Advanced Accounting, 3e

by Hamlen, Huefner, Largay III

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

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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
2 IBM
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.

IFRS

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

myBusinessCourse.com 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 www.mybusinesscourse.com.

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Expand/Collapse All
Preface (pg. i)
Chapter 1: Intercorporate Investments: An Overview (pg. 2)
Chapter 2: Mergers and Acquisitions (pg. 34)
Chapter 3: Consolidated Financial Statements: Date of Acquisition (pg. 78)
Chapter 4: Consolidated Financial Statements Subsequent to Acquisition (pg. 118)
Chapter 5: Consolidated Financial Statements: Outside Interests (pg. 176)
Chapter 6: Consolidated Financial Statements: Intercompany Transactions (pg. 228)
Chapter 7: Consolidating Foreign Currency Financial Statements (pg. 272)
Chapter 8: Foreign Currency Transactions and Hedging (pg. 328)
Chapter 9: Futures, Options and Interest Rate Swaps (pg. 376)
Chapter 10: State and Local Governments: Introduction and General Fund Transactions (pg. 414)
Chapter 11: State and Local Governments: Other Transactions (pg. 468)
Chapter 12: State and Local Governments: External Financial Reporting (pg. 518)
Chapter 13: Private Not-For-Profit Organizations (pg. 564)
Chapter 14: Partnership Accounting and Reporting (pg. 612)
Chapter 15: Bankruptcy and Reorganization (pg. 662)
Chapter 16: The SEC and Financial Reporting (pg. 704)
Index (pg. 736)
Susan S. Hamlen

Susan S. Hamlen

Susan S. Hamlen is the Department Chair and Associate Professor of Accounting at the University at Buffalo School of Management. She received PhD and MS at Purdue University, her BS at the University of California, Berkeley.

Professor Hamlen teaches courses in Global Financial Reporting, Advanced Financial Reporting, and Advanced Financial Accounting at the undegraduate and graduate levels.

Professor Hamlen co-authors Advanced Accounting published by Cambridge Business Publishers. 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).


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