidated Statements after Acquisition—Cost Method 158

Recording Investments in Subsidiaries—Equity Method (Partial or Complete) 170

Elimination of Intercompany Revenue and Expense Items 180

Interim Acquisitions of Subsidiary Stock 182

Consolidated Statement of Cash Flows 194

Illustration of Preparation of a Consolidated Statement of Cash Flows—Year of Acquisition 197

Compare U.S. GAAP and IFRS Regarding Equity Method 201

 Summary 202

Appendix A: Alternative Workpaper Format 203

Appendix B: Deferred Tax Consequences When Affiliates File Separate Income Tax Returns—Undistributed Income 205

Consolidated Tax Returns—Affiliated Companies (80% or More Ownership Levels) 206

Separate Tax Returns—Deferred Tax Consequences Arising Because of Undistributed Subsidiary Income 206

The Cost Method—Separate Tax Returns 207

Undistributed Income Is Expected to Be Realized When the Subsidiary Is Sold 209

The Partial and Complete Equity Methods—Separate Tax Returns 209

Questions 211

Analyzing Financial Statements 212

Exercises 214

ASC Exercises 220

Problems 221

5 ALLOCATION AND DEPRECIATION OF DIFFERENCES BETWEEN IMPLIED AND BOOK VALUES 234

Learning Objectives 234

Allocation of the Difference Between Implied and Book Values to Assets and Liabilities of Subsidiary—Acquisition Date 236

Effect of Allocation and Depreciation of Differences Between Implied and Book Values on Consolidated Net Income—Year Subsequent to Acquisition 243

Consolidated Statements Workpaper—Investment Recorded Using the Cost Method 248

Cost Method Analysis of Controlling and Noncontrolling Interests in Consolidated Net Income and Retained Earnings 257

Consolidated Statements Workpaper—Investment Recorded Using Partial Equity Method 259

Partial Equity Method Analysis of Controlling and Noncontrolling Interests in Consolidated Net Income and Retained Earnings 267

Consolidated Statements Workpaper—Investment Recorded Using Complete Equity Method 269

Complete Equity Method Analysis of Controlling Interest in Consolidated Net Income and Retained Earnings 277

Additional Considerations Relating to Treatment of Difference Between Implied and Book Values 278

Push Down Accounting 287

IFRS vs. U.S. GAAP on Research & Development Costs 292

Summary 293

Questions 294

Analyzing Financial Statements 296

Exercises 297

ASC Exercises 303

Problems 303

6 ELIMINATION OF UNREALIZED PROFIT ON INTERCOMPANY SALES OF INVENTORY 320

Learning Objectives 320

Effects of Intercompany Sales of Merchandise on the Determination of Consolidated Balances 321

Cost Method: Consolidated Statements Workpaper—Upstream Sales 331

Cost Method—Analysis of Consolidated Net Income and Consolidated Retained Earnings 337

Consolidated Statements Workpaper—Partial Equity Method 340

Partial Equity Method—Analysis of Consolidated Net Income and Consolidated Retained Earnings 344

Consolidated Statements Workpaper—Complete Equity Method 345

Complete Equity Method—Analysis of Consolidated Net Income and Consolidated Retained Earnings 350

Summary of Workpaper Entries Relating to Intercompany Sales of Inventory 350

Intercompany Profit Prior to Parent–Subsidiary Affiliation 351

Summary 352

Appendix: Deferred Taxes and Intercompany Sales of Inventory 353

Deferred Tax Consequences Arising Because of Unrealized Intercompany Profit 353

Intercompany Sales of Inventory—Cost and Partial Equity Method 354

Undistributed Subsidiary Income—Impact of Unrealized Intercompany Profit on the Calculation of Deferred Taxes 356

Questions 359

Analyzing Financial Statements 360

Exercises 362

ASC Exercises 365

Problems 365

7 ELIMINATION OF UNREALIZED GAINS OR LOSSES ON INTERCOMPANY SALES OF PROPERTY AND EQUIPMENT 380

Learning Objectives 380

Intercompany Sales of Land (Nondepreciable Property) 381

Intercompany Sales of Depreciable Property (Machinery, Equipment, and Buildings) 384

Consolidated Statements Workpaper—Cost and Partial Equity Methods 392

Calculation of Consolidated Net Income and Consolidated Retained Earnings 401

Consolidated Statements Workpaper—Complete Equity Method 405

Calculation and Allocation of Consolidated Net Income; Consolidated Retained Earnings: Complete Equity Method 411

Summary of Workpaper Entries Relating to Intercompany Sales of Equipment 411

Intercompany Interest, Rents, and Service Fees 411

Summary 415

Appendix: Deferred Tax Consequences Related to Intercompany Sales of Equipment 416

Impact of Unrealized Intercompany Profit on the Calculation of Deferred Tax Consequences Related to Undistributed Subsidiary Income 418

Calculations (and Allocation) of Consolidated Net Income and Consolidated Retained Earnings 419

Questions 421

Analyzing Financial Statements 421

Exercises 422

ASC Exercises 425

Problems 425

8 CHANGES IN OWNERSHIP INTEREST 437

Learning Objectives 437

Parent Acquires Subsidiary Stock Through Several Open-Market Purchases—Cost Method 439

Parent Sells Subsidiary Stock Investment on the Open Market—Cost Method 443

Equity Method—Purchases and Sales of Subsidiary Stock by the Parent 447

Parent Sells Subsidiary Stock Investment on the Open Market—Cost Method 451

Subsidiary Issues Stock 453

Summary 463

Questions 464

Analyzing Financial Statements 464

Exercises 465

ASC Exercises 468

Problems 468

9 INTERCOMPANY BOND HOLDINGS AND MISCELLANEOUS TOPICS—CONSOLIDATED FINANCIAL STATEMENTS 477

Learning Objectives 477

Intercompany Bond Holdings 478

Accounting for Bonds—A Review 479

Constructive Gain or Loss on Intercompany Bond Holdings 480

Accounting for Intercompany Bonds Illustrated 483

Book Entry Related to Bond Investment 484

Interim Purchase of Intercompany Bonds 500

 Notes Receivable Discounted 501

Stock Dividends Issued by a Subsidiary Company 503

Dividends from Preacquisition Earnings 507

Subsidiary with Both Preferred and Common Stock Outstanding 508

Consolidating a Subsidiary with Preferred Stock Outstanding 511

Summary 522

Questions 523

Analyzing Financial Statements 524

Exercises 526

ASC Exercises 530

Problems 530

10 INSOLVENCY—LIQUIDATION AND REORGANIZATION 542

Learning Objectives 542

Contractual Agreements 543

Bankruptcy 545

Liquidation (Chapter 7) 550

Reorganization Under the Reform Act (Chapter 11) 551

Trustee Accounting and Reporting 562

Realization and Liquidation Account 565

Summary 571

Questions 572

Analyzing Financial Statements 572

Exercises 577

ASC Exercises 581

Problems 581

11 INTERNATIONAL FINANCIAL REPORTING STANDARDS 588

Learning Objectives 588

The Increasing Importance of International Accounting Standards 588

The Road to Convergence—U.S. GAAP and IFRS 589

Significant Similarities and Differences Between U.S. GAAP and IFRS 594

GAAP Hierarchy—U.S. versus IFRS 595

Long-Term Convergence Issues—FASB and IASB 605

Lease Accounting Convergence 605

Revenue Recognition Convergence 607

Financial Statement Presentation 609

Potential Changes to Financial Statements 610

International Convergence Issues 614

American Depository Receipts: An Overview 617

Summary 620

Appendix A: List of Current International Financial Reporting Standards, Issued by IASC and IASB 621

Questions 622

Analyzing Financial Statements 623

Exercises 625

ASC Exercises 627

Problems 627

12 ACCOUNTING FOR FOREIGN CURRENCY TRANSACTIONS AND HEDGING FOREIGN EXCHANGE RISK 631

Learning Objectives 631

Exchange Rates—Means of Translation 632

Measured versus Denominated 635

Foreign Currency Transactions 635

Using Forward Contracts as a Hedge 645

Summary 664

Questions 665

Analyzing Financial Statements 666

Exercises 666

ASC Exercises 674

Problems 674

13 TRANSLATION OF FINANCIAL STATEMENTS OF FOREIGN AFFILIATES 682

Learning Objectives 682

Accounting for Operations in Foreign Countries 683

Translating Financial Statements of Foreign Affiliates 684

Objectives of Translation—SFAS No. 52 [ASC 830–30] 685

Translation Methods 686

Identifying the Functional Currency 687

Translation of Foreign Currency Financial Statements 689

Translation of Foreign Financial Statements Illustrated 693

Financial Statement Disclosure 702

Historical Developments of Accounting Standards 704

Summary 706

Appendix: Accounting for a Foreign Affiliate and Preparation of Consolidated Statements Workpaper Illustrated 707

Date of Acquisition 707

Accounting for an Investment in a Foreign Affiliate—After Acquisition 708

Consolidation When the Temporal Method of Translation Is Used 709

Remeasurement and Translation of Foreign Currency Transactions 711

Intercompany Receivables and Payables 712

Elimination of Intercompany Profit 712

Liquidation of a Foreign Investment 713

Questions 714

Analyzing Financial Statements 714

Exercises 716

ASC Exercises 723

Problems 723

14 REPORTING FOR SEGMENTS AND FOR INTERIM FINANCIAL PERIODS 733

Learning Objectives 733

Need for Disaggregated Financial Data 734

Standards of Financial Accounting and Reporting 734

International Accounting Standards Board (IASB) Position On Segment Reporting 746

Interim Financial Reporting 747

Summary 756

Appendix: GE Segmental Disclosures, 2010 Annual Report (partial) 758

Basic for Presentation 760

Questions 761

Exercises 764

ASC Exercises 768

Problems 768

15 PARTNERSHIPS: FORMATION, OPERATION, AND OWNERSHIP CHANGES 773

Learning Objectives 773

Partnership Defined 774

Reasons for Forming a Partnership 776

Characteristics of a Partnership 776

Partnership Agreement 779

Accounting for a Partnership 780

Special Problems in Allocation of Income and Loss 788

Financial Statement Presentation 790

Changes in the Ownership of the Partnership 791

Section A: Admission of a New Partner 793

Section B: Withdrawal of a Partner 800

Summary 804

Questions 805

Exercises 806

ASC Exercises 812

Problems 813

16 PARTNERSHIP LIQUIDATION 820

Learning Objectives 820

Steps in the Liquidation Process 821

Priorities of Partnership and Personal Creditors 823

Simple Liquidation Illustrated 825

Installment Liquidation 827

Incorporation of a Partnership 836

Summary 838

Questions 839

Exercises 839

ASC Exercises 844

Problems 845

Glossary G-1

Appendix ASC: Researching the FASB Codification A-1

Appendix PV: Tables of Present Value A-8

Index I-1

• Significant updates to IFRS coverage, incorporating comparisons with US GAAP and a look at the road ahead in terms of likely convergence points between the two standards.
• Updated end-of-chapter material that includes additional "Business Ethics" questions and Professional Simulation problems, as well as expanded financial statement analysis problems.
• "In the News" feature continues the theme of currency; the book will include updated features.
• Expanded the use of the related concepts feature provides students with a broader picture of each situation to they can learn the concepts in more context.

Comprehensive coverage of all three methods of consolidated financial reporting (cost, partial equity, complete equity).
Current coverage of relevant International Accounting Standards and a compare and contrast discussion of the differences between U.S. GAAP and IFRS.
Consolidated financial statements chapter presented after acquisition without the complications related to excess depreciation and amortization.
Conceptual questions in the end-of-chapter materials relate to theoretical topics covered in the framework and help students keep sight of the big picture.
"Related Concepts" notes and conceptual questions at the end of chapter link the topics covered back to the conceptual framework where appropriate.