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• Cover
• About the Authors
• 1 An Introduction to Financial Statements
• The Three Principal Financial Statements
• Other Items in the Annual Report
• Generally Accepted Accounting Principles: The Rules of the Game
• The Barriers to Understanding Financial Statements
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 2 The Balance Sheet and Income Statement
• A Further Look at the Balance Sheet
• Assets
• Liabilities
• Shareholders’ Equity
• A Further Look at the Income Statement
• Other Things You Should Know About the Balance Sheet and the Income Statement
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• Appendix 2.1 The Mechanics of Financial Accounting: The Double‐Entry System
• KEY TERMS AND CONCEPTS FROM THE APPENDIX
• KEY LESSONS FROM THE APPENDIX
• PROBLEM
• 3 A Brief Overview of GAAP and IFRS: The Framework for Financial Accounting
• The Core Principles of GAAP and IFRS
• The Key Qualitative Characteristics of Financial Information
• The Key Assumptions of Financial Information
• Modifying Conventions
• The Future of Financial Reporting
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• 4 Revenue Recognition
• Introduction
• The Five‐Step Revenue Recognition Model
• Revenue‐Recognition Controversies
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 5 The Statement of Cash Flows
• Introduction
• The Reporting of Cash Flows from Operations
• Preparing the Statement of Cash Flows
• IFRS and the Statement of Cash Flows
• Analyzing the Statement of Cash Flows
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 6 Financial Statement Analysis
• Introduction
• Business and Industry Analysis
• Accounting Analysis
• Financial Analysis
• DuPont Analysis
• ROE and the Analysis of Financial Risk
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• Appendix 6.1 An Industry and Competitive Analysis of Taiwan Semiconductor Manufacturing Company (TSMC)
• Appendix 6.2 Summary of Financial Statement Ratios
• PROBLEMS
• 7 Business Valuation and Financial Statement Analysis
• Valuation Principles
• Valuation: From Theory to Practice
• The Economic Profit Approach to Valuation
• A Case Study in Valuation: TSMC
• A Brief Word on Growth Rates
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 8 Accounting for Receivables and Bad Debts
• Introduction
• Estimating Bad Debts
• Writing‐off Accounts
• The Direct Method: An Alternative Approach
• What Happens When Written‐off Accounts Are Later Collected?
• The “Aging” of Accounts Receivable
• Sales Returns and Allowances
• Analyzing Receivables
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• Appendix 8.1 Accounting for Loan Loss Reserves
• PROBLEMS
• 9 Accounting for Inventory
• Introduction
• Inventory Valuation: LIFO, FIFO, and the Rest
• The Lower of Cost or Net Realizable Value Rule
• The Cost‐flow Assumptions: An Example
• Inventory Cost‐flow Assumptions: A Summary
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 10 Accounting for Property, Plant, and Equipment
• Introduction
• Initial Recognition of PP&E
• Subsequent Expenditures: Repair or Improvement?
• Accounting for Depreciation
• Changes in Depreciation Estimates or Methods
• Asset Impairment
• Fair Value vs. Historical Cost
• Divestitures and Asset Sales
• Intangible Assets
• Key Lessons from the Chapter
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 11 Leases and Off‐Balance‐Sheet Debt
• Introduction
• Leasing Accounting Before 2018: Capital vs. Operating Leases
• Accounting for Capital Leases
• Accounting for Operating Leases
• Lease Accounting: An Example
• Interpreting Lease Disclosures
• Off‐Balance‐Sheet Debt
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEM
• 12 Accounting for Bonds
• Introduction
• Accounting for Bond Issuance
• Accounting for Bonds Sold at Par
• Accounting for Bonds Sold at a Premium
• Bond Redemption Before Maturity
• Accounting for Bonds Issued at a Discount
• Zero‐Coupon Bonds
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 13 Provisions and Contingencies
• Introduction
• Defining Provisions
• Measuring the Provision
• Disclosure of Provisions: Interpreting the Notes
• Contingent Liabilities
• Contingent Assets
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 14 Accounting for Pensions
• Introduction
• A Brief Word on Defined Contribution Plans
• Unfunded Defined Benefit Plans
• Funded Defined Benefit Plans
• American Airlines: An Example of Defined Benefit Plan Disclosure
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• 15 Accounting for Income Tax
• Introduction
• Temporary and Permanent Differences
• Deferred Taxes and the Balance Sheet Approach
• The Balance Sheet Approach: An Example
• Interpreting Income Tax Disclosures: The Case of Intel Corporation
• Why Deferred Income Tax is Important
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 16 Accounting for Shareholders’ Equity
• Introduction
• Shareholders’ Equity: An Introduction
• More on Contributed Capital
• Accounting for Stock Transactions
• Dividends on Common Stock
• Stock Dividends and Stock Splits
• Accumulated Other Comprehensive Income
• Convertible Bonds
• The Statement of Shareholders’ Equity
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 17 Investments
• Introduction
• Investments at Microsoft
• Debt and Passive Equity Investments
• The Fair Value Hierarchy
• Equity Method
• A Further Look at Microsoft’s Investments
• Consolidation
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• 18 Accounting for Mergers and Acquisitions
• Introduction
• Purchase Price/Cost of Acquisition
• Contingent Consideration
• Recognition and Measurement of Identifiable Assets
• Subsequent Adjustments to Acquired Assets and Liabilities
• Goodwill Impairment
• Noncontrolling Interest
• KEY LESSONS FROM THE CHAPTER
• KEY TERMS AND CONCEPTS FROM THE CHAPTER
• QUESTIONS
• PROBLEMS
• Appendix Tables for Present Value and Future Value Factors
• Index
• End User License Agreement