There is a new edition of this book available Advanced Accounting, 4e.

Advanced Accounting, 3e

by Hamlen, Huefner, Largay III

ISBN: 978-1-61853-151-3 | Copyright 2016


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 rather than merely explaining procedures. We develop each topic by explaining the underlying business activity, the reporting goals, and how standards and procedures achieve these goals. Each topic is clearly developed in terms students can understand. We use illustrations from actual practice to enhance understanding and familiarize students with the information presented in real financial statements. Accounting standards are increasingly principles based, requiring 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.
  • Foreign currency translation, 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 10-13.
  • 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:

Chapter Title
1 Coca-Cola
3 General Motors
4 Time Warner
5 Las Vegas Sands Corporation
6 Nike
7 Wal-Mart
8 McDonald's
9 Kellogg's
10 Mecklenburg County, NC
11 Alameda County, CA
12 St. Louis, MO
13 Beta Alpha Psi
14 Suburban Propane Partners
15 Quiznos
16 Securities and Exchange Commission

Emphasis on Current Issues and Trends

Business Applications

Taken from current news and actual financial statements, Business Applications boxes illustrate reporting practices, current issues, and controversies. The following is an example from Chapter 3.

Reporting perspectives

Reporting Perspectives comment on topics such as the strengths and weaknesses in reporting standards, ethical issues, implications for information quality, and proposals for new standards. The following is a sample 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 a sample from Chapter 5.

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. We emphasize the measurement aspects of combinations—reporting assets and liabilities acquired, determining acquisition cost, valuing non-controlling interests, eliminating intercompany accounts.

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 elimination entries necessary to adjust the parent’s accounts to the complete equity method before proceeding with consolidation. The appendix also compares complete equity method eliminations to cost method eliminations.

Additional Pedagogy

To reinforce concepts presented in each chapter and ensure student comprehension, we include 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 frm 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 Class-Tested End-of-Chapter Material

Outstanding assignment material is an essential component of a successful textbook. 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. Assignment material is class-tested, with an emphasis on relevance and accuracy.

Certain business combination problems continue from chapter to chapter. For example, P3.2 covers consolidation at the date of acquisition, and P4.8 covers consolidation of the same two companies in subsequent years. P4.2 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 P2.5, an acquisition is reported as a merger, and in P3.11 the same acquisition is reported as a stock investment and consolidation. P3.4, P4.4, P5.2, 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.

Features New To This Edition

  • In the consolidation chapters, we use color 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 more clearly emphasizes the goal of consolidating controlled entities, and includes updates on development stage entities, kick-out rights, and partnerships as illustrations of this concept.
  • A new section on valuation of acquired intangibles discusses and illustrates the cost, market and income approaches, with emphasis on appropriate judgments and related audit risks.
  • We added new material on common reporting issues related to acquisitions, including valuation of acquired deferred taxes, classifi cation of contingent consideration as acquisition cost versus future compensation, acquisition of entities previously reported as signifi cant infl uence investments, and fair value measurement issues for impairment testing.
  • In the governmental chapters, all illustrations are updated for current standards and practice in the areas of fund balance classifi cations, recognition of deferred infl ows and outfl ows, and reporting for defi ned benefi t pensions. We added new material on accounting for debt refundings, a common activity in state and local governments.
  • We emphasize the commonality of reporting issues for different types of entities—businesses, NFPs, governments, and even partnerships. Examples include consolidation policy, acquisition reporting, and hedge accounting.
  • Chapter 16, covering SEC fi nancial reporting and governance issues, is completely updated for current activities in the areas of regulation, enforcement,and monitoring.
  • All illustrations, current practices, and reporting perspectives are completely updated.
  • There are over 150 new exercises and problems, and a net increase of about 80 exercises and problems, and various levels of diffi culty.
  • In response to requests from adopters, more assignments have been added to myBusinessCourse for the 3rd edition, including the multiple choice questions at the end of each chapter.

Online Instruction and Homework Management System is a web-based learning and assessment program intended to complement your textbook and faculty instruction. This easy-to-use program grades homework automatically (Instructor-Led course only) and provides students with access to narrated demonstrations and eLecture videos. Assignments with the checkmark in the margin are available in the Instructor-Led version of myBusinessCourse. Access is free with new copies of this textbook (look for a page containing the access code near the front of the book). If you buy a used copy of the book, you can purchase access at

Introducing myBusinessCourse

myBusinessCourse is a complete, secure, web-based training and e-Learning solution. There is nothing to download or install; it is accessible through any modern web browser and most mobile devices.

eLecture Videos

97 eLecture Videos

  • Created by the authors of the textbook
  • Consistent with the textbook's explanations and approach
  • Cover learning objectives and concepts from each chapter
  • Ideal for remediation
  • Ideal for online and hybrid classrooms

Narrated demonstration videos

89  Guided Example Videos

  • Created by the authors of the textbook
  • Provide problem solving strategies as well as solutions
  • Offer clear, step-by-step demonstrations of how to solve select problems from the textbook

Auto-graded assignments

Auto-graded Assignments

  • Provides immediate feedback
  • Create assignments using problems from the textbook
  • Additional randomized versions of assignments provide extra practice
  • Ideal for remediation
  • Include select questions from test banks

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Expand/Collapse All
Preface (pg. i)
Brief Contents (pg. x)
Contents (pg. xi)
Chapter 1: Intercorporate Investments: An Overview (pg. 2)
Introduction (pg. 3)
Motivations for Intercorporate Investments (pg. 3)
Types of Investments (pg. 4)
Marketable Debt and Equity Investments (pg. 5)
Trading Investments (pg. 5)
Available-for-Sale Investments (pg. 6)
Held-to-Maturity Investments (pg. 7)
Proposed Reporting Changes for Financial Instruments (pg. 9)
Review 1 • Trading, AFS, and HTM Investments (pg. 9)
Investments with Significant Influence (pg. 9)
Accounting Using the Equity Method (pg. 10)
Equity in Net Income Calculation (pg. 10)
Other Comprehensive Income and the Equity Method (pg. 12)
Impairment Testing (pg. 13)
Joint Ventures (pg. 14)
Review 2 • Reporting for Equity Method Investments (pg. 14)
Controlling Investments (pg. 15)
Mergers, Consolidations, and Asset Acquisitions (pg. 15)
Stock Acquisitions (pg. 16)
Variable Interest Entities (pg. 16)
International Financial Reporting Standards For Intercorporate Investments (pg. 17)
Marketable Debt and Equity Investments (pg. 17)
Investments with Significant Influence (pg. 18)
Joint Ventures (pg. 18)
Controlling Investments (pg. 18)
Review of Key Concepts (pg. 19)
Multiple Choice Questions (pg. 20)
Exercises (pg. 22)
Problems (pg. 26)
Review Solutions (pg. 33)
Chapter 2: Mergers and Acquisitions (pg. 34)
Introduction (pg. 35)
Motivations for Mergers and Acquisitions (pg. 35)
Types of Combinations (pg. 36)
Overview of Reporting for Combinations (pg. 37)
Standards of Reporting for Business Combinations (pg. 39)
Acquisition Date (pg. 40)
Identifying the Acquiring Company (pg. 40)
Measurement of Previously Reported Assets and Liabilities (pg. 41)
Identification and Measurement of Previously Unreported Intangibles (pg. 42)
Illustration of Reporting Assets Acquired and Liabilities Assumed (pg. 45)
Review 1 • Reporting Assets Acquired and Liabilities Assumed (pg. 47)
Contingent Consideration (pg. 48)
Employee Compensation (pg. 49)
Acquisition-Related Costs (pg. 50)
Illustration of Reporting Consideration Given in an Acquisition (pg. 50)
Measurement Period (pg. 51)
Reporting Subsequent Changes in Asset and Liability Values (pg. 51)
Reporting Subsequent Changes in Contingent Consideration Value (pg. 52)
Review 2 • Reporting Assets and Liabilities Acquired, Consideration Paid, and Subsequent Events (pg. 53)
In-Process Research and Development (pg. 55)
Preacquisition Contingencies (pg. 55)
Acquired Deferred Tax Liabilities (pg. 56)
Review of Key Concepts (pg. 58)
Multiple Choice Questions (pg. 59)
Exercises (pg. 60)
Problems (pg. 67)
Review Solutions (pg. 77)
Chapter 3: Consolidated Financial Statements: Date of Acquisition (pg. 78)
Introduction (pg. 79)
Criteria for Consolidation (pg. 80)
Motivations for Off-Balance-Sheet Entities (pg. 80)
Standards for Consolidation (pg. 82)
Control and Consolidation of Equity Investments (pg. 82)
Control and Consolidation of Non-Equity Investments (pg. 83)
Review 1 • Identifying Consolidated Entities (pg. 87)
Consolidation at Date of Acquisition (pg. 88)
Consolidation of Financial Statements: Preliminary Issues (pg. 88)
Objectives of Consolidation (pg. 89)
Consolidation Working Paper (pg. 89)
Review 2 • Consolidation with Identifiable Intangibles (pg. 97)
International Financial Reporting Standards for ConsolidationS (pg. 97)
The Concept of Control (pg. 97)
IFRS and U.S. GAAP Compared (pg. 98)
Review of Key Concepts (pg. 99)
Multiple Choice Questions (pg. 99)
Exercises (pg. 102)
Problems (pg. 107)
Review Solutions (pg. 116)
Chapter 4: Consolidated Financial Statements Subsequent to Acquisition (pg. 118)
Introduction (pg. 119)
Introduction to Consolidation Procedures (pg. 119)
Consolidation Eliminating Entries (pg. 120)
Illustration of Consolidation Process (pg. 121)
Consolidated Financial Statements (pg. 123)
Complete Equity Method as One-Line Consolidation (pg. 124)
Reporting Revaluations of Subsidiary Assets and Liabilities in Subsequent Years (pg. 125)
Previously Reported Assets and Liabilities (pg. 125)
Previously Unreported Identifiable Intangibles (pg. 127)
Goodwill (pg. 128)
Amortization and Impairment of Identifiable Intangibles and Goodwill: An Illustration (pg. 133)
Review 1 • Intangibles Impairment Testing (pg. 135)
Comprehensive Illustration: Consolidation in Subsequent Years (pg. 136)
Consolidation After One Year (pg. 137)
Consolidation After Two Years (pg. 140)
Review 2 • Consolidation in a Subsequent Year with Identifiable Intangibles (pg. 144)
IFRS for Acquired Intangibles (pg. 145)
Identifiable Intangibles (pg. 145)
Goodwill (pg. 146)
Appendix to Chapter 4 (pg. 148)
Consolidation Eliminating Entries When the Parent Uses the Cost Method (pg. 148)
Review of Key Concepts (pg. 153)
Multiple Choice Questions (pg. 154)
Exercises (pg. 156)
Problems (pg. 162)
Review Solutions (pg. 173)
Chapter 5: Consolidated Financial Statements: Outside Interests (pg. 176)
Introduction (pg. 177)
Noncontrolling Interests at Acquisition Date (pg. 178)
Valuation of Noncontrolling Interests and Goodwill at Acquisition (pg. 178)
Measuring the Fair Value of Noncontrolling Interests (pg. 179)
Consolidation Eliminating Entries at Acquisition Date (pg. 180)
Noncontrolling Interests in the Consolidated Balance Sheet (pg. 181)
Consolidating Variable Interest Entities (pg. 182)
Noncontrolling Interests in Subsequent Years (pg. 182)
Consolidation at End of the First Year (pg. 183)
Noncontrolling Interests in the Consolidated Statement of Income and Comprehensive Income (pg. 185)
Consolidation at End of the Second Year (pg. 187)
Review 1 • Consolidation with Noncontrolling Interest at End of Third Year, U.S. GAAP (pg. 192)
Noncontrolling Interests and Bargain Purchases (pg. 192)
Bargain Purchase Consolidation at Date of Acquisition (pg. 193)
Bargain Purchase Consolidation at End of the First Year (pg. 194)
Bargain Purchase Consolidation at End of the Second Year (pg. 196)
International Financial Reporting Standards for Noncontrolling Interests (pg. 197)
Review 2 • Consolidation with Noncontrolling Interest at End of the Third Year, IFRS (pg. 201)
Consolidated Statement of Cash Flows (pg. 201)
Preparation of Consolidated Statement of Cash Flows (pg. 202)
Consolidated Statement of Cash Flows: An Illustration (pg. 202)
Review of Key Concepts (pg. 204)
Multiple Choice Questions (pg. 205)
Exercises (pg. 207)
Problems (pg. 213)
Review Solutions (pg. 225)
Chapter 6: Consolidated Financial Statements: Intercompany Transactions (pg. 228)
Introduction (pg. 229)
Intercompany Service and Financing Transactions (pg. 230)
Intercompany Profits (pg. 231)
Equity in Net Income and Noncontrolling Interest in Net Income (pg. 232)
Intercompany Transfers of Land (pg. 233)
Eliminations in the Year of Transfer (pg. 233)
Eliminations in Subsequent Years (pg. 234)
Eliminations in Year of Sale to Outside Party (pg. 236)
Intercompany Transfers of Inventory (pg. 236)
Unconfirmed Profit in Ending Inventory (pg. 238)
Unconfirmed Profit in Beginning Inventory (pg. 238)
Review 1 • Intercompany Eliminations: Land and Merchandise Transfers (pg. 240)
Intercompany Transfers of Depreciable Assets (pg. 240)
Objectives of the Eliminations (pg. 241)
Eliminations in Year of Transfer (pg. 241)
Eliminations in Subsequent Years (pg. 242)
Eliminations in Year of Sale to Outside Party (pg. 244)
Review 2 • Intercompany Eliminations: Depreciable Asset Transfers (pg. 244)
International Financial Reporting Standards for Intercompany Transactions (pg. 245)
Comprehensive Illustration (pg. 246)
Review of Key Concepts (pg. 250)
Multiple Choice Questions (pg. 251)
Exercises (pg. 253)
Problems (pg. 258)
Review Solutions (pg. 268)
Chapter 7: Consolidating Foreign Currency Financial Statements (pg. 272)
Introduction (pg. 273)
Converting a Subsidiary’s Foreign Currency Accounts to the Parent’s Currency (pg. 273)
The Conversion Process (pg. 274)
The Functional Currency (pg. 276)
Translation and Remeasurement Procedures (pg. 277)
Translation Procedures (pg. 277)
Remeasurement Procedures (pg. 278)
Comparing Translation and Remeasurement (pg. 278)
Translation and Remeasurement Gains and Losses (pg. 278)
Translation and Remeasurement Illustrated (pg. 284)
Review 1 • Calculation of Remeasurement and Translation Gain or Loss (pg. 286)
Review 2 • Translation and Remeasurement of Foreign Currency Financial Statements (pg. 287)
Highly Inflationary Economies (pg. 288)
Changing the Functional Currency (pg. 289)
Translation and Remeasurement of an Existing Entity (pg. 289)
Converting the Statement of Cash Flows to the Reporting Currency (pg. 293)
Disclosures (pg. 293)
Financial Analysis Using Translated and Remeasured Information (pg. 295)
Effects on Profitability: The “DuPont Analysis” (pg. 295)
Effects on Analysis of Short-Term Liquidity and Long-Term Solvency (pg. 296)
Consolidation of international Subsidiaries (pg. 297)
Equity Method Reporting (pg. 297)
The Consolidation Process (pg. 298)
Review 3 • Consolidation of an International Subsidiary (pg. 302)
IFRS for Translating and Consolidating Foreign Currency Financial Statements (pg. 302)
Translation and Remeasurement (pg. 302)
Subsidiaries in Hyperinflationary Economies (pg. 302)
Review of Key Concepts (pg. 304)
Multiple Choice Questions (pg. 305)
Exercises (pg. 307)
Problems (pg. 313)
Review Solutions (pg. 323)
Chapter 8: Foreign Currency Transactions and Hedging (pg. 328)
Foreign Currency Transactions and Risk (pg. 329)
Foreign Currency Transactions (pg. 330)
Import and Export Transactions (pg. 330)
Review 1 • Foreign-Currency-Denominated Import and Export Transactions (pg. 334)
Foreign Borrowing and Lending Transactions (pg. 334)
Hedging Foreign Exchange Exposures (pg. 335)
Types of Foreign Exchange Risk (pg. 335)
Derivative Instruments Used in Hedging (pg. 336)
Reporting Investments in Foreign Currency Derivatives (pg. 338)
Review 2 • Using Forward Contracts to Hedge Foreign-Currency-Denominated Import Transactions (pg. 344)
Review 3 • Using Forward Contracts to Hedge Foreign-Currency-Denominated Firm Commitments (pg. 349)
Review 4 • Using Forward Contracts to Hedge Foreign-Currency-Denominated Forecasted Transactions (pg. 351)
International Financial Reporting Standards for Foreign Currency Transactions and Hedging (pg. 356)
Qualifications for Hedge Accounting (pg. 357)
Differences Between IFRS and U.S. GAAP (pg. 357)
Financial Instruments Disclosures (pg. 359)
Review of Key Concepts (pg. 359)
Multiple Choice Questions (pg. 360)
Exercises (pg. 362)
Problems (pg. 367)
Review Solutions (pg. 373)
Chapter 9: Futures, Options and Interest Rate Swaps (pg. 376)
Derivatives and Hedge Accounting (pg. 377)
Accounting for Derivatives and Hedging Transactions (pg. 378)
Hedge Accounting Qualifications (pg. 378)
Futures Contracts (pg. 380)
Introduction to Futures Contracts (pg. 380)
Transacting in Futures Contracts (pg. 381)
Accounting Events in Futures Trading (pg. 381)
T-Account Analysis of Futures Contracts (pg. 381)
Illustrations of Accounting for Futures Contracts (pg. 382)
Review 1 • Accounting for Futures Contracts (pg. 386)
Option Contracts (pg. 386)
Definitions (pg. 386)
Effects of Price Changes of Optioned Items (pg. 387)
Accounting Events in Options Trading (pg. 387)
Illustrations of Accounting for Options (pg. 380)
Review 2 • Accounting for Option Contracts (pg. 391)
Interest Rate Swaps (pg. 392)
Accounting for Interest Rate Swaps (pg. 394)
Assessing Hedge Effectiveness (pg. 394)
Accounting Events and Entries for Interest Rate Swaps (pg. 395)
Review 3 • Accounting for Interest Rate Swaps (pg. 396)
Disclosure Requirements (pg. 397)
Derivatives and Hedging Disclosures (pg. 397)
Derivatives and Hedging Under IFRS (pg. 399)
IFRS 9 Hedge Accounting Requirements (pg. 399)
Review of Key Concepts (pg. 400)
Multiple Choice Questions (pg. 401)
Exercises (pg. 402)
Problems (pg. 406)
Review Solutions (pg. 410)
Chapter 10: State and Local Governments: Introduction and General Fund Transactions (pg. 414)
Nature of Government Activities (pg. 415)
External Users of Governmental Financial Statements (pg. 417)
Sources of GAAP for State and Local Governments (pg. 417)
GAAP Hierarchy in Government Accounting (pg. 418)
Objectives of Financial Reporting (pg. 418)
Identifying the Reporting Entity (pg. 419)
Fund Structure (pg. 420)
Fund Types (pg. 422)
Review 1 • Identifying Funds (pg. 423)
Accounting and Reporting By Funds (pg. 424)
Accounting for Governmental Funds (pg. 424)
Accounting for Proprietary Funds (pg. 425)
Accounting for Fiduciary Funds (pg. 425)
Accounting for the General Fund (pg. 425)
Budgetary Accounts (pg. 427)
Recording Property Tax Revenue (pg. 429)
Purchase of Goods and Services (pg. 430)
Supplies Inventories (pg. 432)
Interfund Transactions (pg. 433)
Capital Assets and Long-Term Debt (pg. 434)
Closing Entries (pg. 436)
Outstanding Encumbrances at Year-End (pg. 437)
Comprehensive Illustration of General Fund Accounting and Reporting (pg. 438)
Transactions During the Year (pg. 439)
Closing Entries (pg. 442)
Financial Statements (pg. 443)
Review 2 • General Fund Budget and Closing Entries, Financial Statements (pg. 446)
Review of Key Concepts (pg. 446)
Multiple Choice Questions (pg. 447)
Exercises (pg. 449)
Problems (pg. 454)
Review Solutions (pg. 465)
Chapter 11: State and Local Governments: Other Transactions (pg. 468)
Accounting for Special Purpose Activities (pg. 469)
Special Revenue Funds (pg. 470)
Permanent Funds (pg. 470)
Accounting for Capital Projects (pg. 472)
Capital Projects (pg. 472)
Accounting for the Capital Projects Fund (pg. 473)
Accounting for General Obligation Debt (pg. 478)
General Obligation Debt (pg. 478)
Accounting for the Debt Service Fund (pg. 479)
Review 1 • Capital Projects and Debt Service Fund Transactions and Financial Statements (pg. 482)
Accounting for Proprietary Activities (pg. 482)
Accounting for Enterprise and Internal Service Funds (pg. 483)
Review 2 • Enterprise Fund Transactions and Financial Statements (pg. 487)
Accounting for Fiduciary Activities (pg. 487)
Accounting for Trust and Agency Funds (pg. 488)
Accounting for Investments (pg. 490)
Derivatives Investments (pg. 491)
Accounting for Other Liabilities and Debt Refundings (pg. 493)
Compensated Absences (pg. 493)
Landfill Operations (pg. 493)
Accounting for Leased Assets (pg. 494)
Debt Refundings (pg. 495)
Review of Key Concepts (pg. 496)
Multiple Choice Questions (pg. 497)
Exercises (pg. 499)
Problems (pg. 503)
Review Solutions (pg. 513)
Chapter 12: State and Local Governments: External Financial Reporting (pg. 518)
External Reporting Model (pg. 519)
Management’s Discussion and Analysis (pg. 520)
Government-Wide Financial Statements (pg. 521)
Statement of Net Position (pg. 521)
Statement of Activities (pg. 522)
Discussion of Government-Wide Statements (pg. 522)
Review 1 • Prepare a Statement of Activities (pg. 525)
Fund Financial Statements (pg. 525)
Major Funds (pg. 526)
Governmental Funds Financial Statements (pg. 526)
Review 2 • Reconcile the Change in Fund Balances to Change in Net Position (pg. 533)
Proprietary Funds Financial Statements (pg. 533)
Fiduciary Funds Financial Statements (pg. 538)
Comparison of Government-Wide and Funds Information (pg. 539)
Governmental Activities (pg. 539)
Business-Type Activities (pg. 540)
Notes and Required Supplementary Information (pg. 541)
Budgetary Comparison Schedules (pg. 541)
Capital Assets, Infrastructure, Investments, AND DEFINED BENEFIT PENSION PLANS (pg. 543)
Capital Assets and Infrastructure (pg. 543)
Investments (pg. 543)
Defined Benefit Pension Plans (pg. 544)
Review of Key Concepts (pg. 546)
Multiple Choice Questions (pg. 547)
Exercises (pg. 549)
Problems (pg. 555)
Review Solutions (pg. 562)
Chapter 13: Private Not-For-Profit Organizations (pg. 564)
Characteristics of Private Not-For-Profit (NFP) Organizations (pg. 565)
NFP Reporting Environment (pg. 566)
External Financial Reporting Requirements: General Concepts (pg. 566)
Financial Reporting Display Model (pg. 568)
Statement of Financial Position (pg. 568)
Statement of Activities (pg. 568)
Statement of Cash Flows (pg. 571)
Accounting for Contributions Received (pg. 572)
Unconditional and Unrestricted Cash Contributions (pg. 572)
Unconditional and Unrestricted Contributions of Goods and Services (pg. 573)
Donor-Imposed Temporary Restrictions (pg. 574)
Donor-Imposed Conditions (pg. 576)
Donor-Imposed Permanent Restrictions (pg. 576)
Contributions of Long-Lived Assets (pg. 577)
Annuity and Life Income Contributions (pg. 578)
Contributions Received on Behalf of Others (pg. 579)
Review 1 • Accounting for Contributions (pg. 580)
Accounting for Investments (pg. 580)
Review 2 • Reporting for Investments (pg. 581)
Comprehensive Illustration of NFP Accounting: Northeastern Heart Society (pg. 582)
Reporting Issues for Specific Not-For-Profit Organizations (pg. 586)
Voluntary Health and Welfare Organizations (pg. 586)
Colleges and Universities (pg. 586)
Health Care Organizations (pg. 587)
Evaluation of External Reporting for NFP Organizations (pg. 589)
Strengths of External Reporting Requirements (pg. 589)
Criticisms of External Reporting Requirements (pg. 589)
Current Developments in NFP Reporting (pg. 590)
Review of Key Concepts (pg. 591)
Multiple Choice Questions (pg. 592)
Exercises (pg. 594)
Problems (pg. 598)
Review Solutions (pg. 609)
Chapter 14: Partnership Accounting and Reporting (pg. 612)
Introduction (pg. 613)
Characteristics of a Partnership (pg. 613)
Relations of Partners to Others (pg. 614)
Relations Among Partners (pg. 614)
Partners’ Property Rights (pg. 615)
Contractual Provisions: The Partnership Agreement (pg. 615)
Limited Partnerships (pg. 615)
Comparison of Corporate and Partnership Forms of Organization (pg. 616)
Partnership Reporting Issues (pg. 617)
Formation of the Partnership (pg. 619)
Bonus and Goodwill Approaches (pg. 619)
Review 1 • Formation of a Partnership (pg. 620)
Allocation of Partnership Income to PartnerS (pg. 620)
Salaries to Partners (pg. 620)
Bonus to Partners (pg. 621)
Interest on Partners’ Capital Accounts (pg. 622)
Percentage Allocation by Income-Sharing Ratio (pg. 622)
Comprehensive Illustration of Partnership Net Income Allocation (pg. 622)
Schedule of Changes in Capital Accounts (pg. 623)
Review 2 • Income Allocation (pg. 624)
Admission of a New Partner (pg. 624)
Admission by Purchase of an Existing Partnership Interest (pg. 624)
Admission by Investment of New Capital (pg. 626)
Effects of Bonus and Goodwill Methods on Partners’ Capital (pg. 629)
Evaluation of Bonus and Goodwill Methods (pg. 629)
Retirement of a Partner (pg. 630)
Purchase with Personal Assets (pg. 630)
Purchase with Partnership Assets (pg. 630)
Review 3 • Retirement of a Partner and Admission of a New Partner (pg. 633)
Partnership Liquidations (pg. 633)
Priorities for Payments (pg. 633)
Rights of Creditors (pg. 634)
Simple Versus Installment Liquidations (pg. 635)
Simple Liquidations (pg. 635)
Installment Liquidations (pg. 637)
Review 4 • Termination of the Partnership (pg. 643)
Review of Key Concepts (pg. 644)
Multiple Choice Questions (pg. 644)
Exercises (pg. 646)
Problems (pg. 650)
Review Solutions (pg. 659)
Chapter 15: Bankruptcy and Reorganization (pg. 662)
Legal Aspects of Bankruptcy (pg. 664)
Legal Process of Chapter 7 Liquidation (pg. 665)
Legal Process of Chapter 11 Reorganization (pg. 665)
Financial Reporting for Chapter 7 Liquidation (pg. 665)
Statement of Affairs (pg. 665)
Review 1 • Chapter 7 Liquidation (pg. 670)
Statement of Realization and Liquidation (pg. 670)
Financial Reporting for Chapter 11 Reorganization (pg. 674)
Reporting During the Reorganization Process (pg. 674)
Reporting After Reorganization (pg. 677)
Review 2 • Chapter 11 Reorganization (pg. 682)
Other Forms of Restructuring (pg. 683)
Quasi-Reorganization (pg. 683)
Troubled Debt Restructuring (pg. 683)
Review of Key Concepts (pg. 684)
Multiple Choice Questions (pg. 685)
Exercises (pg. 686)
Problems (pg. 692)
Review Solutions (pg. 701)
Chapter 16: The SEC and Financial Reporting (pg. 704)
Establishment of the SEC and Key Securities Legislation (pg. 706)
Establishment of the SEC (pg. 706)
Securities Legislation and the SEC (pg. 706)
Definition of a Security (pg. 707)
Organization and Structure of the SEC (pg. 708)
SEC Pronouncements on Accounting and Auditing (pg. 709)
Review 1 • Mission and Organization of the SEC (pg. 710)
Registration of New Securities (pg. 710)
Periodic Reporting Requirements (pg. 711)
EDGAR (pg. 711)
The Annual Report: Form 10-K (pg. 712)
Regulation S-X (pg. 717)
The Quarterly Report: Form 10-Q (pg. 719)
Special Reports: Form 8-K (pg. 719)
Review 2 • Registration and Periodic Reporting Requirements (pg. 720)
Corporate Accountability and Governance (pg. 720)
Audit Committees (pg. 721)
Antifraud Provisions and Insider Trading (pg. 721)
Proxy Statements (pg. 722)
The Dodd-Frank Act (pg. 723)
The SEC and Accounting Standards (pg. 723)
Review 3 • Corporate Accountability and Governance, SEC Intervention in Standard-Setting (pg. 724)
Review of Key Concepts (pg. 724)
Multiple Choice Questions (pg. 725)
Exercises (pg. 727)
Problems (pg. 731)
Review Solutions (pg. 733)
Index (pg. 736)
Susan S. Hamlen

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.

Ronald J. Huefner

Ronald J. Huefner

A faculty member since 1968, Dr. Huefner's specialties are in the areas of financial and managerial accounting and fraud examination.

He is one of only two School of Management professors to be honored as a SUNY Distinguished Teaching Professor, which represents a promotion in rank above full professor. In addition to his teaching and research roles, Dr. Huefner has held various positions in professional organizations. He is co-author of an advanced financial accounting text, now in its tenth edition. He currently serves as chair of the School's MBA Programs.

James A. Largay III

James A. Largay III

James A. Largay III, has been a Professor of Accounting since 1980. In 1993 he received the Deming Lewis Faculty Award from the Lehigh University Class of 1983.

Professor Largay authored or co-authored about 40 articles that appear in The Accounting Review, the Journal of Accountancy, Accounting Horizons, the Financial Analysts Journal and other journals. He is a co-author of Advanced Accounting (Cambridge, 2009), Advanced Financial Accounting, 10/e (Thomson, 2006), Accounting for Changing Prices (Wiley, 1976) and is a contributor to the Handbook of Modern Accounting, the Handbook of Cost Accounting and the Handbook of Cost Management. He is a member of the American Accounting Association (AAA), the American Institute of CPAs, and Financial Executives International. He was Managing Editor and Editor of Accounting Horizons (2000-2003) and served as President of the Financial Accounting and Reporting Section of the AAA (1994-1995).

Last Updated: Feb 10 2017

Identified textbook errors, corrected.

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