Financial Accounting Theory and Analysis

Richard G. Schroeder is Emeritus Professor of Accounting at the University of North Carolina at Charlotte. A widely published researcher, he has contributed extensively to the study of accounting theory, financial reporting standards, and audit judgment. His work has been cited over 500 times, influencing both academia and practice. Schroeder has co-authored multiple accounting textbooks, shaping accounting education for students and professionals worldwide. Myrtle W. Clark is Associate Professor of Accounting at the Gatton College of Business and Economics, University of Kentucky. She holds a PhD from the University of South Carolina and specializes in financial accounting research and theory. Clark has authored an accounting theory textbook and published articles in esteemed journals such as Accounting Horizons and The Journal of Accounting Literature. Jack M. Cathey is Associate Professor in the Turner School of Accountancy at the Belk College of Business, University of North Carolina at Charlotte. A Certified Public Accountant (NC), he previously worked as a senior auditor with KPMG. Cathey has published extensively in academic and professional journals and frequently lectures on financial reporting and information systems. As Program Director for the UNC Charlotte Master of Accountancy Program, he is dedicated to advancing accounting education and practice.

• Preface, xi1 The Development of Accounting Theory, 1The Early History of Accounting, 2Accounting in the United States Since 1930, 5The Role of Ethics in Accounting, 21International Accounting Standards, 252 The Pursuit of the Conceptual Framework, 30The Early Theorists, 30Professional Organizations' and Authoritative Standard-SettingBodies' Contributions, 32Committee on Accounting Procedure, 33Accounting Principles Board, 33A Statement of Basic Accounting Theory, 36The Trueblood Committee, 37Statement on Accounting Theory and Theory Acceptance, 39The FASB's Original Conceptual Framework Project, 42International Cooperation, 44Principles-Based Versus Rules-Based Accounting Standards, 61International Convergence, 653 International Accounting, 78International Business Accounting Issues, 79he Development of Accounting Systems, 79Preparation of Financial Statements for Foreign Users, 81The International Accounting Standards Committee, 81The Uses of International Accounting Standards, 93The IASC and the IOSCO, 94The IASB Annual Improvements Project, 96IASB–FASB Convergence, 96The Effects of International Versus US GAAP Accounting Standards, 97Standards Overload, 100Framework for the Preparation and Presentation of Financial Statements, 102The IASB–FASB Financial Statement Presentation Project, 1114 The Status, Development and Uses of Financial Reporting, 119The Financial Reporting Environment, 119Research Methodology, 122The Outcomes of Providing Accounting Information, 125The Relationship Among Accounting Research, Education, and Practice, 1555 Income Concepts, Revenue Recognition, and Other Methods of Reporting, 162The Nature of Income, 163Economic Versus Accounting Income, 167Revenue Recognition, 169Matching, 188Income Recognition Constraints, 190Non-GAAP Measures of Performance, 192Sustainability Reporting, 194Earnings Quality, Earnings Management, and Fraudulent Financial Reporting, 205International Accounting Standards, 2116 Financial Statement I: The Income Statement, 227The Economic Consequences of Financial Reporting, 227Income Statement Elements, 227Statement Format, 229The Value of Corporate Earnings, 254International Accounting Standards, 2597 Financial Statements II: The Balance Sheet and the Statement of Cash Flows, 273The Balance Sheet, 274Fair Value Measurements, 285Evaluating a Company's Financial Position, 292The Statement of Cash Flows, 295Financial Analysis of Cash-Flow Information, 306International Accounting Standards, 3078 Working Capital, 321Development of the Working Capital Concept, 321Current Usage, 323Components of Working Capital, 323Working Capital Management, 335International Accounting Standards, 3439 Long-Term Assets I: Property, Plant, and Equipment, 350Property, Plant, and Equipment, 350Financial Analysis of Property, Plant, and Equipment, 355Cost Allocation, 355Capital and Revenue Expenditures, 359Recognition and Measurement Issues, 359Impairment of Value, 360Accounting for Asset Retirement Obligations, 362International Accounting Standards, 36510 Long-Term Assets II: Investments and Intangibles, 377Investments in Equity Securities, 377Investments in Debt Securities, 386Impairment of Investments in Unsecuritized Debt Including Receivables and Loans, 390The Fair Value Option for Financial Assets, 394Transfers of Financial Assets, 395Intangibles, 396Financial Analysis of Investments and Intangibles, 414International Accounting Standards, 41411 Long-Term Liabilities, 432The Definition of Liabilities, 432Recognition and Measurement of Liabilities, 433Debt versus Equity, 434Classification of Long-Term Debt, 437Other Liability Measurement Issues, 452Reference Rate Reform, 460Troubled Debt Restructurings, 461Financial Analysis of Long-Term Debt, 464International Accounting Standards, 46612 Accounting for Income Taxes, 481Historical Perspective, 481The Income Tax Allocation Issue, 483Permanent and Temporary Differences, 483Conceptual Issues, 487Alternative Interperiod Tax Allocation Methods, 491Financial Statement Disclosure, 500FIN No. 48, "Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109", 504The Tax Cuts and Jobs Act of 2017, 505Financial Analysis of Income Taxes, 508International Accounting Standards, 51113 Leases, 519Accounting for Leases, 520Historical Perspective, 521Subsequent Developments, 532FASB ASC 842, 534Lease Agreements Affected by ASU 2020-04 Reference Rate Reform, 545Financial Analysis of the Effects of Capitalizing Operating Leases, 547International Accounting Standards, 54914 Pensions and Other Postretirement Benefits, 561Historical Perspective, 563Accounting for the Pension Fund, 573The Employee Retirement Income Security Act, 574Other Postretirement Benefits, 575Postemployment Benefits, 577SFAS No. 132, 577SFAS No. 158, 577ASU 2017-07, 579ASU 2018-14, 580Financial Analysis of Pension and Other Postretirement Benefits, 581International Accounting Standards, 58115 Equity, 589Theories of Equity, 590Definition of Equity, 594The Distinction Between Debt and Equity, 595Corporate Equity, 598Financial Analysis of Stockholders' Equity, 611International Accounting Standards, 61216 Accounting for Multiple Entities, 621Business Combinations, 621Accounting for Business Combinations, 623Consolidations, 630Financial Engineering and the Role of Structured Entities, 634Theories of Consolidation, 637Noncontrolling Interest, 639Drawbacks of Consolidation, 641Joint Ventures, 642Special Purpose Acquisition Companies, 643Segment Reporting, 646Foreign Currency Translation, 653International Accounting Standards, 66017 Financial Reporting Disclosure Requirements and Ethical Responsibilities, 680Recognition and Measurement Criteria, 680The Securities and Exchange Commission, 703Ethical Responsibilities, 712International Accounting Standards, 721Cases, 727FASB ASC Research, 731Room for Debate, 732Index, I-1