PART 1 AN OVERVIEW OF FINANCIAL ACCOUNTING.
1 Financial Accounting and Its Economic Context.
Financial Reporting and Investment Decisions.
The Demand for Financial Information: A User's Orientation.
The Economic Environment in which Financial Reports Are Prepared and Used.
Corporate Governance.
International Perspective: Movement Toward a Global Financial Reporting System.
Appendix 1A.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Issues for Discussion.
2 The Financial Statements.
Capital Flows and Operating, Investing, and Financial Activities.
The Classified Balance Sheet.
The Income Statement.
The Statement of Shareholders' Equity.
The Statement of Cash Flows.
Relationships among the Financial Statements.
International Perspective: An Example of International Financial Reporting Standards.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
PART 2 MEASUREMENT, MECHANICS, AND USE OF FINANCIAL STATEMENTS.
3 The Measurement Fundamentals of Financial Accounting.
Assumptions of Financial Accounting.
Valuations on the Balance Sheet.
The Principles of Financial Accounting Measurement.
Two Exceptions to the Basic Principles: Materiality and Conservatism.
International Perspective: Measurement Fundamentals and International Reporting Standards.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
4 The Mechanics of Financial Accounting.
Economic Events.
The Fundamental Accounting Equation.
Business Transactions, the Accounting Equation, and the Financial Statements.
The Journal Entry.
Recognizing Gains and Losses.
Periodic Adjustments.
Reporting Difficulties Faced by Multinational Companies.
Appendix 4A
T-Account Analysis and Preparing the Statement of Cash Flows.
Operating Items.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
5 Using Financial Statement Information.
Control and Prediction.
Framework for Using Financial Statements to Predict Future Earnings and Cash Flows.
Elements of Financial Statement Analysis.
Assessing the Business Environment.
Reading and Studying the Financial Statements and Footnotes.
Assessing Earnings Quality.
Analyzing the Financial Statements.
Predict the Future and/or Cash Flow.
Annual Report Information and Predicting Stock Prices.
International Perspective: Financial Statement Analysis in an International Setting.
Appendix 5A.
Shareholder Value, ROE, and Cash Flow Analyses.
Determinants of Value Creation: Analyzing Return on Equity.
Shareholder Value Creation and the ROE Model: JCPenney vs. Kohl's.
Cash Flow Analysis.
Cash Flow Profiles.
Projecting Future Financial Statements.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
PART 3 ASSETS: A CLOSER LOOK.
6 The Current Asset Classification, Cash, and Accounts Receivable.
The Current Asset Classification.
Cash.
Accounts Receivable.
Accounts Receivable from a User's Perspective.
International Perspective: Receivables, Foreign Currency, and Hedging.
ROE Exercise: Management of Working Capital and Receivables and Return on Equity.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
7 Merchandise Inventory.
The Relative Size of Inventories.
Accounting for Inventory: Four Important Issues.
Acquiring Inventory: What Costs to Capitalize?
Carrying Inventory: Perpetual Method.
Selling Inventory: Which Cost Flow Assumption?
Ending Inventory: Applying the Lower-of-Cost-or-Market Rule.
The Lower-of-Cost-or-Market Rule and Hidden Reserves.
International Perspective: Japanese Business and Inventory Accounting.
ROE Exercise: Management of Inventory and Return on Equity.
Inventory Turnover.
ROE Analysis.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
8 Investments in Equity Securities.
Equity Securities Classified as Current.
Trading and Available-for-Sale Securities.
Long-Term Equity Investments.
ROE Exercise: Managing Investments in Equity Securities and Return on Equity.
ROE Analysis.
Appendix 8A.
Consolidated Financial Statements.
Review Problem I.
Review Problem II.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
9 Long-Lived Assets.
The Relative Size of Long-Lived Assets.
Long-Lived Asset Accounting: General Issues and Financial Statement Effects.
An Overview of Long-Lived Asset Accounting.
Acquisition: What Costs to Capitalize?
Postacquisition Expenditures: Betterments or Maintenance?
Cost Allocation: Amortizing Capitalized Costs.
Disposal: Retirements, Impairments, Sales, and Trade-Ins.
Intangible Assets.
Copyrights, Patents, and Trademarks.
The Costs of Developing Computer Software.
Goodwill.
Organizational Costs.
Research and Development Costs.
IFRS vs. GAAP: Revaluations to Fair Market Costs.
ROE Exercise: Managing Long-Lived Assets and Return on Equity.
ROE Analysis.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
PART 4 LIABILITIES AND STOCKHOLDER'S EQUITY: A CLOSER LOOK.
10 Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies.
What Is a Liability?
The Relative Size of Liabilities on the Balance Sheet.
Reporting Liabilities on the Balance Sheet: Economic Consequences.
Current Liabilities.
Determinable Current Liabilities.
Contingencies and Contingent Liabilities.
Provisions vs. Contingent Liabilities: The “Devil is in the Details”.
ROE Exercise: Managing Current Liabilities.
ROE Analysis.
Appendix 10A.
Retirement Costs: Pensions and Postretirement Healthcare and Insurance.
Pensions.
Postretirement Healthcare and Insurance Costs.
Appendix 10B.
Deferred Income Taxes.
The Concept of Deferred Income Taxes.
Accounting Entries for Deferred Income Taxes.
Deferred Income Taxes: Additional issues.
The Conservatism Ratio.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
11 Long-Term Liabilities: Notes, Bonds, and Leases.
The Relative Size of Long-term Liabilities.
The Economic Consequences of Reporting Long-Term Liabilities.
Basic Definitions and Different Contractual Forms.
Effective Interest Rate.
Accounting for Long-Term Obligations.
Accounting for Long-Term Notes Payable.
Bonds Payable.
Financial Instruments, Fair Market Values, and Off-Balance-Sheet Risks.
Bond Redemptions.
Leases.
International Perspective: The Importance of Debt Financing in Other Countries.
ROE Exercise: Managing Long-Term Debt.
ROE Analysis.
Appendix 11A.
The Determination of Bond Prices.
Appendix 11B.
Investing in Bonds.
Appendix 11C.
Interest Rate Swaps and Hedging.
Review Problem.
Cash Flow Calculations.
Journal Entry Calculations.
Discount Balance Sheet Value of Bonds Payable.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
12 Stockholders' Equity.
The Relative Importance of Liabilities, Contributed Capital, and Earned Capital.
Debt and Equity Distinguished.
The Economic Consequences Associated with Accounting for Shareholders' Equity.
Accounting for Shareholders' Equity.
Accounting for Common and Preferred Stock Issuances.
The Statement of Shareholders' Equity.
International Perspective: The Rise of International Equity Markets.
ROE Exercise: Return on Equity and Value Creation.
ROE Analysis.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
PART 5 INCOME AND FLOWS.
13 The Complete Income Statement.
The Economic Consequences Associated with Income Measurement and Disclosure.
The Measurement of Income: Different Measures for Different Objectives.
A Complete Income Statement: Disclosures and Presentation.
Intraperiod Tax Allocation.
Earnings-per-Share Disclosure.
Income Statement Categories: Useful for Decision but Subjective.
International Perspective: Investments and Income Statement Disclosures.
ROE Exercise: Using the Right Earnings Number.
ROE Analysis.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
14 The Statement of Cash Flows.
The Definition of Cash.
A General Description of the Statement of Cash Flows.
How the Statement of Cash Flows Can Be Used.
The Statement of Cash Flows: Economic Consequences.
Deriving Cash Flow from Accrual Financial Statements.
The Complete Statement of Cash Flows.
Analyzing the Statement of Cash Flows: An Application.
International Perspective: The Statement of Cash Flows.
Review Problem.
Summary of Key Points.
Key Terms.
Internet Research Exercise.
Brief Exercises.
Exercises.
Problems.
Issues for Discussion.
Appendix A The Time Value of Money.
Interest: The Price of Money.
Time Value.
Time Value Computations.
Computing Implicit Rates of Return and Interest Rates.
Present Value and Financial Accounting.
Exercises.
Problems.
Appendix B Quality of Earnings Cases: A Comprehensive Review.
Case 1: Liberty Manufacturing.
Case 2: Microline Corporation.
Case 3: Technical Enterprises and Sonar-Sun inc.
Case 4: Avery Corporation.
Case 5: Zenith Creations.
Case 6: Pierce and Snowden.
Appendix C 2009 NIKE-SEC Form 10-K Selected Pages.
Glossary.
Subject Index.
Company Index.
