Intermediate Accounting, 1e

by Hanlon, Hodder, Nelson, Roulstone

ISBN: 978-1-61853-207-7 | Copyright 2019



Welcome to the first edition of Intermediate Accounting, uniquely designed within a system of interactive resources that are tailored to the needs of today's students. As the learning styles of students have evolved, we do not feel that the market has fully embraced the study habits of today’s students and the power of technology in the learning process. The emphasis in our approach is to provide students with a demo and a review problem on each deliberately selected, key learning objective. In this way, students practice each learning objective with the added opportunity to practice the exact demos electronically in myBusinessCourse, our online homework platform. Our approach steers away from dense text (which the average student is not reading) and moves to an active-learning approach where content is delivered in short bursts followed by immediate practice. Because each learning outcome for every chapter is self-contained, faculty have the option to pick and choose learning objectives allowing complete flexibility.

Integral to this active-learning approach are the resources provided to students allowing them to be successful in mastering the demo problems. We noted the need in the market for a direct incorporation of authoritative support. Although some references may be included in a footnote to a chapter in the current market, direct citations are rarely seen. In our approach, we provide succinct yet thorough, to-the-point explanations in each self-contained learning objective along with direct citations of the most relevant references from the Codification. We feel this best prepares the typical intermediate accounting student who will often reference and cite the authoritative standards in practice. This novel approach of combining an active-learning approach supplemented with real life authoritative guidance reflects our combined experiences in preparing intermediate accounting students for life in practice.

Target Audience

Intermediate Accounting is intended for use following the first financial accounting course at either the undergraduate or graduate level. This book supports an intermediate accounting series offered to accounting and some finance majors, typically in a two-course sequence (three-course series in some cases). The topics in intermediate accounting are relevant to approximately 70% of the Financial Accounting Reporting (FAR) section of the Uniform CPA Examination. This rigorous exam ensures that only qualified individuals become licensed as U.S. Certified Public Accountants (CPAs).

Overview, Demo, and Review 

We have adopted a straightforward effective layout throughout every chapter of the book. We have included carefully crafted learning objectives that are not extraneous or all-encompassing. Each key learning objective is clearly identified with a distinct red banner and is followed by its own overview, demo, and review problem.


In fact, each learning objective represents a separate learning module, allowing students and faculty to break down complex topics into manageable subtopics. We believe that students will appreciate this style of learning uniquely adopted in Intermediate Accounting because of the current trend in learning preferences. Students prefer to learn by doing with convenient access explanations and authoritative references for help in the process. For additional support, students have access to short videos for each demo.

Action Plan 

Each chapter opens with a grid that identifies each learning objective for the chapter, the related pages, demonstrations, review applications, and end of chapter assignments. This allows students and faculty to quickly grasp the chapter contents and to efficiently navigate to the desired topic.


Overview--Authoritative Foundation

Following each learning objective is a brief explanation of the topic with visual references (diagrams), when helpful. We also include an overview box for each learning objective to provide students with a quick overview of key topics. For topics that we felt relevant authoritative guidance was important, we included an excerpt from the accounting guidance. This presentation of the accounting guidance minimizes authors’ biases and places both students and faculty in a unique authoritative position. Our approach incorporates ASC Glossary definitions whenever possible and terminology that is common in the Codification such as the terms recognition, measurement, derecognition, and disclosure. References to authoritative guidance are distinctly highlighted with black block text as shown below.



We believe that a presentation focused on demos will inspire the contemporary college learner. Demos are included for each learning objective to illustrate the accounting concept discussed. The blue text, color-coded solutions are provided as this is the student’s first exposure to the relevant topic. We noted that in the market, it is not uncommon for an accounting concept or a variation to an accounting method to be explained in a paragraph or in a two-page (or more) spread instead of through an illustration. This is how our approach is very different—accounting concepts are predominantly demonstrated. The active learner can reconstruct the steps independently or attempt the same demo through the electronic system—myBusinessCourse. Alongside the journal entries in the margins, we also include the impact on the accounting equation and T-accounts to aid in student comprehension. Research tells us that active learning, where the student is involved in the learning process, results in considerable advantages in retention. In addition, each demo is accompanied by a short video clip (typically 3 minutes or less) that walks students through the solution to the demo. This approach, along with the supporting resources, are invaluable in any course, but especially in an online course where students are largely working through these complex topics independently.



At the conclusion of each learning objective, a review problem is provided with answers included at the end of the chapter. These review problems are presented to reinforce concepts presented in the section and to ensure student comprehension. By not providing the review solutions on the same page as the review, we are encouraging students to ‘learn by doing.’ The demo, along with the overview material, provides the foundation for students to complete the review problems. Again, students have the opportunity to practice the same problem electronically in myBusinessCourse. We believe that many students will take advantage of the opportunity to work through the problem electronically because they will gain instant feedback as to whether they completed the solution accurately—and frankly, an electronic environment is more in line with how we all function every day. In addition, each review is accompanied by a short video clip (typically 3 minutes or less) that walks students through the solution to the review.


Learning in Context

Expanding Your Knowledge

This section expands on related topics of the section through examples and discussions going beyond the section’s learning objective. These topics can enhance classroom discussions or simply allow the curious student to expand to topics beyond the usual coverage. A representative sample follows.


Real World

Students appreciate and become more engaged when they can see the real-world relevance of the content they are learning in class. We included current, real-world examples of financial reporting throughout each chapter in Real World boxes.


Chapter Assessment

The challenge in intermediate accounting is applying the concepts to different scenarios. Our end of chapter materials consist of a wide variety of formats, varying levels of complexity, a thorough coverage of learning objectives, and selections with real world data. The materials increase in complexity as you move through the different types of formats: questions, brief exercises, exercises, and problems. The questions in each end of chapter section are numbered sequentially from start to finish to avoid confusion for students. All learning objectives are represented in the end of chapter materials. Each chapter contains approximately 20 questions, 25 brief exercises, 30 exercises, and 15 problems. We prepared a grid plotting each chapter’s content across the best competing texts in the marketplace, arranged by learning objective, to ensure that our coverage meets or exceeds the competition. Importantly, the end of chapter material corresponds with the listed learning objective in that students have the necessary foundational material to complete the corresponding problems.

The last section (Accounting Decisions and Judgments) includes more application-type problems, which are identified as follows:

  • Real World Analysis: Includes real-world material from actual publicly available financial statements.  
  • Communication Case: Allows students to apply chapter content through a written presentation.
  • Judgment Case: Pushes students to levels of evaluation and analysis involving relevant content.
  • Ethics Case: Shows students how decisions have ethical consequences.
  • Codification Skills: Includes research in the ASC glossary and generally in the Codification on specific topics and through an applied example.
  • Challenge Problems: Problems either integrate content from multiple chapters or require students to apply the chapter’s content in a more complex environment that pushes students beyond the usual content coverage.
  • Deloitte Trueblood Cases: References are provided to cases in the Trueblood case series, prepared by Deloitte professionals, based on recent accounting technical issues that require research and judgment.

IFRS Appendix

We provide a separate section summarizing key differences between U.S. GAAP and IFRS, arranged in the same order as the chapter coverage. The presentation of the IFRS section consistently follows our approach of overview, demo, and review. Including the coverage in a separate section provides faculty with the most flexibility in determining how, when, or whether to introduce specific aspects of IFRS.


Chapters are organized into two parts.

Part 1: Chapters 1 through 6 offer a review of introductory financial accounting. We begin with the accounting environment and the underlying conceptual framework. We review the accounting double-entry system, including the preparation and presentation of the four financial statements: Income statement (including comprehensive income), Balance sheet, Statement of equity, and Statement of cash flows. We also show the DuPont framework, which is useful for the analysis and interpretation of accounting reports. The first part of the book concludes with a review of the time value of money.

Part 2: The second part launches with the chapter on revenue recognition. This chapter is crucial to understanding nearly all the remaining chapters, including when revenue (and assets) are recognized, and when expenses (and liabilities) are recognized. Chapters 8 through 22 loosely follow the accounting equation. Specifically, we begin with the chapters covering assets—Chapters 8 through 14, followed by chapters covering liabilities (or both liabilities and assets)—Chapters 15 through 21. We conclude part 2 by revisiting the statement of cash flows (from Chapter 5), which addresses the cash flows related to some special topics introduced in part 2. Finally, Appendix A covers the reporting for accounting changes and error analysis, and Appendix B describes key areas of differences between U.S. GAAP and IFRS.

Selected highlights for each chapter are summarized as follows.

Chapter One—Accounting Environment and the Conceptual Framework

• Concise presentation with direct citations to the Statements of Financial Accounting Concepts (SFACs) allowing students and faculty the opportunity to interpret the guidance directly.

Chapter Two—Accounting Information System

• Visual references to the accounting steps provide clarity throughout the chapter.

Chapter Three—Income Statement and Comprehensive Income

• Includes an introduction to the topics noncontrolling interest and foreign currency translation

• Upfront overview of accounting changes, errors, and estimates with a reference to specific coverage throughout each content area in the book. This eliminates the need for a separate chapter on accounting changes.

Chapter Four—Balance Sheet and Financial Reporting

• Introduction to financial statement disclosures and Form 10-K components provides a base for application of concepts to real world examples.

Chapter Five—Statement of Cash Flows and Financial Analysis

• Stronger emphasis on cash flows in first half of the text, emphasizing its importance in reviewing a full set of financial statements.

• Ratios introduced within the DuPont framework providing a structure to relate ratios to each other. Also distinguishes investment analysis from creditor analysis.

• Includes an introduction to proforma analysis.

• Summary grid of ratios with references to coverage throughout the text.

Chapter Six—Time Value of Money

• Time value of money calculations (in this chapter and throughout text) are illustrated in Excel, consistent with the new tools provided in the CPA exam and tools most relevant in practice.

• Includes clear applications to leases, pensions, bonds, and debt, as introductions to later chapters.

Chapter Seven—Revenue Recognition

• Learning objectives centered around the five steps in the revenue recognition process with demos and reviews concentrated on each separate step. Relevant, real-life examples provided in the demos for each step.

• Includes an overview of long-term construction contracts within the chapter. Appendix on long-term construction contracts is only necessary if faculty prefer to incorporate entries specific to the construction industry.

Chapter Eight—Cash and Receivables

• CECL model incorporated throughout the chapter.

Chapter Nine—Inventory: Measurement

• Includes a demo on periodic vs. perpetual accounting as a review of introductory material that is not always recalled by the typical intermediate student.

Chapter Ten— Inventory: Additional Issues

• Includes a robust, applied discussion of inventory principle changes and errors.

Chapter Eleven—Property, Plant & Equipment: Acquisition & Disposition

• Includes a discussion of construction in process, commonly included in PP&E presentations but missing in competing text books.

Chapter Twelve—Depreciation, Impairments, and Depletion

• Includes examples of commonly used accounting conventions for depreciation.

Chapter Thirteen—Intangible Assets

• Separately presents intangible assets as a standalone topic and not intermingled with property, plant, and equipment to decrease confusion for students and also to reflect its prominence on a balance sheet.

Chapter Fourteen—Investments and Derivatives

• Visual references to the investment categories provide clarity throughout the chapter to aid students in the navigation through multiple classification types.

• Includes a robust appendix on derivatives.

Chapter Fifteen—Short-Term Liabilities and Contingencies

• Incorporates subsequent event discussion with contingency overview.

• Includes examples of the accounting for gift card breakage.

Chapter Sixteen—Long-Term Liabilities

• Short demos followed by immediate practice especially conducive to student retention in complex topics.

Chapter Seventeen—Leases

• Includes a clear presentation of the accounting for lease incentives, including journal entries.

• Logical presentation of lease accounting with an illustration of variations in demos instead of explanations of exceptions in paragraph form.

Chapter Eighteen—Income Taxes

• Content adjusted for the recently passed U.S. tax reform act.

• Utilizes a balance sheet approach, consistent with the authoritative guidance.

Chapter Nineteen—Pensions and Postretirement Benefits

• Includes journal entries for defined contribution plans

Chapter Twenty—Stockholders’ Equity

• Demonstrations include alternative approaches of treasury stock and direct stock retirement.

Chapter Twenty-One—Share-Based Compensation and Earnings per Share

• Short demos followed by immediate practice especially conducive to student retention in complex topics

Chapter Twenty-Two—Statement of Cash Flows Revisited

• Focuses on the indirect method given the extraordinarily high usage and the overwhelming feedback that the FASB received to not require the use of the direct method.

Teaching Supplements

  • Solutions Manual: Created by the authors, the solutions manual contains complete solutions to all assignments.
  • Test Bank: Written by the authors, the test bank includes multiple choice items, matching questions, short essay questions, and problems.
  • PowerPoint: Created by the authors, the PowerPoint slides outline key elements of each chapter. 

Additional Resources

Financial Accounting Bootcamp

This interactive tutorial is intended for use in programs that either require or would like to offer a preterm tutorial that creates a baseline of accounting knowledge for students with little to no prior exposure to financial accounting. This product can be used as a refresher of topics introduced in the first financial accounting course. It is designed as an asynchronous, interactive, self-paced experience for students. Available Learning Modules (You Select) follow.

1. Introducing Financial Accounting (approximate completion time 2 hours)

2. Constructing Financial Statements (approximate completion time 4 hours)

3. Adjusting Entries and Completing the Accounting Cycle (approximate completion time 4 hours)

4. Reporting and Analyzing Cash Flows (approximate completion time 3.5 hours)

5. Analyzing and Interpreting Financial Statements (approximate completion time 3.5 hours)

This is a separate, saleable item. Contact your sales representative to receive more information or email

Guide to Intermediate Accounting Research

The Guide to Intermediate Accounting Research, by Shelby Collins, is intended to serve as a supplement to the materials used in an intermediate or advanced accounting course. It includes many opportunities to apply Codification guidance to related accounting topics (including, for example, leases, investment accounting, revenue recognition, and consolidation). Students will learn to confidently address and communicate accounting research issues, from start to finish. Students will not only take away the ability to identify the accounting problem (the “researchable question”), but will gain experience locating and applying guidance within the FASB Codification. This is a separate, saleable text (ISBN: 978-1-61853-163-6). Contact your sales representative to receive a desk copy or email

Companion Casebook

Cases in Financial Reporting, 8th edition by Michael Drake (Brigham Young University), Ellen Engel (University of Illinois—Chicago), D. Eric Hirst (University of Texas – Austin), and Mary Lea McAnally (Texas A&M University). This book comprises 27 cases and is a perfect companion book for faculty interested in exposing students to a wide range of real financial statements. The cases are current and cover companies from Japan, Sweden, Austria, the Netherlands, the UK, India, as well as from the U.S. Many of the U.S. companies are major multinationals. Each case deals with a specific financial accounting topic within the context of one (or more) company’s financial statements. Each case contains financial statement information and a set of directed questions pertaining to one or two specific financial accounting issues. This is a separate, saleable casebook (ISBN 978-1-61853-122-3). Contact your sales representative to receive a desk copy or email

Chapter 1 Accounting Environment and the Conceptual Framework

Chapter 2 Accounting Information System

Chapter 3 Income Statement and Comprehensive Income

Chapter 4 Balance Sheet and Financial Reporting

Chapter 5 Statement of Cash Flows and Financial Analysis

Chapter 6 Time Value of Money

Chapter 7 Revenue Recognition

Chapter 8 Cash and Receivables

Chapter 9 Inventory: Measurement

Chapter 10 Inventory: Additional Issues

Chapter 11 Property, Plant, and Equipment: Acquisition and Disposition

Chapter 12 Depreciation, Impairments, and Depletion

Chapter 13 Intangible Assets

Chapter 14 Investments and Derivatives

Chapter 15 Short-Term Liabilities and Contingencies

Chapter 16 Long-Term Liabilities

Chapter 17 Leases

Chapter 18 Income Taxes

Chapter 19 Pensions and Postretirement Benefits

Chapter 20 Stockholders' Equity

Chapter 21 Share-Based Compensation and Earnings Per Share

Chapter 22 Statement of Cash Flows Revisited

Appendix A Accounting Changes and Error Analysis Revisited

Appendix B IFRS

Click on an item in the grid to preview the related video. 

Action Plan
LO Topic/Subtopic Page Demos Reviews Highlights & Tips

Classify cash, cash equivalents, restricted cash, and compensating balances

Cash::Cash Equivalents::Restricted Cash::Compensating Balances::Balance Sheet Classification
8-3 HT8-1
(Coming soon)

Account for sales and collections on account including the impact of cash discounts

Gross Method::Net Method::Cash Discount::Discount Period
8-6 HT8-2
(Coming soon)

Account for impact of sales returns and allowances

Account for the impact of sales returns and allowances
Sales Returns::Variable Consideration::Refund Liability::Estimated Returns Inventory

Measure and record accounts receivable at net realizable value using the allowance method

Net Realizable Value::Allowance Method::CECL Model::Aging Schedule::Expected Credit Losses
8-13 HT8-4
(Coming soon)

Measure and record notes receivable

Note Receivable::Face Value::Effective-Interest Method::Discount on Note Receivable
8-20 HT8-5
(Coming soon)

Account for the sale of receivables and use as a collateral for borrowing

Secured Borrowing::Collateral::Sale with Recourse::Sale Without Recourse::Recourse Liability
8-27 HT8-6
(Coming soon)

Describe receivable disclosures and ratio analyses

Accounts Receivable Turnover::Average Days to Collect Receivables
8-32 HT8-7
(Coming soon)

Apply cash controls

Cash Reconciliations::Bank Reconciliation::Accounting Controls
(Coming Soon)
8-35 D8-8A
(Coming soon)
(Coming soon)
(Coming soon)

Account for impairment of receivables

Bad Debt Expense::Allowance for Doubtful Accounts::Effective-Interest Method::Expected Credit Losses
(Coming Soon)
8-41 D8-9
(Coming soon)
(Coming soon)
(Coming soon)
Michelle L. Hanlon

Michelle L. Hanlon

Michelle L. Hanlon is the Howard W. Johnson Professor at the MIT Sloan School of Management. She earned her doctorate at the University of Washington.

Prior to joining MIT, she was a faculty member at the University of Michigan. Professor Hanlon has taught financial accounting to undergraduates, MBA students, executive MBA students, and Masters of Finance students. Professor Hanlon also teaches Taxes and Business Strategy to MBA students. She is the winner of the 2013 Jamieson Prize for Excellence in Teaching at MIT Sloan.

Professor Hanlon’s research focuses primarily on the intersection of taxation and financial accounting. Her recent work examines the capital market effects of the accounting for income tax, the reputational effects of corporate tax avoidance, and the economic consequences of U.S. international tax policies for multinational corporations. She has published research studies in the Journal of Accounting and Economics, the Journal of Accounting Research, The Accounting Review, the Review of Accounting Studies, the Journal of Finance, the Journal of Financial Economics, the Journal of Public Economics, and others. She has won several awards for her research and has presented her work at numerous universities and conferences. Professor Hanlon has served on several editorial boards and currently serves as an editor at the Journal of Accounting and Economics. 

Professor Hanlon has testified in front of the U.S. Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means about the interaction of financial accounting and tax policy. She served as a U.S. delegate to the American-Swiss Young Leaders Conference in 2010 and worked as an Academic Fellow at the U.S. House Ways and Means Committee in 2015.

Leslie Hodder

Leslie Hodder

Professor and the Dean’s Faculty Fellow at Indiana University’s Kelley School of Business

Professor Hodder received her B.B.A and M.B.A./M.Acc from the University of New Mexico and her Ph.D. from the University of Texas at Austin. Prior to obtaining her Ph.D., Professor Hodder was Chief Financial Officer of a publicly traded commercial bank holding company in southern California. Professor Hodder was on faculty at Stanford University before joining the Indiana University faculty in 2003. Her research has appeared in top accounting journals, including The Accounting Review, Review of Accounting Studies, Contemporary Accounting Research, and Accounting Organizations and Society. She is the past winner of the American Accounting Association’s Wildman Award, is a past and present Editor at The Accounting Review, and is currently on the Executive Board of the American Accounting Association. Professor Hodder teaches financial-accounting-related topics in the undergraduate, master, and doctoral programs. Over her teaching career, she has developed or co-developed six courses in financial accounting, including Intermediate Financial Accounting I and II, Applied Audit and Accounting Research, and Detecting Earnings Management with a focus on data analytics. Professor Hodder currently teaches intermediate accounting to undergraduates.

Karen K. Nelson

Karen K. Nelson

M.J. Neeley Professor of Accounting at TCU. Former Harmon Whittington Professor of Accounting and past Accounting Area Coordinator at the Jones Graduate School of Business at Rice University.

Karen previously served on the faculty at Rice University, the Stanford University Graduate School of Business, and as a visiting professor at the University of Michigan. She earned her Ph.D. at the University of Michigan and a bachelor’s degree (summa cum laude) from the University of Colorado. She also holds a CPA license from the state of Colorado. Professor Nelson’s research focuses on financial reporting and disclosure issues, including the role of regulators, auditors, and private securities litigation in monitoring financial reporting quality. She has held research seminars at over 50 leading business schools in the U.S. and abroad, and published in a variety of leading academic journals including The Accounting Review, Journal of Accounting and Economics, Journal of Accounting, and Review of Accounting Studies. Her research has been featured in the financial press in publications such as The Wall Street Journal, Business Week, and Forbes. She is an active member of the American Accounting Association and serves on the Editorial Board of The Accounting Review. She has taught financial accounting at all levels, and her students have honored her with numerous awards for teaching excellence. She currently teaches intermediate accounting to undergraduates and financial accounting to MBAs. She is a member of the Standing Advisory Group of the Public Company Accounting Oversight Board.

Darren Roulstone

Darren Roulstone

Distinguished Professor of Accounting at the Ohio State University’s Fisher College of Business.

Professor Roulstone earned his doctorate at the University of Michigan’s Ross School of Business and BS and MAcc degrees from Brigham Young University’s Marriott School of Management. Professor Roulstone currently directs the Ph.D. program in Accounting and Management Information Systems at Fisher. He teaches a seminar on capital markets research and the core course in financial reporting in Fisher’s Master of Accounting program. He has extensive experience teaching intermediate accounting at both the undergraduate and graduate levels. Prior to joining Fisher, he was on the faculty at the University of Chicago’s Booth School of Business where he taught financial accounting and financial statement analysis in the full-time, evening, and weekend MBA programs. Professor Roulstone’s research focuses on information intermediaries, information acquisition by investors, and textual analysis of corporate disclosure. He serves on the editorial boards of several accounting journals and is currently an associate editor at Management Science. His research has been published in a variety of leading academic journals including The Accounting Review, Journal of Accounting and Economics, Journal of Accounting Research, Management Science, and Review of Accounting Studies. He is a past president of the American Accounting Association’s Financial Accounting and Reporting Section.