Test Bank for Financial Accounting Theory and Analysis: Text and Cases, 12th Edition Richard G. Schroeder

Preface v

1 The Development of Accounting Theory 1

The Early History of Accounting 2

Accounting in the United States since 1930 4

The Role of Ethics in Accounting 18

International Accounting Standards 22

Cases 23

FASB ASC Research 25

Room for Debate 26

2 The Pursuit of the Conceptual Framework 27

The Early Theorists 27

Early Authoritative and Semi-Authoritative Organizational

Attempts to

Develop the Conceptual Framework of Accounting 29

The FASB’s Conceptual Framework Project 38

Principles-Based versus Rules-Based Accounting Standards 51

International Convergence 55

Cases 65

FASB ASC Research 67

Room for Debate 67

3 International Accounting 68

International Business Accounting Issues 69

The Development of Accounting Systems 69

Preparation of Financial Statements for Foreign Users 71

The International Accounting Standards Committee 71

The IFRS Foundation Constitution 75

The Uses of International Accounting Standards 79

The IASC and the IOSCO 80

The IASB Annual Improvements Project 81

The Use of IASC Standards 81

IASB–FASB Convergence 82

The Effects of International versus U.S. GAAP Accounting Standards 83

Standards Overload 86

Framework for the Preparation and Presentation of Financial Statements 87

IAS No. 1 and IFRS No. 1 95

Cases 96

FASB ASC Research 98

Room for Debate 98

4 Research Methodology and Theories on the Uses of Accounting Information 99

Research Methodology 99

The Outcomes of Providing Accounting Information 102

The Relationship among Research, Education, and Practice 120

Cases 121

FASB ASC Research 123

Room for Debate 123

5 Income Concepts, Revenue Recognition and Matching 125

The Nature of Income 126

Economic versus Accounting Income 130

Revenue Recognition 132

Matching 149

Income Recognition Constraints 151

Earnings Quality, Earnings Management, and Fraudulent Financial Reporting 153

International Accounting Standards 159

Cases 159

FASB ASC Research 162

Room for Debate 162

6 Financial Statement I: The Income Statement 164

The Economic Consequences of Financial Reporting 164

Income Statement Elements 164

Statement Format 166

Proposed Format of the Statement of Comprehensive Income 188

The Value of Corporate Earnings 190

International Accounting Standards 195

Cases 199

FASB ASC Research 202

Room for Debate 202

7 Financial Statements II: The Balance Sheet and the Statement of Cash Flows 203

The Balance Sheet 203

Fair Value Measurements 214

Proposed Format of the Statement of Financial Position 220

Evaluating a Company’s Financial Position 222

The Statement of Cash Flows 225

Proposed Format of the Statement of Cash Flows 233

Financial Analysis of Cash-Flow Information 236

International Accounting Standards 237

Cases 243

FASB ASC Research 246

Room for Debate 247

8 Working Capital 248

Development of the Working Capital Concept 248

Current Usage 250

Components of Working Capital 250

Working Capital Management 261

International Accounting Standards 268

Cases 269

FASB ASC Research 272

Room for Debate 273

9 Long-Term Assets I: Property, Plant, and Equipment 274

Property, Plant, and Equipment 274

Financial Analysis of Property, Plant, and Equipment 279

Cost Allocation 279

Capital and Revenue Expenditures 282

Recognition and Measurement Issues 283

Impairment of Value 283

Accounting for Asset Retirement Obligations 286

International Accounting Standards 288

Cases 294

FASB ASC Research 298

Room for Debate 299

10 Long-Term Assets II: Investments and Intangibles 300

Investments in Equity Securities 300

Investments in Debt Securities 309

Impairment of Investments in Unsecuritized Debt 312

Transfers of Financial Assets 313

Intangibles 314

Financial Analysis of Investments and Intangibles 322

International Accounting Standards 323

Cases 332

FASB ASC Research 335

Room for Debate 336

11 Long-Term Liabilities 337

The Definition of Liabilities 337

Recognition and Measurement of Liabilities 338

Debt versus Equity 339

Classification of Long-Term Debt 342

Other Liability Measurement Issues 354

Troubled Debt Restructurings 359

Financial Analysis of Long-Term Debt 362

International Accounting Standards 364

Cases 370

FASB ASC Research 374

Room for Debate 374

12 Accounting for Income Taxes 376

Historical Perspective 376

The Income Tax Allocation Issue 377

Financial Analysis of Income Taxes 397

International Accounting Standards 399

Cases 402

FASB ASC Research 405

Room for Debate 405

13 Leases 407

Accounting for Leases 408

Financial Analysis of Leases 419

Current Developments 421

Cases 434

FASB ASC Research 437

Room for Debate 438

14 Pensions and Other Postretirement Benefits 439

Historical Perspective 441

Accounting for the Pension Fund 450

The Employee Retirement Income Security Act 451

Other Postretirement Benefits 452

SFAS No. 132 454

SFAS No. 158 454

Current Developments 456

Financial Analysis of Pension and Other Postretirement Benefits 457

International Accounting Standards 458

Cases 460

FASB ASC Research 462

Room for Debate 462

15 Equity 463

Theories of Equity 463

Definition of Equity 468

Reporting Equity 471

Financial Analysis of Stockholders’ Equity 483

International Accounting Standards 484

Cases 486

FASB ASC Research 490

Room for Debate 490

16 Accounting for Multiple Entities 491

Business Combinations 491

Accounting for Business Combinations 492

Business Combinations II 497

Theories of Consolidation 501

Noncontrolling Interest 502

Drawbacks of Consolidation 505

Special-Purpose Entities 506

Variable Interest Entities 506

Segment Reporting 508

Foreign Currency Translation 512

International Accounting Standards 519

Cases 530

FASB ASC Research 533

Room for Debate 534

17 Financial Reporting Disclosure Requirements and Ethical Responsibilities 535

Recognition and Measurement Criteria 535

Areas Directly Affected by Existing FASB Standards: Supplementary Information 540

Other Means of Financial Reporting 548

Other Useful Information for Investment, Credit, and Similar Decisions 551

Securities and Exchange Commission 553

Ethical Responsibilities 560

International Accounting Standards 569

Cases 571

FASB ASC Research 575

Room for Debate 576

Index 577