This eighth edition of Advanced Accounting contains 21 chapters and is designed for financial accounting courses above the intermediate level. The eighth edition has been updated to reflect recent business developments and changes in accounting standards and regulatory requirements, especially the coverage of consolidated statements, goodwill and other intangible assets and derivative securities. The chapter content is revised for better and more efficient coverage.
An important feature of this book is its student orientation, and special effort was expended to increase that emphasis in this edition. The eighth edition has been rewritten in a more active writing style intended to enhance the readability of the text. The text has been streamlined by focusing on the complete equity method throughout the chapters on consolidations. We maintain the "reference text" quality of earlier editions by including alternative methods of parent company accounting in Electronic Supplements to chapters which can be found on the advanced accounting website. Our focus on a single method allows students to focus on understanding the underlying accounting concepts, rather than the details of bookkeeping.
The student-oriented features include the shading of working paper entries, presenting working papers on single upright pages, and integrating excerpts from business publications and corporate annual reports throughout the text. A student orientation is also reflected in the assignment material, which is designed to provide variety and maintain student interest. The text includes many exhibits that summarize complex material and both clarify and reinforce the underlying concepts. All exhibits should be read and reviewed in conjunction with the text. The assignment material, including items from past CPA Examinations, is closely aligned with chapter coverage. In addition, the names of parent and subsidiary companies begin with P and S for convenient identification and reference.
The most important changes in this eighth edition of Advanced Accounting include:
• Chapters 1 through 11 have been updated to include changes in the consolidated
financial reporting introduced in FASB Statements No. 141 and 142.
• Chapter 12 has been substantially rewritten to improve coverage of the hedging con
cepts and rules introduced in FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities."
• Chapters 18 through 21 are totally reorganized, updated, and expanded from three
to four chapters, providing a significant improvement in the handling of the gov
ernmental and not-for-profit areas of accounting.
The first 11 chapters cover business combinations, the equity and cost methods of accounting for investments in common stock, and consolidated financial statements. This emphasis reflects the importance of business combinations and consolidations in advanced accounting courses, as well as in financial accounting and reporting practices.
Accounting standards for business combinations under the purchase method are introduced in Chapter 1, along with applicable accounting and reporting standards. Chapter 1 also provides relevant background material relating to the form and economic impact of business combinations. The equity method of accounting as a one-line consolidation is discussed in Chapter 2 and integrated throughout subsequent chapters on consolidations. This parallel one-line consolidation/consolidation coverage permits alternate computations for such key concepts as consolidated net income and consolidated retained earnings and helps the instructor explain the objectives of consolidation procedures. It also permits students to check their logic by alternative approaches to key computations.
The one-line consolidation is established as the standard for a parent company in accounting for its subsidiaries. Our coverage does not ignore situations in which the parent company uses the cost method or an incomplete equity method to account for its subsidiaries and other investees. These methods are illustrated in Electronic Supplements to the chapters which are available on the website at www.prenhall.com/beams, including assignment material so that students are prepared for consolidation assignments regardless of the method used by the parent company in accounting for its subsidiary investments.
Accounting and reporting matters related to pooled subsidiaries have been largely eliminated from the main text, reflecting the impact of FASB Statement No. 141. However, recognizing that existing poolings have been grandfathered in by the FASB, we continue to provide this coverage in either appendices or on the website, as appropriate. Consolidated financial statements and pushdown accounting are introduced in Chapter 3. Chapter 3 includes an illustration of two methods considered by the FASB for allocating the purchase price to (1) the total fair values of the subsidiary's identifiable net assets and purchased goodwill and (2) the total fair values of the subsidiaries identifiable net assets and implied goodwill.
Chapter 4 introduces the student to consolidation working paper techniques and procedures. The three-section, financial statement working paper approach is presented as basic, but the trial balance approach is also illustrated in the appendix and included in the problem material. Consolidation Working papers for a parent company that uses the equity method as a one-line consolidation are presented to set the standard.
Working papers are illustrated under an incomplete (or simple) equity method and the cost method, both for the year of acquisition and the following year on the website. Consolidation under the cost and incomplete equity methods is illustrated using both the traditional approach (alternate working paper entries) and the conversion-to-equity approach (adjusted to the equity method through a schedule and a working paper entry).
Intercompany transactions involving inventories, plant assets, and bonds are covered in Chapters 5, 6, and 7. Chapter 8 reviews ownership changes in subsidiaries. Chapter 9 covers complex affiliation structures, and Chapter 10 reviews concepts for subsidiaries with preferred stock, consolidated earnings per share, and income taxation for consolidated entities. The Electronic Supplement to Chapter 10 reviews accounting and reporting practices for branch operations, including the use of perpetual inventory practices in the combining working papers. The use of perpetual inventory procedures makes the combining working paper entries for branches compatible with those for consolidations.
Chapter 11 discusses alternative consolidation theories, leveraged buyouts, push-down accounting, and corporate joint ventures. An appendix to Chapter 11 presents current cost implications for consolidations. Chapters 9, 10, and 11 include specialized topics, so their coverage is not essential background for assignment of subsequent chapters.
Foreign currency issues continue to be important to American business enterprises. The survival of many American businesses depends on access to foreign markets, suppliers, and capital. Chapter 12 reviews accounting for derivative securities and then applies these concepts to foreign currency transactions, including imports and exports and forward or similar contracts to hedge against exchange losses. It has been thoroughly updated to reflect the requirements of FASB
Statement No. 133. Chapter 13 covers translation and remeasurement of foreign-entity financial statements, one-line consolidations of equity investees, consolidation of foreign subsidiaries for external reporting purposes, and combining foreign branch operations.
Chapter 14 examines disclosures for industry segments and interim financial reporting and has been updated to reflect FASB Statement No. 131. Chapter 15 covers organization, operations, and dissolution of partnership entities, and Chapter 16 extends partnership coverage to liquidations. Chapter 17 covers corporate liquidations, reorganizations, and debt restructurings for financially distressed companies.
Chapters 18 through 20 provide an introduction to governmental accounting, and the final chapter (Chapter 21) introduces accounting for voluntary health and welfare organizations, hospitals, and colleges and universities. These chapters have been completely reorganized and updated to provide the best available assistance for the student to gain a basic grasp of not-for-profit accounting, including up-to-date coverage of GASB Statement No. 34.
The material covered in the Appendices of the prior edition has been updated and moved to www.prenhall.com/beams. Appendix A provides an overview of SEC accounting requirements, and Appendix В discusses and illustrates fiduciary accounting for estates and trusts.
Solutions Manual—prepared by Fatma Cebenoyan and John J. Kim at Hunter College, CUNY. Includes updated answers to questions and solutions to problems. Accuracy checked to maintain a high quality of work.
Instructors Manual—written by Charles Fazzi, Robert Morris College. Contains (a) comprehensive outlines of all chapters; (b) class illustrations; (c) descriptions of all exercises and problems, including estimated times for completion; (d) alternative lesson plans covering different chapters; and (e) a checklist for students of key figures in the problems.
Test Item File—prepared by Michael Broihahn, Barry University. Includes more than 1,000 up-to-date test questions in True/False, Multiple Choice, Short Answer and Problem formats. Solutions to all test items are also included. NEW! TestGenEQ—test management software containing all the material from the Test Item File. This new software is completely user-friendly and allows instructors to view, edit and add test questions; select questions randomly or manually; create tests using drag-and-drop or point-and-click transfer; and print in a variety of formats.
NEW! Companion Website—to access visit www.prenhall.com/beams. The faculty portion of the website is a one-stop resource and includes files available for download of Transparency Masters, Spreadsheet Templates, Power Points. NEW! Instructor's Resource CD-ROM—including files of the Instructor's Manual, Solutions Manual, Test Manager, Power Points, Transparency Masters and Spreadsheet Templates.
NEW! Companion Website—to access visit www.prenhall.com/beams. The student portion of the website includes an Online Study Guide of True/False and Multiple Choice questions, as well as Power Point presentations by chapter.
Many people have made valuable contributions to the eighth edition of Advanced Accounting, and we are happy to recognize their contributions. We are indebted to the many users of prior editions for their helpful comments and constructive criticism. We also acknowledge the help and encouragement that we received from students at Virginia Tech, Louisiana State, Barry and Michigan State who, often unknowingly, participated in class-testing of various sections of the manuscript.
We also want to thank our faculty colleagues for the understanding and support that made eight editions of Advanced Accounting possible.
Our gratitude goes to the reviewers who helped us shape this edition: David Bilker, University of Maryland; Paul Copley, University of Georgia; Chuck Harter, North Dakota State University; Michael Holland, Valdosta State University; Marianne L. James, California State University, Los Angeles; Kathryn Jervis, Roger Williams University; Gary Johnson, Southeast Missouri State University; Saleha B. Khumawala, University of Houston; Robert Kravchuk, Indiana University; John W. Moore, Virginia State University; Ganesh Pandit, Clark Atlanta University.
We would like to thank the Prentice Hall book team for their hard work and dedication: Thomas Sigel, Fran Toepfer, Beth Romph, Beth Toland, Elisa Adams, Jessica Sabloff, Suzanne Grappi, Carol Samet, and Elena Picinic.
FLOYD A. BEAMS
JOSEPH H. ANTHONY