1 Financial Reporting and Accounting Standards 1-1

Continuing Evolution of International Financial Reporting 1-1

Global Markets 1-3

Financial Statements and Financial Reporting 1-4

Accounting and Capital Allocation 1-4

High-Quality Standards 1-5

Objective of Financial Reporting 1-6

General-Purpose Financial Statements 1-6

Equity Investors and Creditors 1-6

What Do the Numbers Mean? Don't Forget Management Stewardship 1-6

Entity Perspective 1-6

Decision-Usefulness 1-7

Standard-Setting Organizations 1-7

International Organization of Securities Commissions (IOSCO) 1-8

What Do the Numbers Mean? What About the Little Guy? 1-8

International Accounting Standards Board (IASB) 1-9

Hierarchy of IFRS 1-11

Financial Reporting Challenges 1-12

IFRS in a Political Environment 1-12

What Do the Numbers Mean? Fair Consequences? 1-13

The Expectations Gap 1-13

Significant Financial Reporting Issues 1-14

Ethics in the Environment of Financial Accounting 1-14

International Convergence 1-15

What Do the Numbers Mean? Can You Do That? 1-15

Conclusion 1-16

Global Accounting Insights 1-24

2 Conceptual Framework for Financial Reporting 2-1

What is It? 2-1

Conceptual Framework 2-3

Need for a Conceptual Framework 2-3

What Do the Numbers Mean? What's Your Principle? 2-4

Development of a Conceptual Framework 2-4

Overview of the Conceptual Framework 2-5

Basic Objective 2-5

Fundamental Concepts 2-6

Qualitative Characteristics of Accounting Information 2-6

What Do the Numbers Mean? Unfaithful--For 20 Years 2-10

What Do the Numbers Mean? Show Me the Earnings! 2-12

Basic Elements 2-12

Assumptions 2-13

Economic Entity Assumption 2-14

Going Concern Assumption 2-14

Monetary Unit Assumption 2-14

Periodicity Assumption 2-15

Accrual Basis of Accounting 2-15

Measurement, Recognition, and Disclosure Concepts 2-16

Basic Principles of Accounting 2-16

Cost Constraint 2-21

What Do the Numbers Mean? Let's Be Prudent 2-22

Summary of the Structure 2-23

Global Accounting Insights 2-39

3 The Accounting Information System 3-1

Working on the Chain Gang 3-2

Accounting Information System 3-2

Basic Terminology 3-3

Debits and Credits 3-4

The Accounting Equation 3-4

Financial Statements and Ownership Structure 3-6

The Accounting Cycle 3-8

Record and Summarize Basic Transactions 3-9

Journalizing 3-9

Posting 3-10

Chart of Accounts 3-11

The Recording Process Illustrated 3-11

Trial Balance 3-17

What Do the Numbers Mean? Change Management 3-18

Identify and Prepare Adjusting Entries 3-18

Types of Adjusting Entries 3-19

Adjusting Entries for Deferrals 3-19

Adjusting Entries for Accruals 3-24

Adjusted Trial Balance 3-29

Preparing Financial Statements 3-29

Closing 3-30

Post-Closing Trial Balance 3-33

Reversing Entries--An Optional Step 3-33

What Do the Numbers Mean? Hey, It's Complicated 3-34

The Accounting Cycle Summarized 3-34

Financial Statements for a Merchandising Company 3-34

Income Statement 3-35

Retained Earnings Statement 3-35

Statement of Financial Position 3-36

Closing Entries 3-37

Appendix 3A Cash-Basis Accounting versus Accrual-Basis Accounting 3-37

Conversion from Cash Basis to Accrual Basis 3-39

Service Revenue Computation 3-39

Operating Expense Computation 3-40

Theoretical Weaknesses of the Cash Basis 3-41

Appendix 3B Using Reversing Entries 3-42

Illustration of Reversing Entries--Accruals 3-42

Illustration of Reversing Entries--Deferrals 3-43

Summary of Reversing Entries 3-44

Appendix 3C Using a Worksheet: The Accounting Cycle Revisited 3-44

Worksheet Columns 3-46

Trial Balance Columns 3-46

Adjustments Columns 3-46

Adjustments Entered on the Worksheet 3-46

Adjusted Trial Balance 3-47

Income Statement and Statement of Financial Position Columns 3-47

Preparing Financial Statements from a Worksheet 3-47

Global Accounting Insights 3-70

4 Income Statement and Related Information 4-1

Financial Statements Are Changing 4-2

Income Statement 4-3

Usefulness of the Income Statement 4-3

Limitations of the Income Statement 4-4

Quality of Earnings 4-4

What Do the Numbers Mean? Four: The Loneliest Number 4-5

Content and Format of the Income Statement 4-5

Elements of the Income Statement 4-5

Intermediate Components of the Income Statement 4-6

Condensed Income Statements 4-8

What Do the Numbers Mean? You May Need a Map 4-8

Reporting Various Income Items 4-9

Gross Profit 4-9

Income from Operations 4-9

Income Before Income Tax 4-12

Net Income 4-13

Earnings per Share 4-13

Discontinued Operations 4-14

Allocation to Non-Controlling Interest 4-16

Summary 4-17

What Do the Numbers Mean? Different Income Concepts 4-17

Accounting Changes and Errors 4-18

Changes in Accounting Principle 4-18

Changes in Accounting Estimates 4-19

Corrections of Errors 4-20

Summary 4-20

Related Equity Statements 4-21

Retained Earnings Statement 4-21

Comprehensive Income Statement 4-21

Statement of Changes in Equity 4-23

Global Accounting Insights 4-43

5 Statement of Financial Position and Statement of Cash Flows 5-1

Hey, It Doesn't Balance! 5-2

Statement of Financial Position 5-3

Usefulness of the Statement of Financial Position 5-3

Limitations of the Statement of Financial Position 5-4

Classification in the Statement of Financial Position 5-5

What Do the Numbers Mean? What Comes First? 5-6

What Do the Numbers Mean? Warning Signals 5-14

Preparation of the Statement of Financial Position 5-14

Statement of Cash Flows 5-16

Purpose of the Statement of Cash Flows 5-16

Content of the Statement of Cash Flows 5-16

What Do the Numbers Mean? Watch That Cash Flow 5-18

Preparation of the Statement of Cash Flows 5-18

Usefulness of the Statement of Cash Flows 5-21

Additional Information 5-24

Notes to the Financial Statements 5-24

Techniques of Disclosure 5-27

Other Guidelines 5-28

Evolving Issue Statement of Financial Position Reporting: Gross or Net? 5-29

Appendix 5A Ratio Analysis--A Reference 5-30

Using Ratios to Analyze Performance 5-30

Global Accounting Insights 5-56

6 Accounting and the Time Value of Money 6-1

How Do I Measure That? 6-2

Basic Time Value Concepts 6-3

Applications of Time Value Concepts 6-3

The Nature of Interest 6-4

Simple Interest 6-5

Compound Interest 6-5

What Do the Numbers Mean? A Pretty Good Start 6-6

Fundamental Variables 6-8

Single-Sum Problems 6-9

Future Value of a Single Sum 6-9

Present Value of a Single Sum 6-11

Solving for Other Unknowns in Single-Sum Problems 6-13

Annuities (Future Value) 6-14

Future Value of an Ordinary Annuity 6-14

Future Value of an Annuity Due 6-17

Examples of Future Value of Annuity Problems 6-18

Annuities (Present Value) 6-20

Present Value of an Ordinary Annuity 6-20

What Do the Numbers Mean? Up in Smoke 6-22

Present Value of an Annuity Due 6-22

Examples of Present Value of Annuity Problems 6-23

Other Time Value of Money Issues 6-25

Deferred Annuities 6-25

Valuation of Long-Term Bonds 6-27

Effective-Interest Method of Amortization of Bond Discount or Premium 6-28

Present Value Measurement 6-29

7 Cash and Receivables 7-1

Is Your Cash Trapped? 7-1

Cash 7-2

Reporting Cash 7-3

Summary of Cash-Related Items 7-5

Evolving Issue What Counts for Cash? 7-5

Receivables 7-6

Recognition of Accounts Receivable 7-7

Measurement of the Transaction Price 7-8

Variable Consideration 7-8

Valuation of Accounts Receivable 7-10

Direct Write-Off Method for Uncollectible Accounts 7-11

Allowance Method for Uncollectible Accounts 7-11

Notes Receivable 7-15

Recognition of Notes Receivable 7-15

Valuation of Notes Receivable 7-19

Other Issues Related to Receivables 7-19

Derecognition of Receivables 7-19

Presentation and Analysis 7-23

What Do the Numbers Mean? Securitizations--Good or Bad? 7-26

Appendix 7A Cash Controls 7-26

Using Bank Accounts 7-26

The Imprest Petty Cash System 7-27

Physical Protection of Cash Balances 7-28

Reconciliation of Bank Balances 7-29

Global Accounting Insights 7-56

8 Valuation of Inventories: A Cost-Basis Approach 8-1

It Should Be Easy, but It Isn't! 8-1

Inventory Issues 8-3

Classification 8-3

Inventory Cost Flow 8-4

Inventory Control 8-6

Determining Cost of Goods Sold 8-7

What Do the Numbers Mean? Staying Lean 8-7

Goods and Costs Included in Inventory 8-7

Goods Included in Inventory 8-7

What Do the Numbers Mean? A Retail Apocalypse! 8-10

Costs Included in Inventory 8-10

Which Cost Flow Assumption to Adopt? 8-12

Specific Identification 8-12

Average-Cost 8-13

First-In, First-Out (FIFO) 8-14

Inventory Valuation Methods--Summary Analysis 8-16

Effect of Inventory Errors 8-17

Ending Inventory Misstated 8-17

Purchases and Inventory Misstated 8-18

Appendix 8A LIFO Cost Flow Assumption 8-19

Last-In, First-Out (LIFO) 8-19

Inventory Valuation Methods--Summary Analysis 8-20

9 Inventories: Additional Valuation Issues 9-1

Not What It Seems to Be 9-2

Lower-of-Cost-or-Net Realizable Value (LCNRV) 9-3

Net Realizable Value 9-3

Illustration of LCNRV 9-4

Methods of Applying LCNRV 9-4

Recording Net Realizable Value Instead of Cost 9-5

Use of an Allowance 9-6

Recovery of Inventory Loss 9-6

Evaluation of the LCNRV Rule 9-7

Valuation Bases 9-7

Net Realizable Value 9-7

Relative Standalone Sales Value 9-10

Purchase Commitments--A Special Problem 9-11

The Gross Profit Method of Estimating Inventory 9-12

Computation of Gross Profit Percentage 9-13

Evaluation of Gross Profit Method 9-15

What Do the Numbers Mean? I'll Trade You 9-15

Retail Inventory Method 9-15

Retail-Method Concepts 9-16

Retail Inventory Method with Markups

and Markdowns--Conventional Method 9-17

Special Items Relating to Retail Method 9-19

Evaluation of Retail Inventory Method 9-20

Presentation and Analysis 9-20

Presentation of Inventories 9-21

Analysis of Inventories 9-22

Global Accounting Insights 9-42

10 Acquisition and Disposition of Property, Plant, and Equipment 10-1

Watch Your Spending 10-1

Property, Plant, and Equipment 10-2

Acquisition of Property, Plant, and...