Wiley GAAP E-Book

Barry J. Epstein

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Regulatory Reporting
• Sprache: Englisch

Seitenzahl: 839

Veröffentlichungsjahr: 2010

Beschreibung

Wiley GAAP Workbook provides easy-to-understand guidance and clarity to practical applications of GAAP. Enhancing your comprehension of GAAP to enable practical application of a variety of situations that you may encounter in practice, this workbook and guide simplifies application of GAAP standards and interpretations to specific real-world situations.

• Provides easy-to-understand clarity and guidance on interpretation and application of the overwhelming and voluminous GAAP standards
• Offers explanations supplemented with examples, case studies, solutions, and illustrations for enhanced understanding of GAAP
• Includes newly issued accounting pronouncements and information on the GAAP codification

Wiley GAAP: Practical Implementation Guide and Workbook is a quick reference guide on Generally Accepted Accounting Principles and their application with easy to understand outlines of FASB standards, practical insights, case studies with solutions, illustrations, and multiple choice questions with solutions. It greatly facilitates understanding of the practical implementation issues involved in applying these complex rules-based standards.

Leseprobe

Table of Contents

Title Page

Copyright Page

About the Authors

Chapter 1 - RESEARCHING GAAP

BACKGROUND AND INTRODUCTION

OBJECTIVE OF GAAP REPORTING

WHO CREATED GAAP?

ACCOUNTING STANDARDS CODIFICATION

HOW IS GAAP CREATED?

HIERARCHY OF GAAP UNDER THE CODIFICATION

IMPORTANT CONCEPT OF MATERIALITY IN APPLYING GAAP

THE SARBANES-OXLEY ACT OF 2002

RESEARCHING GAAP PROBLEMS

FASB CONCEPTUAL FRAMEWORK

CONDUCTING RESEARCH THROUGH THE FASB CODIFICATION WEB SITE

Chapter 2 - STATEMENT OF FINANCIAL POSITION (ASC 210)

INTRODUCTION

SCOPE

STRUCTURE AND CONTENT

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 3 - INCOME STATEMENT (ASC 225)

INTRODUCTION

SCOPE

CONTENT

FORMAT

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 4 - STATEMENT OF CASH FLOWS (ASC 230)

INTRODUCTION

SCOPE

OVERALL CONSIDERATIONS

CLASSIFICATION

PRESENTATION

GROSS VERSUS NET BASIS

CASH FLOW PER SHARE

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS (INDIRECT METHOD)

MULTIPLE-CHOICE QUESTIONS

Chapter 5 - ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES, AND ERRORS ...

BACKGROUND AND INTRODUCTION

ACCOUNTING POLICIES

CONSISTENCY OF ACCOUNTING POLICIES

FACTORS GOVERNING CHANGES IN ACCOUNTING POLICIES

APPLYING CHANGES IN ACCOUNTING POLICIES

LIMITATIONS OF RETROSPECTIVE APPLICATION

DISCLOSURES WITH RESPECT TO CHANGES IN ACCOUNTING POLICIES

CHANGES IN ACCOUNTING ESTIMATES

CHANGE IN REPORTING ENTITY

CORRECTION OF PRIOR PERIOD ERRORS

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 6 - FAIR VALUE (ASC 820)

SCOPE

SCOPE EXCEPTIONS

MEASUREMENT PRINCIPLES

VALUATION TECHNIQUES

MEASUREMENT CONSIDERATIONS

FAIR VALUE DISCLOSURES

FAIR VALUE OPTION

PRESENTATION AND DISCLOSURE

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 7 - CASH, RECEIVABLES, AND PREPAID EXPENSES (ASC 305, 310, 860)

BACKGROUND AND INTRODUCTION

CASH

RECEIVABLES

PREPAID EXPENSES

DISCLOSURES

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 8 - INVENTORY (ASC 330)

BACKGROUND AND INTRODUCTION

SCOPE

OWNERSHIP OF GOODS

FOB

FAS

ACCOUNTING FOR INVENTORIES

MEASUREMENT OF INVENTORIES

COST OF INVENTORIES

COST FLOW ASSUMPTIONS

LIFO LIQUIDATION

LIFO CONFORMITY RULE

LOWER OF COST OR MARKET

OTHER INVENTORY TOPICS

INTERIM REPORTING

DISCLOSURE

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 9 - REVENUE RECOGNITION (ASC 605)

BACKGROUND AND INTRODUCTION

SCOPE

MEASUREMENT OF REVENUE

IDENTIFICATION OF A TRANSACTION

SALE OF GOODS

RENDERING OF SERVICES

DISCLOSURES

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 10 - PROPERTY, PLANT, AND EQUIPMENT (ASC 360)

BACKGROUND AND INTRODUCTION

RECOGNITION OF AN ASSET

DEPRECIATION

DERECOGNITION

DISCLOSURE

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 11 - FINANCIAL INSTRUMENTS (ASC 825)

INTRODUCTION

SCOPE

CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES INTO CATEGORIES

RECOGNITION

DERECOGNITION

MEASUREMENT

DERIVATIVES

HEDGE ACCOUNTING

DISCLOSURES

EXTRACTS FROM FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 12 - EQUITY METHOD INVESTMENTS AND JOINT VENTURES (ASC 323)

BACKGROUND AND INTRODUCTION

EQUITY METHOD

EQUITY INVESTMENTS IN CORPORATE JOINT VENTURES AND NONCORPORATE ENTITIES

MULTIPLE-CHOICE QUESTIONS

Chapter 13 - INTANGIBLE ASSETS (ASC 350)

INTRODUCTION AND BACKGROUND

INTANGIBLE ASSETS

INITIAL RECOGNITION AND MEASUREMENT OF INTANGIBLES

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 14 - CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS (ASC 810)

SCOPE

PRESENTATION OF FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

PRACTICAL INSIGHT

ACCOUNTING PROCEDURES

VARIABLE INTEREST ENTITIES

DISCLOSURES

EXTRACT FROM PUBLISHED FINANCIAL STATEMENT

MULTIPLE-CHOICE QUESTIONS

Chapter 15 - BUSINESS COMBINATIONS (ASC 805)

BACKGROUND AND INTRODUCTION

IDENTIFYING AN ACQUIRER

COST OF ACQUISITION

NET ASSETS ACQUIRED

GOODWILL

INITIAL ACCOUNTING

DISCLOSURES

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 16 - INCOME TAXES (ASC 740)

BACKGROUND AND INTRODUCTION

CURRENT TAX LIABILITIES AND ASSETS

ACCOUNTING FOR DEFERRED TAX

CONSOLIDATED FINANCIAL STATEMENTS

TEMPORARY DIFFERENCES NOT RECOGNIZED FOR DEFERRED TAX

DEFERRED TAX ASSETS

ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES

TAX RATES

DISCOUNTING

CURRENT AND DEFERRED TAX RECOGNITION

DIVIDENDS

DISCLOSURE: KEY ELEMENTS

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 17 - CURRENT LIABILITIES AND CONTINGENCIES (VARIOUS SECTIONS UNDER THE ASC)

BACKGROUND AND INTRODUCTION

CURRENT LIABILITIES

CONTINGENCIES

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 18 - LONG-TERM LIABILITIES (ASC 480 AND 835)

INTRODUCTION

NOTES AND BONDS

MANDATORILY REDEEMABLE SHARES AND SIMILAR INSTRUMENTS

OBLIGATIONS TO ISSUE OR REPURCHASE SHARES

MEASURING LIABILITIES AT FAIR VALUE

MULTIPLE-CHOICE QUESTIONS

Chapter 19 - LEASES (ASC 840)

BACKGROUND AND INTRODUCTION

CLASSIFICATION OF LEASES

LESSEE ACCOUNTING

LESSOR ACCOUNTING

SALE-AND-LEASEBACK TRANSACTIONS AND OTHER TRANSACTIONS INVOLVING THE LEGAL FORM ...

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 20 - SEGMENT REPORTING (ASC 280)

BACKGROUND AND INTRODUCTION

SCOPE

OPERATING SEGMENTS

REPORTABLE SEGMENTS

SEGMENT DISCLOSURES

ENTITY-WIDE DISCLOSURES

RESTATEMENT OF PREVIOUSLY REPORTED SEGMENT INFORMATION

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 21 - INTERIM REPORTING (ASC 270)

OBJECTIVE

FORM AND CONTENT OF INTERIM REPORTS

DISCLOSURE OF INTERIM INFORMATION

PERIODS TO BE PRESENTED BY INTERIM FINANCIAL STATEMENTS

MEASUREMENT

ACCOUNTING CHANGES

CONTINGENCIES

MULTIPLE-CHOICE QUESTIONS

Chapter 22 - FOREIGN CURRENCY (ASC 830)

OBJECTIVES AND SCOPE

FUNCTIONAL CURRENCY

TRANSLATION METHODS

RECOGNITION OF EXCHANGE DIFFERENCES

TRANSLATION OF A FOREIGN OPERATION

DISCLOSURE

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 23 - EARNINGS PER SHARE (ASC 260)

BACKGROUND AND INTRODUCTION

COMMON STOCK

PRESENTATION OF EARNINGS PER SHARE

BASIC EARNINGS PER SHARE

RIGHTS ISSUES

DILUTED EARNINGS PER SHARE

PRESENTATION

DISCLOSURES

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 24 - EMPLOYEE BENEFITS (ASC 715)

SCOPE

DEFINED CONTRIBUTION PLANS AND DEFINED BENEFIT PLANS—CLASSIFICATION

DEFINED BENEFIT PLANS

DEFINED CONTRIBUTION PLANS

CONTRASTING DEFINED BENEFIT AND DEFINED CONTRIBUTION

ACCOUNTING FOR DEFINED CONTRIBUTION PLANS

ACCOUNTING FOR DEFINED BENEFIT PLANS

KEY INFORMATION: DEFINED BENEFIT PLANS

STATEMENT OF FINANCIAL POSITION

INCOME STATEMENT

MEASURING THE DEFINED BENEFIT OBLIGATION

PLAN ASSETS

PENSION ASSETS AND LIABILITIES

CURTAILMENTS AND SETTLEMENTS

ASSET GAINS AND LOSSES—DEFINED BENEFIT PLANS

DISCLOSURE

EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

Chapter 25 - ACCOUNTING AND REPORTING BY RETIREMENT BENEFIT PLANS (ASC 960 AND 962)

INTRODUCTION

DEFINED CONTRIBUTION PLANS

DEFINED BENEFIT PLANS

ADDITIONAL DISCLOSURES REQUIRED BY THE STANDARDS

MULTIPLE-CHOICE QUESTIONS

Chapter 26 - STOCKHOLDERS’ EQUITY (ASC 505)

BACKGROUND AND INTRODUCTION

LEGAL CAPITAL AND CAPITAL STOCK

STOCK SUBSCRIPTIONS

ADDITIONAL PAID-IN CAPITAL

RETAINED EARNINGS

MULTIPLE-CHOICE QUESTIONS

Chapter 27 - PERSONAL FINANCIAL STATEMENTS (ASC 274)

INTRODUCTION

SCOPE

PURPOSE AND COMPONENTS OF FINANCIAL STATEMENTS

MEASUREMENT

DISCLOSURES

HYPOTHETICAL SET OF PERSONAL FINANCIAL STATEMENTS

MULTIPLE-CHOICE QUESTIONS

ANSWERS FOR MULTIPLE-CHOICE QUESTIONS

INDEX

This book is printed on acid-free paper.

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Published simultaneously in Canada.

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ISBN: 978-0-470-59906-8

About the Authors

Barry J. Epstein, PhD, CPA, is a partner with Chicago-based Russell Novak & Company, LLP, where he specializes in technical consultation on accounting and auditing matters and corporate governance, and maintains a national practice as a consulting and testifying expert for commercial and other litigation matters, including accountants’ malpractice, contractual dispute resolution, damages modeling, and white-collar criminal defense. He has previously served in senior technical and litigation consulting positions with several regional and national CPA firms and as a corporate finance executive and college professor. Dr. Epstein has authored or coauthored six books (including Wiley IFRS Interpretation and Application), hundreds of professional education courses, several articles in business or professional journals, and a weekly business column for an international newspaper. He has served on several state and national technical committees, including the AICPA’s Board of Examiners, served as chair of the Illinois CPA Society’s senior accounting technical committee, and held teaching positions at several universities. Dr. Epstein received his doctorate from the University of Pittsburgh and also holds degrees from DePaul University and the University of Chicago. He is a member of the Illinois CPA Society, the AICPA, and the American Accounting Association.

Nadira M. Saafir, CPA, is a senior litigation consultant with Chicago-based Russell Novak & Company LLP. Prior to joining Russell Novak & Company in 2009, she served as a senior auditor at Deloitte, where she gained an extensive knowledge base regarding the theory and practical application of generally accepted accounting principles. She received her master’s degree in accounting from the University of Illinois at Chicago and holds a bachelor’s of business administration degree from Grand Valley State University. She is a member of the AICPA.

Chapter 1

RESEARCHING GAAP

BACKGROUND AND INTRODUCTION

Overview of GAAP

This chapter provides an overview of generally accepted accounting principles (GAAP), including the processes involved in its development.

GAAP Defined

The phrase “generally accepted accounting principles” is a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. It includes not only broad guidelines of general application but also detailed practices and procedures. Those conventions, rules, and procedures provide a standard by which to measure financial presentations.

—U.S. Auditing Standards Board, AU §411

OBJECTIVE OF GAAP REPORTING

Generally accepted accounting principles (GAAP) are concerned with the measurement of economic activity, the timing when such measurements are to be made and recorded, the disclosures surrounding this activity, and the preparation and presentation of summarized economic information in the form of financial statements.

There are two broad categories of accounting principles: those dealing with recognition and measurement, and those dealing with presentation and disclosure.

Recognition and measurement principles determine when and how transactions and events items enter the accounting cycle and impact the financial statements. These quantitative standards require economic information to be reflected numerically.

Presentation and disclosure principles involve qualitative considerations regarding information that is deemed an essential ingredient of a full set of financial statements, the absence or inappropriate presentation of which would make the financial statements materially misleading.

Disclosure principles complement recognition principles by explaining assumptions underlying the numerical information and by providing additional information about accounting policies, contingencies, uncertainties, and other matters that are essential to fully understand the performance and financial condition of the reporting entity.

WHO CREATED GAAP?

Over time, different professional and statutory bodies have been given responsibility for the promulgation of GAAP, with multiple organizations often sharing this responsibility. All GAAP established by earlier standard-setting bodies, to the extent not withdrawn or superseded, continues in effect. GAAP in effect as of July 1, 2009, have been incorporated in the Accounting Standards Codification (ASC) of the Financial Accounting Standards Board (FASB), and that promulgated hereinafter will be set forth as changes to ASC and not as freestanding pronouncements, such as FASB statements.

Committee on Accounting Procedure

The 1929 market crash led to the first serious attempt to create formalized generally accepted accounting principles in 1930, in the hope that a set of uniform and stringent financial reporting requirements would prevent a recurrence. The American Institute of Accountants (which in 1957 was renamed the American Institute of Certified Public Accountants [AICPA]) created a special committee to work with the New York Stock Exchange toward the goal of establishing standards for accounting procedures. The special committee recommended five rules to the Exchange, published in 1938 as Accounting Research Bulletin (ARB) 1 of the Committee on Accounting Procedure. The Committee subsequently published 51 such Bulletins, including ARB 43, which consolidated and superseded all prior bulletins and also attempted to achieve uniformity in accounting terminology. However, its limited resources and lack of serious research efforts in support of its pronouncements were questioned in the late 1950s as a number of very complex controversial topics loomed on the horizon.

Accounting Principles Board

In response, the Accounting Principles Board (APB) was created to facilitate the development of principles that were to be based primarily on the research of a separate Accounting Research Division of the AICPA. The Division was to undertake extensive research, publish its findings, and then permit the APB to take the lead in the discussions that would ensue concerning accounting principles and practices. The Board’s authority was enforced primarily through its prestige and Rule 203 of the AICPA Code of Professional Conduct. Furthermore, formal approval of Board issuances by the Securities and Exchange Commission (SEC) gave additional support to its activities.

During the Board’s 14 years of existence, it issued 31 authoritative Opinions plus 4 nonauthoritative Statements. The Board made only scant use of the efforts of the Accounting Research Division, which published 15 research studies during its lifetime, and the respective agendas of the two bodies were independently arrived at. The general opinion was that the APB did not, ultimately, operate differently or more effectively than had the Committee on Accounting Procedure, resulting in calls for its replacement.