Intermediate Accounting IFRS 3rd Edition

Professor Kieso is the author of other accounting and business books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Illinois CPA Society. He is the recipient of the Illinois CPA Society's Outstanding Accounting Educator Award, Joseph A. of the FSA. Professor Weygandt is the author of other accounting and financial reporting books and is a member of American Accounting.

He has served on numerous committees of the American Accounting Association and as a member of the editorial board of the Accounting Review; He. In addition, he has been actively involved with the American Institute of Certified Public Accountants and has served on that organization's Accounting Standards Executive Committee (AcSEC). He is the recipient of the Wisconsin Institute of CPA's Outstanding Educator's Award and the Lifetime Achievement Award.

He served as an Accounting Academic Fellow in the Office of the Accountant General of the United States. He was chairman of the Financial Accounting and Reporting Section of the Financial Accounting Standards Board of the US Accounting Standards Board.

Key Learning Features

Content Changes by Chapter 10. Key Learning Features
Acknowledgments
Chapter 1 Financial Reporting and Accounting Standards 1. Global Markets
Objective of Financial Reporting 3. Standard-Setting Organizations
Chapter 2 Conceptual Framework for Financial Reporting 1. Conceptual Framework
Fundamental Concepts 3. Assumptions
Notes
Chapter 3 The Accounting Information System 1. Accounting Information System
Record and Summarize Basic Transactions 3. Identify and Prepare Adjusting Entries
Financial Statements for a Merchandising Company
Theoretical Weaknesses of the Cash Basis 9. Appendix 3B Using Reversing Entries
Appendix 3C Using A Worksheet: The Accounting Cycle Revisited 14. Worksheet Columns
Preparing Financial Statements from a Worksheet 16. Global Accounting Insights
Notes
Chapter 4 Income Statement and Related Information 1. Income Statement
Content and Format of the Income Statement 3. Reporting Various Income Items
Accounting Changes and Errors 5. Related Equity Statements
Chapter 5 Statement of Financial Position and Statement of Cash Flows 1. Statement of Financial Position
Preparation of the Statement of Financial Position 3. Statement of Cash Flows
Additional Information
Appendix 5A Ratio Analysis—A Reference 6. Using Ratios to Analyze Performance
Chapter 6 Accounting and the Time Value of Money 1. Basic Time Value Concepts
Single-Sum Problems 3. Annuities (Future Value)
Other Time Value of Money Issues 6. Notes
Chapter 7 Cash and Receivables 1. Cash
Receivables
Valuation of Accounts Receivable 4. Notes Receivable
Other Issues Related to Receivables 6. Appendix 7A Cash Controls
Using Bank Accounts
The Imprest Petty Cash System 9. Physical Protection of Cash Balances
Goods and Costs Included in Inventory 3. Which Cost Flow Assumption to Adopt?
Effect of Inventory Errors
Inventory Valuation Methods—Summary Analysis 8. Notes
The Gross Profit Method of Estimating Inventory 4. Retail Inventory Method
Presentation and Analysis 6. Global Accounting Insights
Chapter 10 Acquisition and Disposition of Property, Plant, and Equipment
Other Depreciation Issues 3. Impairments
Depletion 5. Revaluations
Presentation and Analysis
Revaluation of Depreciable Assets 10. Global Accounting Insights
Chapter 12 Intangible Assets 1. Intangible Asset Issues
Impairment and Presentation of Intangible Assets 4. Research and Development Costs
Global Accounting Insights 6. Notes
Provisions 3. Contingencies
Presentation and Analysis 5. Notes
Chapter 14 Non-Current Liabilities 1. Bonds Payable
Long-Term Notes Payable
Extinguishment of Non-Current Liabilities 4. Presentation and Analysis
Chapter 15 Equity 1. Corporate Capital
Reacquisition of Shares 3. Dividend Policy
Presentation and Analysis of Equity
Appendix 15A Dividend Preferences and Book Value per Share 6. Dividend Preferences
Book Value per Share 8. Global Accounting Insights
Chapter 16 Dilutive Securities and Earnings per Share 1. Dilutive Securities
Share Warrants
Share Compensation Plans 4. Basic Earnings per Share
Appendix 16B Comprehensive Earnings per Share Example 11. Diluted Earnings Per Share
Chapter 17 Investments 1. Debt Investments
Equity Investments 3. Other Reporting Issues
Appendix 17A Accounting for Derivative Instruments 5. Defining Derivatives
Who Uses Derivatives, and Why?
Basic Principles in Accounting for Derivatives 8. Derivatives Used for Hedging
Other Reporting Issues
Comprehensive Hedge Accounting Example 11. Controversy and Concluding Remarks
Appendix 17B Fair Value Disclosures
Chapter 18 Revenue Recognition 1. Fundamentals of Revenue Recognition
Accounting for Revenue Recognition Issues 4. Presentation and Disclosure
Appendix 18A Long-Term Construction Contracts 6. Revenue Recognition Over Time
Appendix 18B Revenue Recognition for Franchises 8. Franchise Accounting
Recognition of Franchise Rights Revenue over Time 10. Notes
Chapter 19 Accounting for Income Taxes 1. Fundamentals of Accounting for Income Taxes
Accounting for Net Operating Losses 4. Financial Statement Presentation
Appendix 19A Comprehensive Example of Interperiod Tax Allocation 6. First Year—2018
Second Year—2019
Global Accounting Insights
Notes
Chapter 20 Accounting for Pensions and Postretirement Benefits 1. Fundamentals of Pension Plan Accounting
Using a Pension Worksheet 3. Past Service Cost
Remeasurements
Reporting Pension Plans in Financial Statements 6. Global Accounting Insights
Notes
Chapter 21 Accounting for Leases 1. The Leasing Environment
Lessee Accounting 3. Lessor Accounting
Special Lease Accounting Problems 5. Appendix 21A Sale-Leasebacks
Appendix 21B Comprehensive Example 9. Lease Terms: Scenario 1
Lease Terms: Scenario 2 11. Global Accounting Insights
Chapter 22 Accounting Changes and Error Analysis 1. Accounting Changes
Changes in Accounting Estimates 3. Accounting Errors
Error Analysis
Chapter 23 Statement of Cash Flows 1. The Statement of Cash Flows
Preparing the Statement of Cash Flows 3. Special Problems in Statement Preparation
Chapter 24 Presentation and Disclosure in Financial Reporting 1. Full Disclosure Principle
Disclosure Issues
Auditor's and Management's Reports 4. Current Reporting Issues
Appendix 24A Basic Financial Statement Analysis 6. Perspective on Financial Statement Analysis
Comparative Analysis
Percentage (Common-Size) Analysis
Appendix 24B First-Time Adoption of IFRS 11. General Guidelines
Implementation Steps 13. Summary
Appendix C Specimen Financial Statements: Puma Group 40. Name Index
Subject Index 42. EULA

The Evolving Issue feature introduces a current topic in the accounting industry and discusses where the profession may be facing controversy or approaching a resolution. The Use Your Judgment section provides students with real-world homework problems covering topics such as financial reporting and financial statement analysis.

Acknowledgments

As a result, our discussion focuses on IFRS and the organization involved in developing these standards: the International Accounting Standards Board (IASB). Source: Adapted from Ben Hall and Nikki Tait, “Sarkozy Seeks EU Accounting Change,” The Financial Times Limited (September 30, 2008). 2 As used here, cash flow means “cash generated and used in operations.” The term cash flows often also means cash obtained from borrowing and used to repay loans, cash used for investing in resources and obtained from the sale of investments, and cash contributed by or distributed to owners.

In addition, the IASB identified a cost constraint as part of the Conceptual Framework (discussed later in the chapter). Olympus then dug the hole deeper; it developed a plan to "sell" the lost investments at original cost to tracking companies set up by Olympus for it. As indicated earlier, the Conceptual Framework specifically identifies only one assumption—the going concern assumption.

Fair value is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Therefore, fair value is a market-based measurement. 6 In 2010, IASB published an exposure draft entitled "Conceptual framework for financial reporting - Reporting entity". The IASB proposal indicates that a reporting entity has three characteristics: (1) economic activities have been developed, are being developed or will be carried out; (2) those activities are distinguishable from those of other entities; and (3) financial information about the entity's economic activities has the potential to be valuable in making decisions about the provision of resources to that entity. The presentation.” The IASB notes that this practice statement is neither an IFRS nor part of the Conceptual Framework.

Therefore, to have a complete record of every transaction or other event in a place, a company uses a journal (also called a "book of original entry"). Each general journal entry consists of four parts: (1) a date, (2) the accounts and amounts to be debited (Dr.), (3) the accounts and amounts to be credited (Cr.), and (4) an explanation. However, the trial balance - the first collection of transaction data - may not contain up-to-date and complete data.

APPENDIX 3A

The cash basis ignores two principles: the principle of revenue recognition and the principle of cost recognition. Illustrations 3A-1 and 3A-2 show net income for each month under cash and accrual accounting, respectively. Illustrations 3A-3 and 3A-4 show Eser's statements of financial position at the end of each month on a cash basis and on an accrual basis.

The cash basis understates the income and assets from the construction and completion of the garage in January. The cash basis underestimates shareholders' equity in January because revenues and assets are not recognized until February. Therefore, to calculate revenue on an accrual basis, we subtract the beginning accounts receivable and add the ending accounts receivable, as the formula in Figure 3A-6 shows.

ILLUSTRATION 3A-6 Conversion of Cash Receipts to Revenue—Accounts Receivable Cash Receipts from Customers{−Beginning Accounts Receivable+Ending Accounts Receivable. To convert money collected from customers into service revenue on an accrual basis, Liwan's dental practice would make the calculations shown in Illustration 3A-8. To convert these cash payments into accrual operating expenses, we subtract the final prepaid expenses from the cash paid for the expenses, as shown by the formula in Illustration 3A-9.

FIGURE 3A-9 Conversion of Cash Payments to Expenses—Prepaid Expenses Cash Paid for Operating Expenses{+Beginning Prepaid Expenses—Ending Prepaid. FIGURE 3A-10 Converting Cash Payments to Expenses - Current Unbilled Liabilities Cash Paid for Operating Expenses{−Beginning of Current Unbilled Liabilities + End of Current Current Liabilities. Liwan's dental practice, in order to convert the cash paid for operating expenses to an accrual operating expense, would make the calculations shown in Illustration 3A-11.

ILLUSTRATION 3A‐11 Conversion of Cash Paid to Operating Expenses Cash paid to operating expenses 170,000 + Initial prepaid expenses 1,800. Using this approach, we adjust cash-basis receipts and disbursements to accrual-basis revenues and expenses to arrive at accrual net income. In any conversion from the cash basis to the accrual basis, depreciation or amortization is an additional expense in arriving at net income over the accrual basis.

APPENDIX 3B

The comparison entries show that the first three entries are the same regardless of whether the company uses reversal entries or not. The November 1 reversal eliminates the 1,200 balance in wages and salaries created by the October 31 adjusting entry. Because the company deducts the entire amount of the first salary and salary payment in the new accounting period to Salary and Salary expenses.

The resulting debit balance in the expense account will be equal to the salaries and wages expense incurred in the new accounting period (1,300 in this example). When a company makes reversing entries, it debits all cash payments from expenses to the related expense account. This means that on November 8 (and every payday) the company debits Salaries and Wages expenses for the amount paid regardless of the existence of any accrued salaries and wages payable.

Until this point, we assumed that all deferrals were recorded as prepaid expenses or unearned revenue. To illustrate the use of prepaid expense reversals, we use the following transaction and regulatory data. Expense, when it purchases the supplies, then makes a reversal to return the cost of unused supplies to the expense account.

The company then proceeds to debit Supplies Expense for additional purchases of office supplies during the next period. Generally, deferrals are recorded in real accounts (assets and liabilities), thus making reversals of entries unnecessary. Income and expense accounts may not require adjustment, and so the company systematically closes them with income.

It also makes recording more efficient, especially when a large number of such transactions occur during the year. He or she does not have to worry about whether an item will result in a prepaid expense at the end of the period because the company will make adjustments at the end of the period. All deferrals for which a company debited or credited the original cash transaction against an expense or income account must be reversed.

APPENDIX 3C

After the adjusting entry on December 31 (regardless of whether you use reverse entries), the asset account Supplies shows a balance of 5,000 and Supplies Expense shows a balance of 15,000. This approach is used because it is useful for items that a company must allocate over several periods (eg, supplies and parts inventories). However, for other items that do not follow this regular pattern and that may or may not span two or more periods, a company usually enters them first in the income or expense accounts.

With a worksheet, a company does not have to wait until it has journalized and posted the adjusting and closing data. In either form, a company uses the worksheet to adjust account balances and prepare financial statements. Instead, it is an informal device for collecting and sorting information needed for financial statements.

Completing the worksheet provides considerable assurance that a company has properly addressed all the details associated with period-end accounting and statement preparation. The 10-column worksheet in Illustration 3C‐1 provides columns for the opening trial balance, adjustments, adjusted trial balance, income statement, and.