Intermediate accounting [7th ed., pbk. NSCC custom value ISBN: 9781121918160 ; hardcover combined ed. ISBN: 9780078025327

Cover Page......Page 1 Half Title Page......Page 2 Title Page......Page 4 Copyright Page......Page 5 Dedication......Page 6 About the Authors......Page 8 What’s New in the Seventh Edition?......Page 23 Acknowledgments......Page 25 We Are Grateful......Page 29 Contents in Brief......Page 30 Contents......Page 31 CHAPTER 1 Environment and Theoretical Structure of Financial Accounting......Page 41 PART A FINANCIAL ACCOUNTING ENVIRONMENT......Page 42 The Economic Environment and Financial Reporting......Page 44 Cash versus Accrual Accounting......Page 45 Historical Perspective and Standards......Page 47 The Establishment of Accounting Standards......Page 52 The Role of the Auditor......Page 54 Financial Reporting Reform......Page 55 A Move Away from Rules-Based Standards?......Page 56 Ethics in Accounting......Page 57 PART B THE CONCEPTUAL FRAMEWORK......Page 58 Qualitative Characteristics of Financial Reporting Information......Page 60 Fundamental Qualitative Characteristics......Page 61 Enhancing Qualitative Characteristics......Page 62 Elements of Financial Statements......Page 63 Economic Entity Assumption......Page 64 Monetary Unit Assumption......Page 65 Recognition......Page 66 Measurement......Page 68 Evolving GAAP......Page 71 Questions For Review of Key Topics......Page 75 Brief Exercises......Page 76 Exercises......Page 77 CPA and CMA Exam Questions......Page 81 Broaden Your Perspective......Page 83 Air France–KLM Case......Page 87 CHAPTER 2 Review of the Accounting Process......Page 89 The Accounting Equation......Page 91 Account Relationships......Page 93 The Accounting Processing Cycle......Page 94 Concept Review Exercise:Journal Entries for External Transactions......Page 103 Adjusting Entries......Page 105 Prepayments......Page 106 Accruals......Page 109 Estimates......Page 111 Concept Review Exercise: Adjusting Entries......Page 113 The Income Statement......Page 114 The Balance Sheet......Page 115 The Statement of Cash Flows......Page 117 The Closing Process......Page 118 Concept Review Exercise: Financial Statement Preparation and Closing......Page 120 Conversion from Cash Basis to Accrual Basis......Page 122 Appendix 2A Use of a Worksheet......Page 126 APPENDIX 2B Reversing Entries......Page 127 APPENDIX 2C Subsidiary Ledgers and Special Journals......Page 129 Brief Exercises......Page 132 Exercises......Page 133 CPA Review Questions......Page 140 Problems......Page 141 Broaden Your Perspective......Page 148 CHAPTER 3 The Balance Sheet and Financial Disclosures......Page 151 Usefulness and Limitations......Page 154 Assets......Page 155 Liabilities......Page 159 Shareholders’ Equity......Page 160 Concept Review Exercise: Balance Sheet Classification......Page 162 PART B FINANCIAL DISCLOSURES......Page 163 Subsequent Events......Page 164 Noteworthy Events and Transactions......Page 165 Management Discussion and Analysis......Page 167 Management’s Responsibilities......Page 168 Auditors’ Report......Page 169 Compensation of Directors and Top Executives......Page 170 Using Financial Statement Information......Page 171 Liquidity Ratios......Page 173 Financing Ratios......Page 174 APPENDIX 3 Reporting Segment Information......Page 179 Questions For Review of Key Topics......Page 182 Brief Exercises......Page 183 Exercises......Page 184 CPA and CMA Review Questions......Page 192 Problems......Page 193 Broaden Your Perspective......Page 199 Air France–KLM Case......Page 207 CHAPTER 4 The Income Statement, Comprehensive Income, and the Statement of Cash Flows......Page 209 Income from Continuing Operations......Page 211 Revenues, Expenses, Gains, and Losses......Page 212 Operating versus Nonoperating Income......Page 213 Income Statement Formats......Page 214 Manipulating Income and Income Smoothing......Page 216 Operating Income and Earnings Quality......Page 217 Nonoperating Income and Earnings Quality......Page 220 Intraperiod Income Tax Allocation......Page 221 Discontinued Operations......Page 223 Extraordinary Items......Page 227 Unusual or Infrequent Items......Page 228 Change in Accounting Principle......Page 229 Prior Period Adjustments......Page 230 Comprehensive Income......Page 231 Flexibility in Reporting......Page 232 Accumulated Other Comprehensive Income......Page 234 Concept Review Exercise: Income Statement Presentation; Comprehensive Income......Page 235 Operating Activities......Page 237 Investing Activities......Page 241 Noncash Investing and Financing Activities......Page 242 Concept Review Exercise: Statement of Cash Flows......Page 243 Brief Exercises......Page 247 Exercises......Page 249 CPA and CMA Review Questions......Page 255 Problems......Page 257 Broaden Your Perspective......Page 262 CPA Simulation 4–1......Page 268 CHAPTER 5 Income Measurement and Profitability Analysis......Page 269 PART A REVENUE RECOGNITION......Page 271 Service Revenue......Page 275 Is the Seller a Principal or an Agent?......Page 276 Revenue Recognition after Delivery......Page 277 Installment Sales......Page 278 Concept Review Exercise: Installment Sales......Page 281 Right of Return......Page 282 Revenue Recognition Prior to Delivery......Page 283 A Comparison of the Completed Contract and Percentage-of-Completion Methods......Page 290 Concept Review Exercise: Long-Term Construction Contracts......Page 295 Software and Other Multiple-Element Arrangements......Page 297 Franchise Sales......Page 299 Activity Ratios......Page 302 Profitability Ratios......Page 303 Profitability Analysis—An Illustration......Page 306 APPENDIX 5: Interim Reporting......Page 309 Brief Exercises......Page 312 Exercises......Page 314 CPA and CMA Review Questions......Page 321 Problems......Page 324 Broaden Your Perspective......Page 331 Air France–KLM Case......Page 338 Where We’re Headed A Chapter Supplement: REVENUE RECOGNITION......Page 339 Concept Review Exercise: Accounting for Revenue In Single-Period Contracts......Page 352 Brief Exercises......Page 354 Exercises......Page 355 Problems......Page 356 CHAPTER 6 Time Value of Money Concepts......Page 359 Simple versus Compound Interest......Page 361 Future Value of a Single Amount......Page 362 Present Value of a Single Amount......Page 363 Solving for Other Values When FV and PV are Known......Page 365 Concept Review Exercise: Valuing a Single Cash Flow Amount......Page 366 Preview of Accounting Applications of Present Value Techniques—Single Cash Amount......Page 367 Expected Cash Flow Approach......Page 369 PART B BASIC ANNUITIES......Page 370 Future Value of an Ordinary Annuity......Page 371 Future Value of an Annuity Due......Page 372 Present Value of an Ordinary Annuity......Page 373 Present Value of an Annuity Due......Page 375 Present Value of a Deferred Annuity......Page 376 Financial Calculators and Excel......Page 377 Solving for Unknown Values in Present Value Situations......Page 378 Concept Review Exercise: Annuities......Page 380 Valuation of Long-Term Bonds......Page 381 Valuation of Long-Term Leases......Page 382 Valuation of Pension Obligations......Page 383 Summary of Time Value of Money Concepts......Page 384 Brief Exercises......Page 386 Exercises......Page 387 CPA and CMA Review Questions......Page 390 Problems......Page 392 Broaden Your Perspective......Page 395 CHAPTER 7 Cash and Receivables......Page 397 PART A CASH AND CASH EQUIVALENTS......Page 398 Internal Control......Page 399 Internal Control Procedures—Cash Disbursements......Page 400 Restricted Cash and Compensating Balances......Page 401 Decision Makers’ Perspective......Page 402 Initial Valuation of Accounts Receivable......Page 403 Subsequent Valuation of Accounts Receivable......Page 405 Concept Review Exercise: Uncollectible Accounts Receivable......Page 412 Notes Receivable......Page 413 Noninterest-Bearing Notes......Page 414 Subsequent Valuation of Notes Receivable......Page 416 Secured Borrowing......Page 418 Sale of Receivables......Page 419 Transfers of Notes Receivable......Page 421 Deciding Whether to Account for a Transfer as a Sale or a Secured Borrowing......Page 422 Disclosures......Page 425 Concept Review Exercise: Financing with Receivables......Page 426 Decision Makers’ Perspective......Page 427 APPENDIX 7A Cash Controls......Page 431 Appendix 7B: Accounting For Impairment of a Receivable and a Troubled Debt Restructuring......Page 434 Questions For Review of Key Topics......Page 437 Brief Exercises......Page 438 Exercises......Page 440 CPA and CMA Review Questions......Page 446 Problems......Page 448 Broaden Your Perspective......Page 454 Air France–KLM Case......Page 458 CHAPTER 8 Inventories: Measurement......Page 459 Manufacturing Inventories......Page 461 Perpetual Inventory System......Page 463 Periodic Inventory System......Page 464 Physical Quantities Included in Inventory......Page 465 Expenditures Included in Inventory......Page 466 Inventory Cost Flow Assumptions......Page 469 Average Cost......Page 470 First-In, First-Out (FIFO)......Page 472 Last-In, First-Out (LIFO)......Page 473 Comparison of Cost Flow Methods......Page 475 Decision Makers’ Perspective—Factors Influencing Method Choice......Page 476 Concept Review Exercise: Inventory Cost Flow Methods......Page 479 Decision Makers’ Perspective......Page 482 LIFO Inventory Pools......Page 485 Dollar-Value LIFO......Page 486 The DVL Inventory Estimation Technique......Page 487 Concept Review Exercise: Dollar-Value LIFO......Page 488 Questions For Review of Key Topics......Page 490 Brief Exercises......Page 491 Exercises......Page 492 CPA and CMA Review Questions......Page 498 Problems......Page 500 Broaden Your Perspective......Page 507 CPA Simulation 8–1......Page 511 CHAPTER 9 Inventories: Additional Issues......Page 513 PART A REPORTING—LOWER OF COST OR MARKET......Page 515 Determining Market Value......Page 516 Applying Lower of Cost or Market......Page 518 Adjusting Cost to Market......Page 519 Concept Review Exercise: Lower of Cost or Market......Page 521 PART B INVENTORY ESTIMATION TECHNIQUES......Page 522 The Gross Profit Method......Page 523 A Word of Caution......Page 524 The Retail Inventory Method......Page 525 Retail Terminology......Page 526 Cost Flow Methods......Page 527 Other Issues Pertaining to the Retail Method......Page 530 Concept Review Exercise: Retail Inventory Method......Page 531 PART C DOLLAR-VALUE LIFO RETAIL......Page 533 Concept Review Exercise: Dollar-Value LIFO Retail Method......Page 535 Most Inventory Changes......Page 536 Change to the LIFO Method......Page 538 Inventory Errors......Page 539 Concept Review Exercise: Inventory Errors......Page 541 Earnings Quality......Page 542 Appendix 9: Purchase Commitments......Page 544 Questions For Review of Key Topics......Page 545 Brief Exercises......Page 546 Exercises......Page 548 CPA and CMA Review Questions......Page 555 Problems......Page 557 Broaden Your Perspective......Page 563 CPA Simulation 9–1......Page 566 CHAPTER 10 Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition......Page 567 Types of Assets......Page 569 Property, Plant, and Equipment......Page 571 Intangible Assets......Page 576 Lump-Sum Purchases......Page 579 Noncash Acquisitions......Page 580 Deferred Payments......Page 581 Issuance of Equity Securities......Page 582 Donated Assets......Page 583 Decision Makers’ Perspective......Page 584 Dispositions......Page 585 Exchanges......Page 586 Fair Value Not Determinable......Page 587 Exchange Lacks Commercial Substance......Page 588 Concept Review Exercise: Exchanges......Page 589 Interest Capitalization......Page 590 Research and Development (R&D)......Page 595 APPENDIX 10 Oil And Gas Accounting......Page 603 Questions For Review of Key Topics......Page 604 Brief Exercises......Page 605 Exercises......Page 607 CPA and CMA Review Questions......Page 613 Problems......Page 616 Broaden Your Perspective......Page 620 Air France–KLM Case......Page 624 CPA Simulation 10–1......Page 625 CHAPTER 11 Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment......Page 627 Cost Allocation—an Overview......Page 629 Allocation Base......Page 630 Time-Based Depreciation Methods......Page 631 Activity-Based Depreciation Methods......Page 633 Decision Makers’ Perspective—Selecting A Depreciation Method......Page 634 Concept Review Exercise: Depreciation Methods......Page 636 Group and Composite Depreciation Methods......Page 637 Depletion of Natural Resources......Page 641 Amortization of Intangible Assets......Page 642 Intangible Assets Subject to Amortization......Page 643 Intangible Assets Not Subject to Amortization......Page 644 Concept Review Exercise: Depletion and Amortization......Page 646 Partial Periods......Page 647 Changes in Estimates......Page 648 Change in Depreciation, Amortization, or Depletion Method......Page 649 Error Correction......Page 650 Assets to Be Held and Used......Page 652 Assets to Be Sold......Page 659 Impairment Losses and Earnings Quality......Page 660 Expenditures Subsequent to Acquisition......Page 661 Improvements......Page 662 Costs of Defending Intangible Rights......Page 663 APPENDIX 11B Retirement And Replacement Methods Of Depreciation......Page 666 Brief Exercises......Page 668 Exercises......Page 670 CPA and CMA Review Questions......Page 677 Problems......Page 680 Broaden Your Perspective......Page 685 CPA Simulation 11–1......Page 690 CHAPTER 12 Investments......Page 691 PART A INVESTOR LACKS SIGNIFICANT INFLUENCE......Page 693 Securities to Be Held to Maturity......Page 695 Trading Securities......Page 698 Securities Available-for-Sale......Page 702 Comparison of HTM, TS, and AFS Approaches......Page 708 Transfers between Reporting Categories......Page 710 Fair Value Option......Page 711 Impairment of Investments......Page 712 Concept Review Exercise: Various Investment Securities......Page 713 Financial Statement Presentation and Disclosure......Page 716 How the Equity Method Relates to Consolidated Financial Statements......Page 718 A Single Entity Concept......Page 719 Further Adjustments......Page 721 Reporting the Investment......Page 723 What If Conditions Change?......Page 725 Comparison of Fair Value and the Equity Method......Page 726 Fair Value Option......Page 727 Concept Review Exercise: The Equity Method......Page 728 Decision Makers’ Perspective......Page 730 Financial Instruments and Investment Derivatives......Page 731 APPENDIX 12A Other Investments (Special Purpose Funds, Investments in Life Insurance Policies)......Page 733 APPENDIX 12B Impairment of Investments......Page 735 Questions For Review of Key Topics......Page 741 Brief Exercises......Page 742 Exercises......Page 744 CPA and CMA Review Questions......Page 751 Problems......Page 754 Broaden Your Perspective......Page 760 CPA Simulation 12–1......Page 764 Where We’re Headed A Chapter Supplement: Investments......Page 765 Concept Review Exercise: Identifying the Accounting Approach Used for Investments......Page 771 Brief Exercises......Page 772 Problem......Page 773 CHAPTER 13 Current Liabilities and Contingencies......Page 775 Characteristics of Liabilities......Page 777 What Is a Current Liability?......Page 778 Accounts Payable and Trade Notes Payable......Page 779 Short-Term Notes Payable......Page 780 Commercial Paper......Page 782 Salaries, Commissions, and Bonuses......Page 783 Deposits and Advances from Customers......Page 785 A Closer Look at the Current and Noncurrent Classification......Page 787 When Short-Term Obligations Are Expected to Be Refinanced......Page 788 Concept Review Exercise: Current Liabilities......Page 790 Loss Contingencies......Page 791 Product Warranties and Guarantees......Page 793 Premiums......Page 796 Litigation Claims......Page 798 Subsequent Events......Page 799 Unasserted Claims and Assessments......Page 801 Concept Review Exercise: Contingencies......Page 803 Decision Makers’ Perspective......Page 805 APPENDIX 13 Payroll-Related Liabilities......Page 808 Questions For Review of Key Topics......Page 810 Brief Exercises......Page 811 Exercises......Page 812 CPA and CMA Review Questions......Page 819 Problems......Page 821 Broaden Your Perspective......Page 826 Air France–KLM Case......Page 833 CHAPTER 14 Bonds and Long-Term Notes......Page 835 The Nature of Long-Term Debt......Page 836 The Bond Indenture......Page 837 Determining the Selling Price......Page 838 Determining Interest—Effective Interest Method......Page 841 Zero-Coupon Bonds......Page 842 Bonds Sold at a Premium......Page 843 When Financial Statements Are Prepared between Interest Dates......Page 845 The Straight-Line Method—A Practical Expediency......Page 846 Concept Review Exercise: Issuing Bonds and Recording Interest......Page 847 Debt Issue Costs......Page 848 Note Issued for Cash......Page 849 Note Exchanged for Assets or Services......Page 850 Installment Notes......Page 852 Financial Statement Disclosures......Page 853 Decision Makers’ Perspective......Page 854 Concept Review Exercise: Note with an Unrealistic Interest Rate......Page 857 Early Extinguishment of Debt......Page 858 Convertible Bonds......Page 859 When the Conversion Option Is Exercised......Page 861 Bonds with Detachable Warrants......Page 862 Concept Review Exercise: Issuance and Early Extinguishment of Debt......Page 863 PART D OPTION TO REPORT LIABILITIES AT FAIR VALUE......Page 864 Reporting Changes in Fair Value......Page 865 Counterintuitive Effect......Page 867 APPENDIX 14A Bonds Issued Between Interest Dates......Page 869 APPENDIX 14B Troubled Debt Restructuring......Page 870 Questions For Review of Key Topics......Page 874 Brief Exercises......Page 875 Exercises......Page 877 CPA and CMA Review Questions......Page 883 Problems......Page 885 Broaden Your Perspective......Page 891 Air France–KLM Case......Page 895 CPA Simulation 14–1......Page 896 CHAPTER 15 Leases......Page 897 PART A ACCOUNTING BY THE LESSOR AND LESSEE......Page 898 Decision Makers’ Perspective—Advantages of Leasing......Page 899 Capital Leases and Installment Notes Compared......Page 900 Classification Criteria......Page 901 Additional Lessor Conditions......Page 903 Operating Leases......Page 905 Advance Payments......Page 906 Capital Leases—Lessee and Lessor......Page 907 Depreciation......Page 909 Accrued Interest......Page 910 Concept Review Exercise: Direct Financing Lease......Page 911 Sales-Type Leases......Page 912 Bargain Purchase Options......Page 915 Residual Value......Page 917 Effect on the Lessee of a Residual Value......Page 918 Effect on the Lessor of a Residual Value......Page 919 Executory Costs......Page 922 Discount Rate......Page 923 When the Lessor’s Implicit Rate is Unknown......Page 924 Lessor’s Initial Direct Costs......Page 925 Lease Disclosures......Page 926 Balance Sheet and Income Statement......Page 929 Statement of Cash Flow Impact......Page 930 Concept Review Exercise: Various Lease Accounting Issues......Page 931 Sale-Leaseback Arrangements......Page 933 Capital Leases......Page 934 Operating Leases......Page 935 Real Estate Leases......Page 936 Leases of Only Part of a Building......Page 937 Brief Exercises......Page 939 Exercises......Page 941 CPA and CMA Review Questions......Page 948 Problems......Page 951 Broaden Your Perspective......Page 958 CPA Simulation 15–1......Page 961 Where We’re Headed A Chapter Supplement: Leases......Page 962 Questions For Review of Key Topics......Page 977 Brief Exercises......Page 978 Exercises......Page 979 Problems......Page 983 CHAPTER 16 Accounting for Income Taxes......Page 985 Conceptual Underpinning......Page 987 Deferred Tax Liabilities......Page 988 The FASB’s Balance Sheet Approach......Page 990 Types of Temporary Differences......Page 991 Deferred Tax Assets......Page 995 Valuation Allowance......Page 998 Permanent Differences......Page 999 Concept Review Exercise: Temporary and Permanent Differences......Page 1002 When Enacted Tax Rates Differ......Page 1003 Changes in Tax Laws or Rates......Page 1004 Multiple Temporary Differences......Page 1005 Net Operating Losses......Page 1007 Operating Loss Carryforward......Page 1008 Operating Loss Carryback......Page 1009 Balance Sheet Classification......Page 1010 Disclosure Notes......Page 1011 Coping with Uncertainty in Income Taxes......Page 1013 Intraperiod Tax Allocation......Page 1015 Decision Makers’ Perspective......Page 1017 Concept Review Exercise: Multiple Differences and Operating Loss......Page 1018 Questions For Review of Key Topics......Page 1021 Brief Exercises......Page 1022 Exercises......Page 1024 CPA and CMA Review Questions......Page 1031 Problems......Page 1033 Broaden Your Perspective......Page 1040 Air France–KLM Case......Page 1044 CPA Simulation 16–1......Page 1045 CHAPTER 17 Pensions and Other Postretirement Benefits......Page 1047 PART A THE NATURE OF PENSION PLANS......Page 1049 Defined Contribution Pension Plans......Page 1051 Defined Benefit Pension Plans......Page 1052 Pension Expense—An Overview......Page 1053 Accumulated Benefit Obligation......Page 1054 Projected Benefit Obligation......Page 1055 Pension Plan Assets......Page 1060 The Relationship between Pension Expense and Changes in the PBO and Plan Assets......Page 1062 Components of Pension Expense......Page 1064 Income Smoothing......Page 1066 Recording Gains and Losses......Page 1068 Recording the Pension Expense......Page 1070 Recording the Funding of Plan Assets......Page 1071 Comprehensive Income......Page 1072 Income Tax Considerations......Page 1073 Putting the Pieces Together......Page 1074 Settlement or Curtailment of Pension Plans......Page 1075 Concept Review Exercise: Pension Plans......Page 1076 PART E POSTRETIREMENT BENEFITS OTHER THAN PENSIONS......Page 1078 Postretirement Health Benefits and Pension Benefits Compared......Page 1079 Determining the Net Cost of Benefits......Page 1080 Measuring the Obligation......Page 1081 Accounting for Postretirement Benefit Plans Other Than Pensions......Page 1082 A Comprehensive Illustration......Page 1084 Decision Makers’ Perspective......Page 1085 Concept Review Exercise: Other Postretirement Benefits......Page 1086 APPENDIX 17 Service Method of Allocating Prior Service Cost......Page 1089 Questions For Review of Key Topics......Page 1090 Brief Exercises......Page 1091 Exercises......Page 1092 CPA and CMA Review Questions......Page 1101 Problems......Page 1103 Broaden Your Perspective......Page 1110 Air France–KLM Case......Page 1115 CHAPTER 18 Shareholders’ Equity......Page 1117 PART A THE NATURE OF SHAREHOLDERS’ EQUITY......Page 1118 Financial Reporting Overview......Page 1119 Retained Earnings......Page 1120 Accumulated Other Comprehensive Income......Page 1121 Reporting Shareholders’ Equity......Page 1122 The Corporate Organization......Page 1124 Types of Corporations......Page 1125 The Model Business Corporation Act......Page 1126 Distinguishing Classes of Shares......Page 1127 Typical Rights of Preferred Shares......Page 1128 Is It Equity or Is It Debt?......Page 1129 Shares Issued For Cash......Page 1130 More Than One Security Issued for a Single Price......Page 1131 Share Issue Costs......Page 1132 Concept Review Exercise: Expansion of Corporate Capital......Page 1133 Decision Maker’s Perspective......Page 1134 Shares Formally Retired or Viewed as Treasury Stock......Page 1135 Accounting for Retired Shares......Page 1136 Accounting for Treasury Stock......Page 1137 Concept Review Exercise: Treasury Stock......Page 1138 Liquidating Dividend......Page 1141 Cash Dividends......Page 1142 Stock Dividends......Page 1143 Stock Splits Effected in the Form of Stock Dividends (Large Stock Dividends)......Page 1145 Decision Maker’s Perspective......Page 1147 Concept Review Exercise: Changes in Retained Earnings......Page 1148 APPENDIX 18 Quasi Reorganizations......Page 1152 Brief Exercises......Page 1154 Exercises......Page 1156 CPA and CMA Review Questions......Page 1163 Problems......Page 1165 Broaden Your Perspective......Page 1170 CPA Simulation 18–1......Page 1176 CHAPTER 19 Share-Based Compensation and Earnings Per Share......Page 1177 PART A SHARE-BASED COMPENSATION......Page 1178 Stock Award Plans......Page 1179 Expense—The Great Debate......Page 1180 Recognizing the Fair Value of Options......Page 1182 When Unexercised Options Expire......Page 1184 Plans with Graded Vesting......Page 1186 Plans with Performance or Market Conditions......Page 1188 Employee Share Purchase Plans......Page 1189 Concept Review Exercise: Share-Based Compensation Plans......Page 1190 PART B EARNINGS PER SHARE......Page 1191 Issuance of New Shares......Page 1192 Stock Dividends and Stock Splits......Page 1193 Reacquired Shares......Page 1194 Earnings Available to Common Shareholders......Page 1195 Options, Rights, and Warrants......Page 1196 Convertible Securities......Page 1198 Options, Warrants, Rights......Page 1201 Convertible Securities......Page 1202 Order of Entry for Multiple Convertible Securities......Page 1203 Concept Review Exercise: Basic and Diluted EPS......Page 1204 Components of the “Proceeds” in the Treasury Stock Method......Page 1205 Contingently Issuable Shares......Page 1207 Summary of the Effect of Potential Common Shares on Earnings Per Share......Page 1208 Financial Statement Presentation of Earnings Per Share Data......Page 1209 Decision Makers’ Perspective......Page 1212 Concept Review Exercise: Additional EPS Issues......Page 1213 APPENDIX 19A Option-Pricing Theory......Page 1216 APPENDIX 19B Stock Appreciation Rights......Page 1218 Questions For Review of Key Topics......Page 1220 Brief Exercises......Page 1221 Exercises......Page 1222 CPA and CMA Review Questions......Page 1228 Problems......Page 1230 Broaden Your Perspective......Page 1236 Air France–KLM Case......Page 1243 CPA Simulation 19–1......Page 1244 CHAPTER 20 Accounting Changes and Error Corrections......Page 1245 PART A ACCOUNTING CHANGES......Page 1247 Decision Makers’ Perspective—Motivation for Accounting Choices......Page 1248 The Retrospective Approach: Most Changes in Accounting Principle......Page 1249 The Prospective Approach......Page 1253 Change in Accounting Estimate......Page 1255 Changing Depreciation, Amortization, and Depletion Methods......Page 1256 Change in Reporting Entity......Page 1258 Error Correction......Page 1259 Concept Review Exercise: Accounting Changes......Page 1260 Prior Period Adjustments......Page 1261 Error Affecting Previous Financial Statements, but Not Net Income......Page 1263 Error Affecting a Prior Year’s Net Income......Page 1264 Concept Review Exercise: Correction of Errors......Page 1268 Questions For Review of Key Topics......Page 1270 Brief Exercises......Page 1271 Exercises......Page 1272 CPA and CMA Review Questions......Page 1279 Problems......Page 1281 Broaden Your Perspective......Page 1289 CPA Simulation 20–1......Page 1293 CHAPTER 21 The Statement of Cash Flows Revisited......Page 1295 Cash Inflows and Outflows......Page 1297 Role of the Statement of Cash Flows......Page 1298 Cash and Cash Equivalents......Page 1300 Primary Elements of the Statement of Cash Flows......Page 1301 Preparation of the Statement of Cash Flows......Page 1307 Using a Spreadsheet......Page 1310 Income Statement Accounts......Page 1312 Balance Sheet Accounts......Page 1319 Concept Review Exercise: Comprehensive Review......Page 1328 Getting There through the Back Door......Page 1332 Components of Net Income That Do Increase or Decrease Cash......Page 1333 Comparison with the Direct Method......Page 1334 Reconciliation of Net Income to Cash Flows from Operating Activities......Page 1335 Decision Makers’ Perspective—Cash Flow Ratios......Page 1337 APPENDIX 21A Spreadsheet for the Indirect Method......Page 1339 APPENDIX 21B The T-Account Method of Preparing the Statement of Cash Flows......Page 1343 Questions For Review of Key Topics......Page 1345 Brief Exercises......Page 1346 Exercises......Page 1347 CPA and CMA Review Questions......Page 1357 Problems......Page 1359 Broaden Your Perspective......Page 1372 CPA Simulation 21–1......Page 1378 APPENDIX A Derivatives......Page 1379 APPENDIX B Dell Annual Report (selected pages)......Page 1400 APPENDIX C IFRS Comprehensive Case......Page 1424 Glossary......Page 1429 Photo Credits......Page 1438 Subject Index......Page 1440 Accounting Standards Index......Page 1470 Present and Future Value Tables......Page 1476