Wiley CPAexcel Exam Review July 2020 Study Guide

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• About the Authors xiAbout the Financial Accounting Professors xiiiWelcome to Financial Accounting and Reporting xvConceptual Framework and Financial Reporting 1Financial Accounting Standards Board (FASB) 2Overview of US GAAP 2FASB and Standard Setting 2Accrual Accounting 7Financial Accounting Standards Codification 13Conceptual Framework of Financial Reporting by Business Enterprises 17Objectives and Qualitative Characteristics 17Assumptions and Accounting Principles 20Constraints and Present Value 24Fair Value Framework 27Fair Value Framework—Introduction and Definitions 27Recognition and Measurement 31Inputs and Hierarchy 34Disclosure Requirements 36International Financial Reporting Standards (IFRS) 40IASB Accounting Standards 40IASB Framework 45IFRS for SMEs 49IFRS—General-Purpose Financial Statements 52General-Purpose Financial Statements 59Overview—General-Purpose Financial Statements 59Income Statement 64Balance Sheet/Statement of Financial Position 70Statement of Comprehensive Income 77Statement of Changes in Equity 81Statement of Cash Flows 84Sources and Uses of Cash 84Operating, Investing, and Financing Activities 87Operating Cash Flows—Indirect Method 95Notes to Financial Statements 103Notes to Financial Statements 103Risks and Uncertainties 109Subsequent Events 114Exit or Disposal Activities and Discontinued Operations 117Evaluating Financial Statements 122Ratios—Liquidity/Solvency and Operational 122Ratios—Profitability and Equity 126Consolidated Financial Statements 129Introduction to Consolidated Financial Statements 129Consolidating Process 133Consolidation at Acquisition 133Consolidation Subsequent to Acquisition 140Consolidation Less than 100% Ownership 145Intercompany (I/C) Transactions and Balances 150Intercompany (I/C) Transactions and Balances—Introduction 150Intercompany (I/C) Inventory Transactions 153Intercompany (I/C) Fixed Asset Transactions 163Intercompany (I/C) Bond Transactions 175IFRS—Consolidations 183Combined Financial Statements 188Variable Interest Entities (VIEs) 190Public Company Reporting Topics (SEC, EPS, Interim, and Segment) 192U.S. Securities and Exchange Commission (SEC) 192SEC—Role and Standard-Setting Process 192SEC Reporting Requirements 195Earnings Per Share 200Introduction to Earnings per Share 200Basic Earnings per Share 203Diluted Earnings per Share 207Earnings per Share and IFRS 217Segment Reporting 218Interim Financial Reporting 222Interim Reporting Principles 222Interim Reporting—Details and IFRS 226Special-Purpose Frameworks 231Cash, Modified Cash, Income Tax 231Private Company Council 235Select Financial Statement Accounts 239Cash and Cash Equivalents 240Cash 240Bank Reconciliations 243Receivables 246Accounts Receivable—Accounting and Reporting 246Uncollectible—Direct Write-Off and Allowance 249Allowance—Income Statement and Balance Sheet Approach 251Notes Receivable 256Criteria for Sale of Receivables 260Factoring, Assignment, and Pledging 263Notes Receivable—Impairment 266Inventory 268Introduction to Inventory 268Periodic Inventory System and Cost-Flow Assumption 272Perpetual Inventory System and Cost-Flow Assumption 279Evaluation of FIFO and LIFO 283Dollar-Value LIFO 286Gross Margin and Relative Sales Value Method 290Retail Inventory Method 293Dollar-Value LIFO Retail 298Subsequent Measurement of Inventory 300Inventory Errors 304Losses on Purchase Commitments 306Inventory and IFRS 308Property, Plant and Equipment 310Categories and Presentation 310Capitalized Costs 311Valuation 313Interest Capitalization Basics 316Interest Capitalization Limits 319Post-Acquisition Expenditures 324Non-Accelerated Depreciation Methods 326Accelerated Depreciation Methods 329Natural Resources 333Impairment—Assets for Use and Held-for-Sale 337Impairment and IFRS 341PPE and IFRS 343Nonmonetary Exchange 346Commercial Substance 346No Commercial Substance 349Nonmonetary Exchanges and IFRS 352Investments 353Introduction—Investments in Equity and Debt Securities 353Investments in Equity Securities 358Equity Investments at Fair Value 358Equity Investments at Cost 362Equity Investments Using Equity Method Accounting 366Investments in Debt Securities 374Debt Investments at Fair Value 374Debt Investments at Amortized Cost 384Investor Stock Dividends, Splits, and Rights 387Comparison and Transfers of Investments 390IFRS—Investments in Equity and Debt Securities 398Intangible Assets—Goodwill and Other 402Introduction to Intangible Assets 402Goodwill 408Research and Development Costs 413Software Costs 416Intangibles and IFRS 421Payables and Accrued Liabilities 423Current Liabilities 423Specific Current Liabilities 426Compensated Absences 428Asset Retirement Obligations and Environmental Liabilities 432Contingencies, Commitments, and Guarantees (Provisions) 435Contingent Liability Principles 435Examples of Contingent Liabilities and Additional Aspects 438IFRS—Contingencies 441Long-Term Debt (Financial Liabilities) 443Notes Payable 443Bonds Payable 449Bond Accounting Principles 449Bond Complications 453Bond Fair Value Option, International 456Modification and Debt Retirement 460Refinancing Short-Term Obligations 460Debt Retirement 462Troubled Debt 464Debt Covenant Compliance 471Distinguishing Liabilities from Equity 476Equity 480Owners’ Equity Basics 480Stock Issuance 489Preferred Stock 494Treasury Stock 497Dividends 502Stock Dividends and Splits 506Dividend Allocation 509Stock Rights, Retained Earnings 512Book Value per Share 517Select Transactions 521Revenue Recognition 522Five Steps of Revenue Recognition 522Determining Transaction Price 527Allocating Transaction Price 532Special Issues in Revenue Recognition 535Contract Modifications and Other Considerations 541Accounting for Construction Contracts 549Employee/Retiree Benefit Plans 557Pension Principles, Reporting 557Pension Expense Basics 562Pension Expense, Delayed Recognition 566Pension Plan Reporting, International 575Postretirement Benefits 578Share-Based Payments 584Stock Options 584Stock Awards 592Stock Appreciation Rights 596Income Taxes 599Income Tax Basics 599Permanent Differences 602Temporary Differences 604Tax Accrual Entry 610Interperiod Tax Allocation Process 614Valuation Allowance for Deferred Tax Assets 618Uncertain Tax Positions 620Net Operating Losses 623Accounting Changes and Error Corrections 628Types of Changes and Accounting Approaches 628Retrospective Application 632Prospective Application 635Accounting Errors—Restatement 638Business Combinations 643Introduction to Business Combinations 643Acquisition Method of Accounting 648Introduction to Acquisition Method of Accounting 648Determining the Cost of the Business Acquired 652Recognizing/Measuring Assets, Liabilities, and Noncontrolling Interest 656Recognizing/Measuring Goodwill or Bargain Purchase Amount 661Post-Acquisition Issues 664Disclosure Requirements—Acquisition Method 668Recording Business Combinations 670IFRS—Business Combinations 681Financial Instruments 684Financial Instruments Introduction 684IFRS—Financial Instruments 687Financial Instruments Disclosures 692Derivatives and Hedging 695Derivatives Introduction 695Hedging Introduction 701Fair Value Hedges 706Cash-Flow Hedges 710Foreign Currency Hedges 714Effectiveness and Disclosure 716IFRS—Hedging 720Foreign Currency Denominated Transactions 723Introduction and Definitions 723Import Transactions 728Export Transactions 731Foreign Currency Hedges 734Introduction to Forward and Option Contracts 734Natural (Economic) Hedge 739Hedging Forecasted Transactions and Firm Commitment 743Hedging Asset/Liability, Available for Sale, and Foreign Operations 747Speculation and Summary 750Conversion of Foreign Financial Statements 752Introduction to Conversion of Foreign Financial Statements 752Conversion Using Translation 754Conversion Using Remeasurement 757Remeasurement, Translation, and IFRS 761Leases 763Background, Short-Term Leases, and Operating Leases 763Finance Lease Basics 769Finance Lease—Lessee 774Sales-Type Leases 780Direct Financing Leases—Lessor 785Sale Leasebacks and Disclosures 791Additional Aspects of Leases 796Not-for-Profit Organizations 801Introduction to Types of Not-for-Profit Entities and Standard Setting 801Financial Reporting 803Donations, Pledges, Contributions, and Net Assets 811Special Issues—Recent Developments 818Special Industries: Healthcare and Colleges 822Healthcare Organizations 822Colleges and Universities 828State and Local Governments 833State and Local Government Concepts 834Introduction to Governmental Organizations 834GASB Concepts Statements 837Fund Accounting 843Measurement Focus Basis of Accounting 849Budgetary Accounting 854Encumbrance Accounting 857Deferred Outflows and Deferred Inflows of Resources 862Net Position and Fund Balance 868Governmental Funds 872Proprietary Funds 889Fiduciary Funds 894Format and Content of Comprehensive Annual Financial Report (CAFR) 914The Comprehensive Annual Financial Report 914Determining the Financial Reporting Entity 929Major Funds and Fund-Level Reporting 933Deriving Government-Wide Financial Statements from Fund-Level Financial Statements 935Typical Items and Specific Types of Transactions and Events 941Interfund Transactions, Construction Projects, and Infrastructure 941Long-Term Liabilities Other Than Bonded Debt 947Terminology and Nonexchange Transactions 952Special Items—Recent Developments 962Index 965