Financial Accounting and Reporting 16th edition [Minkštas viršelis]

Brief contents Preface and acknowledgements Guided tour of MyAccountingLab Part 1 PREPARATION OF FINANCIAL STATEMENTS 1 Accounting and reporting on a cash flow basis 2 Accounting and reporting on an accrual accounting basis 3 Preparation of financial statements of comprehensive income, changes in equity and financial position 4 Annual Report: additional financial statements 5 Statements of cash flows Part 2 INCOME AND ASSET VALUE MEASUREMENT SYSTEMS 6 Income and asset value measurement: an economist's approach 7 Accounting for price-level changes 8 Revenue recognition Part 3 REGULATORY FRAMEWORK - AN ATTEMPT TO ACHIEVE UNIFORMITY 9 Financial reporting - evolution of global standards 10 Concepts - evolution of an international conceptual framework 11 Ethical behaviour and implications for accountants Part 4 STATEMENT OF FINANCIAL POSITION - EQUITY, LIABILITY AND ASSET MEASUREMENT AND DISCLOSURE 12 Share capital, distributable profits and reduction of capital 13 Liabilities 14 Financial instruments 15 Employee benefits 16 Taxation in company accounts 17 Property, plant and equipment (PPE) 18 Leasing 19 Intangible assets 20 Inventories 21 Construction contracts Part 5 CONSOLIDATED ACCOUNTS 22 Accounting for groups at the date of acquisition 23 Preparation of consolidated statements of financial position after the date of acquisition 24 Preparation of consolidated statements of income, changes in equity and cash flows 25 Accounting for associates and joint arrangements 26 Introduction to accounting for exchange differences Part 6 INTERPRETATION 27 Earnings per share 28 Review of statements for management purposes 29 Analysis of published financial statements 30 An introduction to financial reporting on the Internet Part 7 ACCOUNTABILITY 31 Corporate governance 32 Sustainability - environmental and social reporting Index Full contents Preface and acknowledgements Guided tour of MyAccountingLab Part 1 PREPARATION OF FINANCIAL STATEMENTS 1 Accounting and reporting on a cash flow basis 1.1 Introduction 1.2 Shareholders 1.3 What skills does an accountant require in respect of external reports? 1.4 Managers 1.5 What skills does an accountant require in respect of internal reports? 1.6 Procedural steps when reporting to internal users 1.7 Agency costs 1.8 Illustration of periodic financial statements prepared under the cash flow concept to disclose realised operating cash flows 1.9 Illustration of preparation of statement of financial position 1.10 Treatment of non-current assets in the cash flow model 1.11 What are the characteristics of these data that make them reliable? 1.12 Reports to external users Summary Review questions Exercises References 2 Accounting and reporting on an accrual accounting basis 2.1 Introduction 2.2 Historical cost convention 2.3 Accrual basis of accounting 2.4 Mechanics of accrual accounting - adjusting cash receipts and payments 2.5 Subjective judgements required in accrual accounting - adjusting cash payments in accordance with the matching principle 2.6 Mechanics of accrual accounting - the statement of financial position 2.7 Reformatting the statement of financial position 2.8 Accounting for the sacrifice of non-current assets 2.9 Reconciliation of cash flow and accrual accounting data Summary Review questions Exercises References 3 Preparation of Financial Statements of comprehensive income, Changes in equity and Financial Position 3.1 Introduction 3.2 Preparing an internal statement of income from a trial balance 3.3 Reorganise the income and expenses into one of the formats required for publication 3.4 Format 1: Classification of operating expenses and other income by function 3.5 Format 2: classification of operating expenses according to their nature 3.6 Other comprehensive income 3.7 How non-recurring or exceptional items can affect operating income 3.8 How decision useful is the Statement of comprehensive income? 3.9 Statement of Changes in Equity 3.10 The statement of financial position 3.11 The explanatory notes that are part of the financial statements 3.12 Has prescribing the formats meant that identical transactions are reported identically? 3.13 Fair presentation 3.14 What does an investor need in addition to the primary financial statements to make decisions? Summary Review questions Exercises References 4 Annual Report: additional financial statements 4.1 Introduction 4.2 IAS 10 Events after the reporting period 1 4.3 Retrospective changes to financial statements 4.4 What do segment reports provide? 4.5 IRFS 8 - Operating Segments 4.6 Benefits and continuing concerns following the issue of IFRS 8 4.7 Discontinued operations - IFRS 5 Non-current assets held for sale and discontinued operations 4.8 Held for sale - IFRS 5 Non-current assets held for sale and discontinued operations 4.9 Related party disclosures -IAS 24 Related Party Disclosures Summary Review questions Exercises References 5 Statements of cash flows 5.1 Introduction 5.2 Development of statements of cash flows 5.3 Applying IAS 7 (revised) Statements of Cash Flows 5.4 Step approach to preparation of a statement of cash flows - indirect method 5.5 Additional notes required by IAS 7 5.6 Analysing statements of cash flows 5.7 Approach to an exam question 5.8 Critique of cash flow accounting Summary Review questions Exercises References Part 2 INCOME AND ASSET VALUE MEASUREMENT SYSTEMS 6 Income and asset value measurement: an economist's approach 6.1 Introduction 6.2 Role and objective of income measurement 6.3 Accountant's view of income, capital and value 6.4 Critical comment on the accountant's measure 6.5 Economist's view of income, capital and value 6.6 Critical comment on the economist's measure 6.7 Income, capital and changing price levels Summary Review questions Exercises References Bibliography 7 Accounting for price-level changes 7.1 Introduction 7.2 Review of the problems of historical cost accounting (HCA) 7.3 Inflation accounting 7.4 The concepts in principle 7.5 The four models illustrated for a company with cash purchases and sales 7.6 Critique of each model 7.7 Operating capital maintenance - a comprehensive example 7.8 Critique of CCA statements 7.9 The ASB approach 7.10 The IASC/IASB approach 7.11 Future developments Summary Review questions Exercises References Bibliography 8 Revenue recognition 8.1 Introduction 8.2 The issues 8.3 The challenge 8.4 Proposed IFRS Revenue from Contracts with Customers 8.5 Harmonisation Summary Review questions Exercises References Part 3 REGULATORY FRAMEWORK - AN ATTEMPT TO ACHIEVE UNIFORMITY 9 Financial reporting - evolution of global standards 9.1 Introduction 9.2 Why do we need financial reporting standards? 9.3 Why do we need standards to be mandatory? 9.4 Arguments in support of standards 9.5 Arguments against standards 9.6 Standard setting and enforcement in the UK under the Financial Reporting Council (FRC) 9.7 The Accounting Standards Board (ASB) 9.8 Standard setting an enforcement in The European Union 9.9 Standard setting and enforcement in the US 9.10 Advantages and disadvantages of global standards for publicly accountable entities 9.11 How do reporting requirements differ for non-publicly accountable entities? 9.12 IFRS for SMEs 9.13 Why have there been differences in financial reporting? 9.14 Move towards a conceptual framework Summary Review questions Exercises References 10 Concepts - evolution of a international conceptual framework 10.1 Introduction 10.2 Different countries meant different financial statements 10.3 Historical overview of the evolution of financial accounting theory 10.4 IASC Framework for the Presentation and Preparation of Financial Statements 10.5 Conceptual Framework for Financial Reports 2010 10.6 Phase A of the Conceptual Framework 10.7 ASB Statement of Principles 1999 Summary Review questions Exercises References 11 Ethical behaviour and implications for accountants 11.1 Introduction 11.2 The meaning of ethical behaviour 11.3 The accounting standard setting process and ethics 11.4 The IFAC Code of Ethics for Professional Accountants 11.5 Implications of ethical values for the principles versus rules-based approaches to accounting standards 11.6 Ethics in the accountants' work environment research report 11.7 Implications of unethical behaviour for stakeholders using the financial reports 11.8 The increasing role of whistle blowing 11.9 The role of financial reporting authorities 11.10 Why should students learn ethics? Summary Review questions Exercises References Part 4 STATEMENT OF FINANCIAL POSITION - EQUITY, LIABILITY AND ASSET MEASUREMENT AND DISCLOSURE 289 12 Share capital, distributable profits and reduction of capital 12.1 Introduction 12.2 Common themes 12.3 Total owners' equity: an overview 12.4 Total shareholders' funds: more detailed explanation 12.5 Accounting entries on issue of shares 12.6 Creditor protection: capital maintenance concept 12.7 Creditor protection: why capital maintenance rules are necessary 12.8 Creditor protection: how to quantify the amounts available to meet creditors' claim 12.9 Issued share capital: minimum share capital 12.10 Distributable profits: general considerations 12.11 Distributable profits: how to arrive at the amount using relevant accounts 12.12 When may capital be reduced? 12.13 Writing off part of capital which has already been lost and is not represented by assets 12.14 Repayment of part of paid-in capital to shareholders or cancellation of unpaid share capital 12.15 Purchase of own shares Summary Review questions Exercises References 13 Liabilities 13.1 Introduction 13.2 Provisions - a decision tree approach to their impact on the statement of financial position 13.3 Provisions 13.4 What are the general principles that IAS 37 applies to the recognition of a provision? 13.5 Management approach to measuring the amount of a provision 13.6 Application of criteria illustrated 13.7 Provisions for specific purposes 13.8 Contingent liabilities 13.9 Contingent assets 13.10 ED IAS 37 Non-financial Liabilities 13.11 ED/2010/1 Measurement of Liabilities in IAS 37 Summary Review questions Exercises References 14 Financial instruments 14.1 Introduction 14.2 Financial instruments - the IASB's problem child 14.3 IAS 32 Financial Instruments: Disclosure and Presentation 14.4 IAS 39 Financial Instruments: Recognition and Measurement 14.5 IFRS 7 Financial Statement Disclosures 14.6 Financial instruments developments Summary Review questions Exercises References 15 Employee benefits 15.1 Introduction 15.2 Greater employee interest in pensions 15.3 Financial reporting implications 15.4 Types of scheme 15.5 Defined contribution pension schemes 15.6 Defined benefit pension schemes 15.7 IAS 19 (revised) Employee Benefits 15.8 The liability for pension and other post-retirement costs 15.9 The statement of comprehensive income 15.10 Comprehensive illustration 15.11 Plan curtailments and settlements 15.12 Multi-employer plans 15.13 Disclosures 15.14 Other long-service benefits 15.15 Short-term benefits 15.16 Termination benefits 15.17 Exposure draft of amendments to IAS 19 15.18 IFRS 2 Share-Based Payment 15.19 Scope of IFRS 2 15.20 Recognition and measurement 15.21 Equity-settled share-based payments 15.22 Cash-settled share-based payments 15.23 Transactions which may be settled in cash or shares 15.24 IAS 26 Accounting and Reporting by Retirement Benefit Plans Summary Review questions Exercises References 16 Taxation in company accounts 16.1 Introduction 16.2 Corporation tax 16.3 Corporation tax systems - the theoretical background 16.4 Corporation tax systems - avoidance and evasion 16.5 Corporation tax - the system from 6 April 1999 16.6 IFRS and taxation 16.7 IAS 12 - accounting for current taxation 16.8 Deferred tax 16.9 FRS 19 (the UK standard on deferred taxation) 16.10 A critique of deferred taxation 16.11 Examples of companies following IAS 12 16.12 Value added tax (VAT) Summary Review questions Exercises References 17 Property, plant and equipment (PPE) 17.1 Introduction 17.2 PPE - concepts and the relevant IASs and IFRSs 17.3 What is PPE? (IAS 16) 17.4 How is the cost of PPE determined? 17.5 What is depreciation? 17.6 What are the constituents in the depreciation formula? 17.7 Calculation of depreciation 17.8 Measurement subsequent to initial recognition 17.9 IAS 36 Impairment of Assets 17.10 IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations 17.11 Disclosure requirements 17.12 Government grants towards the cost of PPE (IAS 20) 17.13 Investment properties 17.14 Effect of accounting policy for PPE on the interpretation of the financial statements Summary Review questions Exercises References 18 Leasing 18.1 Introduction 18.2 Background to leasing 18.3 Why was the IAS 17 approach so controversial? 18.4 IAS 17 - classification of a lease 18.5 Accounting requirements for operating leases 18.6 Accounting requirements for finance leases 18.7 Example allocating the finance charge using the sum of the digits method 18.8 Accounting for the lease of land and buildings 18.9 Leasing - a form of off balance sheet financing 18.10 Accounting for leases - a new approach 18.11 Classification of leases 18.12 The significance of options to extend the lease 18.13 Implications of the revenue recognition standard 18.11 Accounting for leases by lessors Summary Review questions Exercises References 19 R&D; goodwill; intangible assets and brands 19.1 Introduction 19.2 Intangible assets defined 19.3 Accounting treatment for research and development 19.4 Why is research expenditure not capitalised? 19.5 Capitalising development costs 19.6 Disclosure of R&D 19.7 IFRS for SMEs 19.8 Internally generated and purchased goodwill 19.9 The accounting treatment of goodwill 19.10 Critical comment on the various methods that have been used to account for goodwill 19.11 Negative goodwill 19.12 Brands 19.13 Accounting for acquired brands 19.14 Emissions trading 19.15 Intellectual capital disclosures (ICDs) in the annual report 19.16 Review of implementation of IFRS 3 Summary Review questions Exercises References 20 Inventories 20.1 Introduction 20.2 Inventory defined 20.3 The controversy 20.4 IAS 2 Inventories 20.5 Inventory valuation 20.6 Work-in-progress 20.7 Inventory control 20.8 Creative accounting 20.9 Audit of the year-end physical inventory count 20.10 Published accounts 20.11 Agricultural activity Summary Review questions Exercises References 21 Construction contracts 21.1 Introduction 21.2 The need to replace IAS 11 Construction Contracts 21.3 Identification of contract revenue 21.4 Identification of contract costs 21.5 Proposed new accounting rules 21.6 Approach when a contract can be separated into components 21.7 Accounting for a contract 21.8 Illustrated - profitable contract using step approach 21.9 Illustrated - loss-making contract using step approach 21.10 Public-private partnerships (PPPs) Summary Review questions Exercises References Part 5 CONSOLIDATED ACCOUNTS 22 Accounting for groups at the date of acquisition 22.1 Introduction 22.2 Preparing consolidated accounts for a wholly owned subsidiary 22.3 Preparing consolidated accounts when there is a partly owned subsidiary 22.4 The treatment of differences between a subsidiary's fair value and book value 22.5 Parent issues shares to acquire shares in a subsidiary 22.6 IFRS 10 provisions 22.7 IFRS 3 Business Combinations Treatment of goodwill 22.8 When may a parent company not be required to prepare consolidated accounts? 22.9 When may a parent company exclude or not exclude a subsidiary from a consolidation? 22.10 IFRS 13 Fair Value Measurement 22.11 What advantages are there for stakeholders from requiring groups to prepare consolidated accounts? Summary Review questions Exercises References 23 Preparation of consolidated statements of financial position after the date of acquisition 23.1 Introduction 23.2 Uniform accounting policies and reporting dates 23.3 Pre- and post-acquisition profits/losses 23.4 The Bend Group - assuming there have been no inter-group transactions 23.5 Inter-company transactions 23.6 The Bend Group - assuming there have been inter-group transactions 23.7 How is the investment in subsidiaries reported in the parent's own statement of financial position? Summary Review questions Exercises References 24 Preparation of consolidated statements of comprehensive income, changes in equity and cash flows 24.1 Introduction 24.2 Preparation of a consolidated statement of comprehensive income - the Ante Group 620 24.3 The statement of changes in equity (SOCE) 24.4 Other consolidation adjustments 24.5 A subsidiary acquired part of the way through the year 24.6 Published format statement of comprehensive income 24.7 Consolidated statements of cash flows Summary Review questions Exercises References 25 Accounting for associates and joint ventures 25.1 Introduction 25.2 Definitions of associates and of significant influence 25.3 The treatment of associated companies in consolidated accounts 25.4 The Brill Group - the equity method illustrated 25.5 The treatment of provisions for unrealised profits 25.6 The acquisition of an associate part-way through the year 25.7 Joint arrangements Summary Review questions Exercises References 26 Accounting for the effects of changes in foreign exchange rates under IAS 21 26.1 Introduction 26.2 The rules on the recording of foreign currency transactions in a company's own books 26.3 Boil plc - a more detailed illustration 26.4 IAS 21 concept of functional and presentational currencies 26.5 Translating the functional currency into the presentation currency 26.6 Preparation of consolidated accounts 26.7 How to reduce risk of translation differences 26.8 IAS 29 Financial Reporting in Hyperinflationary Economies Summary Review questions Exercises References Part 6 INTERPRETATION 27 Earnings per share 27.1 Introduction 27.2 Why is the earnings per share figure important? 27.3 How is the EPS figure calculated? 27.4 The use to shareholders of the EPS 27.5 Illustration of the basic EPS calculation 27.6 Adjusting the number of shares used in the basic EPS calculation 27.7 Rights issues 27.8 Adjusting the earnings and number of shares used in the diluted EPS calculation 27.9 Procedure where there are several potential dilutions 27.10 Exercise of conversion rights during financial year 27.11 Disclosure requirements of IAS 33 27.12 The Improvement Project 27.13 Convergence project Summary Review questions Exercises References 28 Analysing financial statements for management purposes 28.1 Introduction 28.2 Overview of techniques for the analysis of financial data 28.3 Ratio analysis -a case study 28.4 Introductory review 28.5 Financial statement analysis part 1 - financial performance 28.6 Financial statement analysis part 2 - liquidity 28.7 Financial statement analysis part 3 - financing 28.8 Peer comparison 28.9 Report based on the analysis 28.10 Caution when using ratios for prediction Summary Review questions Exercises
Chapter 29 to follow Summary Review questions Exercises References 30 An introduction to financial reporting on the Internet 30.1 Introduction 30.2 The reason for the development of a business reporting language 30.3 Reports and the flow of information pre-XBRL 30.4 What are HTML, XML and XBRL? 30.5 Reports and the flow of information post-XBRL 30.6 XBRL and the IASB 30.7 Why should companies adopt XBRL? 30.8 What is needed to use XBRL for outputting information? 30.9 What is needed when receiving XBRL output information? 30.10 Progress of XBRL development for internal accounting 30.11 Further study Summary Review questions Exercises References Bibliography Part 7 ACCOUNTABILITY 31 Corporate Governance 31.1 Introduction 31.2 A systems perspective 31.3 Different jurisdictions have different governance priorities 31.4 Pressures on good governance behaviour vary over time 31.5 Types of past unethical behaviour 31.6 The effect on capital markets of good corporate governance 31.7 Risk management 31.8 The role of internal control and internal audit in corporate governance 31.9 External audits in corporate governance 31.10 Executive remuneration in the UK 31.11 Corporate governance, legislation and codes 31.12 Corporate governance - the UK experience Summary Review questions Exercises References 32 Sustainability - environmental and social reporting 32.1 Introduction 32.2 An overview - stakeholders growing interest in corporate social responsibility (CSR) 32.3 An overview - Business growing interest in corporate social responsibility 32.4 Companies voluntary adoption of Guidelines and certification 32.5 The accountant's role in a capitalist industrial society 32.6 The nature of the accountant's involvement 32.7 Summary on environmental reporting 32.8 Concept of social accounting 32.9 Background to social accounting 32.10 Corporate social responsibility reporting 32.11 Need for comparative data 32.12 Investors 32.13 The accountant's changing role Summary Review questions Exercises References Bibliography Index