Advanced Accounting, 5e

by Hamlen

| ISBN: 978-1-61853-424-8 | Copyright 2023


Example of the Road Map & video features available for each chapter.

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Road Map
LO Learning Objective Page eLecture Guided Example Assignments

Explain the purpose and motivations behind consolidation.

MC1, P8

Apply the concept of control to equity investments.


Apply the concept of control to non-equity investments.

MC2, 3, 9; E16, 17; P11, 12

Prepare consolidated balance sheets at the date of acquisition.

MC4-8, 10; E1-15; P1-10, 13-17

Explain IFRS for consolidations.

MC9, P10

Data Analytics

Businesses have experienced significant change in the last several decades due to the increased use of new technologies ranging from data analytics and Blockchain to machine learning and artificial intelligence. In response to the changing demands of the business world, the AACSB has incorporated data analytics requirements within its educational framework. More recently, the AICPA and NASBA have underscored the importance of data analytics by making it a significant element in the CPA Evolution Model Curriculum. The consensus suggests that students entering the accounting profession (or the business world more generally) need an understanding and working knowledge of data analytics to compete for the best jobs.

In recognition of the increasing importance of data analytics, the Fifth Edition includes assignments in myBusinessCourse that help students develop their data analytics skills. The assignments use Excel and Tableau to hone analysis and visualization skills. In addition, Appendix A at the end of the book provides an overview of data analytics, data visualization, and best practices for the effective display of data.

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Welcome to Advanced Accounting!

This book covers reporting for mergers and acquisitions, foreign currency transactions, hedges, state and local governments, not-for-profit organizations, plus specialized topics. Discussion of each topic focuses on key concepts, with manillustrations from practice, using familiar organizations. Emphasis is on the logic behind reporting standards and requirements, presented in a student-friendly way. Coverage is completely updated for the newest FASB and GASB standards and proposals, as well as relevant IFRS. Illustrations of business practice are taken from current financial statements and events.
The text has extensive student and instructor support. PowerPoint slides, eLecture videos, guided examples, and online homework and quizzes provide students with additional learning resources, and support both virtual and in-class instruction.

Target Audience

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.

CPA Evolution Model Curriculum

The AICPA and NASBA CPA Evolution Model Curriculum (CPAEMC), launched in 2021, is designed to prepare students for current demands of the CPA exam and the accounting profession. The curriculum consists of three core areas required of all future CPAs, and a choice of one of three disciplines. Content areas within each core area and discipline are organized in modules and topics. Suggested courses are identified for each content area.

This textbook provides extensive coverage of the content areas suggested for advanced (ADV) and governmental/not-for-profit (GVT/NFP) courses, plus in-depth coverage of some content areas suggested for intermediate (INT) courses, as described below. Critical thinking, evaluation of reporting alternatives, and analysis of information are emphasized. A detailed description of the model curriculum can be downloaded at this link:

How This Book Effectively Teaches Advanced Accounting Topics

Conceptual Focus

Conceptual explanations focus on the logic underlying reporting standards. Each topic is developed by explaining the underlying business activity, the reporting goals, and how standards and procedures achieve these goals, using language students can understand. Illustrations from actual practice enhance understanding and familiarize students with the information presented in real financial statements. Reporting requirements are complex and require 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 1–7.
  • International subsidiary translation and consolidation, 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 chapters topics. For example, in Chapter 2, IBMs 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, Kelloggs hedging practices illustrate hedge accounting for futures, options and swaps. In Chapter 13, Beta Alpha Psis 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.

Emphasis on Current Issues and Trends

Reporting Perspective

Reporting Perspectives comment on topics such as the strengths and weaknesses in reporting standards, motivations for changes in standards, their costs and benefits, ethical issues, implications for information quality, and proposals for new standards. The following is an example from Chapter 4.

Business Applications

Taken from current news and actual financial statements, Business Application boxes illustrate reporting practices, current issues, and controversies. Here is an example from Chapter 2, in the section covering valuation methods for assets acquired and liabilities assumed in a business combination.


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 an excerpt from Chapter 5.

Illustrations of IFRS in practice are also provided. Here is an excerpt 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. Emphasis in this text is on the measurement aspects of combinations—reporting assets and liabilities acquired, determining acquisition cost, valuing noncontrolling interests, and eliminating intercompany accounts. The consolidation chapters start with the reasons why companies should consolidate and the goals of consolidation, and then explain how consolidation procedures achieve these goals.

To make consolidation procedures more comprehensible, eliminations subsequent to acquisition (covered in Chapters 4–7) 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 eliminating entries necessary to adjust the parents accounts to the complete equity method before proceeding as usual with consolidation.

Additional Pedagogy

To reinforce concepts presented in each chapter and ensure student comprehension, each chapter has 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 chapters assignments. The following example is from 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 End-of-Chaper Material

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.

Certain business combination problems continue from chapter to chapter. For example, P3.2 covers consolidation at the date of acquisition, and P4.11 covers consolidation of the same two companies in subsequent years. P4.5 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 P2.6, an acquisition is reported as a merger, and in P3.12 the same acquisition is reported as a stock investment and consolidation. P3.4, P4.7, 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. P6.17 adds intercompany eliminations to P4.2s acquisition in subsequent years. Each of these problems can also be assigned separately.  In working through these problems, students gain a clearer understanding of accounting for business combinations, and how concepts learned in each chapter fit together.

In the state and local government chapters, two sets of comprehensive problems for the same county take the student through preparation of financial statements for the general fund, for other gov- ernmental, proprietary, and fiduciary funds, and culminating in preparation of the countys government-wide statements, with reconciliations. The Lake County problems are P10.19, P11.19, and P12.19, and the Hot Springs County problems are P10.20, P11.20, and P12.20. These problems can also be assigned individually or as a class project. 

New To The Fifth Edition

The text is completely updated for new standards, proposals, and other relevant events as of 2022. All illustrations, current practices, and reporting perspectives are also completely updated. Pandemic-related reporting issues and applications are included in many chapters. In addition, some text material has been rewritten to clarify and better organize specific topics. Major changes by chapter include:

  • Chapter 1: Additional explanation and analysis of AFS debt security impairment; actual applications of reporting using the CECL model for HTM investments; implementation of ASU 2016-01 for equity securities; additional description of reporting for changes in ownership.
  • Chapter 2: Comparison of mergers versus consolidations versus stock acquisitions has been rewritten to emphasize that they lead to the same reporting result; new material on reporting for asset acquisitions, with comparison to business combinations.
  • Chapter 4: Updates and additional explanation of goodwill impairment, including PCC guidance for private companies and discussion of possible changes for public companies.
  • Chapter 7: Consolidation procedures for an international subsidiary have been reorganized for clarity; new material on changes in functional currency; new section on consolidation when the subsidiarys functional currency is the parents currency.
  • Chapters 8 and 9: Expanded coverage of changes in hedge effectiveness and reporting alternatives for basis differences and time value; options and swaps material rewritten to better organize topics and illustrations; elimination of LIBOR.
  • Chapters 10, 11, and 12: A comprehensive illustration of fund and government-wide reporting, using Chapter 10s illustration of general fund reporting for Ranford County in Chapter 10, is extended to reporting for other funds in Chapter 11 and fund and government-wide reporting in Ranford Countys ACFR in Chapter 12; additional end-of-chapter comprehensive problems are added; current discussion of GASB financial reporting model improvements; enhanced coverage of implementation of the other postemployment benefits standard (GASB Statement No. 75).
  • Chapter 13: Additional examples of implementation of NFP reporting requirements that became effective in 2018; expanded discussion of reporting issues and the value of NFP financial information, as well as intermediate performance measures and liquidity disclosures; more actual illustrations of NFP reporting.
  • Chapter 14: New section on partnership tax issues; expanded coverage of partnership types.
  • Chapter 15: Expanded discussion of troubled debt restructurings, illustrations, and end-of-chapter problems.
  • Chapter 16: Updated for recent SEC reporting issues and changes in requirements; expanded discussion of SEC activities, including the use of data analytics for enforcement; extended coverage of CAMs; new section on current issues, including cybersecurity disclosures and ESG disclosures.
  • There are 325 new questions, exercises, and problems, and a net increase of 255 questions, exercises, and problems, at various levels of difficulty.

Teaching Supplements

myBusinessCourse: This easy-to-use program grades homework automatically and provides students with additional help when you are not available. Visit to sign up or to learn more about this programs features and benefits. In addition, detailed diagnostic tools assess class and individual performance. myBusinessCourse is ideal for online courses, blended courses, and traditional face-to-face courses for which you want to offer students more resources to succeed. Assignments with the MBC Homework icon in the margin are available in myBusinessCourse. eLecture videos and Guided Examples for the In-chapter Reviews are available for you to assign students.

Solutions Manual: Created by the textbook author, the Solutions Manual contains complete solutions to all the assignments in the textbook.

Test Bank: Written by the textbook author, the test bank includes a variety of multiple choice questions and problems, at various levels of difficulty.

Excel Templates:  Excel spreadsheets for select assignments are provided through myBusinessCourse. The Excel spreadsheets are identified by the Excel icon.

PowerPoint: Edited by the textbook author, the PowerPoint slides outline key elements of each chapter.

Susan S. Hamlen

Susan S. Hamlen

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

Professor Hamlen is the author of Advanced Accounting 4e and previously co-authored 12 editions of advanced accounting texts. She has taught courses in advanced accounting for over twenty-four years and courses in financial accounting for over nine years, at the undegraduate and graduate levels.

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.