Financial Reporting and Analysis

by Revsine, Lawrence; Collins, Daniel W.; Johnson, W. Bruce

• ISBN13: 9780131430211
• ISBN10: 0131430211
• Edition: 3rd
• Format: Hardcover
• Copyright: 2005-01-01
• Publisher: Pearson College Div

Summary

The CPA exam is changing. You need to change as well...to a book that better prepares you for the CPA examandfor business. This is the only book of its kind that demonstrateshow to preparefinancial reports and thenhow to analyzewhat those numbers really mean.Every manager has incentives to present his or her firm in the most favorable light to lenders, equity investors and others. And, every manager wants to use the flexibility allowed by GAAP to manage the firm's earnings to achieve certain goals. Revsine, Collins, and Johnsonexplain these incentivesand help readers spot cases of earnings management, which disguises a firm's true performance.For anyone preparing to take the CPA exam, and for anyone who wants or needs a working knowledge of accounting, financial reporting, and financial statement analysis.

Table of Contents

The Economic and Institutional Setting for Financial Reporting	p. 1
Why Financial Statements Are Important	p. 2
Economics of Accounting Information	p. 5
A Closer Look at Professional Analysts	p. 11
The Rules of the Financial Reporting Game	p. 14
An International Perspective	p. 22
Challenges Confronting the Analyst	p. 24
GAAP in the United States	p. 25
Accrual Accounting and Income Determination	p. 39
Example: Cash versus Accrual Income Measurement	p. 40
Measuring Profit Performance: Revenues and Expenses	p. 43
Income Statement Format and Classification	p. 51
Comprehensive Income	p. 63
Review of Accounting Procedures and T-Account Analysis	p. 67
Additional Topics in Income Determination	p. 101
Revenue Recognition Prior to Sale	p. 101
Revenue Recognition Subsequent to Sale	p. 110
Earnings Management	p. 113
Structure of the Balance Sheet and Statement of Cash Flows	p. 131
Classification Criteria and Measurement Conventions for Balance Sheet Accounts	p. 132
Statement of Cash Flows	p. 143
Essentials of Financial Statement Analysis	p. 173
Basic Approaches	p. 173
Quaker Oats Company--An Illustration	p. 175
Profitability, Competition, and Business Strategy	p. 184
Return on Equity and Financial Leverage	p. 197
The Role of Financial Information in Valuation, Cash Flow Analysis and Credit Risk Assessment	p. 233
Corporate Valuation	p. 234
Research on Earnings and Equity Valuation	p. 239
Valuing a Business Opportunity (An Illustration)	p. 250
Cash Flow Analysis and Credit Risk	p. 253
Abnormal Earnings Valuation for Reebok	p. 261
Measuring Cash Flow at Standard and Poor's	p. 267
The Role of Financial Information in Contracting	p. 295
Conflicts of Interest in Business Relationships	p. 296
Lending Agreements and Debt Covenants	p. 297
Management Compensation	p. 304
Regulatory Agencies	p. 314
Analytical Insights: Identifying "Managed" Earnings	p. 318
Receivables	p. 343
Assessing the Net Realizable Value of Accounts Receivable	p. 343
Analytical Insight: Do Existing Receivables Represent Real Sales?	p. 348
Imputed Interest on Trade Notes Receivable	p. 352
Accelerating Cash Collection: Selling Receivables and Collateralized Borrowings	p. 356
Troubled Debt Restructuring	p. 362
Inventories	p. 387
An Overview of Inventory Accounting Issues	p. 388
Determining Inventory Quantities	p. 390
Items Included in Inventory	p. 393
Costs Included in Inventory	p. 393
Absorption Costing Versus Variable Costing	p. 394
Cost Flow Assumptions: The Concepts	p. 397
Inflation, LIFO Reserves, and the LIFO Effect on Income	p. 406
LIFO Liquidation	p. 408
Eliminating LIFO Ratio Distortions	p. 413
Tax Implications of LIFO	p. 414
Eliminating Realized Holding Gains for FIFO Firms	p. 415
Inventory Errors	p. 416
Analytical Insights: LIFO Dangers	p. 418
Empirical Evidence on Inventory Policy Choice	p. 419
Eliminating Realized Holding Gains from FIFO Income	p. 422
Lower of Cost or Market Method	p. 424
Dollar Value LIFO	p. 428
Overview of Dollar Value LIFO	p. 429
Long-Lived Assets and Depreciation	p. 457
Measuring the Carrying Amount of Long-Lived Assets	p. 458
Long-Lived Asset Measurement Rules Illustrated	p. 460
Financial Analysis and Fixed Asset Reporting	p. 464
Intangible Assets	p. 468
A Case Study of Ambiguities in Capitalization Criteria: Oil and Gas Exploration Costs	p. 472
Asset Impairment	p. 475
Obligations Arising from Retiring Long-Lived Assets	p. 477
Depreciation	p. 478
International Perspective	p. 484
Financial Instruments as Liabilities	p. 509
Bonds Payable	p. 510
Managerial Incentives and Financial Reporting for Debt	p. 521
Incentives for Off-Balance Sheet Liabilities	p. 527
Hedging	p. 529
Loss Contingencies	p. 546
Financial Reporting for Leases	p. 575
Evolution of Lease Accounting	p. 575
Lessee Accounting	p. 578
Lessor Accounting	p. 589
Additional Leasing Aspects	p. 597
Making Balance Sheet Data Comparable by Adjusting for Off-Balance Sheet Leases	p. 600
Income Tax Reporting	p. 629
Understanding Income Tax Reporting	p. 630
Using Footnote Disclosures to Improve Financial Analysis	p. 648
A Comprehensive Interperiod Tax Allocation Problem	p. 661
Pensions and Postretirement Benefits	p. 689
Financial Reporting for Pensions	p. 691
Postretirement Benefits Other than Pensions	p. 719
Are Pension and Other Postretirement Benefits (OPEB) Disclosures Useful? The Research Evidence	p. 723
Financial Reporting for Owners' Equity	p. 758
Appropriate Income Measurement	p. 758
Compliance with Contract Terms	p. 763
Legality of Corporate Distributions	p. 767
Earnings per Share	p. 770
Accounting for Stock-Based Compensation	p. 774
Convertible Debt	p. 783
Employee Stock Ownership Plans	p. 786
Intercorporate Equity Investments	p. 817
Minority Ownership	p. 818
Majority Ownership	p. 828
Foreign Subsidiaries	p. 840
Statement of Cash Flows	p. 883
Statement Format	p. 884
Preparing the Cash Flow Statement	p. 891
Reconciling Between Statements: Some Complexities	p. 898
Analytical Insights: Cash Burn Rate of Internet Stocks	p. 904
Overview of International Financial Reporting Differences and Inflation	p. 939
An International Financial Reporting Map	p. 940
Inflation Accounting	p. 952
Present Value Tables	p. 983
WWW/Electronic Resources for Financial Information	p. 986
Index	p. 990
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