Description
Financial Reporting and Analysis Edition 7 by Lawrence Revsine EBOOK PDF Instant Download
Table of Contents
Cover
Title
Copyright
Dedication
About the Authors
Preface
Walkthrough
Brief Contents
Contents
Chapter 1 The Economic and Institutional Setting for Financial Reporting
Why Financial Statements Are Important
Economics of Accounting Information
Demand for Financial Statements
Disclosure Incentives and the Supply of Financial Information
A Closer Look at Professional Analysts
Analysts’ Decisions
Fundamental Concepts of Financial Reporting
Generally Accepted Accounting Principles
Who Determines the Standards?
The Politics of Accounting Standards
FASB Accounting Standards Codification™
Incentive Conflicts and Financial Reporting
An International Perspective
International Financial Reporting
APPENDIX 1A: GAAP in the United States
Early Developments
Emergence of GAAP
Current Institutional Structure in the United States
Chapter 2 Accrual Accounting and Income Determination
Cash Flow Versus Accrual Income Measurement
Articulation of Income Statement and Balance Sheet
Revenue Recognition—General Concepts
Expense Recognition
Income Statement Format and Classification
Income from Continuing Operations
Discontinued Operations
Frequency and Magnitude of Various Categories of Transitory Income Statement Items
Reporting Accounting Changes
Change in Accounting Principle
Change in Accounting Estimate
Change in Reporting Entity
Earnings Management
Popular Earnings Management Devices
Accounting Errors, Earnings Restatements, and Prior Period Adjustments
Earnings per Share
Comprehensive Income and Other Comprehensive Income
Global Vantage Point
APPENDIX 2A: Review of Accounting Procedures and T-Account Analysis
Understanding Debits and Credits
Adjusting Entries
Posting Journal Entries to Accounts and Preparing Financial Statements
Closing Entries
T-Accounts Analysis as an Analytical Technique
Chapter 3 Revenue Recognition
The Five-Step Revenue Recognition Model
Step 1: Identify the Contract(s) with a Customer
Step 2: Identify the Performance Obligations in the Contract
Step 3: Determine the Transaction Price
Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
Step 5: Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation
Practical Expedients in Applying the Model
Applying the Model to Contract Modifications
Contract Acquisition and Fulfillment Costs
Amortization and Impairment
Disclosure Requirements
Disaggregated Revenue
Contract Balances
Performance Obligations and Significant Judgments
Effective Dates and Transition
Retrospecitve Approach
Cumulative Effect Approach
Financial Statement Effects of New Standard
Global Vantage Point
The Meaning of Collectibility
Reversals of Impairments
Disclosure Requirements
Revenue Recognition Prior to the Effective Date of ASC Topic 606
Long-Term Construction Contracts
Installment Sales Method
Franchise Sales
Sales with Right of Return
Bundled (Multiple-Element) Sales
Chapter 4 Structure of the Balance Sheet and Statement of Cash Flows
Balance Sheet
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities
Stockholders’ Equity
Analytical Insights: Understanding the Nature of a Firm’s Business
International Differences in Balance Sheet Presentation
Statement of Cash Flows
Structure of Cash Flow Statement
Example of Indirect Method Cash Flow Statement
Example of Direct Method Cash Flow Statement
Cash Flow Statement and Financial Statement Articulation
Deriving Cash Flow Information
Comparison of Cash Flow from Operations under Direct and Indirect Methods
Global Vantage Point
Notes to Financial Statements
Summary of Significant Accounting Policies
Subsequent Events
Related-Party Transactions
APPENDIX 4A: Worksheet Approach to Indirect Method Cash Flow Statement
Chapter 5 Essentials of Financial Statement Analysis
Basic Approaches
Financial Statement Analysis and Accounting Quality
A Case In Point: Getting Behind the Numbers at Whole Foods Market
Examining Whole Foods Market’s Financial Statements
Profitability, Competition, and Business Strategy
Financial Ratios and Profitability Analysis
ROA and Competitive Advantage
Return on Common Equity and Financial Leverage
Global Vantage Point
Liquidity, Solvency, and Credit Analysis
Cash Flow Analysis
Financial Ratios and Default Risk
Chapter 6 The Role of Financial Information in Valuation and Credit Risk Assessment
Business Valuation
The Discounted Cash Flow Valuation Approach
The Role of Earnings in Valuation
The Abnormal Earnings Approach to Valuation
Fair Value Accounting
Valuation Application: Goodwill Impairment
Global Vantage Point
Research on Earnings and Equity Valuation
Sources of Variation in P/E Multiples
Earnings Surprises
Credit Risk Assessment
Traditional Lending Products
Credit Analysis
Credit-Rating Agencies
APPENDIX 6A: Discounted Cash Flow and Abnormal Earnings Valuation Applications
Valuing a Business Opportunity
Valuing Whole Foods Market’s Shares
APPENDIX 6B: Financial Statement Forecasts
Illustration of Comprehensive Financial Statement Forecasts
Chapter 7 The Role of Financial Information in Contracting
Conflicts of Interest in Business Relationships
Debt Covenants in Lending Agreements
Affirmative Covenants, Negative Covenants, and Default Provisions
Mandated Accounting Changes May Trigger Debt Covenant Violation
Managers’ Responses to Potential Debt Covenant Violations
Management Compensation
How Executives Are Paid
Proxy Statements and Executive Compensation
Incentives Tied to Accounting Numbers
Catering to Wall Street
Regulatory Agencies
Capital Requirements in the Banking Industry
Rate Regulation in the Electric Utilities Industry
Taxation
Fair Value Accounting and the Financial Crisis
The Meltdown
The Controversy
Analytical Insights: Incentives to “Manage” Earnings
Chapter 8 Receivables
Assessing the Net Realizable Value of Accounts Receivable
Estimating Uncollectibles
Assessing the Adequacy of the Allowance for Uncollectibles Account Balance
Estimating Sales Returns and Allowances
Analytical Insight: Do Existing Receivables Represent Real Sales?
Imputing Interest on Trade Notes Receivable
The Fair Value Option
Accelerating Cash Collection: Sale of Receivables and Collateralized Borrowings
Sale of Receivables (Factoring)
Borrowing Using Receivables as Collateral
Ambiguities Abound: Is It a Sale or a Borrowing?
A Closer Look at Securitizations
Securitization and the 2008 Financial Crisis
Some Cautions for Financial Statement Readers
Troubled Debt Restructuring
Settlement
Continuation with Modification of Debt Terms
Evaluating Troubled Debt Restructuring Rules
Global Vantage Point
Comparison of IFRS and GAAP Receivable Accounting
Recent FASB and IASB Actions
Chapter 9 Inventories
An Overview of Inventory Accounting Issues
Determination of Inventory Quantities
Items Included In Inventory
Costs Included in Inventory
Manufacturing Costs
Vendor Allowances
Cost Flow Assumptions: The Concepts
First-In, First-Out (FIFO) Cost Flow
Last-In, First-Out (LIFO) Cost Flow
FIFO, LIFO, and Inventory Holding Gains
Analyzing LIFO Companies
The LIFO Reserve Disclosure
Inflation and LIFO Reserves
LIFO Liquidations
Reconciliation of Changes in LIFO Reserve
Improved Trend Analysis
LIFO and Earnings Management
Eliminating LIFO Ratio Distortions
Tax Implications of LIFO
Eliminating Realized Holding Gains for FIFO Firms
Empirical Evidence on Inventory Policy Choice
Inventory Impairment
Impact of Inventory Impairment
Old-Lower of Cost or Market Method (Old-LCM)
Global Vantage Point
Comparison of IFRS and GAAP Inventory Accounting
Future Directions
APPENDIX 9A: Variable Costing Versus Absorption Costing
APPENDIX 9B: Dollar-Value LIFO
APPENDIX 9C: Inventory Errors
Chapter 10 Long-Lived Assets
Measurement of the Carrying Amount of Long-Lived Assets
The Approach Used by GAAP
Long-Lived Asset Measurement Rules Illustrated
Intangible Assets
Asset Impairment
Tangible and Amortizable Intangible Assets
Indefinite-Lived Intangible Assets
Case Study of Impairment Recognition and Disclosure—Krispy Kreme Doughnuts
Management Judgments and Impairments
Obligations Arising from Retiring Long-Lived Assets
Assets Held for Sale
Depreciation
Disposition of Long-Lived Assets
Financial Analysis and Depreciation Differences
Exchanges of Nonmonetary Assets
Exchanges Recorded at Book Value
Global Vantage Point
Comparison of IFRS and GAAP Long-Lived Asset Accounting
Chapter 11 Financial Instruments and Liabilities
Balance Sheet Presentation
Debt or Equity?
Bonds Payable
Characteristics of Bond Cash Flows
Bonds Issued at Par
Bonds Issued at a Discount
Bonds Issued at a Premium
Graphic Look at Bonds
Book Value versus Fair Value after Issuance
Option to Use Fair Value Accounting
Global Vantage Point
Managerial Incentives and Financial Reporting for Debt
Debt Carried at Amortized Historical Cost
Imputed Interest on Notes Payable
Analytical Insights: How to Analyze Debt Disclosures
Derivatives
Typical Derivative Instruments and the Benefits of Hedging
Financial Reporting for Derivative Instruments
Hedge Accounting
Fair Value Hedge Accounting
Cash Flow Hedge for an Existing Asset or Liability
Cash Flow Hedge for an Anticipated Transaction
Hedge Effectiveness
Global Vantage Point
Contingent Liabilities
Measuring and Recognizing Loss Contingencies
Recording Gain Contingencies
Loan Guarantees
Global Vantage Point
Chapter 12 Financial Reporting for Leases
Evolution of Lease Accounting
Why Lessees Like the Operating Lease Method
The Securities and Exchange Commission’s Initiative
Lessee Accounting Under ASC 840
Criteria for Capital Lease Treatment
Lease Economics and Capital Lease Accounting
Guaranteed Residual Values
Executory Costs
Payments in Advance
Sale and Leaseback
Interpeting Lessee Financial Statement Information Under ASC 840
Capital Lease versus Operating Lease Effects
Lessees’ Financial Statement Disclosures
Uneven Lease Payments
Global Vantage Point
Lessee Accounting Under ASU 2016-02 (ASC 842)
Overview of ASC 842
Beginning-of-Period and Uneven Payments
Sale and Leaseback
Presentation and Disclosure—Lessee
Differences between ASC 842 and IFRS 16
Evaluation of ASC 842
Lessor Accounting Under ASC 840
Sales-Type and Direct Financing Leases
Lessors’ Operating Leases
Distinction between Capital and Operating Leases
Direct Financing Lease Treatment Illustrated
Financial Statement Effects of Direct Financing versus Operating Leases
Sales-Type Lease Treatment Illustrated
Lessors’ Disclosures
Leveraged Leases
Global Vantage Point
Lessor Accounting Under ASU 2016-02 (ASC 842)
Overview
Collectibility
Presentation and Disclosure—Lessor
Differences between ASC 842 and IFRS 16
Financial Reporting Versus Tax Accounting
APPENDIX 12A: Constructive Capitalization and Projecting ASU 2016-02 Effects
Determining the Discount Rate
Estimating Payments beyond Five Years
Chapter 13 Income Tax Reporting
Understanding Income Tax Reporting
A Note on Semantics
Temporary and Permanent Differences between Book Income and Taxable Income
Problems Caused by Temporary Differences
Deferred Income Tax Accounting: Interperiod Tax Allocation
Deferred Tax Liabilities
Deferred Tax Assets
Net Operating Losses: Carrybacks and Carryforwards
Deferred Tax Asset Valuation Allowances
Classification of Deferred Tax Assets and Deferred Tax Liabilities
Deferred Income Tax Accounting When Tax Rates Change
Permanent Differences
Understanding Income Tax Note Disclosures
Current versus Deferred Portion of Current Period’s Tax Provision
Reconciliation of Statutory and Effective Tax Rates
Details on the Sources of Deferred Tax Assets and Liabilities
Why Don’t a Company’s Deferred Tax Assets and Liabilities Seem to Reverse?
Deferred Taxes and Cash Flow
Measuring And Reporting Uncertain Tax Positions
Assessing an Uncertain Tax Position Related to a Permanent Difference
Assessing an Uncertain Tax Position Related to Timing of Deductibility
Making Changes to or Resolving Uncertain Tax Positions
Assessing Disclosures on Uncertain Tax Positions
Extracting Analytical Insights from Note Disclosures
Using Deferred Tax Notes to Assess Earnings Quality
Using Tax Notes to Improve Interfirm Comparability
Global Vantage Point
Enacted Tax Law Changes vs. Substantively Enacted Tax Law Changes
Approach to Reporting Deferred Tax Assets When Realizability Is Uncertain
Reconciliation of Statutory and Effective Tax Rates
Classification and Offsetting of Deferred Tax Assets and Deferred Tax Liabilities
Disclosure of Income Tax Amounts Recognized Directly in Equity (Other Comprehensive Income)
Uncertain Tax Positions
Other Current IASB Activities
APPENDIX 13A: Comprehensive Interperiod Tax Allocation Problem
Computation of Taxable Income
Calculation of Taxes Due
Calculation of Change in Deferred Tax Asset and Liability Accounts
Calculation of Income Tax Expense
Hawkeye’s Tax Note
Chapter 14 Pensions and Postretirement Benefits
Rights and Obligations in Pension Contracts
Accounting Issues Related to Defined Benefit Pension Plans
Financial Reporting for Defined Benefit Pension Plans
A Simple Example: A World of Complete Certainty
The Real World: Uncertainty Introduces Gains and Losses
Comprehensive Example
Determinants of Pension Funding
Case Study of Pension Recognition and Disclosure—General Electric
Accumulated Other Comprehensive Income Disclosure and Deferred Income Taxes
Additional Issues in Computing Expected Return
Extraction of Additional Analytic Insights from Note Disclosures
Postretirement Benefits Other Than Pensions
Analytical Insights: Assessing OPEB Liability
Evaluation of Pension and Postretirement Benefit Financial Reporting
Global Vantage Point
Comparison of IFRS and GAAP Retirement Benefit Accounting
Chapter 15 Financial Reporting for Owners’ Equity
Accounting for Transactions With Shareholders
What Constitutes the “Firm”?
Why Companies Repurchase Their Stock
Equity-Based Covenants and Preferred Stock
Legality of Corporate Dividend Distributions
Shareholders’ Equity: Financial Statement Presentation
Global Vantage Point
Earnings per Share
Simple Capital Structure
Complex Capital Structure
Analytical Insights
Is Earnings per Share a Meaningful Number?
Global Vantage Point
Accounting for Share-Based Compensation
Historical Perspective
Opposition to the FASB
The Initial Compromise—SFAS No. 123
Stock Options Debate Rekindled
Current GAAP Requirements
EPS Effect of Stock Options
Accounting at Date of Exercise
Epilogue
Taxation of Share-Based Compensation
Incentive Stock Options (ISOs)
Nonqualified Stock Option Plans
How Does Tax Accounting Interact with Financial Reporting?
Share-Based Compensation Case Study—Whole Foods Market
Convertible Debt
Background
Financial Reporting Issues
Analytical Insights
Convertible Debt That May Be Settled in Cash
Global Vantage Point
Chapter 16 Intercorporate Investments
Minority Passive Investments: Fair Value Accounting
Minority Passive Investments through 2017
Minority Passive Equity Investments Beginning in 2018
Minority Active Investments: Equity Method
When Cost and Book Value Differ
Fair Value Option for Equity Method Investments
Controlling (Majority) Interest: Consolidation
Acquisition Method and Preparation of Consolidated Statements (100% Acquisition)
Acquisition Method with Noncontrolling Interests (Less Than 100% Acquisition)
Income Statement Consolidation
Accounting for Goodwill
Previous Approaches to Consolidated Statements
Poolings of Interests and Purchases
Presentation of Noncontrolling Interests
Financial Analysis Issues—Acquisition Method and Purchase Method
Financial Analysis Issues—Acquisition Method vs. Pooling of Interests
Variable Interest Entities
Accounting for Foreign Subsidiaries and Foreign Currency Transactions
Foreign Currency Transactions
Foreign Subsidiaries
Accounting for Investments in Debt Securities
Held-to-Maturity Securities
Available-for-Sale Securities
Trading Securities
Other-Than-Temporary Impairments
Global Vantage Point
Accounting for Financial Assets (Marketable Securities and Investments)
Consolidated Financial Statements and Accounting for Business Combinations
Accounting for Special Purpose Entities (SPEs) or Variable Interest Entities (VIEs)
Chapter 17 Statement of Cash Flows
Review of Cash Flow Statement Formats and Content
The Direct Method
The Indirect Method
Preparing the Cash Flow Statement
Reconciliation between Statements: Some Complexities
Asset Write-Offs and Impairments
Asset Retirements and Reclassifications to Assets Held for Sale
Foreign Currency Translation Adjustments
Acquisitions of Other Companies
Simultaneous Noncash Financing and Investing Activities
Analytical Insights: Ways Operating Cash Flows Can Be Distorted or Manipulated
Changes in Working Capital Accounts
Accounts Receivable Sale (Securitization) versus Collateralized Borrowing
Capitalizing versus Expensing
Software Development Costs
Capital versus Operating Leases
Cash Flow Effect of Stock Options
Global Vantage Point
Appendix A Time Value of Money
Future Value
Present Value
Present Value of an Ordinary Annuity
Present Value of an Annuity Due
Appendix B Segment Reporting
Definition of a Reportable Segment
Required Disclosures
Case Study: Harley-Davidson, Inc.
Index
