Accounting and Finance for Lawyers in a Nutshell
Author:
Meyer, Charles H.
Edition:
7th
Copyright Date:
2021
28 chapters
have results for accounting and finance for lawyers in a nutshell
Foreword to the Seventh Edition 6 results (showing 5 best matches)
- As always, I trust that this seventh edition will continue to provide law students, lawyers, and other readers with a sufficient understanding of the basics of accounting and finance so that they can better appreciate the significance of accounting and its importance in the commercial and legal world.
- Other changes include refinements in the accounting for goodwill and investments. I have added additional references to relevant sections of the Accounting Standards Codification throughout the book for those who want to go to the source for additional detail on the accounting rules.
- The accounting world and accounting rules continue to change reflecting both changes in the business environment and refined thinking about how transactions and events should be presented in financial statements. The seventh edition reflects the key developments that have occurred since the sixth edition.
- The significant changes in the accounting for leases issued by the FASB in 2016 are now fully effective for most companies (the required implementation for private companies and certain other issuers is delayed to 2021). The changes primarily affect the balance sheet presentation for operating leases requiring almost all such leases to be capitalized. Since the changes are now being implemented by most companies, Chapter 11 has been reorganized and revised to focus on the new rules.
- The discussion of other comprehensive income and loss is expanded reflecting the increased role that this concept has in the presentation of the total income or loss of a business
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Chapter 9 Accounting for Investments 158 results (showing 5 best matches)
- This chapter will discuss in detail the rules for reporting investments including the requirement for certain investments be reported at market value. These rules apply to current assets and noncurrent assets. The accounting described in this chapter represents the general rules for accounting for investments for most businesses. Certain specialized industries, particularly finance and investment companies, have special rules for accounting for investments.
- One of the principal accounting benefits sought in using a VIE is that it provides a form of off-balance sheet financing if consolidation is not required. Off-balance sheet financing generally removes what would otherwise be assets and liabilities from the balance sheet of the company using the VIE, which in turn lowers the debt-equity ratio of the company. This can create more borrowing capacity for the sponsoring company, reduce the sponsoring company’s cost of capital by lowering the risk of the company that comes with a higher debt-equity ratio, or provide a combination of these and other financial benefits.
- When bonds are acquired as an investment, there are several steps in the accounting process. The bonds are initially recorded at their cost. The business that invests in the bonds must then account for the receipt of interest revenue and the accrual of interest revenue when interest is not paid currently through the date of the financial statements. Finally, bonds are often acquired at a price that differs from the face amount of the bonds. When this occurs, the business must account for the resulting discount or premium on the bonds. This section will review first the accounting for bonds acquired at face value and then will discuss the accounting treatment when bonds are acquired at a discount or premium. There will then be a discussion of the accounting for changes in market value of the bonds.
- This chapter will address issues related to accounting for investments. Accounting for short-term investments in securities that are reported as current assets was discussed briefly in Chapter 5. Expanding on that discussion, Section A will discuss the appropriate accounting for investments in bonds. Section B will discuss the methods for accounting for investments in the stock of other companies. Section C will address the accounting for certain other investments.
- Viewed as a single economic entity, the balance in the Investment in S account of $16,000 is really a duplication of the net assets (assets minus liabilities) of S. Also, since the stock of S is owned by P and not by outside shareholders, the stockholders’ equity accounts of S should really be ignored (remembering that the retained earnings of S are already included in the retained earnings of P as a result of applying the equity method of accounting for the investment in S on P’s separate accounting records). To prepare appropriate consolidated financial statements and avoid double-counting, the following elimination entry would be recorded not in the actual accounting books of either company but on a worksheet used to prepare the consolidated financial statements:
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Chapter 11 Accounting for Leases 82 results (showing 5 best matches)
- Leveraged lease accounting was a special form of accounting by a lessor for leases that met certain requirements (this special accounting treatment did not apply to lessees). The most significant feature of leveraged lease accounting was that the lessor reported its investment in the leased property net of the nonrecourse financing on the property (nonrecourse financing was an essential element of leveraged leases).
- Under the procedures described above, the initial measurement of the right of use asset and lease liability is like the measurement of the initial asset and liability under a finance lease. The subsequent amortization of the lease liability will also be like that for finance leases. The subsequent amortization of the right of use asset will, however, differ from the subsequent accounting for assets under finance leases.
- For purposes of classifying the lease as a finance lease or an operating lease, the rules are generally the same for the lessee and the lessor but there are some differences. Different terminology is also used for lessees and lessors. The discussion below will first look at the lease accounting from the standpoint of the lessee. After that, the lease accounting for the lessor will be discussed.
- Closely related to the topic of accounting for long-term debt is the accounting treatment of leases. Long-term leases, sometimes called finance leases, are an alternative to the use of debt financing for the acquisition of assets. Until recently, if the acquisition of an asset was accomplished by properly structured leases rather than with debt, the financial accounting consequences were quite different. While differences still exist on the earnings statement, the statement of financial position treatment of leases as opposed to debt-financed purchases is no longer significantly different, with minor exceptions. While the accounting differences are minimized, there are still different income tax consequences for the two forms of financing and there are different legal rights of the parties under commercial law including bankruptcy.
- In determining how to account for a lease, the first step is to determine if the lease is an operating lease or a finance lease. As discussed in more detail below, finance leases are leases that in substance are not significantly different from a purchase of property with secured debt financing for the cost of the leased property. Operating leases are leases that generally represent the right to use the leased property for a period but do not appear to be in substance substantially equivalent to a purchase of the leased asset.
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Chapter 19 International Accounting Issues 51 results (showing 5 best matches)
- U.S.-based businesses that operate in foreign markets have special issues for their accounting and preparation of financial statements in accordance with generally accepted accounting principles in the United States. Aside from the political and legal issues presented by such operations, which are beyond the scope of this Nutshell, foreign operations create significant accounting issues because of the need to present financial information in a single currency, which is the U.S. dollar for financial statements prepared by companies based in the United States.
- This Nutshell is based on generally accepted accounting principles in the United States. In most developed countries the basics of accounting would be similar. However, the actual accounting principles and practices for many transactions will differ among countries (which is understandable given that even in the U.S., there are situations where companies can choose from alternative acceptable accounting practices). While efforts are underway to harmonize the accounting principles followed in different countries, differences still exist. Just as there is no international tribunal or body that can create law applicable in all countries around the world, there is no single, all-powerful accounting body that can set mandatory accounting principles for all countries. The process for harmonizing accounting around the world essentially involves countries participating in international projects the goal of which is to reach agreement on consistent accounting practices and principles that...
- The IFRS rules on accounting for leases and the classification of leases are more subjective than under U.S. GAAP (Chapter 11). With the adoption of the new lease accounting rules by the FASB in 2016, the statement of financial position differences will be reduced but the statement of earnings impact will still differ. The IFRS does not distinguish between operating leases and finance leases. IFRS does not permit the use of LIFO accounting for inventory (Chapter 6). There are several differences at the technical level in the accounting for share-based compensation arrangements (Chapter 13) between U.S. GAAP and IFRS. For example, there are differences in whether these arrangements should be classified as equity or liabilities. IFRS permits capitalization of internally developed intangible assets ( , patents) in situations where capitalization would not be allowed under U.S. GAAP (Chapter 8). U.S. GAAP and IFRS both have the concept of a fair value option (Chapter 3) but the... ...and...
- When the functional currency is a foreign currency, the foreign branch or subsidiary would maintain its financial books and records in that foreign currency. When it is necessary for the parent to issue financial statements, several steps must be completed. If the financial records are maintained in accordance with accounting rules in the foreign country and those accounting rules differ from the U.S. accounting rules, adjustments must first be made to convert the financial statements to a U.S. accounting basis.
- The rules for translating foreign financial statement are quite complex. Different rules apply depending on whether the “functional currency” of the foreign operations is the U.S. dollar or a foreign currency. The functional currency of a branch or subsidiary is “the currency of the primary economic environment in which the entity operates,” which would normally be the currency in which the branch or subsidiary “primarily generates and expends cash.” ASC 830–10–45–2. Factors to be considered in determining the functional currency include the currency in which the business generally receives its revenues and pays its expenses, the extent to which cash flows of the branch or subsidiary are retained in the foreign country as opposed to being made available to the parent for its own use, the currency in which the branch or subsidiary raises financing and the extent to which the branch or subsidiary can service that financing out if its own operations, and the extent of intercompany...
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Chapter 1 The Basic Financial Statements 50 results (showing 5 best matches)
- The main subject matter of this Nutshell is financial accounting. Financial accounting involves the process of recording in the accounting records of a business the financial impact of transactions and events that affect the business and periodically extracting, sorting, and summarizing this information to produce a set of financial statements. Financial statements are the primary means by which businesses communicate financial information to various users. When a business issues a complete set of financial statements, there are four individual statements that are typically prepared. This chapter will introduce and describe the basic financial statements. Various items and concepts introduced briefly in this chapter will be discussed in more detail in later chapters. A general familiarity with the output of the financial accounting process should assist in understanding the accounting process and the issues that arise in the preparation of the financial statements.
- In addition to the actual financial statements described above, a complete set of financial statements includes certain additional information. Financial statements include numerous “notes.” One critical note describes the significant accounting policies adopted by the issuer of the financial statements. As we will see in subsequent chapters in this Nutshell, there are many areas where alternative accounting treatments are available for material items included in the financial statements. The note on accounting policies alerts the readers to which of the alternative accounting procedures have been adopted by the issuer in question.
- The second adjustment modifies income for changes in certain current assets and liabilities. For example, net income includes all sales for the year. But not all sales are immediately collected in cash. If the business extends credit to its customers, some sales will be represented by accounts receivable (cash to be received in the future). If the balance in accounts receivable has increased during the period covered by the financial statements, this increase must be subtracted from net income to convert the sales component of net income to an amount reflecting the actual on account of sales, which is the correct amount to include in the cash flow from operations. Similar adjustments are made for changes in inventory, accounts payable, and other current asset and liability accounts.
- At least for companies that are required to file financial statements with the Securities and Exchange Commission, another important part of the financial statements is a section called “Management’s Discussion and Analysis.” This provides management’s explanation of operating and financing matters for the company as well as additional detailed financial figures. This discussion is very useful in helping to understand the basic financial statements and what they mean.
- ., failure to apply the appropriate accounting principles) and were not corrected by management, the auditor’s report sets forth information about the items that the auditor believes should be handled differently and, if possible, the effect that the items have on the financial statements. If the failure to follow appropriate accounting principles is so extensive that the auditors believe they cannot rectify the matter with a disclosure in their report, the auditor would be required to issue an adverse opinion stating in effect that the failure to follow required accounting principles precludes even a qualified opinion.
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Appendix Time Value of Money 36 results (showing 5 best matches)
- This appendix will discuss the concept of the time value of money (also known as future value and present value (discounting) analysis). Time value of money concepts are employed extensively in the areas of accounting and corporate finance. This appendix will introduce the concepts of present and future value for those who are not familiar with them and will serve as a convenient review for those who are familiar with these concepts.
- The factors in the present value tables discussed above are normally based on the present value of an annuity in arrears. Adjustments must be made to calculate the present value of an annuity in advance. As compared to an annuity in arrears, the payments on an annuity in advance are discounted for one less period (since each payment occurs one period earlier as compared to an annuity in arrears). The last payment of a ten-year annuity in arrears is discounted for ten periods while the last payment of a ten-year annuity in advance is discounted for only nine years. The first payment in an annuity in arrears is discounted for one year while the first payment of an annuity in advance is not discounted at all. To determine the appropriate present value factor for an annuity in advance from the tables for the present value of an annuity in arrears, you select from the tables the appropriate factor for one period less than the number of periods in the annuity and then add one to that...
- The annuity illustrated above called for payments to made at the end of each year during the annuity period. This is called an ordinary annuity or an annuity in arrears. If the payments in the annuity are to be made at the beginning of each of the years in the annuity period, this is referred to as an annuity due or an annuity in advance. As compared to an annuity in arrears, an annuity in advance gets one additional year’s interest on each of the annuity payments. For example, the first payment of a ten-year annuity in arrears earns interest for nine years but the first payment in a ten-year annuity in advance earns interest for ten years. The last payment in an annuity in arrears does not earn any interest but the last payment in an annuity in advance earns interest for one year. Most tables for the future value of an annuity give the future value for an annuity in arrears. When using such tables to determine the factor for an annuity in advance, the procedure is to look up in the...
- Future value tables for annuities are prepared just as in the case of future values and present values of $1. The factors in these tables represent the future value of an annuity of $1 for the number of periods indicated and at the interest rate indicated. A sample table of future value factors for annuities is included at the end of this appendix as Table 3. Calculators and computer software also have functions that calculate the future value of an annuity.
- Tables are available that give the factors for the present value of an annuity of $1 for selected interest rates and selected terms for the annuity. Based on the term of the annuity and the applicable interest rate, you determine the appropriate factor from the table and multiply that factor by the amount of the annuity payment. Table 4 at the end of this appendix gives the present value factors for annuities at a variety of interest rates and for a variety of periods. Alternatively, special functions in calculators or computer software can be used to calculate the present value of an annuity based on any interest rate and any number of periods for the annuity.
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Title Page 3 results
Chapter 2 The Accounting Process 104 results (showing 5 best matches)
- Note that in the entry for the land purchase, the debit items equal the credit items. This must always be true. The convention is that the debit entries are offset to the left of the credit entries in the journal. An actual journal entry would also have associated with it the date of the entry and in some cases, a description of the transaction that produced the entry. In a similar manner, all the other transactions of the business and other events affecting the accounting records would be recorded in the journal with the debits always equaling the credits. This format for journal entries will be used throughout this Nutshell to illustrate accounting for different events and transactions.
- The other unique feature of the revenue and expense accounts is that they are temporary accounts that exist for a certain period (usually one year) and are then closed out at the end of the year. Balance sheet accounts (the accounts for assets, liabilities, and owners’ equity) are permanent accounts. While the balances in these permanent accounts are computed at the end of the year and entered in the balance sheet, the next year’s entries are made in the same accounts. Each permanent (balance sheet) account starts with the balance in that account as of the end of the immediately preceding period. Thus, if the cash account, after all the debit and credit entries for 202x, has a debit balance on December 31, 202x, of $40,000, then the cash account for the next year will begin with a balance on January 1 of $40,000 before any transactions in the new year have been recorded.
- At the end of each year, the process of closing the books begins. The first step is the preparation of a “trial balance.” The balances in all the accounts (permanent accounts and the revenue and expense accounts) are computed and listed on a worksheet in separate columns for the accounts with debit balances and the accounts with credit balances. A preliminary check is made to confirm that the total of the accounts with debit balances equals the total of the accounts with credit balances. A corollary to the requirement that for each accounting entry the debit entries must equal the credit entries is the similar requirement that the total amount in the accounts with debit balances equals the total amount in the accounts with credit balances.
- This entry has the effect of closing out (creating a zero balance in) the revenue and expense accounts. For example, the sales revenues account had a credit balance of $100,000. The $100,000 debit in the closing entry reduces the sales revenue account to zero. The same is true of the expense accounts. The net of all the revenue and expense accounts, $20,000, is now a credit balance in the income summary account.
- With the help of the T-accounts representing the ledger, we can now expand on the concept of debits and credits and explain the significance of posting the journal entry on either the left or right hand side of the T-account (the left and right hand sides of the T-accounts represent two columns in the ledger—one for the debit entries and one for the credit entries). The terms debit and credit are merely labels that are used in describing the process of recording accounting transactions. A debit entry is a left-side entry and a credit entry is a right-side entry. In the journal entry for the land purchase, the debit entry is set off slightly to the left of the credit entry and the credit entry is similarly to the right of the debit entry. In posting this journal entry to the ledger, the debit entry to the Land account for $100,000 has been posted to the left-hand side of the Land T-account. The credit entries for Cash and Notes Payable have been posted to the right-hand side of those...
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Chapter 10 Accounting for Long-Term Debt 70 results (showing 5 best matches)
- Long-term debt is issued in a variety of forms. The debt may be in the form of a note payable, particularly where the loan is negotiated with a single lender such as a bank. For large companies, particularly those with traded stock, long-term debt may be issued in the form of bonds that divide an aggregate debt placement into smaller pieces that may be sold to different investors. Notes or bonds, in turn, may take different forms. The notes or bonds may be unsecured obligations of the debtor. Unsecured traded bonds are frequently referred to as debentures. Mortgage notes or bonds are secured by a mortgage on the debtor’s real property. Long-term debt may also be secured by personal property such as equipment, in which case they may be in the form of equipment trust certificates. These are the basic forms. The financial markets have developed additional specialized forms of debt. For accounting purposes, the legal form of the debt is not important. The accounting treatment will be...and
- After initial issuance, the accounting for the debt would follow the normal rules. With respect to the warrants, if they are exercised, the amount in the stock warrants account would be added to the cash received and recorded in the common stock and regular additional paid-in-capital accounts. If stock warrants lapse unexercised, the amount in the stock warrants account would be reclassified as additional paid-in-capital from stock warrants lapsed. For example, assume that one-half of the warrants described above are exercised. The company would receive $250,000 in cash (12,500 shares × $20). The entry to record the exercise of the warrants would be:
- Accounting by the debtor for long-term debt such as bonds payable and mortgages payable is like the accounting by investors in debt securities that are intended to be held to maturity (discussed in Chapter 9). This chapter will review the principal accounting rules applicable to long-term debt from the borrower’s perspective. In appropriate places, reference will be made to the discussion of investments in debt securities in Chapter 9 for more detail regarding certain computations.
- Companies may issue bonds or other debt instruments that are convertible at the option of the holder into stock of the issuing corporation. Financial theory indicates that the amount paid by the purchaser of convertible debt consists of two components, (1) the value of the debt exclusive of the conversion feature and (2) the value of the conversion option. In accounting for the issuance of convertible debt, however, the convertibility feature is generally ignored. The proceeds are all recorded in the convertible debt account, which is reported as a liability in the balance sheet at least where the debt is issued at a price not significantly more than the face amount of the debt. ASC 470–20–25–12. Any discount or premium from face value is accounted for in the normal manner. In certain situations, a portion of the proceeds from the issuance of ...separately from the debt. This would occur, for example, where it appears to be beneficial to exercise the conversion feature as of... ...in...
- At one time, the FASB provided that a retirement of debt could result for accounting purposes from an “in-substance defeasance.” An in-substance defeasance occurred when assets that would generate the necessary cash flow to make all future payments on the outstanding debt were placed in a trust for the purpose of making future payments on the debt, provided that certain requirements were met.
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Chapter 14 Partnership Accounting 60 results (showing 5 best matches)
- Alternatively, separate partner accounts could be used to record income and loss and distributions during the year. For example, distributions during the year could be recorded in a “drawing account.” At the end of the year, the debit balance in the drawing account would be deducted from the capital account by crediting the drawing account and debiting the capital account for each partner. Similarly, a separate account could be used to record the share of income or loss that accrues to the partner. If such separate accounts are maintained, each partner’s capital in the partnership would be the total of the amounts in these accounts.
- Partnerships maintain a separate capital account for each partner. Each partner’s capital account is used to record that partner’s contributions to the partnership, that partner’s share of income or loss, and any distributions made to the partner. This differs from the accounting for stockholders’ equity of a corporation, which generally does not maintain separate accounts for each shareholder in the corporation but only for separate classes of stock.
- The alternative approach to dealing with the retiring partner is the bonus method. Under the bonus method, amounts in the capital accounts of the partners are reallocated among them to adjust the retiring partner’s capital account to the amount to be distributed to the retiring partner. In this case, T’s capital account must be increased by $15,000. If the book value of the net assets is to remain the same, this additional capital must come from the capital accounts of the other partners. The $15,000 will be charged against the capital accounts of the continuing partners in the ratio in which they share partnership losses. Since R and S share income and loss in a 2:1 ratio (50% for R and 25% for S), $10,000 will be debited to R’s capital account and $5,000 will be debited to S’s capital account. The entry would be as follows:
- A new partner may also be admitted to the partnership in return for a contribution of additional assets to the partnership. The amount required to be contributed by the new partner will frequently reflect the fair value of the net assets of the partnership so that the new partner may be required to contribute an amount to the partnership that represents a premium over, or discount from, the amount that would be expected based on the current book values of the capital accounts. In the example involving the EF partnership, assume that G is now to be admitted to the partnership as a 25% partner in return for a contribution to the partnership of cash in the amount of $50,000. If G’s contribution were simply combined with the current book value of the capital accounts of E and F, G would have a capital account equal to approximately 29.4% (50,000/170,000) of the total partnership capital following G’s admission. There are three approaches to accounting for G’s admission.
- The partnership form of entity presents some unique accounting issues that do not exist with the corporation, which is the form of entity that is typically used to illustrate accounting for owner’s equity. These differences are attributable primarily to the fact that a separate account is maintained for the owners’ equity of each partner in the case of a partnership and the book value of each partner’s interest in the partnership may vary from that of the other partners, even partners that have the same general percentage interest in the partnership. This chapter will review the key issues related to accounting for partnerships that differ from the accounting rules applicable to corporations.
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Chapter 7 Property, Plant, and Equipment and Depreciation 91 results (showing 5 best matches)
- In the noncurrent asset section of the balance sheet, the principal component for most businesses is the property, plant, and equipment account, also called the fixed asset account. The property, plant, and equipment account is generally composed of the tangible property other than inventory that is used in the operations of the business and expected to be used for more than one year. It includes land used in the business (but not land held for investment), machinery and equipment, furniture and fixtures, and buildings and other structures. There are five principal issues in accounting for property, plant, and equipment. These issues relate to recording the initial acquisition, allocating the cost of the property to expense over the life of the property through a process called depreciation accounting, reporting post-acquisition costs incurred to keep the property operational, accounting for the disposal of the property, and accounting for any permanent impairments.
- The third principal accounting issue related to fixed assets is the accounting treatment for expenditures made on fixed assets after they are acquired and placed in service. When a post-acquisition expenditure is made in connection with a fixed asset, two possible accounting treatments are available. The expenditure could be immediately expensed (such an expenditure is sometimes referred to as a revenue expenditure). To expense an item means to recognize it as an expense in full in computing net income at the time the expenditure is made. Revenue expenditures in connection with fixed assets are generally expenditures for normal maintenance of the assets and for minor repairs.
- Thus, on an annualized basis, the business has invested $167,917 for the current year. Assume that there is no debt specifically incurred to finance the construction. The interest allocable to the funds invested in the construction process is $167,917 × 11%, or $18,471. This amount would be transferred from the interest expense account for the year to the account in which the construction costs are being accumulated. The entry would be as follows:
- Historical cost accounting is generally used to account for fixed assets. There is no attempt to revalue the assets and maintain them at their fair market values. An exception to this applies when an asset has experienced a reduction in value to an amount below the current book value of the asset and that loss of value is not temporary. Such a reduction in value would be recorded as a loss in the financial statements.
- The depreciation expense is deducted in computing net income for the period. In some cases, depreciation for the year is not recorded as an expense. It is recorded as an addition to some other asset account. For example, in the case of a manufacturer, the depreciation on the manufacturing facilities and equipment is initially recorded as part of the cost of the manufactured goods and is included in inventory cost. This depreciation will effectively be recorded as an expense as part of the cost of goods sold when the inventory is sold. Depreciation is also transferred to another asset account when the depreciation is incurred in connection with the self-construction of assets.
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Copyright Page 7 results (showing 5 best matches)
- Nutshell Series, In a Nutshell
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Chapter 5 Current Assets and Liabilities 132 results (showing 5 best matches)
- ASC 860–10 and –20 govern the accounting for sales of receivables and other transfers of financial assets. In this discussion, a sale of receivables will be used to illustrate the accounting issues that arise in these types of transfers. After reviewing the requirements to treat the transfer as a sale, the accounting for a transfer of receivables treated as a sale will be illustrated.
- One audit issue related to the cash account is the concept of check “kiting.” Kiting generally involves writing a check on one account for an amount greater than the actual funds in that account and then depositing the check in another bank account. The deposited amount is immediately withdrawn from the second account before the check clears the first account. To avoid detection, the excess must be deposited back in the first account before the check clears that account.
- There are few accounting issues related to the cash account. Because of its highly liquid status and the exposure to theft, embezzlement, or other loss, the cash account is subject to extensive internal control procedures and stringent audit procedures to be certain that the amount of cash reported in the balance sheet is in existence and that cash is not being used for unauthorized purposes. Bank reconciliations are prepared on a regular basis to compare the company’s reported cash in its bank accounts with the reported bank balances and to identify items that may have been entered directly into the bank accounts but for which accounting entries have not yet been made. Auditors will confirm with the banks the amounts reported in the accounts at the end of the year. At the same time, the auditors will confirm with the banks the absence of any unrecorded loans that may be used to conceal a cash shortage.
- The second approach for determining the bad debt expense for the period is the aged accounts receivable analysis. In an aging analysis, the accounts receivable balance is periodically divided into categories based on the age of the receivables. The amount in each aging category is examined and a determination is made, based on experience, how much of the receivables in each category will eventually be uncollectible. The total amount expected to be uncollectible is then computed and compared to the amount currently in the allowance account. The difference is recorded as an adjustment to bad debt expense and the allowance account. This aged accounts receivable analysis is also used as a periodic check on the amount computed under the percentage of sales method.
- This chapter will discuss accounting issues related to current assets and liabilities. Current assets are assets that are generally expected to be converted into cash or consumed in the business within the next year or within the operating cycle for businesses with an operating cycle greater than one year. The operating cycle is the length of time needed for a business to acquire raw materials or other inputs, produce and sell its goods or services, and collect the cash generated by the revenue-producing activities. For most businesses, the primary components of current assets are cash, marketable securities, receivables, inventories, and short-term prepayments. Accounting for inventories will be discussed separately in Chapter 6 and accounting for marketable securities is discussed further in Chapter 9.
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Chapter 3 Generally Accepted Accounting Principles 59 results (showing 5 best matches)
- The rules and regulations of various federal and state regulatory agencies that require financial statements to be filed with them is another source of authoritative accounting guidance for those financial statements. In some cases, these agencies have established accounting rules or procedures for issues that have not been addressed by the official private sector accounting standard setting bodies and to this extent, the regulatory rules can be an additional source of guidance for GAAP. However, these agencies frequently issue their own accounting procedures and rules that in some cases conflict with GAAP. In those cases, the companies subject to the jurisdiction of the regulatory agencies will prepare one set of financial statements for filing with the regulatory agencies and another set of financial statements prepared in conformity with GAAP for use by shareholders, creditors, and other users and for filing with the SEC, where appropriate. It may not be possible for an auditor...an
- The foregoing discussion of GAAP relates primarily to how accountants determine whether a specific accounting treatment must be used for a particular transaction or event. From time to time, the accounting profession has also tried to establish a broader set of fundamental accounting principles (sometimes referred to as concepts, pervasive principles, conventions, postulates, axioms, etc.) that could be used primarily in two ways. These fundamental principles serve as the conceptual basis for the official standard-setting bodies when they are considering adopting a new accounting standard. A new standard is expected to be in conformity with the underlying, fundamental principles. Alternatively, when an accountant is trying to determine the accounting for a specific transaction or event and there is no specific guidance in any of the sources described above, the accountant should presumably be guided by the fundamental underlying principles in developing a solution to the particular
- Throughout this Nutshell, references will be made to topics, subtopics, sections, or paragraphs in the Accounting Standards Codification or ASC ( , ASC 740 on Income Taxes or ASC 730–10–25 on recognition of research and development costs). These references are to the FASB Accounting Standards Codification, which can be found on the FASB’s website at
- The requirement for yearly reporting requires that a conceptual basis be developed for assigning revenue to a particular accounting period even though that revenue may be earned through a continuous process. The “revenue recognition principle” is the conceptual basis for assigning revenue to accounting periods. Similarly, it is necessary to assign costs incurred in generating revenue as expenses to the appropriate accounting period. The conceptual approach to this issue is that expenses should be matched (recorded as expense) in the same period as the revenues to which they relate. Revenue recognition and the matching principle are the subject of Chapter 4.
- The Financial Accounting Standards Board (the “FASB”) is an independent body that was created to establish and improve standards for financial accounting and reporting. The FASB’s seven members are selected by the Financial Accounting Foundation Board of Trustees. Funding for the FASB comes from revenues from the sale of publications (like the Accounting Standards Codification, discussed ), fees paid by issuers of publicly traded securities as defined in SOX, and investment income. The FASB website states that in 2019, sales of publications provided approximately $18.7 million in revenue and fees paid by issuers provided approximately $29.3 million in revenue.
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Chapter 13 Accounting for Stock and Stockholders’ Equity 132 results (showing 5 best matches)
- At the end of each year in connection with the closing of the books, the net income or loss for the year is transferred from the temporary revenue and expense accounts to the retained earnings permanent account. If a corporation has net income for the year of $150,000 and the corporation used an “income summary” account to summarize the net income for the year, the entry to transfer the net income to retained earnings would be:
- The dividends declared account is a temporary account in which the dividends for the year are recorded. At the end of the year, the amount in the dividends declared account would be transferred to, and deducted from, retained earnings. If the total amount in the dividends declared account at the end of the year were $1,000,000, the following entry would be made:
- Similar accounting applies to the issuance of preferred stock. The par or stated value of the preferred stock would be recorded in an account called “Preferred Stock.” Any additional amount received for the stock would be recorded in an additional paid-in-capital account for the preferred. Thus, if 10,000 shares of $100 par value preferred stock are issued for $105 per share, the entry to record the issuance would be as follows:
- In some transactions involving a purchase of the company’s stock there may be another aspect to the transaction that results in an amount being paid for the stock greater than fair value and the excess over fair value is consideration for something other than the stock. In that case, the accounting for the treasury stock should be based on the fair value of the stock and the difference should be accounted for separately depending on the circumstances giving risk to the premium being paid. ASC 505–30–30–2.
- The first issue that arises in accounting for stockholders’ equity is accounting for contributions to the capital of a corporation. A contribution to capital normally involves the issuance of stock by the corporation in exchange for the receipt of assets.
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Chapter 18 Corporate Finance— Valuation 71 results (showing 5 best matches)
- Financial accounting information is critical to the valuation of business enterprises and the valuation of the individual securities issued by businesses. The information from the financial statements may be used directly in the valuation process or the accounting information may be used indirectly in projecting such items as earnings or cash flow or in determining the risk associated with the securities of the business. Risk is reflected in the discount rate or required rate of return that is a central element of many valuation techniques used in corporate finance.
- A more sophisticated variation of this approach is to use a model called the capital asset pricing model to determine appropriate rates of return. The theoretical and conceptual basis for the capital asset pricing model is beyond the scope of this Nutshell. A simplified application of this model will, however, illustrate its use in determining common stock values. Analysts determine the expected rate of return for a “market portfolio of stocks” consisting, for example, of all the stocks in the Standard & Poors 500 index. This rate of return for a broad-based market index is composed of two elements, a risk-free interest rate and a risk premium. The expected rate of return for individual stocks is then computed by determining how risky an individual stock is compared to the market as a whole. This relationship is stated as follows:
- Several types of multiples can be used. A multiple based on book value of a company may be used. This multiple would be based on the relationship between the price paid for other comparable businesses and the book value of those businesses at the time of the acquisition. For most industries, book value multiples are unreliable because of the use of historical costs in accounting for inventory and property, plant, and equipment. Different businesses may have widely disparate book values solely as the result of historical cost accounting.
- The market interest rates to be used in valuing bonds are determined by several factors. The primary determinants of the market interest rates for a bond issue are discussed in this section. This Nutshell does not discuss the determinants of the overall level of interest rates in the economy since these factors are not specific to the bond issue.
- Analysts use different techniques to estimate this terminal cash flow value. The terminal cash flow may be based on the projected book value of the business taking into account the projected income, capital expenditures, and changes in working capital, and distribution of all free cash flow to the owners over the projection period. Another procedure used to estimate the terminal cash flow is an earnings-based value computing by multiplying the estimated earnings (unleveraged) for the final year in the cash flow projection period by an appropriate price/earnings multiple to compute a terminal value for the business. A third calculation might involve a calculation of a terminal value of the business based on an appropriate multiplier applied to the free cash flow for the final year in the projection period. From these amounts, the analyst will determine a subjective estimate of the terminal cash value for the firm.
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Chapter 17 Special Reporting Issues 50 results (showing 5 best matches)
- ASC 250–10–45 governs the reporting for changes in accounting principles. A change in accounting principle is the decision to adopt one accepted accounting approach for an accounting issue in place of the accounting approach previously utilized where both of the methods are generally accepted accounting principles. A change can only be made if it is required by an amendment to the ASC or it can be justified as being clearly preferable to the prior accounting treatment. ASC 250–10–45–2. There is a general presumption that accounting principles once adopted should not be changed.
- Previously, the general rule for reporting most changes in accounting principles required a determination of the cumulative effect of the change in accounting principle as of the beginning of the period in which the change occurred. The cumulative effect of the change in accounting principle was the amount that retained earnings would change as of the beginning of the year in which the change is adopted if the new accounting principle had been applied in all prior periods ( the cumulative change in income net of tax). This cumulative effect was reported as a separate item in the income statement. The new accounting principle was then applied prospectively in the current year and all future years.
- Under ASC 250–10–45–18, certain changes in accounting principles are treated as “changes in accounting estimates effected by a change in accounting principle.” For these types of changes in accounting principles, the changes are implemented prospectively as in the case of changes in estimates. ASC 250–10–45–18 indicates that a change in the method of depreciating long-lived assets, for example from a straight-line method to an accelerated method (see Chapter 7 B.3.), would be an example of a change in accounting estimate effected by a change in accounting principle.
- Under ASC 250–10–45–5, the appropriate reporting for a change in accounting principle now generally requires “retrospective application” of the new accounting principle to all prior periods. Retrospective application requires that the balances of affected assets and liabilities be adjusted for the cumulative effect that the change would have had to those assets and liabilities as of the beginning of the earliest period for which financial statements are presented. If the new accounting principle would have affected the net income of the company for periods prior to the earliest period presented, the cumulative effect of the change in accounting principle on net income as of that date (net of income tax effects) would be recorded as an adjustment to retained earnings. The financial statements for each separate period presented would then be adjusted for the effects in that period of the changed accounting principle.
- Adopting an accounting principle for transactions or events that are occurring for the first time (or that occurred in the past but were not material) or for transactions or events that are clearly different in substance from prior events or transactions is not a change in accounting principle. ASC 250–10–45–1.
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Chapter 16 Earnings per Share and Financial Ratios 82 results (showing 5 best matches)
- Aside from questionable accounting policies, the analyst is also sensitive to the fact that many acceptable accounting practices are choices from available alternatives. Since most securities analysis involves comparison of the financial data for several companies, the existence of multiple acceptable accounting practices makes the analysis difficult. The financial statements of companies using different accounting practices are not necessarily comparable even if the companies are in the same industry. For example, one company may use LIFO in accounting for inventory and another company may employ FIFO in accounting for inventory. In this situation, the analysts will attempt to adjust the financial statements in such a way as to reflect comparable accounting policies for all the companies under review.
- Finally, companies may not be directly comparable not because of different accounting policies but because of different business practices that create different accounting results even though the underlying business realities are not different in substance. An example of this situation is the choice by one company to finance its receivables by borrowing against the receivables while another company sells its receivables so that the receivables are not included on the balance sheet and no liability is recorded. If securities analysts believe that the substantive differences of these alternatives is not significant, they will “reconstruct” the financial statements of one or more companies to make the statements of all companies under review more comparable regardless of the form of financing used.
- If the net income for the year includes separately reported items such as effects of changes in accounting principles or gain or loss from the disposal of a business (see Chapter 17), EPS is calculated and reported separately for each of these components (as well as for the net income before these items and the overall net income).
- As noted above, the basic and diluted EPS numbers are shown at the bottom of the income statement. If the income statement includes the effect of changes in accounting principles, or amounts attributable to the disposal of a business, basic and diluted EPS amounts would also be shown for these separately disclosed items.
- Once any necessary adjustments have been made to the financial statements, there are several financial ratios that are typically computed and used to assist in the evaluation of companies by investors, analysts, and lenders. The following is a brief discussion of some of the principal financial ratios that are typically used. Lawyer’s should be familiar with these ratios because they are also found in negative covenants in loan agreements and other legal documents. Violating the contractual limits for one or more of these ratios may cause a default under a loan. Some familiarity with the ratios is important for attorneys working on these types of transactions.
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Chapter 12 Accounting for Other Long-Term Liabilities 107 results (showing 5 best matches)
- Accounting for income taxes is the subject of ASC Topic 740. The principal accounting issues related to income taxes arise from the fact that the rules for determining income for income tax purposes are different from the rules of GAAP used in determining income before tax for financial reporting. There are two types of differences. “Temporary differences” arise when an item of income or expense is taken into account in determining financial or book income before tax in a different period from the period in which the item is taken into account in determining taxable income. “Permanent differences” arise because some items that are income for one purpose are never treated as income for the other purpose and similarly some items that are deducted as expenses for one purpose are never deducted as expenses for the other purpose.
- The deferred tax liabilities and deferred tax assets are accounting deferral techniques used to match income tax expense with the related financial reporting income before tax. A deferred tax liability does not represent a present obligation to make a payment to any governmental agency. Whether any liability to the government will exist in the future depends on the future taxable income of the business. Similarly, a deferred tax asset does not represent a present right to receive a tax refund from any government. Deferred tax assets and deferred tax liabilities can become very substantial in amount as they accumulate over time. Take, for example, a growing capital-intensive business. Each year, the business adds new equipment and other depreciable property eligible for the accelerated tax depreciation allowed for income tax reporting that is one of the main reasons deferred tax liabilities arise. While the book depreciation on older assets will exceed the tax depreciation on those...
- Another significant obligation for many businesses is the obligation associated with retirement plans. As will be discussed below, retirement plans may result in the recognition of significant assets and liabilities and significant amounts of pension expense. Retirement plans or pensions represent a major obligation in the general sense for many businesses particularly if the businesses have defined benefit retirement plans in which the retired employees are to receive an amount at retirement that is based on a formula that takes into account such factors as compensation level, years of service, and age at retirement. The dollar amounts involved are often quite large. In addition, defined benefit plans can trigger large swings in income or expense from year to year. Many companies that previously provided defined benefit pension plans are moving to some type of defined contribution plan. However, because employees who were covered by defined benefit plans are often grandfathered at...a
- There are four basic categories of temporary differences in accounting for deferred income taxes that we will discuss. Certain types of temporary differences can also arise related to accounting for investment tax credits, tax effects from changes in foreign currency and business combinations. ASC 740–10–25–20.
- Measuring the amount of compensation expense associated with defined benefit plans and the amount of liabilities or assets to be recorded in connection with defined benefit plans is much more complicated than the related issues for defined contribution plans. The accounting rules related to these plans are extremely technical. The discussion below only highlights the key elements and accounting issues for these types of plans.
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Chapter 6 Accounting for Inventories 62 results (showing 5 best matches)
- To determine cost of goods sold under this system, one more item of information is necessary. The business will have maintained a temporary account during the year called “Purchases” (assuming that we are dealing with a retail or wholesale operation) and all the purchases of inventory items during the year will have been recorded in that account. Assume that the balance in the Purchases account for the year is $400,000 ( 400,000 units were purchased during the year at a cost of $1 per unit). A summary journal entry for all the inventory purchase transactions for the year would be as follows:
- ASC 330 generally governs the accounting for inventory. Accounting for inventory involves three primary steps. First, there must be a procedure for determining the physical quantities of goods included in the inventory at the balance sheet dates and typically at certain interim points during the accounting year. Second, items that are included in inventory are acquired from time to time at different prices or costs. In addition to determining the number of items on hand, businesses must determine the appropriate unit cost to be assigned to the items that are still on hand and the units that have been sold during the period. Third, generally accepted accounting principles require that inventory be periodically evaluated to determine if its “value” is less that its cost. Where that is the case, the lower of cost or market rule requires that the carrying amount or book value of the inventory be written down to its lower value.
- An accounting entry is made at the end of the year to update the inventory account, close out the purchases account, and enter the appropriate amount in the cost of goods sold account. That entry would be as follows:
- During the manufacturing process, costs of raw materials and conversion costs are accumulated in a separate category of inventory called work-in-process inventory. The cost of raw materials added during the current period and the conversion costs (labor and overhead) incurred during the period are added to the amount of work-in-process at the beginning of the period. Using a periodic inventory system for illustration, the ending work-in-process inventory is subtracted to determine the cost of goods manufactured during the period. At the end of the accounting period, cost of goods manufactured would thus be computed as follows:
- In the examples in Section A above, it was assumed that the unit cost or value of the units of inventory did not change during the year. A major complicating factor in accounting for inventory is the reality that inventory items are acquired at varying costs throughout the year and from year to year. A procedure is necessary to determine the costs to be assigned to the units still in inventory at the end of the year and the costs to be assigned to the units that were sold during the year.
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Chapter 15 Accounting for Business Combinations 27 results (showing 5 best matches)
- The accounting for a business combination is similar in many respects to any purchase of assets. The assets, liabilities, and any non-controlling interest in the acquired entity are recorded on the acquirer’s books at their fair value. The acquirer’s stock or some types of noncash consideration for the acquisition will be measured at their fair value. The book values of the assets and liabilities of the target are not carried over. There is no carryover of any accounting attributes from the seller as was the case under an old method of accounting for business combinations called the pooling of interests method.
- Under the acquisition method of accounting for a business combination, the acquiring company records the acquired net assets at their fair values at the date of acquisition. In illustrating the accounting for business combinations, I will assume an acquisition of stock of the target rather than an acquisition of the target’s assets. The rules for acquisitions of assets are essentially the same. The following simplified statements of financial position of the purchaser and the target will be used to illustrate acquisition accounting.
- In the case of a business combination in the form of an acquisition of stock, the adjustments to the fair value of the assets and the liabilities of the acquired business under the acquisition method of accounting are often recorded in the process of preparing consolidated financial statements, as discussed in Chapter 9. These adjustments are not generally recorded in the regular books of the target. In certain situations where the acquired subsidiary must issue its own separate financial statements, a procedure called “push down accounting” is employed. Under push down accounting, the assets and liabilities of the acquired subsidiary are adjusted based on the fair values at the time of the acquisition in the same manner that those values are adjusted in the preparation of the parent company’s consolidated financial statements.
- The rules for accounting for business combinations are not applicable to a transfer by a corporation of its net assets to a newly created corporate entity, nor does it apply to a transfer of assets among corporations under common control ( between a parent and its subsidiary or between two subsidiaries of a common parent corporation). ASC 805–10–15–4. The rules apply to an acquisition of the assets of an unrelated entity or to the acquisition of stock of an unrelated entity. All references to “acquisitions” in this chapter mean acquisitions that meet the definition of a business combination.
- The next step is to determine whether any goodwill results from the acquisition. Goodwill is the value of an acquired business over and above the value of the identifiable assets of the target less its liabilities. More technically, goodwill is (a) the fair value of the consideration issued by the acquirer plus (b) the fair value of any noncontrolling interest in the target not acquired by the acquirer less (c) the fair value of the identifiable assets acquired less the liabilities of the target recorded at the date of acquisition. ASC 805–30–30–1. In this case, the fair value of the consideration issued is $90,000 and the fair value of the noncontrolling interest in the target is $10,000, for a total of $100,000. The fair value of the identifiable assets of the target is $105,000 and the liabilities of the target are $30,000, or a net amount of $75,000. Therefore, the goodwill to be recorded is $100,000 minus $75,000, or $25,000. The post-acquisition accounting for goodwill is...
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Chapter 4 Recognition of Revenues and Expenses 55 results (showing 5 best matches)
- Where there appears to be a financing component involved but that component is not separately stated ( , where the buyer has the right to delay its payments for a significant period), an appropriate financing component should be separated from the basic consideration and recognized over the relevant financing period. Where payments are not expected to go beyond a year after the goods or services are provided, an entity can elect to ignore any requirement to compute the separate financing component. Where there is noncash consideration involved, it will be necessary to determine the fair value of the noncash consideration.
- On the other hand, expenses may be recognized in some cases before any identifiable costs are actually incurred by the business. For example, when a business sells goods subject to a warranty, the normal practice is to report an estimated warranty expense at the time of the sale of the goods. The offsetting entry to the warranty expense (which is a debit entry) is a credit to a liability account for future warranty costs. The actual warranty costs will not be incurred until some later time. When warranty costs are incurred, the warranty costs will be debited to the liability account rather than being deducted as an expense. Contingent expenses like the possible loss from litigation in which the business is a defendant may have to be recognized as expenses prior to the actual resolution of the lawsuit. Thus, expense is recognized prior to any actual costs being incurred. It is the matching principle and the expense recognition rules derived therefrom that determine when “costs” are...
- Certain types of costs can be directly related with revenue. These costs are recognized as expense when the related revenues are recognized. The cost of goods sold is an example of this approach to expense recognition. A retailer incurs costs in acquiring inventory that is held for sale. When the inventory is acquired, the cost is not treated as an expense but is reported in a current asset account called inventory. When sales occur and revenue is recognized, the appropriate cost of the items sold is removed from the inventory account and recognized as an expense called cost of goods sold.
- Once the revenue recognition method is determined, the business must decide how to associate the expenses that are incurred in generating the revenues with the revenues that are recognized. Some costs or expenses may be easily identified with their related revenues. For example, the costs of the raw materials that were used in producing an order can be easily identified and associated with the appropriate revenue from that order. On the other hand, many expenses do not bear such a direct relationship to a specific revenue generating transaction and there is a need to determine when such expenses should be recognized for accounting purposes.
- The alternative method for accounting for this type of contract is the percentage of completion method. Under this method, at the end of 202x an estimate is made of the portion of the contract that has been completed at that point in time. That estimate is usually made on the basis of engineering analysis of the project or on the basis of the proportion of estimated total costs that have been incurred at the balance sheet date (in this example, both approaches indicate that the contract is 60% complete at the end of 202x ($480,000 of cost incurred in the current year is 60% of the $800,000 estimated total cost)). A corresponding portion of the total revenue on the project is recognized. Thus, $600,000 of the revenue (60% of $1,000,000) would be recognized in 202x and the remaining $400,000 would be recognized in the next year. This approach also results in recognition of a corresponding portion of the total gross profit on the contract in each of the two years.
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Chapter 8 Intangible Assets 38 results (showing 5 best matches)
- The accounting for intangible assets is a function of the method by which the intangibles are acquired (whether they are purchased or whether they are internally developed) and by the nature of the intangible assets (including whether they are specifically identifiable, whether they have indeterminate lives, and whether they are inherent in a continuing business). The accounting for goodwill and other intangible assets is now governed by ASC 350 and by ASC 805–30 (which addresses the original recognition of goodwill and other intangibles acquired as part of a business combination, as discussed in Chapter 15).
- Amortization is generally on a straight-line basis unless a different pattern can be reliably determined. ASC 350–30–35–6. The amount subject to amortization is the full capitalized cost of the intangible but may be reduced by an estimated residual value for the intangible in relatively rare situations. When amortization is recognized for intangible assets, there are two ways for recording the credit entry to reduce the book value of the intangible asset. The credit entry could be to an accumulated amortization account like the accumulated depreciation account used for tangible property. For intangible assets, however, the amortization is frequently credited directly to the asset account. Under this approach, the entry to record $100,000 of amortization expense related to a patent would be as follows:
- Private companies can elect an alternative approach to post-acquisition accounting for goodwill. In lieu of doing an annual review of goodwill to test for an impairment, private companies may elect to amortize goodwill on a straight-line basis over a period not to exceed ten years. ASC 350–20–15–4 and ASC 350–20–35–63. This simplifies the post-acquisition accounting for goodwill by eliminating the more complicated annual testing of goodwill for impairment. However, a private company that elects to amortize goodwill must still perform impairment testing when certain triggering events occur. The private company can determine whether to apply impairment testing for goodwill at the entity level or the reporting unit level. Where impairment testing is required, the process is like that described above for companies other than private companies.
- After a business combination is completed, it is necessary to determine the post-acquisition accounting for the goodwill and other intangible assets resulting from the business combination. The accounting for the intangible assets other than goodwill will depend on whether those assets have finite useful lives. ASC 350–30–35–1. If these assets have finite useful lives, they must be amortized over that useful life and if they do not have finite useful lives, they are not amortized. Both assets with and without finite lives must also be tested periodically for impairment. The determination of whether a useful life exists and the length of a useful life may be complicated and subjective and can be based on various factors including legal, regulatory, contractual, competitive, economic, and other factors.
- The post-acquisition accounting for the costs related to intangible assets that are required to be capitalized depends on whether those assets are determined to have a finite useful life. An intangible asset with a finite useful life is amortized over that useful life. ASC 350–30–35–1 through 6. Useful life is the period over which the asset is expected to contribute directly or indirectly to the cash flows of the business. ASC 350–30–35–2. ASC 350–30–35–3 sets forth several factors to be considered in determining the useful life of an intangible including how the asset will be used in the business, the useful life of other assets to which the intangible relates, legal, regulatory and contractual considerations affecting the intangible asset, various factors that could render the intangible obsolete, and the amount of maintenance expenditures required to maintain the cash flows expected from the asset. The useful life of intangibles should be reassessed at least annually. ASC 350–30...
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Outline 130 results (showing 5 best matches)
Index 116 results (showing 5 best matches)
West Academic Publishing’s Emeritus Advisory Board 8 results (showing 5 best matches)
- Joanne and Larry Doherty Chair in Legal Ethics &
- Dean and Joseph L. Rauh, Jr. Chair of Public Interest Law University of the District of Columbia David A. Clarke School of Law
- Professor of Law and Dean Emeritus
- Professor of Law, Chancellor and Dean Emeritus
- President, William and Flora Hewlett Foundation
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- Publication Date: October 29th, 2020
- ISBN: 9781647083007
- Subject: Accounting
- Series: Nutshells
- Type: Overviews
- Description: This product provides a well-rounded summary of the relevant accounting areas from basic financial statements to complex earnings-per-share ratios and corporate finance and valuation. Learn how to recognize revenue, expenses, assets, and liabilities. It reviews accounting principles for many different areas, including acquisitions, investments, long-term debt, leases, stocks, and partnerships. It also discusses recent developments such as adoption of new requirements to place most operating leases on the lessee’s balance sheet, a new principles based approach to accounting for revenue, and refinements in the accounting for stock options.
