Beams has been honored with the National Association of Accounts' Lybrand Bronze Medal Award for Outstanding Contribution to Accounting Literature, the Distinguished Career in Accounting Award from the Virginia Society of CPAs, and the Virginia Outstanding Accounting Educator Award from the Carman G. Anthony His research interests include financial statement analysis, corporate reporting and the impact of accounting information in the securities markets. BRUCE BETTINGHAUS, PH.D., is an associate professor of accounting in the School of Accounting in the Seidman College of Business at Grand Valley State University.
He has published articles in The International Journal of Accounting, Management Accounting Quarterly, Strategic Finance and The Journal of Corporate Accounting and Finance. SMITH, PH.D., is an Associate Professor of Accounting and Department Chair at Central Washington University. He has published articles in journals such as Accounting Horizons, Journal of Government Financial Management, Public Performance & Management Review, Nonprofit and Voluntary Sector Quarterly, International Public Management Journal, Government Finance Review and Strategic Finance.
Smith's professional activities include membership in the American Accounting Association, the Association of Government Accountants, the Government Finance Officers Association, the Institute of Internal Auditors and the Institute of Management Accountants. He is an elected official and member of the school board of the tenth largest school district in Washington State.
CONTENTS
Accounting for Hedge Contracts: Illustrations of Cash Flow and Fair Value Hedge Accounting Using Interest Rate Swaps 450. Creation of an Estate 775 Probate Procedures 776 Administration of the Estate 776 Accounting for the Estate 777 Illustration of Estate Accounting 778 Accounting for Trusts 782. All The chapters have been updated to address, where appropriate, the latest international reporting standards and issues.
All chapters have been updated to reflect the latest changes to the Financial Accounting Standards Board Codification and the Governmental Accounting Standards Board Codification. The chapters on government and non-profit organizations have been updated to include all standards through no. GASB. These chapters have also been enhanced with illustrations of financial statements from Golden, Colorado.
Although this text is intended primarily for accounting students, it is also useful for accounting professionals interested in the preparation or analysis of consolidated financial statements, accounting for derivative securities, and governmental and nonprofit accounting and reporting. This 13th edition has been thoroughly updated to reflect recent business developments as well as changes in accounting standards and regulatory requirements.
PREFACE
OPERATING SEGMENTS Revenues (in millions)
Accounting for business combinations is one of the most important and interesting topics of accounting theory and practice. Most major economies prohibit the use of the pooling method to account for business combinations. In a business combination that is accomplished in stages, the fair value at the acquisition date of the acquirer's previously held equity interest in the acquiree.
On the acquisition date, the Investment and Paid-In Capital accounts are increased by the fair value of the contingent consideration. On the acquisition date, the Investment and Liability accounts are increased by the fair value of the contingent consideration. If the contingent consideration is in the form of equity, the acquirer does not remeasure the fair value of the contingent liability at each reporting date until the contingent liability is resolved.
If the contingent consideration is in the form of a liability, the acquirer measures the fair value of the contingency at each reporting date until the contingency is resolved. Changes in the fair value of the contingent consideration are recognized as a gain or loss in earnings, just as the liability is adjusted.
GOODWILL
GAAP (ASC 350-20) defines goodwill as the excess of investment costs over the fair value of net assets received. We calculate the fair value of goodwill in a manner similar to the original calculation at the date of acquisition. If the carrying amount exceeds the implied fair value of the goodwill, the firm must recognize an impairment loss for the difference.
A description of the intangible asset that has been impaired and the facts and circumstances that led to the impairment. b. When assessing an equity method investment for impairment, we include impairment losses in the value of the investment as a whole. The book value of the acquired interest in an associate may be greater than the investment costs or the fair value.
Because the fair value of the net assets acquired exceeds the cost of the investment, the difference is a bargain gain on the acquisition. Assume that Pop Corporation acquires 40 percent of Son Company's voting common stock.
GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Impairments
If fair value is less than the carrying amount, firms proceed to step 2, measurement and recognition of the impairment loss. If a company concludes that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount, it does not need to perform the two-step impairment test. Firms allocate the fair value of the reporting unit to all identifiable assets and liabilities as if they had purchased the unit on the measurement date.
Recognition of an impairment loss on goodwill of a subsidiary that is part of the reporting unit (ASC). Impairment losses on goodwill from discontinued operations must be reported separately (net of income tax effects) in the discontinued operations section of the income statement. Impairment tests for equity method investments are performed based on the fair value versus the carrying amount of the investment as a whole.
The fair values of Son's assets and liabilities were equal to their book values at the time of both share purchases. Pam Corporation paid $290,000 for 40 percent of Sun Corporation's outstanding common stock on January 2, 2017. Prepare a schedule for allocating the cost of the investment over the carrying value/fair value of the interest purchased.
Determine the correct amount of the investment in Sun that should appear on Pam's balance sheet at December 31, 2019. This chapter presents the combination of the separate accounting records of the parent company and the subsidiary into a more meaningful set of consolidated financial statements. Deere & Company's share of the income or loss of these companies is reported in the consolidated income statement under 'Equity in income (losses) of unconsolidated subsidiaries.' The investment in these companies is reported in the consolidated balance sheet under.
Note that the consolidated balance sheet is not simply a summary of account balances of the affiliates. We include all assets and liabilities of the subsidiary in the consolidated balance sheet and record the non-controlling interest's share of subsidiary net assets based on fair values separately in shareholders' equity. Both components of consolidated net income (net income attributable to non-controlling interest and net income attributable to controlling interest) must be disclosed on the face of the consolidated income statement.
Assumptions
The non-controlling interest is equal to the non-controlling interest multiplied by the fair value of the subsidiary's equity at the balance sheet date. 4,333 (representing $5,268 of unamortized surplus)—in the consolidated balance sheet workpapers via workpaper entry b that assigns the unamortized surplus at the balance sheet date. The difference between the consolidated income statement and the unconsolidated income statement of the parent company is in the details presented.
In some cases, the allocation of the purchase price may be recorded in the subsidiary. The difference between income of a subsidiary recognized in the books of the parent company and dividends received represents the change in the investment account for the period. Entry c also enters unamortized patents in the working paper from the beginning of the period.
Note that the unamortized patent amount in the consolidated balance sheet of Exhibit 4-1 is the unamortized patent amount at the beginning of the period in Exhibit 4-2. Consolidation Techniques and Procedures 139 retained earnings on the worksheet and retained earnings on the balance sheet. The retained earnings amounts at the beginning of the year come from Pop and Son's trial balances.
The difference between income from a subsidiary recognized in the parent company's books and the dividend received represents the change in the investment account for the period. To eliminate income and dividends from Son and adjust the investment account to its beginning of the year. Intra-group transactions are intra-group transactions from the point of view of the consolidated entity. therefore, we eliminate their effects in the consolidation process.
Overstating ending inventory from a consolidated perspective understates consolidated cost of goods sold. The importance of adjustments lies in the accurate statement of consolidated income for each period. However, the parent company's net income is affected in the year of the transfer by the subsidiary because the parent recognizes its share of the subsidiary's income on an equity basis.
This requires that the non-controlling interest's share of unrealized profits be deducted from the non-controlling interest's share of the subsidiary's reported net income. Exhibit 5-7 shows these amounts in the separate company columns of the consolidation worksheet for Pam Corporation and Subsidiary for the year ended December 31, 2019. How is the combined cost of goods sold affected by unrealized profit in (a) the beginning inventory of the subsidiary and ( b) the closing stock of the subsidiary.
Prepare a schedule of consolidated net income for Pop Corporation and its subsidiary for the years and 2018, starting with the separate income of the two affiliates and including the noncontrolling interest calculations.
