Real Data Incorporated Throughout

Today’s business students must be skilled in using real financial statements to make business decisions. We feel strongly that the more exposure students get to real financial statements, the more comfortable they become with the variety in financial statements that exists across companies and industries. Through their exposure to various financial statements, students will learn that, while financial statements do not all look the same, they can readily understand and interpret them to make business decisions. Furthermore, today’s students must have the skills to go beyond basic financial statements to interpret and apply nonfinancial disclosures, such as footnotes and supplementary reports. We expose students to the analysis and interpretation of real company data and nonfinancial disclosures through the use of focus companies in each chapter, the generous incorporation of footnotes, financial analysis discussions in nearly every chapter, and an abundance of assignments that draw on real company data and disclosures.

Focus Companies for Each Chapter

Each chapter’s content is explained through the accounting and reporting activities of real companies. Each chapter incorporates a “focus company” for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage students in real analysis and interpretation. Focus companies were selected based on student appeal and the diversity of industries.

Footnotes and Management Disclosures

We incorporate footnote and other management disclosures, where appropriate, throughout the book. We explain the significance of the footnote and then demonstrate how to use the disclosed information to make managerial inferences and decisions. A representative sample follows.

Financial Analysis Discussions

Each financial accounting chapter includes a financial analysis discussion that introduces key ratios and applies them to the financial statements of the chapter’s focus company. By weaving some analysis into each of these chapters, we try to instill in students a deeper appreciation for the significance of the accounting methods being discussed. One such analysis discussion follows.

Assignments that Draw on Real Data

It is essential for students to be able to apply what they have learned to real financial managerial decisions. Therefore, we have included an abundance of assignments in each chapter that draw on real data. A representative example follows.

Balanced Approach

As instructors of introductory financial accounting, we recognize that the first financial accounting course serves the general business students as well as potential accounting majors. Financial & Managerial Accounting for Decision Makers embraces this reality. This book balances reporting, analysis, interpretation, and decision making with the more standard aspects of accounting such as journal entries, T-accounts, and the preparation of financial statements.

3-Step Process: Analyze, Journalize, Post

One technique we use throughout the financial accounting portion of the book to maintain a balanced approach is the incorporation of a 3‑step process to analyze and record transactions. Step 1 analyzes the impact of various transactions on the financial statements using the financial statement effects template. Step 2 records the transaction using journal entries, and Step 3 requires students to post the journal entries to T-accounts.

The template captures each transaction’s effects on the four financial statements: the balance sheet, income statement, statement of stockholders’ equity, and statement of cash flows. For the balance sheet, we differentiate between cash and noncash assets to identify the cash effects of transactions. Likewise, equity is separated into the contributed
and earned capital components (the latter includes retained earnings as its major element). Finally, income statement effects are separated into revenues, expenses, and net income (the updating of retained earnings is denoted with an arrow line running from net income to earned capital). This template provides a convenient means to represent financial accounting transactions and events in a simple, concise manner for assessing their effects on financial statements.

International Financial Reporting Standards

The convergence of U.S. GAAP and International Financial Reporting Standards (IFRS) is in process. Our introductory students should be prepared for this eventuality with a basic understanding of the similarities and differences in the current reporting requirements and methods under U.S. GAAP and IFRS. Consequently, we incorporate discussions that examine these similarities and differences where appropriate throughout the book in Global Perspective boxes, as illustrated here:

We also include exercises and problems throughout the text, where appropriate, to stimulate a discussion of international reporting differences. Our approach is conceptual—we purposefully avoid the detailed mechanics that are more appropriate for an intermediate level accounting course at either the undergraduate or graduate level. We feel strongly that our IFRS coverage exposes students to the similarities and differences without overwhelming them.

Innovative Pedagogy

Business Insights

Students appreciate and become more engaged when they can see the real world relevance of what they are learning in the classroom. We have included a generous number of current, real world examples throughout each chapter in Business Insight boxes. The following is a representative example:

Decision Making Orientation

One primary goal of an accounting course is to teach students the skills needed to apply their accounting knowledge to solving real business problems. With that goal in mind, You Make the Call boxes in each chapter encourage students to apply the material presented to solving actual business scenarios.                                                                                                       

Mid-Chapter and Chapter-End Reviews

Accounting can be challenging—especially for students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each chapter and to ensure student comprehension, we include mid-chapter and chapter-end reviews that require students to recall and apply the accounting techniques and concepts described in each chapter.

Research Insights for Business Students

Academic research plays an important role in the way business is conducted, accounting is performed, and students are taught. It is important for students to recognize how modern research and modern business practice interact. Therefore, we periodically incorporate relevant research to help students understand the important relation between research and modern business.

New In the 3rd Edition

• New Co-author: Michelle Hanlon, the Howard W. Johnson Professor and Professor of Accounting at the MIT Sloan School of Management, joined the 3rd edition. Michelle has won several awards for her research and is the winner of the 2013 Jamieson Prize for Excellence in Teaching at Sloan where she regularly teaches
  introductory financial accounting to MBAs. Hanlon recently testified in front of the U.S. Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means regarding U.S. tax policy. She brings a wealth of knowledge and expertise to this best-selling author team.
• myBusinessCourse: myBusinessCourse (MBC) is a complete learning and assessment program that accompanies the textbook and contributes to student success in this course. MBC has been expanded to include nearly all the multiple choice questions, mini-exercises, and exercises from the 3rd edition. In addition, the Guided Examples and eLectures have been revised and improved.

Financial Accounting Chapters (1-12)

• Updated Standards: As appropriate, the text and assignments have been updated to reflect the latest standards. A brief discussion of the pending Revenue Recognition standard is included in Chapter 6 and the chapterend appendix contains more detailed coverage of the new standard. The text and assignments have also been revised to reflect the change in accounting standards related to Extraordinary Items. Chapter 10 now includes a discussion of the new lease standard.
• In addition to the chapter specific changes, there have been several changes that span the entire book. Some of these global changes include: updated numbers for examples, illustrations, and assignments that use real data; updated footnotes and other nonfinancial disclosures; updated excerpts from the business and popular press; numerous assignments in each chapter have been revised or replaced with new assignments.

Managerial Accounting Chapters (Chapters 13-24)

• Contemporary Topics and Examples: The authors have revised and added new Business Insight boxes throughout each chapter to bring the accounting to life for students using current, real‑world examples.
• Several new Research Insight boxes have been incorporated throughout the text to emphasize the important relationship between research and modern business.
• Real Company Examples: Dozens of new, real company examples have been integrated throughout the text.
• Added In-Chapter Reviews for each Learning Objective with corresponding Guided Example videos to test students’ understanding of the topics covered.
• Learning Objectives have been refined and written at the granular level, in order to ensure coverage of all topics. Each Learning Objective now contains a Review and corresponding Guided Example video.
• Revised Assignments: Nearly two‑thirds of the assignments in each chapter have been revised and updated.
• Updated Design to enhance student understanding of topics, and enhanced several graphics for student comprehension.
• All 12 Opening Vignettes have been updated