Advanced Accounting, 4e
by Hamlen
ISBN: 978-1-61853-261-9 | Copyright 2019
Student-Friendly Features
4th Edition Updates
myBusinessCourse
Welcome to Advanced Accounting 4e!
This book covers reporting for mergers and acquisitions, foreign currency transactions, hedges, state and local governments, not-for-profit organizations, plus specialized topics. Discussion of each topic focuses on key concepts, with many illustrations from practice, using familiar organizations. Emphasis is on the logic behind reporting standards and requirements, presented in a student-friendly way. Coverage is completely updated for the newest FASB and GASB pronouncements and proposals, as well as relevant IFRS. Illustrations of business practice are taken from current financial statements and events.
The text has extensive student and instructor support. PowerPoint slides, eLecture videos, guided examples, and online homework and quizzes provide students with additional learning resources, and allow instructors to use class time efficiently and effectively.
Advanced Accounting is intended for use, at either the undergraduate or graduate level, in the course commonly known as advanced accounting. It is also designed to be used in courses focusing on mergers and acquisitions that are often part of the MBA curriculum or that are offered as a nondegree, professional development program.
Conceptual Focus
Conceptual explanations focus on the logic underlying reporting standards. Each topic is developed by explaining the underlying business activity, the reporting goals, and how standards and procedures achieve these goals, using language students can understand. Illustrations from actual practice enhance understanding and familiarize students with the information presented in real financial statements. Reporting requirements are increasingly complex and require substantial judgment in their application. And standards change every year. Conceptual understanding prepares students to evaluate and effectively apply future standards throughout their professional careers.
Logical Flow of Topical Coverage
The organization of chapters reflects the logical flow of topics:
Mergers and acquisitions material is covered in Chapters 1–6.
International subsidiary translation and consolidation, foreign currency transactions and hedging, and other financial derivatives (futures, options, and swaps) are in Chapters 7–9.
Reporting standards for state and local government and NFP organizations are in Chapters
Partnerships, bankruptcy and reorganization, and the SEC are covered in Chapters 14–16.
Relevant Real Company Illustrations
Each chapter begins with a description of a familiar focus company, and how its activities and reporting practices relate to that chapter's topics. For example, in Chapter 2, IBM's extensive acquisitions illustrate accounting for mergers and acquisitions. Noncontrolling interests are common in the resort industry, and in Chapter 5 Las Vegas Sands Corporation illustrates reporting for noncontrolling interests in subsidiaries. In Chapter 9, Kellogg's hedging practices illustrate hedge accounting for futures, options and swaps. In Chapter 13, Beta Alpha Psi's financial statements illustrate NFP reporting standards. Throughout each chapter, examples from actual practice highlight major topics, using either the focus company or other companies in the same industry.
Following is a list of focus companies by chapter.
Emphasis on Current Issues and Trends
Taken from current news and actual financial statements, Business Application boxes illustrate reporting practices, current issues, and controversies. Here is an example from Chapter 2, in the section covering valuation methods for assets acquired and liabilities assumed in a business combination.
Reporting Perspectives
Reporting Perspectives comment on topics such as the strengths and weaknesses in reporting standards, motivations for changes in standards, ethical issues, implications for information quality, and proposals for new standards. The following is an example from Chapter 4.
Extensive discussion and illustration of international financial reporting standards and proposals appear in each of the business combinations, foreign currency translation and transactions, and futures, options and swaps chapters. The following is an excerpt from Chapter 5.
Illustrations of in practice are also provided. Here is an excerpt from Chapter 3.
Clear and Logical Development of Business Combinations Topics
Reporting issues related to business combinations cover a variety of topics. Consolidation procedures are difficult to comprehend and can be confusing to students. Emphasis in this text is on the measurement aspects of combinations—reporting assets and liabilities acquired, determining acquisition cost, valuing noncontrolling interests, and eliminating intercompany accounts. The consolidation chapters start with the reasons why companies should consolidate and the goals of consolidation, and then explain how consolidation procedures achieve these goals.
To make consolidation procedures more comprehensible, eliminations subsequent to acquisition (covered in Chapters 4–6) presume that the parent uses the complete (full) equity method. Exclusive use of the complete (full) equity method allows students to focus on the goals of consolidation and the key issues in consolidation procedures. Once students develop a solid understanding of the consolidation process, changes in procedures required when the parent uses the cost method can be introduced. The appendix to Chapter 4 explains the eliminating entries necessary to adjust the parent's accounts to the complete equity method before proceeding as usual with consolidation.
Additional Pedagogy
To reinforce concepts presented in each chapter and ensure student comprehension, each chapter has two or more In-Chapter Review Problems that require students to recall and apply the accounting techniques and concepts described in the chapter. The solutions to the review problems are included after each chapter's assignments. The following example is from Chapter 2.
Learning Objectives identify the primary learning outcomes for each chapter. An end-of-chapter Review of Key Concepts summarizes the key topics of each chapter.
Extensive End-of-Chapter Material
End-of-chapter questions, exercises and problems cover all major topics and have a range of difficulty levels, allowing students ample opportunity to practice their understanding of the chapter. Some problems require students to use real company data in applying their knowledge.
Certain business combination problems continue from chapter to chapter. For example, P3.2 covers consolidation at the date of acquisition, and P4.9 covers consolidation of the same two companies in subsequent years. P4.3 covers subsequent year consolidation of a wholly owned subsidiary, and P5.7 addresses subsequent year consolidation of the same subsidiary, when the subsidiary has outside ownership. In P2.6, an acquisition is reported as a merger, and in P3.12 the same acquisition is reported as a stock investment and consolidation. P3.4, P4.5, P5.4 and P5.5 use the same acquisition data to illustrate consolidation of a bargain purchase at the date of acquisition, subsequent years, and with a noncontrolling interest. Each of these problems can also be assigned separately. In working through these problems, students gain a clearer understanding of accounting for business combinations, and how concepts learned in each chapter fit together.
In the state and local government chapters, three problems for the same county take the student through preparation of financial statements for the general fund (P10.17), for other governmental and proprietary funds (P11.17), and culminating in preparation of the county's government-wide statements, with reconciliations (P12.17). These problems can be assigned individually or as a class project.
In the consolidation chapters, color is used pedagogically to identify eliminating entries, both in journal form and in the consolidation working papers, making it easier for students to navigate the complexities of consolidation procedures.
All consolidation chapters emphasize consolidation of the statement of income and comprehensive income. Because in practice companies use a variety of formats to present consolidated operating results, the working paper consolidates the trial balances of the parent and subsidiary, which students then package into financial statements in whatever format desired. This approach increases students' flexibility and understanding of basic concepts.
Discussion of consolidation policy emphasizes the goal of consolidating controlled entities, and shows how FASB updates on consolidation policy illustrate this goal.
Measurement issues in identifying and valuing acquired assets and liabilities and consideration paid are discussed in detail. Cost, market, and income approaches are explained and illustrated. Common reporting issues in practice, including identifiable intangibles, deferred taxes, and stock options, are covered, with examples from practice.
In the governmental and not-for-profit chapters, concepts are illustrated with actual financial statements of cities, counties, states, and a variety of NFP organizations, with emphasis on ways in which the information provided by these entities differs from regular businesses, reasons why this information is required, and the judgments and choices involved.
The commonality of reporting issues for different types of entities—businesses, NFPs, governments, and even partnerships—is emphasized. Examples include consolidation policy, acquisition reporting, and hedge accounting.
The text is completely updated for new standards, proposals, and other relevant events as of 2018.
Major updates are:
Chapter 1: ASU 2016-01 and ASU 2016-13, investments in debt securities and equity securities with no significant influence; impairment testing for debt securities, and changes in the comparison of GAAP and IFRS for these investments.
Chapter 2: Definition of a business (ASU 2017-01) determining when ASC Topic 805 requirements apply; reporting the effects of measurement period changes on subsequent income (ASU 2015-16).
Chapter 4: Simplified goodwill impairment test (ASU 2017-04) and updated comparison of GAAP and IFRS for identifiable intangibles and goodwill.
Chapters 8 and 9: New hedging model (ASU 2017-12).
Chapters 10-12: GAAP hierarchy (SGAS 76), component unit display (SGAS 80), accounting for fiduciary activities (SGAS 84), leases (SGAS 87), defined benefit pensions and OPEBs (SGAS 68 and SGAS 75).
Chapter 13: Completely updated for the new NFP reporting model (ASU 2016-14), including examples and illustrations from practice.
All illustrations, current practices, and reporting perspectives are completely updated, and include new issues and examples.
There are over 130 new exercises and problems, and a net increase of over 65 exercises and problems, at various levels of difficulty.
The number of questions included in myBusinessCourse has been more than doubled with this new edition, as well.
In addition, new material has been added, based primarily on suggestions from adopters, including these topics:
Consolidation procedures for VIEs
Step acquisitions
Expanded explanation of the differences in reporting acquisition of a business versus an asset
Pushdown accounting for subsidiaries (ASU 2014-17) and implications for consolidation procedures
Expanded explanation of intercompany transaction eliminations
Expanded explanation of consolidated statement of cash flows
Rewritten explanation of swap accounting and hedging with options
Reporting for asset retirement obligations
Expanded coverage of deferred inflows/outflows
Comprehensive problem combining concepts of general fund reporting, reporting for other funds, and development of government-wide financial statements
NFP organizations
Expanded coverage of health care NFPs and intermediate performance measures
Bankruptcy and reorganization
Liquidation basis of accounting (ASU 2013-07)
Comment letters on periodic filings
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eLecture Videos
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Guided Example Videos
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eLecture
Guided Example
LO3.1
Explain the purpose and motivations behind consolidation.
E3-1
MC1, P8
Apply the concept of control to equity investments.
Apply the concept of control to non-equity investments.
MC2, 3, 9; E16, 17; P11, 12
Prepare consolidated balance sheets at the date of acquisition.
MC4-8, 10; E1-15; P1-10, 13-17
Explain IFRS for consolidations.
MC9, P10
Preface (pg. iii)
Brief Contents (pg. xii)
Contents (pg. xiii)
Chapter 1: Intercorporate Investments: An Overview (pg. 2)
Introduction (pg. 3)
Motivations for Intercorporate Investments (pg. 3)
Types of Investments (pg. 4)
Intercorporate Debt Investments and Equity Investments with No Significant Influence (pg. 5)
Trading Investments (pg. 5)
Available-for-Sale Investments (pg. 6)
Held-to-Maturity Investments (pg. 7)
Equity Investments (pg. 8)
Review 1 • Trading, AFS, and HTM Debt Investments (pg. 9)
Investments with Significant Influence (pg. 9)
Accounting Using the Equity Method (pg. 9)
Equity in Net Income Calculation (pg. 10)
Other Comprehensive Income and the Equity Method (pg. 12)
Investee Losses and the Equity Method (pg. 12)
Impairment Testing (pg. 12)
Change to Significant Influence (pg. 13)
Joint Ventures (pg. 13)
Review 2 • Reporting for Equity Method Investments (pg. 14)
Controlling Investments (pg. 15)
Mergers, Consolidations, and Asset Acquisitions (pg. 15)
Stock Acquisitions (pg. 16)
Change to Controlling Interest (pg. 16)
Variable Interest Entities (pg. 17)
International Financial Reporting Standards For Intercorporate Investments (pg. 17)
Intercorporate Debt Investments and Equity Investments with No Significant Influence (pg. 17)
Investments with Significant Influence (pg. 18)
Review of Key Concepts (pg. 19)
Multiple Choice Questions (pg. 20)
Exercises (pg. 22)
Problems (pg. 26)
Review Solutions (pg. 34)
Chapter 2: Mergers and Acquisitions (pg. 36)
Introduction (pg. 37)
Motivations for Mergers and Acquisitions (pg. 37)
Types of Combinations (pg. 38)
Overview of Reporting for Combinations (pg. 39)
Standards of Reporting for Business Combinations (pg. 41)
Valuation of Assets Acquired and Liabilities Assumed (pg. 43)
Acquisition Date (pg. 43)
Identifying the Acquiring Company (pg. 43)
Measurement of Previously Reported Assets and Liabilities (pg. 44)
Identification and Measurement of Previously Unreported Intangibles (pg. 45)
Illustration of Reporting Assets Acquired and Liabilities Assumed (pg. 49)
Review 1 • Reporting Assets Acquired and Liabilities Assumed (pg. 51)
Measurement of Acquisition Cost (pg. 51)
Contingent Consideration (pg. 52)
Employee Compensation (pg. 53)
Acquisition-Related Costs (pg. 53)
Illustration of Reporting Consideration Given in an Acquisition (pg. 54)
Subsequent Changes in Asset, Liability, or Contingent Consideration Values (pg. 55)
Measurement Period (pg. 55)
Reporting Subsequent Changes in Asset and Liability Values (pg. 55)
Reporting Subsequent Changes in Contingent Consideration Value (pg. 56)
Review 2 • Reporting Assets and Liabilities Acquired, Consideration Paid, and Subsequent Events (pg. 57)
Bargain Purchases (pg. 57)
Special Issues: In-Process Research And Development, Preacquisition Contingencies, Deferred Tax Liabilities, And Step Acquisitions (pg. 59)
In-Process Research and Development (pg. 59)
Preacquisition Contingencies (pg. 59)
Acquired Deferred Tax Liabilities (pg. 60)
Step Acquisitions (pg. 61)
International Financial Reporting Standards for Business Combinations (pg. 62)
Chapter 3: Consolidated Financial Statements: Date of Acquisition (pg. 84)
Criteria for Consolidation (pg. 86)
Motivations for Off-Balance-Sheet Entities (pg. 86)
Standards for Consolidation (pg. 88)
Control and Consolidation of Equity Investments (pg. 88)
Control and Consolidation of Non-Equity Investments (pg. 89)
Review 1 • Identifying Consolidated Entities (pg. 94)
Consolidation at Date of Acquisition (pg. 94)
Consolidation of Financial Statements: Preliminary Issues (pg. 94)
Objectives of Consolidation (pg. 95)
Consolidation Working Paper (pg. 95)
Pushdown Accounting (pg. 103)
Review 2 • Consolidation with Identifiable Intangibles (pg. 106)
International Financial Reporting Standards for ConsolidationS (pg. 106)
The Concept of Control (pg. 106)
IFRS and U.S. GAAP Compared (pg. 107)
Review of Key Concepts (pg. 108)
Multiple Choice Questions (pg. 108)
Exercises (pg. 110)
Problems (pg. 117)
Review Solutions (pg. 127)
Chapter 4: Consolidated Financial Statements Subsequent to Acquisition (pg. 128)
Introduction (pg. 129)
Introduction to Consolidation Procedures (pg. 129)
Consolidation Eliminating Entries (pg. 130)
Illustration of Consolidation Process (pg. 131)
Consolidated Financial Statements (pg. 133)
Complete Equity Method as One-Line Consolidation (pg. 134)
Reporting Revaluations of Subsidiary Assets and Liabilities in Subsequent Years (pg. 135)
Previously Reported Assets and Liabilities (pg. 135)
Previously Unreported Identifiable Intangibles (pg. 137)
Goodwill (pg. 138)
Amortization and Impairment of Identifiable Intangibles and Goodwill: An Illustration (pg. 143)
Review 1 • Intangibles Impairment Testing (pg. 145)
Comprehensive Illustration: Consolidation in Subsequent Years (pg. 146)
Consolidation After One Year (pg. 146)
Consolidation After Two Years (pg. 149)
Review 2 • Consolidation in a Subsequent Year with Identifiable Intangibles (pg. 153)
IFRS for Acquired Intangibles (pg. 154)
Identifiable Intangibles (pg. 154)
 Appendix to Chapter 4 (pg. 157)
Consolidation Eliminating Entries When the Parent Uses the Cost Method (pg. 157)
Chapter 5: Consolidated Financial Statements: Outside Interests (pg. 186)
Noncontrolling Interests at Acquisition Date (pg. 188)
Valuation of Noncontrolling Interests and Goodwill at Acquisition (pg. 188)
Measuring the Fair Value of Noncontrolling Interests (pg. 189)
Consolidation Eliminating Entries at Acquisition Date (pg. 190)
Noncontrolling Interests in the Consolidated Balance Sheet (pg. 191)
Consolidating Variable Interest Entities (pg. 192)
Noncontrolling Interests in Subsequent Years (pg. 193)
Consolidation at End of the First Year (pg. 193)
Noncontrolling Interests in the Consolidated Statement of Income and Comprehensive Income (pg. 196)
Consolidation at End of the Second Year (pg. 198)
Consolidation of VIEs in Subsequent Years (pg. 201)
Review 1 • Consolidation with Noncontrolling Interest at End of Third Year, U.S. GAAP (pg. 204)
Noncontrolling Interests and Bargain Purchases (pg. 204)
Bargain Purchase Consolidation at Date of Acquisition (pg. 205)
Bargain Purchase Consolidation at End of the First Year (pg. 206)
Bargain Purchase Consolidation at End of the Second Year (pg. 208)
International Financial Reporting Standards for Noncontrolling Interests (pg. 209)
Review 2 • Consolidation with Noncontrolling Interest at End of the Third Year, IFRS (pg. 213)
Consolidated Statement of Cash Flows (pg. 213)
Preparation of Consolidated Statement of Cash Flows (pg. 214)
Consolidated Statement of Cash Flows: An Illustration (pg. 214)
Chapter 6: Consolidated Financial Statements: Intercompany Transactions (pg. 242)
 Intercompany Service and Financing Transactions (pg. 244)
 Intercompany Profits (pg. 245)
Equity in Net Income and Noncontrolling Interest in Net Income (pg. 246)
 Intercompany Transfers of Land (pg. 247)
Eliminations in the Year of Transfer (pg. 247)
Eliminations in Subsequent Years (pg. 248)
Eliminations in Year of Sale to Outside Party (pg. 251)
 Intercompany Transfers of Inventory (pg. 251)
Unconfirmed Profit in Ending Inventory (pg. 253)
Unconfirmed Profit in Beginning Inventory (pg. 254)
Review 1 • Intercompany Eliminations: Land and Merchandise Transfers (pg. 256)
 Intercompany Transfers of Depreciable Assets (pg. 256)
Objectives of the Eliminations (pg. 257)
Eliminations in Year of Transfer (pg. 257)
Review 2 • Intercompany Eliminations: Depreciable Asset Transfers (pg. 261)
 International Financial Reporting Standards for Intercompany Transactions (pg. 261)
 Comprehensive Illustration (pg. 262)
Chapter 7: Consolidating Foreign Currency Financial Statements (pg. 290)
 Converting a Subsidiary's Foreign Currency Accounts to the Parent's Currency (pg. 291)
The Conversion Process (pg. 292)
The Functional Currency (pg. 294)
 Translation and Remeasurement Procedures (pg. 295)
Translation Procedures (pg. 295)
Remeasurement Procedures (pg. 296)
Comparing Translation and Remeasurement (pg. 296)
Translation and Remeasurement Gains and Losses (pg. 296)
Translation and Remeasurement Illustrated (pg. 302)
Review 1 • Calculation of Remeasurement and Translation Gain or Loss (pg. 304)
Review 2 • Translation and Remeasurement of Foreign Currency Financial Statements (pg. 305)
Highly Inflationary Economies (pg. 306)
Changing the Functional Currency (pg. 307)
Translation and Remeasurement of an Existing Entity (pg. 307)
Converting the Statement of Cash Flows to the Reporting Currency (pg. 311)
Disclosures (pg. 311)
 Financial Analysis Using Translated and Remeasured Information (pg. 313)
Effects on Profitability: The "DuPont Analysis" (pg. 313)
Effects on Analysis of Short-Term Liquidity and Long-Term Solvency (pg. 314)
 Consolidation of international Subsidiaries (pg. 315)
Equity Method Reporting (pg. 315)
The Consolidation Process (pg. 316)
Review 3 • Consolidation of an International Subsidiary (pg. 320)
 IFRS for Translating and Consolidating Foreign Currency Financial Statements (pg. 320)
Translation and Remeasurement (pg. 320)
Subsidiaries in Hyperinflationary Economies (pg. 320)
Chapter 8: Foreign Currency Transactions and Hedging (pg. 346)
 Foreign Currency Transactions and Risk (pg. 347)
 Foreign Currency Transactions (pg. 348)
Import and Export Transactions (pg. 348)
Review 1 • Foreign-Currency-Denominated Import and Export Transactions (pg. 352)
Foreign Borrowing and Lending Transactions (pg. 352)
 Hedging Foreign Exchange Exposures (pg. 353)
Types of Foreign Exchange Risk (pg. 353)
Derivative Instruments Used in Hedging (pg. 354)
Reporting Investments in Foreign Currency Derivatives (pg. 356)
Review 2 • Using Forward Contracts to Hedge Foreign-Currency-Denominated Import Transactions (pg. 362)
Review 3 • Using Forward Contracts to Hedge Foreign-Currency-Denominated Firm Commitments (pg. 367)
Review 4 • Using Forward Contracts to Hedge Foreign-Currency-Denominated Forecasted Transactions (pg. 369)
Improvements in Hedge Accounting Requirements (pg. 374)
 International Financial Reporting Standards for Foreign Currency Transactions and Hedging (pg. 375)
Qualifications for Hedge Accounting (pg. 375)
Comparison of IFRS and U.S. GAAP Hedge Accounting (pg. 376)
Financial Instruments Disclosures (pg. 378)
Chapter 9: Futures, Options and Interest Rate Swaps (pg. 396)
 Derivatives and Hedge Accounting (pg. 397)
Accounting for Derivatives and Hedging Transactions (pg. 398)
Hedge Accounting Qualifications (pg. 398)
2017 FASB Accounting Standards Update (pg. 400)
 Futures Contracts (pg. 400)
Introduction to Futures Contracts (pg. 401)
Transacting in Futures Contracts (pg. 401)
Accounting Events in Futures Trading (pg. 402)
T-Account Analysis of Futures Contracts (pg. 402)
Illustrations of Accounting for Futures Contracts (pg. 403)
Review 1 • Accounting for Futures Contracts (pg. 407)
 Option Contracts (pg. 407)
Definitions
(pg. 407)
Effects of Price Changes of Optioned Items (pg. 408)
Accounting Events in Options Trading (pg. 408)
Illustrations of Accounting for Options (pg. 409)
Review 2 • Accounting for Option Contracts (pg. 413)
 Interest Rate Swaps (pg. 414)
Accounting for Interest Rate Swaps (pg. 415)
Assessing Hedge Effectiveness (pg. 416)
Accounting Events and Entries for Interest Rate Swaps (pg. 417)
Review 3 • Accounting for Interest Rate Swaps (pg. 419)
 Disclosure Requirements (pg. 420)
Derivatives and Hedging Disclosures (pg. 420)
 Derivatives and Hedging Under IFRS (pg. 422)
IFRS 9 Hedge Accounting Requirements (pg. 422)
Chapter 10: State and Local Governments: Introduction and General Fund Transactions (pg. 438)
 Nature of Government Activities (pg. 439)
External Users of Governmental Financial Statements (pg. 441)
 Sources of GAAP for State and Local Governments (pg. 441)
GAAP Hierarchy in Government Accounting (pg. 442)
 Objectives of Financial Reporting (pg. 442)
Identifying the Reporting Entity (pg. 443)
 Fund Structure (pg. 444)
Fund Types (pg. 446)
Review 1 • Identifying Funds (pg. 447)
 Accounting and Reporting By Funds (pg. 448)
Accounting for Governmental Funds (pg. 448)
Accounting for Proprietary Funds (pg. 449)
Accounting for Fiduciary Funds (pg. 449)
 Accounting for the General Fund (pg. 449)
Budgetary Accounts (pg. 451)
Recording Property Tax Revenue (pg. 453)
Purchase of Goods and Services (pg. 454)
Supplies Inventories (pg. 456)
Interfund Transactions (pg. 458)
Capital Assets and Long-Term Debt (pg. 459)
Closing Entries (pg. 460)
Outstanding Encumbrances at Year-End (pg. 461)
 Comprehensive Illustration of General Fund Accounting and Reporting (pg. 463)
Transactions During the Year (pg. 463)
Financial Statements (pg. 467)
Review 2 • General Fund Budget and Closing Entries, Financial Statements (pg. 470)
Chapter 11: State and Local Governments: Other Transactions (pg. 494)
 Accounting for Special Purpose Activities (pg. 496)
Special Revenue Funds (pg. 496)
Permanent Funds (pg. 496)
 Accounting for Capital Projects (pg. 498)
Capital Projects (pg. 498)
Accounting for the Capital Projects Fund (pg. 499)
 Accounting for General Obligation Debt (pg. 504)
General Obligation Debt (pg. 505)
Accounting for the Debt Service Fund (pg. 505)
Review 1 • Capital Projects and Debt Service Fund Transactions and Financial Statements (pg. 508)
 Accounting for Proprietary Activities (pg. 509)
Accounting for Enterprise and Internal Service Funds (pg. 509)
Review 2 • Enterprise Fund Transactions and Financial Statements (pg. 513)
 Accounting for Fiduciary Activities (pg. 513)
 Accounting for Investments (pg. 517)
Derivatives Investments (pg. 518)
 Accounting for Other Liabilities and Debt Refundings (pg. 520)
Compensated Absences (pg. 520)
Landfills and Asset Retirement Obligations (pg. 520)
Accounting for Leased Assets (pg. 522)
Debt Refundings (pg. 523)
Chapter 12: State and Local Governments: External Financial Reporting (pg. 546)
 External Reporting Model (pg. 547)
Management's Discussion and Analysis (pg. 548)
 Government-Wide Financial Statements (pg. 549)
Statement of Net Position (pg. 549)
Statement of Activities (pg. 550)
Discussion of Government-Wide Statements (pg. 550)
Review 1 • Prepare a Statement of Activities (pg. 553)
 Fund Financial Statements (pg. 553)
Major Funds (pg. 554)
Governmental Funds Financial Statements (pg. 554)
Financial Reporting Model Improvements (pg. 561)
Review 2 • Reconcile the Change in Fund Balances to Change in Net Position (pg. 561)
Proprietary Funds Financial Statements (pg. 562)
Fiduciary Funds Financial Statements (pg. 566)
 Comparison of Government-Wide and Funds Information (pg. 567)
Governmental Activities (pg. 567)
Business-Type Activities (pg. 568)
 Notes and Required Supplementary Information (pg. 569)
Budgetary Comparison Schedules (pg. 569)
 Capital Assets, Infrastructure, Investments, and Defined Benefit Pension Plans (pg. 571)
Capital Assets and Infrastructure (pg. 571)
Investments (pg. 571)
Defined Benefit Pension Plans (pg. 572)
Chapter 13: Private Not-For-Profit Organizations (pg. 592)
 Characteristics of Private Not-For-Profit (NFP) Organizations (pg. 593)
 NFP Reporting Environment (pg. 594)
External Financial Reporting Requirements: General Concepts (pg. 594)
Presentation of Financial Statements (pg. 596)
Statement of Financial Position (pg. 596)
Statement of Cash Flows (pg. 601)
Liquidity Disclosures (pg. 602)
 Accounting for Contributions Received (pg. 603)
Unconditional and Unrestricted Cash Contributions (pg. 603)
Unconditional and Unrestricted Contributions of Goods and Services (pg. 603)
Donor-Imposed Time and Use Restrictions (pg. 605)
Donor-Imposed Conditions (pg. 607)
Donor-Imposed Restrictions in Perpetuity (pg. 607)
Contributions of Long-Lived Assets (pg. 608)
Split-Interest Agreements (pg. 609)
Contributions Received on Behalf of Others (pg. 610)
Review 1 • Accounting for Contributions (pg. 611)
Review 2 • Reporting for Investments (pg. 612)
 Comprehensive Illustration of NFP Accounting: Northeastern Heart Society (pg. 613)
 Reporting Issues for Specific Not-For-Profit Organizations (pg. 618)
Voluntary Health and Welfare Organizations (pg. 618)
Colleges and Universities (pg. 619)
Health Care Organizations (pg. 619)
Chapter 14: Partnership Accounting and Reporting (pg. 642)
 Characteristics of a Partnership (pg. 643)
Relations of Partners to Others (pg. 644)
Relations Among Partners (pg. 644)
Partners' Property Rights (pg. 645)
Contractual Provisions: The Partnership Agreement (pg. 645)
Limited Partnerships (pg. 645)
Comparison of Corporate and Partnership Forms of Organization (pg. 646)
Partnership Reporting Issues (pg. 647)
 Formation of the Partnership (pg. 649)
Bonus and Goodwill Approaches (pg. 649)
Review 1 • Formation of a Partnership (pg. 650)
 Allocation of Partnership Income to PartnerS (pg. 650)
Salaries to Partners (pg. 651)
Bonus to Partners (pg. 651)
Interest on Partners' Capital Accounts (pg. 652)
Percentage Allocation by Income-Sharing Ratio (pg. 652)
Comprehensive Illustration of Partnership Income Allocation (pg. 652)
Schedule of Changes in Capital Accounts (pg. 653)
Review 2 • Income Allocation (pg. 654)
 Admission of a New Partner (pg. 654)
Admission by Purchase of an Existing Partnership Interest (pg. 654)
Admission by Investment of New Capital (pg. 656)
Effects of Bonus and Goodwill Methods on Partners' Capital (pg. 659)
Evaluation of Bonus and Goodwill Methods (pg. 659)
 Retirement of a Partner (pg. 660)
Purchase with Personal Assets (pg. 660)
Purchase with Partnership Assets (pg. 660)
Review 3 • Retirement of a Partner and Admission of a New Partner (pg. 663)
 Partnership Liquidations (pg. 663)
Priorities for Payments (pg. 663)
Rights of Creditors (pg. 664)
Simple Versus Installment Liquidations (pg. 665)
Simple Liquidations (pg. 665)
Installment Liquidations (pg. 667)
Review 4 • Termination of the Partnership (pg. 677)
Chapter 15: Bankruptcy and Reorganization (pg. 698)
 Legal Aspects of Bankruptcy (pg. 700)
Legal Process of Chapter 7 Liquidation (pg. 701)
Legal Process of Chapter 11 Reorganization (pg. 701)
 Financial Reporting for Chapter 7 Liquidation (pg. 701)
Liquidation Basis of Accounting (pg. 701)
Statement of Affairs (pg. 704)
Review 1 • Chapter 7 Liquidation (pg. 709)
Statement of Realization and Liquidation (pg. 709)
 Financial Reporting for Chapter 11 Reorganization (pg. 713)
Reporting During the Reorganization Process (pg. 713)
Reporting After Reorganization (pg. 716)
Review 2 • Chapter 11 Reorganization (pg. 721)
 Other Forms of Restructuring (pg. 721)
Quasi-Reorganization (pg. 721)
Troubled Debt Restructuring (pg. 722)
Chapter 16: The SEC and Financial Reporting (pg. 744)
 Establishment of the SEC and Key Securities Legislation (pg. 746)
Establishment of the SEC (pg. 746)
Securities Legislation and the SEC (pg. 746)
Definition of a Security (pg. 748)
 Organization and Structure of the SEC (pg. 748)
SEC Pronouncements on Accounting and Auditing (pg. 750)
Review 1 • Mission and Organization of the SEC (pg. 750)
 Registration of New Securities (pg. 750)
 Periodic Reporting Requirements (pg. 752)
EDGAR (pg. 752)
The Annual Report: Form 10-K (pg. 752)
Regulation S-X (pg. 757)
The Quarterly Report: Form 10-Q (pg. 759)
Special Reports: Form 8-K (pg. 760)
Review 2 • Registration and Periodic Reporting Requirements (pg. 762)
 Corporate Accountability and Governance (pg. 762)
Audit Committees (pg. 763)
Antifraud Provisions and Insider Trading (pg. 763)
Proxy Statements (pg. 764)
The Dodd-Frank Act (pg. 764)
 The SEC and Accounting Standards (pg. 765)
Review 3 • Corporate Accountability and Governance, SEC Intervention in Standard-Setting (pg. 766)
Index (pg. 778)
Susan S. Hamlen
Susan S. Hamlen is the former Department Chair and Associate Professor of Accounting at the University at Buffalo School of Management. She received her PhD and MS at Purdue University and her BS at the University of California, Berkeley.
Professor Hamlen is the author of Advanced Accounting 4e and previously co-authored 12 editions of advanced accounting texts. She has taught courses in advanced accounting for over twenty-four years and courses in financial accounting for over nine years, at the undegraduate and graduate levels.
Professor Hamlen's research interests are in the area of reporting for financial derivatives and international reporting. She has publications in Journal of Derivatives Accounting, Theoretical Economics Letters, and in other accounting and analysis journals.
Professor Hamlen is an active member of the American Accounting Association and other accounting, analysis, and business organizations.
Errata - Textbook
Last Updated: Mar 31 2020
Corrections that were made to the text after the first printing.
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