Advanced Accounting, 4e

by Hopkins, Halsey

| ISBN: 978-1-61853-312-8 | Copyright 2020

Instructor Requests


Welcome to the Fourth edition of Advanced Accounting

Our goal in writing this book was to satisfy the needs of today’s accounting students by providing the most contemporary, relevant, engaging, and student-oriented textbook available. We think that we have accomplished that objective by maintaining a conceptually rigorous discussion of the material in an intuitive and student-friendly style. Prior to writing this book, we both taught advanced financial accounting for many years, and we both felt that the structure and format of available textbooks contributed to the difficulties that our students have had in learning the material. several examples come to mind:

  1. Too many issues discussed simultaneously. Taken individually, consolidation issues can be difficult for students to grasp. The learning process is made all the more difficult when a particular topic (intercompany sales of assets, for example) is presented using alternative methods of pre-consolidation equity investment bookkeeping (e.g., equity, partial equity, and cost). Our experience—and the experience of many of our focus group participants—indicates that students are generally confused by the mixing of bookkeeping approaches in the main-chapter discussion of most textbooks. To address this issue, we present only two pre-consolidation bookkeeping approaches: equity method and cost method. In each consolidations-related chapter, we begin the consolidations-related discussion with the equity method because it provides the clearest and easiest-to-understand linkage between the parent’s pre-consolidation financial statements and the consolidated financial statements. We then use a page-edge border to very clearly mark the pages in which we discuss cost-method consolidations procedures. By clearly distinguishing between the two approaches, we make it much easier for instructors and students to know exactly which approach we are covering. In addition, this makes tailoring the material much easier. For example, if an instructor wishes to only cover the equity method of pre-consolidation bookkeeping, the easy-to-follow chapter set-up makes this possible.
  2. Mechanics versus intuition. After completing our courses and entering the working world, our former students have encountered many different consolidation approaches used by their employers and clients. Given the diversity of processes and procedures in practice, we adjusted our own teaching styles to emphasize an intuitive understanding of the concepts over the rote memorization of static journal-entry approaches. unfortunately, the available textbooks were mostly written with a mechanical perspective. in writing this text, we incorporated our teaching-based observations. In each chapter, we initially focus on conceptual explanations and discuss mechanics only after we convey an intuitive perspective on each topic. In addition, to help students immediately identify each of the various consolidation entries, we consistently color-code the C-E-A-D-I consolidation entries throughout the chapter discussion, the consolidation-entry listings, and in the consolidation worksheets.
  3. Connection between fund-base statements and government-wide statements. Most texts combine, in a single chapter, fund-based accounting and government-wide financial statements, and do not demonstrate how government-wide statements are generated from fund-based accounting. We address this issue by covering these topics in two separate chapters, and we focus on the adjustments necessary to create government-wide financial statements described in the reconciliations from fund statements to government-wide statements. We present this material within the context of an actual new england town. The town is large enough to demonstrate the accounting concepts, yet small enough to avoid obscuring the learning process with unnecessary complexity.
  4. Not written for students. Many texts are written using overly technical language. Our text, while rigorous, is written in a student-friendly, conversational style that makes the material much easier for students to comprehend and apply.

This book is the product of extensive market research including focus groups, market surveys, class tests, manuscript reviews, and interviews with faculty from across the country. We are grateful for the feedback from faculty who reviewed, and students who studied, early drafts of our text.

Target Audience

Advanced Accounting is intended for use in undergraduate and graduate accounting programs that include a course in advanced accounting as part of the curriculum. This book is especially written for advanced accounting courses in which an intuitive understanding of the material, in addition to accounting mechanics, is emphasized. Feedback from students who used our text, and subsequently completed the uniform CPA exam, has been extremely positive. They report that they felt well-prepared for the portions of the exam relating to advanced financial accounting topics.

Emphasis on Intuition

We introduce topics by discussing the intuition behind accounting standards before discussing the mechanics of the accounting process. In addition, we intentionally deemphasize memorization of journal entry mechanics. We believe that this approach allows students to better understand the material and to develop relevant transferrable knowledge.

Easy-to-Remember Mnemonic

Although our text emphasizes the intuition underlying the consolidation process, we also introduce the C-E-A-D-I (pronounced “seedy”) consolidation journal entry sequence to assist students in learning the mechanics of consolidation. The sequence systematically eliminates the book value of subsidiary equity (C, E), establishes the fair value adjustments for subsidiary net assets (A, D), and eliminates intercompany transactions and balances (I). Over the years, we’ve observed that this easy-to-remember mnemonic improves students’ understanding of consolidations and allows for easier recall of each step of the consolidation adjustment process.

Clear Cost-Method Coverage in Chapters 3 through 6

In recognition of the fact that, in practice, companies apply procedures that blend the cost and equity methods of pre-consolidation bookkeeping, the authors have incorporated extensive cost method coverage in the relevant chapters and assignment material.  The 4th edition continues to focus on the full equity method in the consolidations chapters, but now the cost method is also discussed and illustrated.  All cost-method discussion is clearly marked with a labeled, colored bar in the margins.

FASB Codification Throughout

We wrote our text after implementation of the FASB’s Codification and we integrated the Codification throughout, including end-of-chapter problem assignments. Unlike many advanced accounting textbooks, we cite passages of the Codification frequently so that students can become familiar with the actual language of the standards, not just the authors' summary of the standards. This also allows students to easily find the relevant passages on their own. In addition, to familiarize students with the Codification search engine and to better develop their research skills, we also include numerous FASB Codification-related research assignments in our end-of-chapter problem sets.

CPA Exam Questions

The primary purpose of the Advanced Accounting course at most universities it to prepare accounting majors for the CPA exam. To provide students with relevant practice, we have included a number of multiple choice questions in each chapter that have been adapted from past CPA exams. We are grateful to the AiCPA for granting us permission to use former CPA exam questions for this purpose.

IFRS Coverage

Accounting students must become familiar with IFRS. Fortunately, the current accounting standards relating to the main topic of the book business combinations and consolidation were written jointly by the FASB and the IASB, and are 99% equivalent. In addition, other standards (e.g., segment reporting) are similar, but have key differences. In the text, we discuss the IFRS equivalent of accounting standards and highlight the differences between the two sets of accounting standards when they occur. These discussions are identified with the IFRS icon.

Relevance and Engagement

Advanced accounting is a challenging topic. We have adopted a number of techniques in our book to make the material relevant and engaging to students. These techniques include:

Focus Companies for Each Chapter

Each chapter incorporates a “focus company” for special emphasis and demonstration. We chose companies that illustrate the topic of the chapter so that students can learn the material within context. In addition, our chapters on governmental accounting are written around a small new england town that is large enough to effectively communicate the concepts of governmental accounting, yet small enough not to obscure those concepts in unnecessary complexity. 

Real company Data in Text and Assignments

We believe that an important part of the learning process involves the application of concepts to realworld data. We include references to actual footnotes in the body of our text and also include a number of end-of-chapter problems that are written around actual footnote disclosures. These problems allow students to think about accounting concepts more broadly (i.e., less mechanically) and from the perspective of the users of financial statements.

Practice Insight Boxes

We provide a number of Practice insight Boxes resulting from interviews with practicing accountants and financial managers. These boxes provide students with insight into issues that accountants face in the real world, and with a glimpse into the types of decisions that practicing accountants must make.

Mid-Chapter and Chapter-End Reviews

Advanced accounting concepts can be challenging. To reinforce concepts presented in each chapter and to ensure student comprehension, we include topic reviews that require students to recall and apply the financial accounting techniques and concepts described in each chapter.

New in the 4th Edition:

       Revised Chapter 1 focuses entirely on non-business-combination investment accounting.  All references to business combinations have been moved to Chapter 2.

       Revised Chapter 2 includes the FASB’s new definition of a business (i.e., from ASU 2017-01) and includes improved discussion of the differences in accounting for a business combination and an asset acquisition that does not qualify as a business combination. In addition, 4E includes new coverage of Pushdown Accounting.

       Revised Chapter 3 includes coverage of the new, simplified one-step goodwill impairment model (i.e., ASU 2017-04). Because the simplified model is not required for all companies until 2022, we also continue to cover the two-step model goodwill impairment model. 

       Revised Chapter 6 includes new “intuition boxes” for the Variable Interest Entity consolidations model.     

       Revised Chapter 7 has been rewritten to include improved focus on foreign currency denominated assets and liabilities, and the related hedge-accounting issues. We also include discussion of the FASB’s new hedge accounting rules (ASU 2017-12).   

       Revised Chapter 9 includes emphasis on the reconciliations between government wide and fund-based financial statements to explain each reconciliation entry. This should help students better understand the objectives of these reconciliations and the information they contain.

       Revised Chapter 10 incorporates the changes in the Not-For-Profit Financial Reporting Framework.

       Road Map: Each chapter opens with a grid that identifies each learning objective for the chapter, the related pages, eLecture and Guided Example videos, and end of chapter assignments. This allows students and faculty to quickly grasp the chapter contents and to efficiently navigate to the desired topic.

       myBusinessCourse (MBC): Bob Halsey has revised and recorded the eLectures and Guided Examples in MBC. In addition, even more problems from the book are now available in MBC.

       End-of-chapter Assignments: All real-world assignments and all stylized assignments throughout the book have been refreshed with new scenarios, numbers, and solutions. 

Patrick E. Hopkins

Patrick E. Hopkins

Patrick E. Hopkins, is a professor and Deloitte Foundation Accounting Faculty Fellow at Indiana University’s Kelley School of Business. Professor Hopkins received his B.S. and M.Acc. from the University of Florida and his Ph.D. from the University of Texas at Austin.

Prior to entering the accounting doctoral program, Professor Hopkins served as a senior consultant with the Emerging Business Services practice of Deloitte, Haskins and Sells in Miami, Florida. Professor Hopkins has been at IU since 1995, where he teaches undergraduate and graduate courses on financial reporting for mergers, acquisitions and changes in corporate structure. He also served as a Visiting Professor at Stanford University’s Graduate School of Business, where he taught courses on global financial reporting and on accounting for mergers, acquisitions and changes in corporate structure. During his career, Professor Hopkins won each of the top teaching awards in the Kelley School of Business, including the Trustees Teaching Award, the Schuyler F. Otteson Award, and the Sauvain Award. He also teaches in international and online executive MBA programs at Indiana University, and in the doctoral program at HHL University in Leipzig, Germany. Professor Hopkins is also a widely respected research scholar in the area of financial reporting, and investor and analyst judgment and decision making. His work has appeared in top accounting journals, including The Accounting Review, the Journal of Accounting Research, Contemporary Accounting Research, and Accounting Organizations and Society, and has been discussed in business press publications, including Barron’s, CFO, and The Deal. He is the past winner of the American Accounting Association’s Financial Accounting and Reporting Section Best Research Paper Award, the Indiana University Outstanding Junior Faculty Award, and Kelley School of Business Outstanding Research Award.

Robert F. Halsey

Robert F. Halsey

Robert F. Halsey is Professor of Accounting and Associate Dean of the Undergraduate School at Babson College. He received his MBA and PhD from the University of Wisconsin.

Prior to obtaining his PhD he worked as the chief financial officer (CFO) of a privately held retailing and manufacturing company and as the vice president and manager of the commercial lending division of a large bank.

Professor Halsey teaches courses in financial and managerial accounting at both the graduate and undergraduate levels, including a popular course in financial statement analysis for second year MBA students. He has also taught numerous executive education courses for large multinational companies through Babson’s school of Executive Education as well as for a number of stock brokerage firms in the Boston area. He is regarded as an innovative teacher and has been recognized for outstanding teaching at both the University of Wisconsin and Babson College.

Professor Halsey co-authors Advanced Accounting published by Cambridge Business Publishers. Professor Halsey’s research interests are in the area of financial reporting, including firm valuation, financial statement analysis, and disclosure issues. He has publications in Advances in Quantitative Analysis of Finance and Accounting, The Journal of the American Taxation Association, Issues in Accounting Education, The Portable MBA in Finance and Accounting, the CPA Journal, AICPA Professor/Practitioner Case Development Program, and in other accounting and analysis journals.

Professor Halsey is an active member of the American Accounting Association and other accounting, analysis, and business organizations. He is widely recognized as an expert in the areas of financial reporting, financial analysis, and business valuation.