Index of Accounting Topics

I N D EX

A. C. Nielsen Company, 657n.16
AASB (Australian Accounting Standards
Board), 1360
Abbott Laboratories, 183, 873–874
Abdel-khalik, A. Rashad, 1129n.19
Abnormal shortages, 456
Abrams, J., 993n.1
Absences, compensated, 648–650
Accelerated Cost Recovery System
(ACRS), 564
Accounting, ethics in, 19
Accounting changes. see Change(s) in
accounting
Accounting cycle, 73–98
adjusted trial balance, 90
adjusting entries, 81–82
closing, 92–94
journalizing, 75–76
post-closing trial balance, 94
posting, 76–80
preparing financial statements, 91–92
reversing entries, 95
steps of, 95
transactions and other events, identifying/
recording, 73–75
trial balance, 80–81
Accounting information system, 68–73
Accounting policies
on balance sheets, 191, 192
disclosure of, 1316–1319
MD&A of, 1339–1340
Accounting principle, changes in. see
Change(s) in accounting principle
Accounting Principles Board (APB), 9, 24.
See also Opinions of the Accounting
Principles Board
Accounting Research Bulletins, 9
Accounting Research Study No. 13 (“The
Accounting Basis of Inventories”),
445n.5
Accounting standards
economic consequences of, 17
need for development of, 7
politicization of, 24
Accounting Standards Board (AcSB)
(Canada), 1360
Accounting Standards Board (ASB)
(U.K), 1360
Accounting Standards Board of Japan
(ASBJ), 1360
Accounting Standards Executive Committee
(AcSEC), 12, 493n.2, 510n.11, 547n.6
Accounting theory, and cash basis
accounting, 101–102
Accounts payable(s), 639
decrease in, 1257
increase in, 1254
indirect method of analyzing, 1251

Accounts receivable(s), 324
age of, 329n.7
days to collect, 344
decrease in, 1254
disposition of, 337–342
increase in, 1256
indirect method of analyzing, 1250
net, accounts receivable, 1267–1269, 1277
recognition of, 324–326
trade, 336
uncollectible, 326–331
valuation of, 326–331
Accounts receivable written off, 330–331
Accruals
as class of adjusting entries, 81
in reversing entries illustration, 105–106
Accrual basis accounting
cash basis accounting vs., 101–104
conversion to cash basis accounting,
103–104
for warranties, 655
Accrued expenses
adjusting entries for, 87
Accrued interest, adjusting entries for,
87–88
Accrued revenue(s)
adjusting entries for, 86–87
overstatement of, 1207
Accrued salaries, adjusting entries for,
88–89
Accrued wages, failure to record, 1206
Accumulated benefit obligation, 1053
Accumulated depreciation, 1255, 1257, 1279
Accumulated Depreciation account, 559
Accumulated other comprehensive loss,
765n.19
Accumulated postretirement benefit
obligation (APBO), 1085–1089
Accumulated rights, 649
Acid-test ratio, 666
Acquisition costs, 507–511, 555
ACRS (Accelerated Cost Recovery
System), 564
AcSB (Accounting Standards Board)
(Canada), 1360
AcSEC. see Accounting Standards Executive
Committee
Activity method for depreciation, 543–544
Activity ratios, 208, 1350, 1351
Actually refinancing, 642
Actual return on plan assets, 1057, 1086
Actuarial present value, 1054n.7
Actuaries, 1053
Adaptec, 823
ADC Telecommunications, 321
Additions, 509

Additional paid-in capital, 746
Adelphia, 40, 709, 710, 1345
Adjunct account, 700
Adjustable-rate mortgage, 709
Adjusted trial balance, 69, 90, 94, 109–110
Adjustments, 81–90
for accruals, 86–90
for bad debts, 89–90
for deferrals, 82–86
defined, 68–69
for depreciation, 84–85
for insurance, 82–83
prior period, 147
for statement presentation, 85
types of, 81–82
for unearned revenues, 85–86
on worksheet, 108–109
Adjustments columns, 108
Administrative expenses, on income
statement, 136
Adolph Coors Company, 662
Adverse opinion, 1338
Advertising costs, 607, 1331–1332
AES, 143, 688
After-closing trial balance, 69
Age of accounts receivables, 329n.7
AHold NV, 960
AICPA. see American Institute of Certified
Public Accountants
AICPA Special Committee on Financial
Reporting
on cost of business reporting, 1315
on forward-looking disclosures, 1342
on interim reporting, 1334
on off-balance-sheet accounting, 1320
on segment disclosure, 1328
on users’ changing needs, 1316
AICPA Task Force on LIFO Inventory
Problems, 399n.5, 408n.15,
442n.1, 443n.3
AIG, 2, 5, 49, 337
Airline industry, 178, 541n.2
Air Products & Chemicals,
886n.12, 886n.12
Alaska Airlines, 1157
Alberto-Culver Company, 195, 764
Alcatel-Lucent, 488–489
Allied Products Corporation, 755
Allowance method, 327, 328, 442–443
Alltel Corp., 643
Almost Family, Inc., 89
Altera International, 872
Alternative minimum tax (AMT), 1005
Alterra Healthcare Corp., 181–182
Altman, E. I., 191
Amazon.com, 130, 178, 187, 259, 393, 596,
797, 811, 825, 861, 872
Ameren, 561

I-1

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I-2 · Index
American Airlines, 85, 644, 1094,
1158–1159, 1178
American Bar Association, 742
American Express, 338
American Home Mortgage Investment
Corp., 931
American Institute of Certified Public
Accountants (AICPA), 192. See also
AICPA Special Committee on Financial
Reporting; AICPA Task Force on LIFO
Inventory Problems
and Accounting Standards Executive
Committee, 12–13
and APB, 9
Code of Professional Conduct, 13
and Committee on Accounting
Procedure, 9, 24
and GAAP standards development, 9
and government intervention, 27
and SEC, 7
American Maize-Products Company, 399
America Online (AOL), 590
America West, 178
Ameritrade, 763
Ames Department Stores, 437
AM International, 391
Amortization
of bonds, 289–290, 695–696, 1266–1267
corridor, 1064–1065, 1075–1076, 1088
defined, 540
effective-interest method, of bond, 289–290
of intangible assets, 591–593
of limited-life intangible assets, 1266
on postretirement benefit plans, 1088
of prior service costs, 1060–1061, 1086
straight-line, 1061
of trademark, 1279
on units-of-production basis, 596n.5
years-of-service, 1060–1061
Amortized cost, 859
Ampco-Pittsburgh Corporation, 546, 1196
AMT (alternative minimum tax), 1005
Anadarko Petroleum Corporation, 498, 904
Analogic Corporation, 616
Anheuser-Busch, 1352
Anixter Bros., Inc., 391
Annual interest rate, in compound interest
tables, 268–269
Annualized approach, 1332
Annual reports, on World Wide Web, 5–6
Annuity(-ies), 286–288
Annuity due, 278–279, 286
future value of, 278–279
present value of, 283–286
Ante, S. E., 444
Antidilutive securities, 817, 819–821, 834n.21
APB. see Accounting Principles Board
APBO. see Accumulated postretirement
benefit obligation
APB Opinions. see Opinions of the Accounting
Principles Board
Apple Computer, 323, 451, 593, 654
April-Marcus, Inc., 387
Arbitrageurs, 885
Arcady, A. T., 1078n.19
Arndt, M., 1005
AROs (asset retirement obligations), 659

Arrears, dividend in, 754
Artificial loss, 1158n.22
Artistic-related intangible assets, 594
ASB (Accounting Standards Board)
(U.K), 1360
ASBJ (Accounting Standards Board of
Japan), 1360
Assessments, 654–655
Asset(s)
on balance sheet, 180
current assets, 181–184
depreciable base for, 540
gains/losses in (pensions), 1063–1064
held for disposal, 553
in lessee accounting, 1124
noncurrent, 184–186
pensions, 1063–1064
recognition of, 999
replacement of fixed, 549
sales price of, 1142
transfer of, 717
Asset expenditures, 508–509
Asset-linked bonds, 691
Asset retirement obligations (AROs), 659, 714
Asset reversions, 1078–1079
Asset turnover ratio, 560–561
Asset valuation, 507
Astra Zeneca Plc., 597
Atlantic Richfield, 558
AT&T, 74, 545, 615, 800–801, 1082
Attmore, R. H., 1091
Attribution period, 1084–1085
Auditing Standards Board, 13
Auditor’s report, 1335–1338
emphasis of matter in, 1337
and expectation gap, 1346n.26
on going concern of entity, 1337
and lack of consistency, 1337
and management’s responsibilities for
financial statements, 1340n.18
qualified/adverse/disclaimer opinion,
1337–1338
standards for, 1335–1336
unqualified/clean opinion, 1337
Australian Accounting Standards Board
(AASB), 1360
Available-for-sale securities, 152n.21, 182,
858, 861–865, 868–870, 873, 882
Average cost method, 460
for cost flow assumption, 395–396
for security purchases, 868n.6
Average days to sell inventory, 459
Avis, 962
Avon Products, 177, 323
Avon Rubber PLC., 174
Ayers, B., 996
Baan NV, 960
Badanhausen, K., 177
Bad debts
failure to adjust for, 1207–1208
Bahree, B., 557
Balance sheet(s), 69, 178–197
accounting policies on, 191
and cash flows statement, 1247–1248,
1253, 1256, 1260

classification in, 179–191
classified, 179
columns on, 110
comparative, 1275
contingencies on, 191, 192
contractual situations on, 191–193
current assets on, 181–184
debit vs. credit balances on, 1274
deferred tax reporting on, 1011–1013
elements of, 180
errors on, 1205–1208
events after preparation of, 1323–1324
example, 97
fair values on, 191, 193–194
format of, 189–191
under GAAP/iGAAP, 206
liabilities on, 180, 186–188
limitations of, 179
noncurrent assets on, 184–186
owner’s equity on, 189
presentation of, 154
stockholders’ equity on, 72, 765–766
usefulness of, 178–179
Balance sheet (percentage-of-receivables)
approach, 328–330
Ball, J., 557
Banks
as lessors, 1117, 1148n.17
treatment of purchases/sales of
loans/securities by, 1246n.2
Bank, David, 645
Bank accounts, 347–348
Bank charges, reconciling, 349–352
Bank credits, reconciling, 350
Bank errors, reconciling, 350
Bankers Trust, 885
Bank of America, 67, 352, 759, 1115,
1119, 1157
BankOne, 5, 809, 811
Bank overdrafts, 322
Bank reconciliation, 349–352
Bankruptcies, of retailers, 437
Bankruptcy-prediction model, 191
Bank statements, 349
Bargain purchases, 964
Bargain purchase option, 1123, 1144
Bargain purchase option test, 1121–1122
Barnesandnoble.com, 596
Barrick Gold Corporation, 486
Barth, Mary, 802n.6
Barth Industries, 652
Basis Technology, 872
Basket purchase, 446
Bayer, 634
Bearer (coupon) bonds, 691
Bear Stearns & Co., 187
Beaver, W. H., 133n.3
Beck, Rachel, 751
Beckett, Paul, 352
Bed Bath & Beyond, 1129
Behn, Bruce K., 609n.16
BellSouth Corp., 691, 692
Benchmark, verifiable, 42
Benefits/years-of-service actuarial method,
1056, 1085n.26
Beresford, Dennis R., 877n.9
Berkshire Hathaway Inc., 1312


Index · I-3
Bernanke, Ben S., 291, 323
Bernard, Victor, 381
Beru AG Corporation, 636
Best Buy, 40, 55, 112, 326, 344, 385, 436,
452, 663, 666, 710–713, 767, 1182, 1336
Best Western, 962
Bethlehem Steel, 999, 1066, 1079
Bhamornsiri, Sak, 944n.18
Biddle, Gary C., 410n.22
“Big GAAP versus little GAAP,” 1316
Biggs, Stanley F., 448n.8
Black & Decker, 55
Blackman, Andrew, 768n.22
Bloomberg, 596
Bloomingdale’s, 452
Blow-out sales, 380
BLS (Bureau of Labor Statistics), 405n.10
Blumenstein, Rebecca, 508
BMC Industries, Inc., 652
Boeing Capital, 1117
Boeing Company, 84, 180, 382, 490, 508,
741, 1084, 1119, 1130
Boise Cascade, 447
Bonds. See also specific types, e.g.: Discount
bonds
accounting for, 702–703
corporate listings, 691–692
effective-interest method for, 697–700
and extinguishment of debt, 701–703
face value of, 692
and interest date, 694–696
between interest dates, issuance, 696
issuance of, 690, 700–701
monitoring investments in, 691–692
notes vs., 703
par on interest date, issuance at, 694–695
premium, 693
types of, 691
Bond amortization, effective-interest
method of, 289–290
Bond covenants, 688–689
Bond discounts, amortization of, 1266–1267
Bondholders, 1349
Bond indenture, 691
Bonds payable, 690–703
and contra accounts, 700
decrease in, 1258
discount, 700
increase in, 1255
Bond premium(s)
amortization of, 1266–1267
Bonus agreements, 650–651
Bonus payments, and change in
accounting method, 1203
Book depreciation, tax depreciation vs.,
566–567
Book of original entry, 69
Book value (bonds), 85, 697n.3
Book value method, 755
Book value per share, 768, 772–773
BOP Clothing Co., 686–687
Borrus, A., 694
Bradlees Stores, 437
Brand images, 608
Braniff, 178
Briggs & Stratton, 651, 724

Brinker International Inc., 1128
Bristol-Myers Squibb Company, 321
Broadcom, 823
Brokers, 1246n.2
Brown, K. L., 49, 938n.17
Brown, Robert Moren, 409n.20
Brown Group, Inc., 764
Brown Shoe Company, 399
Budge, Bruce P., 1272n.9
Buffet, Warren E., 1312
Building depreciation, 1254, 1279
Burden, 492
Bureau of Labor Statistics (BLS), 405n.10
Burger King, 962
Burton, John C., 8n.6
Business combinations, 590n.1
Business combinations, as present valuebased measurement, 265
Business-method patents, 596
Business organization. see Corporate form
Buyback(s)
in early 1990s, 749n.5
of outstanding stock, 756n.11
as sign to buy stock, 750–751
of treasury stock, 756n.11
Buyback agreements, 388, 935
Buybackletter.com, 750
Byrnes, Nanette, 1049, 1129
Byrnes, Tracey, 937
Cable and Wireless, 1150
Cablevision Systems, 744
Cadbury Schweppes, 1080
Calhoun, Charles H., III, 964n.31
Callable bonds, 691, 701n.8
Callable preferred stock, 755
Callaway Golf Co., 1162
Call option, 887
Call provisions, 689
Calpine, 688, 710
Campbell Soup Company, 570, 868–869,
1094, 1244
Canada, 1358–1360
Cannondale Corporation, 55
CAP. see Committee on Accounting Procedure
Capettini, Robert, 505n.9
Capital allocation, 4
Capital assets errors, 1198
Capital expenditures, 508–509
Capitalization criteria
avoiding, 1148–1149
for lessee, 1121–1124
for lessor, 1131
Capitalization period, 494
Capitalized lease accounting, 1118n.1,
1120–1124
bargain purchase option test in,
1121–1122
economic life test in, 1122
recovery of investment test in,
1122–1124
transfer of ownership test in, 1121
Capital leases, 1121–1124
Capital lease method, 1124–1129
Capital maintenance approach, 134n.5
Capital One Financial, 177
Capital stock, 742–743, 750

Capital structure, 1203
Capital structure ratios, 1350n.28
Captive leasing companies, 1117
Carcache, B., 564n.1, 1069, 1116
Carrybacks, 1006, 1018
Carryforwards, 1018. See also Loss
carryforwards
Carrying amounts, 994
Carrying value (bonds), 697n.3
Cash and cash equivalents, 181–182,
320–323, 1245n.1, 1269n.7
alternate terminology for, 320n.2
on balance sheets, 181–182
basis of valuation of, 181
determining change in, 1248, 1249,
1253, 1256
GAAP/iGAAP standards, 1283
internal control over, 347
from operating activities, 200
reporting, 320–322
restricted cash vs., 321–322
Cash balances, physical protection of, 349
Cash-balance pension plans, 1078n.19
Cash basis accounting
and accounting theory, 101–102
accrual-basis accounting vs., 101–104
conversion to accrual basis, 103–104
financial statements, 101
modified cash basis, 102
of pension plan, 1055n.10
theoretical weaknesses of, 104–105
warranties, 655
Cash controls, 347–352
and bank balances reconciliation,
349–352
and imprest petty cash system, 348–349
and physical protection of cash
balances, 349
using bank accounts, 347–348
Cash crunch, 203
Cash debt coverage ratio, 204
Cash deposits, returnable, 643–644
Cash discounts, 325–326, 392, 499
Cash dividends, 758–759
on common stock, 758n.12
on treasury stock, 759
Cash dividends payable, 1269
Cash flows, 7n.3
classification of, 1245
evaluating, 1246–1247
free, 204–205
net income vs., 203
Cash flow hedge, 893–894
Cash flow risk, 893
Cash flow statement. see Statement of
cash flows
Cash funds, 320
Cash over account, 348
Cash payments
classes of, 1261
and direct method, 1263–1264
for income taxes, 1263
for operating expenses, 1262–1263
special rules applying to, 1265
to suppliers, 1262
Cash ratio, 323
Cash rebates, 657


I-4 · Index
Cash receipts
classes of, 1261
from customers, 1261–1262
and direct method, 1263–1264
Cash-related items, 322–323
Caterpillar, Inc., 84, 382, 407, 604, 875, 886,
1117, 1325
Caterpillar Financial Services Corp., 1117,
1124–1127, 1130, 1132–1146
CBS, 750
CDs (certificates of deposit), 320n.1
Ceiling (upper), 439–440
Ceiling and Floor, 438–445
Cendant, 17
Century 21, 595
Certificates of deposit (CDs), 320n.1
Change(s) in accounting (general), 1182
guidelines for, 1201–1202
motivations for, 1203–1204
Change(s) in accounting estimate, 146, 148,
1195–1197, 1201
Change(s) in accounting principle, 148,
1182–1194, 1201
accounting for/reporting of, 1191–1192
direct/indirect effects of, 1193
disclosure of, 1320
and impracticability, 1193–1194
prospective reporting of, 1183
and retained earnings adjustment, 1192
retrospective, 1184–1190
Change in cash, determining, 1248, 1249,
1253, 1256
Change in reporting entity, 1197, 1201
Change-in-the-present-value method,
1145–1146
Channel stuffing, 936
Chase, 1117
Checks
bouncing, 351–352
outstanding, 350
paper, 349n.16
postdated, 320
Check fraud, 349n.16
Checking accounts, 347–348
Cheney, Richard E., 1352n.29
Chesapeake Corporation, 192
ChevronTexaco, 558n.10
ChexSystems, 352
China Railway Construction Corp, 741
Choice Point, Inc., 904
Christie, Rebecca, 1316
Chrysler Corporation, 40, 409, 550n.8, 1184
Chrysler Financial, 1117
Ciba-Geigy, 433
Ciesielski, J., 204, 795, 804, 1055n.9
Cinergy, 811
Circuit City, 40, 326, 436, 457, 645, 666, 743,
1129, 1182
Cisco Systems, 47, 92, 133, 444, 593, 709,
885, 1271n.8
Citicapital, 1159
Citicorp, 145n.15
Cities Service Company, 665
Citigroup, 145n.15, 326, 608, 885, 904,
1117, 1130
CKE Restaurants Inc., 1128

Claims, 654–655, 1319–1320
Clarcor Inc., 649
Class B common stock, 744
Classified balance sheets, 179–180
Clean opinion. see Unqualified opinion
Clorox Co., 759
Closing, 92–94
Closing entries, 69, 93–94, 98
Closing prices, 92–94
CNC (Conseil Nationale de la
Comptabilité), 1360
Coach Inc., 1313
Coastal Corp., 1064
The Coca-Cola Company, 18, 20, 64, 81,
127, 172, 257–258, 377, 484–485, 584,
590, 597, 608, 632–633, 685, 738, 791,
809, 811, 852, 858, 870, 885, 890, 902,
927, 987, 1045, 1051, 1111, 1239, 1244,
1308–1309, 1356, 1377
“Cockroach theory,” 140
Code of Professional Conduct (AICPA), 13
“The codification,” 19
Cohen, A. J., 823, 1313
Collaterized receivables, 339n.11
Collection float, 347
Columbia Sportswear Company, 19, 619
Combination methods for depreciation, 547
Combined statement, 153
Comiskey, Eugene E., 1079n.20, 1273
Commercial paper, 320n.1
Commercial substance, 501–502
Commitments, disclosure of, 1320
Committee for Improvements in Financial
Reporting (CIFR), 1181
Committee on Accounting Procedure
(CAP), 9, 24, 761n.14
Commodity-backed bonds, 691
Common costs, 1328
Common-size analysis, 1354–1355
Common stock, 743. See also Preferred stock
cash dividend paid for, 758n.12
change related to investment in, 1267
increase in, 1258
rate of return on, 767
in treasury at cost, 751n.7
as worksheet entry, 1280
Commonwealth Edison, 271, 738
Company names (intangible asset), 593
Compaq, 603
Comparative analysis, 1353
Comparative balance sheets, 1248, 1253,
1256, 1275
Comparative financial statements,
correcting errors on, 1200–1201
Compensated absences, 648–650
Compensating balances, 321
Compensation plans, 796–811
convertible debt accounting, 797–798
convertible preferred stock, 798–799
debt and equity classifications of, 796
dilutive securities issuance in, 816n.14
effective, 803
and FASB, 796n.1
stock compensation plans, 803–811
stock warrants, 799–803
Competition, 1357

Completed-contract accounting method,
938, 943–944, 960
Completion-of-production basis, 948
Complex capital structure EPS, 816–822, 824
antidilution, 820–821
contingent issue agreement, 820
convertible securities—diluted EPS,
817–819
options and warrants—diluted EPS,
819–820
presentation and disclosure of, 821–822
simple vs., 812–813
Components, 141
Component depreciation, 547n.6
Composite depreciation rate, 546
Composite life, 546
Composite methods for depreciation,
545–547
Compounded continuously, 269n.4
Compounded daily, 269
Compound interest, 266–269
future value as variable in, 270
present value as variable in, 270
rate of interest as variable in, 270
and Social Security, 267
tables for, 267–269, 308–317
variables fundamental to, 270
Comprehensive dollar-value LIFO method,
402–403
Comprehensive income, 152–154, 877
combined statement of, 153
corrections of errors as, 154n.24
display requirements of, 153n.23
errors in, 1198
Computer Associates, 811
Computer software. see under Software
Comserve, 620
Condensed income statements, 138–139
Conditional expenses, 651
Conglomerate (diversified) companies
ConocoPhillips, 749
Conseil Nationale de la Comptabilité
(CNC), 1360
Consigned goods, 387–388, 965–966
Consignment shipment, 387
Consolidated Edison, 491
Consolidated financial statements, 871
Consolidated Natural Gas Company
(CNG), 306
Consolidated Papers, Inc., 195
Consolidated statements of cash flows, 1265
Consolidations, 882, 1197
Continental Airlines, 178, 1157
Continental Trucking, 870
Contingencies, 651–662
on balance sheets, 191, 192
defined, 192
disclosure of, 1320
errors in, 1198
presentation of, 664–665
Contingent-fee-basis litigation, 1342n.21
Contingent liabilities. see Loss contingencies
Contingent shares, 820
Continuing franchise fees, 964
Continuously compounded, 269n.4


Index · I-5
Contra accounts, and bonds payable, 700
Contract-related intangible assets, 595
Contractual situations, on balance sheets,
191–193
Contra items, 196
Contributions, accounting for, 506–507
Contributory pension plans, 1050
Control device, 453
Convenience financial statements, 1350
Convergence, of U.S. and international
standards, 1183n.1, 1356–1360
accounting changes and errors, 1212
accounting information systems, 99
balance sheets, 206
cash and receivables, 345
conceptual framework for, 51
dilutive securities, 825
disclosure, 1347
earnings per share (EPS), 825
income statements, 155
income taxes, 1019
intangible assets, 612
international financial reporting, 20
inventories, 460
investments, 882
lease accounting, 1151
liabilities, 714
postretirement benefits, 1080
property, plant, and equipment, 562
revenue recognition, 960
statement of cash flows, 206, 1283
stockholders’ equity, 769
Convertible bonds, 691, 755, 796–797, 833
Convertible debt accounting, 797–798, 825
Convertible preferred stock, 755,
798–799, 833
Convertible securities, 817–819
Cookie jar reserves, 134
Coolidge, C., 1202
Coon, William R., 401n.8
Copyrights, 594
Corning, 823
Corporate bond listings, 691–692
Corporate capital, 744–753
Corporate form, 742–743
capital stock/share system, 742–743
and ownership interests, 743
state laws, 742
Corporate taxes, 646n.6. See also Income
taxes, accounting for
Corrections of errors
as comprehensive income, 154n.24
in income statement, 148
Corridor amortization, 1064–1065,
1075–1076, 1088
Cost, 438
Cost allocation, 395n.4, 540–551. See also
Depreciation
Cost approach, 500n.4
Cost-benefit constraint, 1271
Cost flow assumption, 386
average cost method for, 395–396
and first-in, first-out, 396–397
identification, 394–395
and last-in, first-out, 397–398

Costs included in inventory, 386
period costs, 392
product costs, 391–392
and treatment of purchase discounts,
392–393
Cost method, 452, 751, 867n.5
Costs of financing, 392
Cost of goods available for sales or use, 386
Cost of goods sold, 386, 1142
multiple pools contributing to, 401n.8
in periodic inventory system, 384
section of income statement, 136
Cost per unit of product, 555–556
Cost-recovery accounting method, 956–958
Cost-to-cost basis, 939–941
Cost-to-retail ratio, 445
Coughlan, J. D., 541n.1
Counterbalancing errors, 1205–1207
Counterparty, 887n.16
Countrywide Financial Corp., 43, 343
Coupons, 657
Coupon bonds, 691
Coupon rate, 692
Coverage ratios, 208, 1350, 1351
CPC International, 329
Craig, Susanne, 865
Credits (Cr.), 69–71, 178
Credit balance, 69
Credit cards, 339n.12
Creditors, 203
disclosure of claims by, 1319–1320
short-term, 1349
Creditor calculations, 720–721
Credit quality, 694
Credit risk, 343n.14
Credit risk rate of interest, 291
Creswell, J., 143, 596
Crittenden, M., 319
Cron, William R., 406n.11
Cross-reference items, 196
CRS (FASB Codification Research
System), 14
Cummins, C., 557
Cumulative catch-up, 942
Cumulative-effect approach, 1183
Cumulative preferred stock, 754
Current assets, 181–184
cash, 181–182
Current cash debt coverage ratio, 204
Current liability(-ies), 638–651. See also
specific types, e.g.: Accounts payable(s)
analysis of, 665–666
declared cash dividends as, 759
Current maturities of long-term debt, 641
Current operating performance
approach, 141
Current ratios, 398, 665–666
Current receivables, 323
Current tax expense (benefit), 1018
Cushing, Barry E., 409n.19
Customary form, of balance sheets, 190n.11
Customer-related intangible assets, 593–594
CVS, 1129
Cycle, accounting. see Accounting cycle

Daily compounding, 269
DaimlerChrysler, 20, 1117, 1184, 1266, 1356
Dairy Queen, 962
Dakdduk, Kenneth E., 1086n.27
Daley, Clayton C., Jr., 214, 215
Darden Restaurants Inc., 1128
Darlin, D., 1052n.4
Date of declaration (stock dividends), 758
Date of payment (stock dividends), 758
Date of record (stock dividends), 758
Days outstanding, 344
Days to collect accounts receivable, 344
Dead-weight debt, 702
Debenham, 451
Debenture bonds, 691
Debit balance, 69
Debits (Dr.), 69–71
Debt(s)
compensation plans, 796
continuation of, 718–722
current maturities of, 641
dead-weight, 702
extinguishment of, 701–703
failure to adjust for bad, 1207–1208
issue cost (SFAS No. 6), 700n.5
long-term (see Long-term debt)
settlement of, 717–718
Debtor accounting, 718n.15
Debtor calculations, 719–720
Debt ratings, 694
Debt-rating triggers, 1321
Debt to total assets ratio, 713
Debt triggers, 1321
Declaration, date of (stock dividends), 758
Declared cash dividends, 758
Declining-balance method, 545
Decreasing-charge methods for
depreciation, 544–545
Deductible amounts, 994
Deductible temporary differences, 1001, 1018
Deep-discount bonds, 691
Defaults, 953–954
Deferrals, adjusting entries for, 82–86
Deferred annuities, 286–288
Deferred income taxes, 993–1000
changes in, 1267
and changes in tax rate, 1004–1005
Congressional acts affecting, 1005n.2
under GAAP and iGAAP, 1019
on income statements, 1000–1001
Deferred-payment contracts, 499–500
Deferred taxes, disclosure of, 1320
Deferred tax amounts, 993
Deferred tax assets, 993, 997–1000, 1018
asset recognition for, in company
records, 999
recognized as loss carryforwards, 1008n.4
valuation allowance for, 999–1000
Deferred tax benefits, 997, 1018
Deferred tax consequences, 1018
Deferred tax expense, 995, 1018
Deferred tax liabilities, 993–995, 1018
in company assessments, 996
Congressional acts affecting, 1005n.2
and SFAS No. 6, 996
and SFAS No. 109, 996
Defined-benefit plans, 1051–1052, 1080


I-6 · Index
Defined-contribution plans, 1051, 1080
DeFond, Mark L., 1198n.7
Dell Computer, 5, 179, 604, 884, 1122
Delphi Corp., 716, 1084
Delta Airlines, 85, 178, 885, 1016, 1114,
1115, 1119–1124, 1267
Deluxe Corp., 352
de Mesa Graziano, Cheryl, 931
Denny’s, 962
Depletion, 554–559
acquisition costs of, 555
defined, 540
development costs of, 555
exploration costs of, 555
issues in oil and gas industry, 557–559
and liquidating dividends, 557
and recoverable reserves, 556
restoration costs of, 555
Depletion base, 554–555
Deposits
legally restricted, 322
in transit, 350
Deposit method, 958–959
Depositor errors, reconciling, 350
Depreciable base, for assets, 540
Depreciable tax life. see Recovery periods
Depreciation, 540–551
Accumulated Depreciation account, 559
activity method for, 543–544
and asset vs. liability accounting, 1124
changes in method of, 1196
decreasing-charge methods for, 544–545
defined, 540
factors involved in process of, 540
failure to record, 1207
group and composite methods for,
545–547
hybrid or combination methods for, 547
issues in airline industry, 541n.2
under partial periods, 548–549
post-September 11, 2001 measures, 564n.1
rate revision for, 550
and replacement of fixed assets, 549
straight-line method for, 543–544
tax methods for, 564–567
Depreciation expense, 1254, 1257
Derivatives, 884–900
basic accounting principles for, 886–889
cash flow hedge, 893–894
characteristics of, 889
disclosures for, 897
embedded, 895
and fair hedge value, 891–893
hedging, 890–894
SFAS No. 133, 900
Designated market value, 440
Detachable stock warrant, 800, 802
Development costs, 555
Devon Energy Corporation, 194
Dieter, Richard, 1148n.16
Differential disclosure, 1315–1316
Diluted earnings per share, 816–821
convertible securities, 817–819
factors in, 818–819
illustration of, 831–834

options and warrants, 819–820
reconciliation for basic and, 821
Dilutive securities, 796, 816
Diners Club, 338
Dingell, John, 27
Direct costs, incremental vs. internal, 1145
Direct-financing leases, 1131–1135
initial direct costs in, 1145
sales-type vs., 1141–1142
Direct method, 442–443
for accounts receivable (net), 1268–1269
for determining net cash flow from
operating activities, 1250, 1260–1264
indirect vs., 1251, 1264–1265
Direct write-off method, 327–328
Disclaimer of an opinion, 1338
Disclosure(s), 343n.14
of change in accounting estimate, 1196–1197
for derivatives, 897
of fair value, 905–908
in financial statements, 947
of franchisors, 965
full (see Full disclosure in financial
reporting)
of interest rates, 265n.2
of lease data, 1146–1148
of operating activities, 1265
as present value-based measurement, 265
of restrictions on retained earnings,
764–765
and Sarbanes-Oxley Act of 2002, 661
for securities, 881
and Statement of Position 94-6, 192
techniques of, 194–197
Disclosure—effectiveness project, 1315n.2
Discontinued operations, 137, 141–142,
148, 834n.20
Discounts, cash, 325–326
Discount bonds, 692, 693, 700, 708n.13
Discounting, 272–273
Discount notes, 705
Discount rate, of postretirement benefit
obligation, 1086n.28
Discover, 330, 338
Discrete approach, 1330, 1334
Diversified (conglomerate) companies
Dividends. See also Stock dividends; specific
types, e.g.: Liquidating dividends
cash, 758–759, 1269
date determining receipt of, 758n.13
liquidating, 758, 760
property, 759
types of, 757
Dividend in arrears, 754
Dividends payable, 643
Dividend policy, 756
Dividend preferences, 771–772
Dollar-value LIFO method, 401–406,
452, 463–465
and AICPA Task Force on LIFO
Inventory Problems, 442n.1
comprehensive, 402–403
for determining cost of single item, 442n.1

example, 401–402
and price index selection, 403–405
specific-goods pooled approach vs.,
401–406
Dollar-value retail method, 401n.6
Double-declining-balance method, 545
“Double dipping,” 1118
Double-entry accounting system, 70
Double-extension method, 404
Dow Jones & Co, 744
Dr. (debits), 69–71
Dr. Pepper, 451
Dresser Industries, 173
DRSC (German Accounting Standards
Committee), 1360
Drugs.com, 593
Drugstore.com, 37, 393, 872
Dudley, Lola W., 811n.11
Due process system, 10–11
Duffy, Wendy A., 495n.3
DuPont, 759
Dynegy, 710
E. F. Hutton, 322n.3
Eagle Clothes, Inc., 387
Earned capital, 744
Earned revenues, 933
Earnings, 132n.2
claim by stockholders, 743
retained (see Retained earnings)
smooth, and changes in accounting
method, 1203
Earnings before interest, taxes, depreciation,
and amortization (EBITDA), 542
Earnings management, 133
Earnings per common share, 150
Earnings per share (EPS), 150–151, 811
calculating, 150n.18
for complex capital structure, 816–822
computations, 811–824
diluted, 816–821
illustration of, 830–834
on income statement, 137, 137n.9
interim reporting of, 1332–1333
for simple capital structure, 812–816
Eastern Air Lines, 1079
Eastman Kodak Company, 55, 145n.15, 329,
438, 510, 575, 1016, 1315
Eavis, P., 198, 330
eBay, 904
Ebbers, Bernie, 26–27
EBITDA (earnings before interest, taxes,
depreciation, and amortization), 542
Ecolab, 177
Economic consequences, 17n.10, 541, 761n.14
Economic life, 1136n.13
Economic life test (75% test), 1122
Economic Recovery Tax Act of 1981, 564
EDGAR (electronic data gathering and
retrieval), 1335n.12, 1344
Effective-interest method, 333, 704, 705
and accruing interest, 699–700
asset vs. liability accounting with, 1124
of bond amortization, 289–290
for bonds, 697–700
for bonds issued at discount, 697–698
for bonds issued at premium, 698–699


Index · I-7
Effective interest rate, 331n.9
Effective rate, calculating, 269n.5
Effective yield, 331n.9, 693
Efficiency ratios, 1350n.28
Efficient-market hypothesis, 1352
eFund, 352
EITF. see Emerging Issues Task Force
EITF Issue No 86-29 (“Nonmonetary
Transactions: Magnitude of Boot and
the Exception to the Use of Fair
Value”), 504n.8
Elective straight-line method, 566
Electronic data gathering and retrieval
(EDGAR), 1335n.12, 1344
Electronic dissemination of financial
reports, 1343
Eli Lilly, 597n.6
Elliott, J., 145n.15
Elmer’s Restaurants, 1167
El Paso Corporation, 557
El Paso Energy, 1005
Elstrom, P., 393
Ely, Michael, 1272n.9
Embedded derivatives, 895
Embraer, 1309–1310
Emerging Issues Task Force (EITF), 12, 143
Employees, as pension beneficiaries, 1052
Employee discounts, 457
Employee payroll deductions, 648
Employee-related liabilities, 646–651
Employee Retirement Income Security Act
(ERISA) (1974), 1076–1078
Employee stock purchase plans (ESPPs),
808–809
Employer(s)
payroll taxes paid by, 648
and pension plan risks, 1052
Enacted tax rate, 1004
Ending inventory, misstated, 389–390
Enron, 2, 5, 8, 17, 32, 49, 179, 337, 661, 688,
709, 710, 749, 865, 872, 886n.12, 902,
1005, 1314, 1321, 1321n.4, 1345
Entity
change in reporting, 1197
as going concern, 1337
Entries
adjusting (see Adjustments)
reversing (See Reversing entries)
Entwistle, G., 131
Environmental liabilities, 265, 658–661
EPBO. see Expected postretirement benefit
obligation
Epictetus, 642
EPS. see Earnings per share
Equipment
depreciation of, 1255
loss on sale of, 1257
purchase of, 1258
Equipment lease-versus buy analysis,
1341n.16
Equity
on balance sheets, 180
owner’s, 189
Equity awards, share-based, 827
Equity classifications (compensation
plans), 796

Equity errors, 1198
Equity holders’ claims, disclosure of, 1320
Equity interest, 718
Equity investment, 882
Equity method, 870–872, 1215–1218
changing from, 1215–1216
changing to, 1216–1217
and fair value options, 873–874
and retrospective application, 1197n.6
Equity securities, 866–872
Erickson, Naomi, 1083n.25
Eralp, Osman, 617
Ernst and Young, 741
Errors, accounting, 1205–1214
on balance sheet and income statement,
1205–1208
correction of, 146
counterbalancing, 1205–1207
example of, 1199–1200, 1208–1210
fraud vs., 1322
on income statements, 1205
noncounterbalancing, 1207–1208
preparation of financial statements with
corrections to, 1210–1211
reporting correction of, 1197–1201
types of, 1198
ESM Government Securities, Inc., 1346
eSpeed, 596
ESPPs (employee stock purchase plans),
808–809
Estée Lauder, 744
Estimate, changes in. see Change(s) in
accounting estimate
Estimates, judgments and, 179
Estimated annual effective tax rate, 1332
E-tailers, 393
Ethics, 19
E*Trade Financial, 633
Europe, aging population of, 1053
European Union (EU), 1358n.36
Eurotext, 740
Event, defined, 68
Exchange for noncash consideration, 868n.6
Exchange price, 324
Exchange rate risk, 890
Excise tax, 1078
Ex-dividend date, 758n.13
Executory contract, lease as, 1119
Executory costs, 1123
Exelon Corp., 703
Exercise price, 887
Expectations gap, 17–18, 1346n.26
Expected cash flow approach, 290–292
Expected inflation rate of interest, 291
Expected postretirement benefit obligation
(EPBO), 1085, 1086
Expected rate of return, 1063, 1067
Expected reversal date, 1013
Expense(s)
conditional, 651
on financial statements, 134
on income statement, 136–137
pension, 1055–1057
postretirement, 1086
prepaid (see Prepaid expenses)

Expense expenditures, 508–509
Expense recognition errors, 1198
Expenses subject to year-endadjustment, 1332
Expense warranty approach, 655–656
Exploration costs of depletion, 555
Extensible business reporting language
(XBRL), 1343
External environment, fraud and, 1345
External events, 68, 74–75
External indexes, 403n.9, 405n.10
Extinguishment of debt, 701–703
Extractive industries, R&D costs of, 605n.12
Extraordinary gains, 149
Extraordinary items
determining, 143n.14
frequency of, in 2004 survey, 142n.13
on income statement, 137, 142–144, 148
interim reporting of, 1332
reporting, after September 11, 2001, 143
Extraordinary losses, 149
ExxonMobil, 74, 382, 554, 557, 558n.10, 886,
890, 1116
Eziba.com, 872
Face rate (interest), 269
Face value (bonds), 692
Factors, 339
Factoring arrangement, 339n.12
Factoring receivables, 339
FAF. see Financial Accounting Foundation
Failure to adjust for bad debts, 1207–1208
Failure to record accrued wages, 1206
Failure to record prepaid expenses, 1206
Faircloth, Lauch, 27
Fair hedge value, 891–893
Fair value(s)
of asset, 506
on balance sheets, 191, 193–194
of derivatives, 886n.14
disclosure of, 905–908
and EITF Issue No. 86-29, 504n.8
hierarchy for, 886n.14, 905
hierarchy of, 193
of security, 859, 865, 879
of stock in lump-sum exchange, 746
of stock issued, 761
of stock options, 805
Fair value controversy, 880
Fair value hedge, 898–899
Fair value method
changing from, 1216
changing from equity method to,
1215–1216
of stock compensation, 805, 809–811
for unrealized gains/losses, 1257n.5
Fair value options, 873–874
Fair value tests
for indefinite-life intangible
impairment, 601
for limited-life intangible
impairment, 601
Falconbridge Ltd, Nickel Mines, 551
Fannie Mae, 811, 886n.12, 890
Farrell, C., 589


I-8 · Index
FASAC (Financial Accounting Standards
Advisory Council), 9–10
FASB. see Financial Accounting Standards
Board
FASB Concepts. see Statements of Financial
Accounting Concepts
FASB Interpretation No. 46(R)
(“Consolidation of Variable Interest
Entries (revised)—an interpretation of
ARB No. 51”), 903, 904, 908
FASB Statements. see Statements of Financial
Accounting Standards
Federal Insurance Contribution Act
(F.I.C.A.), 646–647
Federal Reserve Bank, 291
Federal Unemployment Tax Act
(F.U.T.A.), 647
Federated Department Stores, 436
FedEx Corporation, 55
Feedback value, 1349
Feltham, G., 131
FFO (funds from operations), 547n.7
FFP Marketing, 66
F.I.C.A. (Federal Insurance Contribution
Act), 646–647
FIFO. See First-in, first-out
Fifth Third Bancorp., 5
Final reconciling entry, 1280–1281
Financial accounting, as discipline, 4, 6
Financial Accounting Foundation, 9, 26
Financial Accounting Standards Advisory
Council (FASAC), 9–10
Financial Accounting Standards Board
(FASB), 26
on accounting changes, 1182–1183
Accounting Standards Codification, 13–15
APB vs., 9–10
on basis for statement of cash flows,
1245n.1
and capitalization of interest costs, 392
and cash and cash equivalents, 197n.13
Codification Research System, 14
and compensation plans, 796n.1
Concepts of, 12 (See also Statements of
Financial Accounting Concepts)
on differential disclosure, 1315
on direct method on statement of cash
flows, 1252
due process system of, 10–11
and Emerging Issues Task Force, 12
and financial engineering, stance on,
710n.14
and financial statements, 179–180
and GAAP, 9–12
and goodwill measurement, 599n.8
and guarantees, 665n.20
and held-to-maturity requirement, 859n.2
improved financial statement
presentation, 1344
on income taxes as operating cash
outflows, 1271
and international standards, 1358–1360
Interpretations (see FASB Interpretations)
and irregular items, 139
on leased property, 1124
and loss contingencies, 328, 652
on operating cash receipts/payments, 1265

on pension plans, 1056–1057, 1070n.14
on postretirement benefits accounting,
1082–1083, 1086n.28, 1091
and sales, 341
and SEC, 7, 8n.6
and staff positions, 11
Standards of, 11, 1360 (See also Statements
of Financial Accounting Standards)
Technical Bulletins of, 11
and transactions, 74–75
on uncertain tax positions, 1016–1017
Financial components approach, 340
Financial engineering, 710n.14
Financial flexibility, 179, 199, 204
Financial forecasts, 1341–1343
Financial income, 992, 1001–1004
Financial information, types of, 1314
Financial instruments, 193
Financial liquidity, 204
Financial markets, 1356
Financial position, statement of. see
Balance sheet(s)
Financial projections, 1341–1343
Financial reporting, 4. See also Reporting
accuracy of, 2–3
and expectations gap, 17–18
of international accounting standards, 18
objectives of, 6–7
and politically-influenced standard
setting, 15–17
Financial Reporting Standards Board
(FRSB), 1360
Financial statement(s), 4
correcting errors on, 1199–1201
defined, 69
elements of, 134–135
example of, 210–238
general-purpose, 7
installment-sales transactions
presentation, 955–956
interest rate swap presentation, 899–900
inventory accounting for, 442n.2
maintaining monthly vs. quarterly, 96
management’s responsibilities for, 1340
for merchandising company, 96–98
notes to the (see Balance sheet(s))
and ownership structure, 72
pecentage-of-completion presentation,
942–943
pension plan reporting in (see Pension
plan reporting)
preparing, 91–92
preparing, with error corrections,
1210–1211
presenting, 864–865
worksheet preparation of, 110
Financial statement analysis, 1349–1355
comparative analysis, 1353
percentage analysis, 1354–1355
perspective on, 1349–1350
ratio analysis, 1350–1352
Financing activities, 199, 201, 1245, 1246
Financing agreement, 642
Firm (as concept), 448n.8
“Firm” contractual rights and
obligations, 1120
Firm purchase commitments, 448n.8

First Chicago, 1157
First-in, first-out (FIFO), 460
for assigning investment costs, 868n.6
and cost flow assumption, 396–397
and LIFO, 398–399
Fixed assets, 490
Fixed percentage of book value method.
see Declining-balance method
Fixed-rate mortgage, 709
Fleming, Sir Alexander, 595n.4
Flexibility, financial, 179, 199, 204
Flint, J., 381
Float, collection, 347
Floating-rate mortgage, 709
Floor (lower), 439–440
f.o.b. (free on board) destination, 387
Footstar, 143
Ford Motor Company, 4, 17, 38, 40, 132,
177, 194, 381, 382, 414, 550n.8, 650, 651,
741, 744, 1084, 1182, 1266, 1363
Foreign Corrupt Practices Act, 66
Foreign currency hedging, 890n.20
Form 10-Q, 1330
Fortune Brands, Inc., 458, 538
Forward-looking information, 5
Foster, Taylor W., III, 761n.15, 764n.17
401(k) plan, 1051
Foust, D., 1005
France, 1360
Franchise(s), 595, 962–965
Franchise agreement, 963
Franchise fees, continuing, 964
Franchisor’s cost, 965
Fraud
check, 349n.16
recorded by ChexSystems, 352
Fraudulent financial reporting, 1344–1346
accounting errors vs., 1322
causes of, 1345–1346
National Commission on, 1322n.6
Freddie Mac, 337, 890
Free cash flow, 204–205, 209
Free on board (f.o.b.) destination, 387
Freight costs, 456
Frequent-flyer programs, 658
Frito Lay, 35
FRSB (Financial Reporting Standards
Board), 1360
Fruehauf, 1314
Full-cost concept, 557
Full-costing approach, 492
Full disclosure in financial reporting,
1314–1316
of auditor’s reports, 1335–1338
criteria for accounting/reporting choices
in, 1346
current reporting issues with, 1341–1346
and differential disclosure, 1315–1316
of diversified companies, 1324–1329
on financial forecasts/projections,
1341–1343
and fraudulent reporting, 1344–1346
increase in reporting requirements, 1315
of interim reports, 1330–1335
on Internet, 1343
issues with, 1321–1335
of management’s reports, 1338–1340


Index · I-9
and notes to financial statements,
1316–1321
of post-balance-sheet events, 1323–1324
as principle, 1314–1315
of special transactions/events, 1321–1322
and stock markets, 1316
Functional expense classification, 137
Fund (term), 1050n.1
Funds from operations (FFO), 547n.7
Fuqua Industries, 406–407
F.U.T.A. (Federal Unemployment Tax
Act), 647
Future deductible amounts, 997
Future tax consequences, 1017
Future tax rates, 1004–1005
Future tax savings, 1007
Future value
of an annuity due, 278–281
of annuity, 278–279
of an ordinary annuity of 1 (table),
267–268
computing for unknown, 270
of deferred annuity, 286–288
of 1 (table), 267–268
of single sum, 271–272
as variable in compound interest, 270
GAAP. see Generally accepted accounting
principles
Gage. J., 177
Gains, 1270
on income statements, 137
on pension plans, 1063–1067
and postretirement expense, 1086, 1088
Gain contingencies, 651–652
Gains trading, 880
The Gap, 1116
Gap fillers, 598
Gap Inc., 457, 590, 645
Gateway, 1315
General checking account, 347–348
General Dynamics, 49
General Electric (GE), 49, 55, 132, 145, 329,
608, 643, 741, 809, 811, 885, 890, 1082,
1084, 1111, 1324–1325
General Electric Capital Corp., 643, 1158
General Electric Credit, 1158
General expenses, 136
General Foods, 1332
General indexes, 403n.9
General journal entry, 75
General ledger, 69, 75
Generally accepted accounting principles
(GAAP), 7, 13
and actual interest capitalization, 494
“big” vs. “little,” 1316
codification of, 19
and fair value, 896n.32
hierarchy, 13n.7
and IFRS, 1183n.1
international and U.S., 1357, 1360
major sources of, 13
and OPEBs, 1055n.9
organizations settings standards for, 8–13
and variable interest entities, 902
General Mills, Inc., 89, 360, 604

General Motors (GM), 38, 40, 337, 380–381,
491, 550n.8, 691, 692, 742, 759, 811, 823,
1005, 1010n.6, 1049, 1051, 1078n.16,
1084, 1266
General Motors Acceptance Corp.
(GMAC), 337
General-purpose financial statements, 7
General Tire and Rubber, 408n.16
Georgia-Pacific, 172, 447, 512
German Accounting Standards Committee
(DRSC), 1360
Germany, 1360
Gerth, J., 557
Gibson, R., 49, 1128
Gillette, 224–226, 235–236
GlaxoSmithKline plc, 634, 1019
Gleckman, H., 1005
Global Crossing, 49, 506, 932, 1150, 1315
Going concern concept, 1337
Goldman, Sachs & Co., 1313
Golf Digest, 644
Goods in transit, 387
Goodwill, 597–601
economic consequences of, 16
impairment of, 602–603
recording, 598–600
as write-off, 600
Goodyear Tire and Rubber, 540, 689, 1005,
1016, 1051
Google, 96, 590, 744, 884
Gore, Richard, 547n.7
Gotham Utility Company, 649
Governmental Accounting Standards
Board (GASB), 1091
Granof, Michael H., 408n.17, 410n.22
Grant date, 805
The Great Atlantic & Pacific Tea
Company, 188
Greenberg, Herb, 542, 689
Greene, Kelly, 1082n.21
Gross margin percentage, 450n.11
Gross profit method (gross margin
method), 451
Gross profit on selling price, 450
Gross profit percentage, 450–451
Grothe, M., 1181
Group methods for depreciation, 545–547
Guarantees, 655–657, 657n.15, 665n.20. See
also Warranties
Guaranteed residual value, 1123
in capitalization of lease, 1149
in lessee accounting, 1137–1138
in lessor accounting, 1140–1141
for sales-type lease, 1143
Gujarathi, Mahendra R., 448n.8
Gulf Oil, 742
H. J. Heinz Company, 1373
Half-year convention, 549, 565
Hall, C., 177
Halliburton Company, 186–187, 948, 1186
Halperin, Alex, 744
Hambrecht & Quist, 617
Hamm, S., 589
Hanna, D., 145n.15
Harley-Davidson, Inc., 1322
Harris, Trevor, 634

Hasbro, Inc., 184
Hayes, Randall, 401n.8, 406n.11
HCA, 319
Healthcare benefits, 1082n.21, 1083–1084
Healthsouth, 32
Hedging, 885, 890–894
Held-to-maturity debt securities, 182,
859–861, 882
Henriques, D., 323
Henry, David, 763
Hershey Foods, 173, 410, 745
Hertz, 962
Herz, Bob, 19, 337
Hewitt, Conrad W., 3
Hewlett-Packard Company, 343n.14, 603,
604, 1051, 1147–1148, 1197, 1244
Hickok, Richard S., 938n.16
Historical cost, 179–180
Hof, R. D., 591
Holiday Inn, 962
The Home Depot, 491, 1122, 1340
Homer, Sidney, 262
Homestake Mining Company, 1045
Homestore Inc., 931
Honeywell Inc., 750, 823
Honghua Group Ltd, 741
Horizontal percentage analysis, 1354
Host security, 895
H & R Block, 962
Hudson, M., 353, 354
Huffy Corp., 716
Hurricanes, 1324n.8
Hybrid methods for depreciation, 547
Hybrid plans, 1078n.19
Hybrid securities, 895
IASB. see International Accounting
Standards Board
IASCF (International Accounting Standards
Committee Foundation), 1358
IBM Corporation, 4, 18, 36, 132, 180,
208, 240, 382, 389, 589, 608,
614n.17, 617, 1082, 1117, 1131,
1162–1163, 1315
IBM Global Financing, 1117
IDEA (Interactive Data Electronic
Applications), 1344
If-converted method, 817, 831, 832
IFRS. see International Financial Reporting
Standards
iGAAP. see International GAAP
iGo Corp., 930
Ijiri, Yuji, 448n.8, 1120n.3
ILFC, 1122–1124
Illegal acts, 1322
Imhoff, Eugene A., Jr., 1352n.30
Impaired note receivable, 336–337
Impairments, 551–554, 875
GAAP/iGAAP standards, 552, 553
measuring, 354–356, 552–553
of receivables, 352–356
recognizing, 352–354, 551–552
recoverability tests for, 552, 601
and SFAS No. 114, 718n.16
Impairment loss, 354–356, 553


I-10 · Index
Impairment test, 592, 612
Implicit interest rate, 332–333, 1123–1124
Impracticability, 1193–1194
Imprest bank accounts, 348
Imprest petty cash system, 348–349
Imprest system for petty cash
disbursements, 348–349
Imputation, 335, 707
Imputed interest rate, 335, 707
Inadequacy, 541
Income approach, 500n.4
Income available to common
stockholders, 816
Income before taxes. see Pretax financial
income
Income bonds, 691
Income statement(s), 69, 132–135
alternate terminology for, 132n.2
and cash flows statement, 1248–1249,
1253, 1256, 1260
columns on, 110
and comprehensive income, 152–154
condensed, 138–139
deferred tax reporting on, 1000–1001,
1013–1015
and earnings per share, 150–151
errors on, 1205–1208
example, 96
and extraordinary gains, 149
and extraordinary losses, 149
format of, 134–139
illustration of, 1276
intermediate components of, 136–137
and intraperiod tax allocation, 148–149
irregular items reported on, 139–140
limitations of, 132–133
and quality of earnings, 132–133
and retained earnings statement, 151–152
segmented, 1325
single-step, 135–136
and unusual gains and losses, 144–145
usefulness of, 132–133
Income statement (percentage-of-sales)
approach, 328
Income statement method. see Direct method
Income taxes, accounting for, 992–1018,
1265n.6
accounting objectives, 996–997
asset-liability method, 1017
on balance sheet, 1011–1013
deferred taxes, 993–1000, 1018, 1267
depreciation, 564–567
and future deductible amounts, 997
and future taxable amounts, 993–994
on income statement, 137, 1000–1001,
1013–1015
interim reporting, 1332
interperiod tax allocation (example),
1021–1028
LIFO, 407n.13
and net operating losses, 1006–1011
as operating cash outflows, 1271–1272
and uncertain tax positions, 1016–1017
and withholding, 647–648
Income tax benefit, 1018
Income tax expense, 1018
Income taxes payable, 646

Incorporation acts, 742
Increasing-charge method, of
depreciation, 547
Incremental borrowing rate, 1123, 1125n.7
Incremental direct costs, 1145
Incremental method, 747, 801, 832, 833
Incremental shares, 819n.16
Indefinite-life intangibles, 592, 602
Independent lessors, 1117
Independent third-party trustee, 1051
Indexes, computing, 403–405
Indirect method, 442–443
for accounts receivable (net), 1267–1268
for determining net cash flow from
operating activities, 1250–1251,
1259–1260
direct vs., 1264–1265
Induced conversions, 797–798
Indy Mac Bank, 8
Inflows, cash, 1274
Information, financial, 1314
Information overload, 1315
Information technology, 1356
Initial direct costs (lessor accounting), 1145
Initial franchise fee, 963–964
Initial operating-losses, 607
Inland Steel, 543
Input, in depreciation, 543
Installment-sales accounting method,
948–956
Instruments, financial, 193
In-substance defeasance, 701n.7
Insurance, adjusting entries for, 82–83
Intangibility index, 588–589
Intangible assets, 588–603, 609–611.
See also specific types, e.g.: Limited-life
intangibles
amortization of, 591–593
characteristics of, 591
defined, 590
limited-life, 1266
valuation of, 590
Integral approach, 1330, 1334
Intel, 20, 45, 85, 240, 265, 444, 511, 608,
902, 1356
Interactive Data Electronic Applications
(IDEA), 1344
Interbrand Corp., 608
Interest. See also Compound interest
accruing with effective-interest method,
699–700
capitalization of, 392n.3, 392n.8, 495
components of, 291
computation of, 265–266
costs of, 392
as pension expense, 1057
as period cost, 392
as postretirement expense, 1086
and time value concepts, 265
variables in computation of, 265
Interest-bearing notes, 331, 333–335,
639–640, 705–706

Interest rate(s), 495
in capitalization of lease, 1149
choosing, 291, 335
computation of, 285
disclosure requirement, 265n.2
implicit, 332–333
imputed, 335
as variable in interest computation, 265
Interest rate risk, 890
Interest rate swap, 899–900
Interest revenue, 326, 498
Interest tables, 267–268
Interim period tax, 1332
Interim reports, 1330–1335
continuing controversy about, 1334–1335
requirements for, 1330–1331
unique problems of, 1331–1335
Internal controls, 17
over cash, 347
Internal direct costs, 1145
Internal environment, fraud and, 1345
Internal events, 75
Internal indexes, 403n.9
Internally created goodwill, 598
Internally created intangibles, 590
Internal Revenue Code, 992–993
Internal Revenue Service (IRS), 66
and indexes, 405n.10
and LIFO conformity rule, 409
and purchases-only-approach, 465n.2
International accounting convergence. See
standards
International accounting standards, 18,
1356–1360
accounting changes and errors, 1212
on cash and cash equivalents, 1245
challenge of, 1357
convergence of FASB and, 1359–1360
disclosure, 1347
IASB in, 1358–1359
IOSCO, 1358
for leases, 1151
national standard setters, 1358
present environment, 1356
rationale for understanding, 1356–1357
International Accounting Standards Board
(IASB), 18, 20, 64–65, 813, 817, 1080,
1183n.1, 1344, 1358–1359
International Accounting Standards
Committee Foundation (IASCF), 1358
International Financial Reporting
Standards (IFRS), 18, 1080, 1183n.1,
1347, 1358, 1360
GAAP comparison to, 637
interim reporting, 1334
International GAAP (iGAAP), 1358. See also
standards
and income taxes, 1018
valuation of long-term debt, 692
International Lease Finance Corp.
(ILFC), 1120
International Organization of Securities
Commissions (IOSCO), 1358


Index · I-11
International Paper Co., 16, 195, 538, 550,
560, 823
International stock exchanges, 740
International Thoroughbred Breeders, 321
Internet financial reporting, 1343
Intraperiod tax allocation, 148–149
Intrinsic value, 887
Intuit Inc., 182–183
Inventory(-ies), 382–386. See also related
headings, e.g.: Periodic inventory system
alternative method for estimating, 449n.10
analysis of, 459
average days to sell, 459
control, 383–386
costs included in, 391–393
defined, 382
disclosure of, 1319
estimating, using gross profit percentage,
449n.10
gross profit method for, 449–451
increase in, 1256–1257
land as, 491
management of, 436–437
method selection for, 409–411
misstated, 390–391
at net realizable value, 445
purchases of, 406n.11
valuation of, 386, 410–411, 445–448
Inventory cost flow, 383
Inventory errors, 389–391, 1198
Inventory methods, 385.1, 408n.18
Inventory turnover ratio, 459
Investing activities, 198, 201, 1245, 1246
Investment(s), 856–881
available-for sale securities, 861–865,
868–870
in common stock, 1267
in debt securities, 858–865
derivatives, 884–900
equity method for accounting, 870–872
equity securities, 866–872
fair value controversy, 880
and FASB interpretation No. 46(R), 903,
904, 908
held-to-maturity securities, 859–861
holdings of less than 20%, 867–870
impairment of value, 875
long-term, 184–185
PPE, 491
security, 858n.1
short-term, 181–183
in stock, as worksheet entry, 1278
trading securities, 865–866, 870
transfers between categories, 879
variable-interest entities, 902–904
Investment accounting approaches, 858
Investment carrying amount, 1215–1216
Investor groups, 769
Investors’ expectations, 1357
IOSCO (International Organization of
Securities Commissions), 1358
I.O.U.s, 320

Ip, Grep, 187
iPhone, 593
Irregular items
analyzing, 141
categories of, 141
and FASB, 139
on income statement, 139–140
summary of, 147–148
IRS (Internal Revenue Service), 66
Issue costs, 748
J. Crew, 5
J. P. Morgan Chase, 608
Jack in the Box, 49, 1128
Jaenicke, Henry R., 934n.9
Japan, 1053, 1122, 1360
Japan Airlines (JAL), 1178
JCPenney Company, 409, 436, 691
Jenkins, Edmund L., 1357n.32, 1358n.33
Jiambalvo, James, 1198n.7
Jiffy Lube International, 963n.30
Jim Walter’s Corporation, 498
Job Creation and Worker Assistance Act of
2002, 564n.1
John Deere and Company, 172, 259, 337,
410, 604, 1051
John Deere Credit, 337
Johnson, L. Todd, 877n.9
Johnson Controls, 16
Johnson & Johnson, 534–535, 604, 633, 749,
886, 1329
Jones, S. D., 49, 1128
Journal(s), 69, 75–76
Journal entry, general, 75–76
Journalizing, 75–76
JPMorgan Chase & Co., 187, 1116
Judgments and estimates, 179
Junk bonds, 694
Kahn, Jeremy, 933
Kaiser Aluminum, 1079
Kardous, D., 451
Kazenski, Paul M., 495n.3
Kellogg Company, 35, 127–128, 459,
490, 604, 745, 766, 791, 852–853,
1078, 1332
Kelly, Kate, 187
Kelly Services, 962
Kerwin, K., 1005
Keystone Consolidated Industries, 144
KFC, 962
Kiley, David, 597, 608
Kimberly-Clark Corp., 904, 1164
Kimco Realty, 547, 585–586
King, Thomas E., 505n.9
Kirk, Donald, 617
KLM Royal Dutch Airlines, 1178
Kmart, 437
Kmart Holding, 1015
Knutson, Peter H., 1120n.2
Kohls, 326
Krispy Kreme, 5, 176, 709, 1016, 1114–1115,
1118
Kroger, 177, 561
Kurzweil Applied Intelligence Inc., 389
Kyowa Hakko Kogyo Co., Ltd., 1112

Labaton, S., 557
Laboratory Corp. of America, 689
Lafley, A. G., 212, 215
Lahart, J., 749
Land
cost of, 491
decrease in, 1258
expenditures for, 498
increase in, 1254
Landsman, Wayne, 802n.6
Largay, James A., III, 1243
Large stock dividends, 761n.15
Larson, R. K., 938n.17
Last-in, first-out (LIFO). See also LIFO
entries
adoption of, for inventory valuation,
1194n.4
advantages of, 406–407
approach comparisons, 405–406
and cost flow assumption, 397–398
disadvantages of, 407–408
external indexes computations, 405n.10
and FIFO, 398–399
and future earning hedge, 407
specific-goods, 400–401
tax benefits, 406–407, 409
Lavelle, Louis, 795n.1
Lawsuits, 1341n.18
Layers, 399–400
LBO (leveraged buyout), 750
LCM. see Lower-of-cost-or-market
Leach, Jim, 27
Lease accounting
and bargain purchase option, 1144
current vs. noncurrent classification
in, 1145–6
and disclosing lease data, 1146–1148
and initial direct costs, 1145
by lessee, 1120–1129
by lessor, 1130–1135
and residential values, 1136–1141
for sales-type leases, 1141–1144
special problems in, 1135–1148
unsolved problems in, 1148–1150
Leases and leasing, 1116–1160
accounting for (see Lease accounting)
advantages of, 1118–1119
classifications of, 1131–1132
conceptual nature of, 1119–1120
and disclosure, 1320
economics of, 1130
environment for, 1116–1120
examples of, 1153–1157
lessor types in, 1116–1117
operating leases, 710
term of lease, 1118, 1122, 1136n.13
Lease receivable, 1132–1135, 1142
LeClere, Marc J., 409n.19
Ledger, 69
Lee Enterprises Inc., 603
Legally restricted deposits, 322
Lennard, A., 1149n.20
Leone, M., 1181
LePeep Restaurants, Inc., 963n.30
Leslie Fay (company), 391


I-12 · Index
Lessee accounting, 1120–1129
of assets vs. liabilities, 1124
for bargain purchase option, 1144
capitalization criteria for, 1121–1124
capital lease method of, 1124–1127
capital vs. operating, 1128–1129
operating method of, 1127–1128
for residual value, 1137–1140
for sale-leasebacks, 1158
Lessor accounting, 1130–1135
benefits of, 1130
and classification of leases, 1131–1132
direct-financing method of, 1132–1135
and economics of leasing, 1130
for initial direct costs, 1145
operating method of, 1135
for residual value, 1140–1141
for sale-leasebacks, 1158
for sales-type leases, 1141–1144
Lev, Baruch, 609n.16
Level 8 Systems, 47
Leveraged buyout (LBO), 750
Leverage ratios, 1350n.28
Levitt, A., 133n.4
Lewent, Judy, 1312
Liability(-ies), 638
on balance sheets, 180, 186–188
contingent (see Loss contingencies)
current vs. noncurrent lease, 1145–1146
defined, 638
employee-related, 646–651
environmental, 660
and fair value option, 874
in lessee accounting, 1124, 1129
long-term, 188
pension, 1064
Liability approach, 1017
Liability awards, share-based, 827–828
Liability measurements, 714
Liability valuation account, 700
Liberty International, 585–586
Licenses, 595
Liesman, S., 15, 140, 999
LIFO. see Last-in, first-out
LIFO conformity rule, 409
LIFO liquidations, 399–401, 408n.15, 443n.3
LIFO matches, 406
LIFO method, dollar-value, 401–406
LIFO reserve, 398–399
LIFO retail methods, 452, 462–466
changing from conventional retail
method to, 465–466
and stable prices, 462–463
Limited Brands Inc., 990–991
Limited-life intangibles, 591, 1266
accounting treatment for, 593
fair value tests for, 601
impairment of, 601
Lipe, Robert C., 1352n.30
Liquidating dividends, 557, 758, 760
Liquidity, 178, 199
Liquidity evaluation, 400–401
Liquidity ratios, 208, 1350, 1351
Litigation, 654–655, 1341–1343
Lloyd’s of London, 1149n.18
Loans, 352n.17, 1246n.2
Loans.com, 593

Lobbyists, 1204n.13
Lockbox accounts, 347
Loews Corporation, 1076
Logarhythmics, 269n.4
Long Island Railroad (LIRR), 66
Long-term assets, 264
Long-term bonds, valuation of, 288–289
Long-term borrowing, 322
Long-term contract losses, 944–947
Long-term debt, 690
analysis of, 713
current maturities of, 641
off-balance-sheet financing, 709–711
and SAF Opinions No. 5, 709
and SAF Opinions No. 6, 709
Long-term investments, 184–185
Long-term liabilities, 688–713
bonds payable, 690–703
long-term notes payable, 703–708
and reporting and analysis of debt, 709–713
Long-term notes payable, 703–708
Loomis, Carol J., 603
Loss(es)
accumulated other comprehensive loss,
765n.19
from continuing operations, 834n.21
on pension plans, 1063–1067
and postretirement expense, 1086
in sale-leasebacks, 1158
on sale of equipment, 1257
Loss carrybacks, 1006
Loss carryforwards, 1006
deferred tax assets recognized as, 1008n.4
example, 1007–1011
operating, 1008–1009
period length for, 1007n.3
with valuation allowance, 1009–1010
without valuation allowance, 1008–1009
Loss contingencies, 352, 652–666
coupons, 657
environmental liabilities, 659–660
and FASB, 323, 652
guarantee and warranty costs, 655–657
litigations, claims, and assessments,
654–655
of no-par stock, 745–746
premiums, 657–658
self-insurance, 661–662
Loss measurement, 144
Loudder, Martha L., 609n.16
Lower (floor), 439–440
Lower-of-cost-or-market (LCM)
applying, 441–442
and net realized value, 439–440
in practice, 445n.5
and recording market instead of cost,
442–444
Lower-of-cost-or-market (LCM) rule, 439,
440, 444, 445
LTV Corporation, 755, 1079

Lubore, Seth, 1115
Lucent Technologies, 763, 823, 937, 1064
Lump-sum exchange, 747
Lump-sum price, 500
Lump-sum purchases, 500
McConnell, Pat, 1015n.8
McDermott, D., 141n.11
MacDonald, Elizabeth, 1115
McDonald’s Corporation, 4, 20, 49, 81, 135,
584–585, 595, 885, 962, 1116, 1356
McGregor, Warren, 1120n.2
MacKay, Archibald E., 963n.29
McKay, P., 749
Mack Trucks, Inc., 183
McLean, Bethany, 319
McNamee, M., 694
MACRS. see Modified Accelerated Cost
Recovery System
McTauge, R., 49
Maher, Kris, 489
Mahoney, Jeff, 337
Major repair, 510–511
Maker, 331
Mallorca Ltd, 769
Management, 1338–1340, 1349
Management’s discussion and analysis
(MD&A), 1338–1340
Managerial accounting, 4
Mandel, M., 589
Manufacturers Hanover Trust Co., 347
Manufacturing, 382, 392
Maremont, M., 1144
Marginal principle approach, 1332
Markdowns, 451, 453
Markdown cancellations, 453
Market(s) (GAAP/iGAAP definition), 438
Marketable securities, 320n.2
Market approach, 500n.4
Marketing-related intangible assets, 593
Market rate, 331n.9, 693
Market-related asset value, 1063
Market value, and accounting quality, 134
Markup, 451, 453
Marriott, 595, 962
Martha Stewart Living, 744
Masco Corporation, 1324
MasterCard, 338, 339n.12
MasterNet, 67
Master valuation accounts, 598
Master valuation approach, 599–600
Matching principle, 45n.13
Mattel, Inc., 185
Maturity value (bonds), 692
Maxwell House, 325
May Department Stores, 436
Maytag Corp., 1116
Mbagwu, C., 131
MD&A. see Management’s discussion
and analysis
Means, Grady, 489
Means, Kathryn, 495n.3
Medicare, 646–647
Mehring, James, 703
Meineke Mufflers, 962
Mellors, F., 1078n.19
Mercedes-Benz, 608


Index · I-13
Merchandising concerns, 382
Merck & Co., Inc., 595, 604, 609, 611, 633,
634, 651, 1051, 1118, 1312
Meredith, 744
Mergers and acquisitions, 816n.14, 1356
Merit rating, 647
Mermin, G., 1049
Merrill Lynch, 811
Mesa Limited Partnerships, 558n.12
Metallgesellschaft, 886n.12
Mexico, 1357
M&I Bank, 885
Microsoft Corporation, 4, 5, 18, 133, 265, 323,
377–378, 589, 608, 615, 644, 645, 751, 795
MicroStrategy, 134, 158, 1315, 1319
Midway, 178
Miller, G. S., 1011
Miller, Paul B. W., 1058n.12, 1272n.9
Minimum lease payments, 1122, 1137
Minimum liability, pension, 1076
Minimum rental payments, 1122
Misclassification errors, 1198
Mobile Telecommunications Company
Saudi Arabia, 741
Model Business Corporate Act, 742
Modified Accelerated Cost Recovery
System (MACRS), 564–567
optional straight-line method vs., 566
property classes, 564
and tax depreciation methods, 565
Modified cash basis, 102
Modified perpetual inventory system, 385
Mohican Company, 686
Molson Coors Brewing, 324, 1051
Monetary assets, 501n.5
Monetary exchange, 504n.8
Money-market funds, 320n.1
Money-market savings certificates, 320n.1
Monsanto Chemical Corporation, 329, 1343
Montavon Winery, 642
Montgomery Ward, 437
Monthly financial statements, 96
Moody’s Investors Service, 694
Moran, M., 823
“More likely than not,” 999
Morgan Stanley, 608, 865
Morgenson, Gretchen, 37, 47, 177, 1321
Mortgages, 708–709
Mortgage notes payable, 708–709
Moses, O. Douglas, 1203n.12
Moto Photo, Inc., 963n.30
Motorola Inc., 45, 55, 185, 382
Mott, D., 1015n.8
Moving-average method, 395
Mulford, Charles W., 1079n.20, 1272n.9, 1273
Multinational corporations, 1356
Multiple-step income statements, 136
Mumford of Wyoming, 458
Myers, David, 26–27
Myers, John H., 1120n.2
Nailor, H., 1149n.20
NASDAQ, 740
National Car Rental, 962
National Commission on Fraudulent
Financial Reporting, 1322n.6, 1344n.24

National Steel, 1079
Natural expense classification, 137
Natural resources, 559
Navistar, 593, 1005
NBC TV, 1325
NBC Universal, 1325
NEC, 960
Nesco Holdings, Inc., 652
Nestlé Group, 714
Net cash flow
direct method of determining, 1250
indirect method of determining,
1250–1251, 1265
from investing/financing activities, 1248,
1251–1252, 1254–1255, 1257–1258
from operating activities, 1249–1251,
1253–1254, 1256–1261, 1270
Net income
cash flows vs., 204
and indirect method, 1265
Net increase in cash, 201
Net losses, 137n.9, 1269–1270
Net method, 392–393
Net of cash discounts, 392
Net operating loss (NOL), 1006–1011
Net periodic postretirement benefit
cost, 1086
Net realizable value, 445, 460
Net realized value (NRV), 439–440
Net settlement, 889
Net working capital, 187
Neutrality, 1204
New allowance account, 443
New average unit cost, 395–396
New Century, 43
Newmont Gold Company, 458
New York Stock Exchange (NYSE),
740, 1051n.3
The New York Times, 744
Nicholaisen, Don, 49
90% test. see Recovery of investment test
Nissan (formerly Datsun), 593
Noel, J., 381
Nokia Corporation, 460
NOL. see Net operating loss
NOL carrybacks. see Loss carrybacks
NOL carryforwards. see Loss carryforwards
Nominal accounts, 69
Nominal rate, 269, 692
Noncalculable purchase commitments,
448n.8
Noncash charges/credits, 1280
Noncash transactions, 1272–1273
Non-consolidated subsidiary, 709
Noncontributory pension plans, 1050
Noncounterbalancing errors, 1205,
1207–1208
Noncurrent assets, 184–186
Noncurrent receivables, 323
Nondetachable stock warrants, 802
Nonfinancial measurements, 5
Non-interest bearing notes. see Zerointerest-bearing notes
Nonmonetary assets, 501–506, 512, 562
Nonpublic enterprise, 812n.12
Nonqualified stock-option plans, 827
Nonreciprocal transfers, 506

Nonrecognized subsequent events, 1323–1324
Nontrade receivables, 323–324
No-par stock, 745–746
Norby, William C., 33n.3
Nordstrom, 436, 438
Norfolk Southern Corporation, 55, 1064
Normal shortages, 456
Normand, Troy, 26–27
Norris, Floyd, 356, 799, 1312
Nortel, 5, 318–319, 488–489
Northern Trust Company, 271
Northland Cranberries, 685
Northwest Airlines, 178, 716, 1048
Northwest Industries, Inc., 868
Note(s)
accounting for, 703
bonds vs., 703
choice of interest rate for, 707–708
common, 1319–1321
discount, 705
interest-bearing, 331, 333–335, 705–706
issuance of, at face value, 332, 703–704
issuance of, for property, goods, and
services, 335, 706
of noncash investing/financing
activities, 1272
not issued at face value, 332–335, 704–706
as present value-based measurement, 264
Notes payable, 639–641, 703n.10,
706–709, 1269
Notes receivable, 323
disposition of, 337–342
fair value option for, 336
impaired, 336–337
recognition of, 331–335
Notes to the financial statements, 188n.10
accounting policies in, 1316–1319
as disclosure technique, 195
pension plan reporting within, 1058,
1072–1074, 1076
postretirement benefits reporting within,
1090–1091
Notional amount, 887
Not-sufficient funds (NSF) checks, 350
Noven Pharmaceuticals, Inc., 432–433
NRG Energy, 688
NRV. see Net realized value
NSF (not-sufficient funds) checks, 350
NYSE (New York Stock Exchange),
740, 1051n.3
NYSE Eurotext, 740
O.A.S.D.I (old age, survivor, and disability
insurance), 646–647
Obligations (postretirement benefits), 1085
Obsolescence, 541
Occidental Petroleum, 377, 1078
Off-balance-sheet financing, 709–711
disclosure of, 1320
forms of, 709–710
and leases, 1118, 1119, 1129
rationale for, 710
and SEC stance on, 710
Ohio Edison, 1157
Oil and gas industry, depletion issues in,
557–559


I-14 · Index
Old age, survivor, and disability insurance
(O.A.S.D.I), 646–647
Olofson, Roy, 506
OMX, 740
On-balance sheet financing, 711
1-800-Flowers, 744
One-time items, 145n.15
Opdyke, Jeff, 756n.10
OPEB. see Other postretirement benefits
Operating activities
cash provided by, 201
net cash flow computation from,
1249–1251, 1253–1254
net income vs. net cash flow from,
1249–1250
and securitizing receivables, 1251
on statement of cash flows, 198, 1245,
1246, 1256–1257
Operating cycle, 639
Operating expense computation, 103–104
Operating leases, 710, 1132, 1135, 1145
Operating lease method, 1127–1129, 1135
Operating loss carryforwards, 1008–1009
Operating segments, 1326–1328, 1347
Operations, 132n.2
Opinions of the Accounting Principles Board
(APB Opinions), 9, 11
Options. see Stock options
Optional straight-line method, 566
Option to purchase (franchises), 965
Oracle Corporation, 55, 378
Ordinary annuity, 281–283, 286
Ordinary stock dividends, 760
Original entry, book of, 69
Originating temporary difference, 1002
Other postretirement benefits (OPEB),
1055n.9, 1082n.22, 1084
Outdoor Channel Holdings, 592
Outflows, cash, 1274
Output
in depreciation, 543
measures of, 939
Outstanding checks, 350
Outstanding stock, 750, 756n.11
Overfunded pension plans, 1070
Overhead, 492
Overseas National Airways, 760
Overstatement of accrued revenue, 1207
Overstatement of purchases, 1207
Owens Corning, Inc., 182
Owners’ equity. see Stockholders’ equity
Ownership structure, 72
Oxford Industries, 1251
Ozanian, Michael K., 177, 539
Pacific Lighting, 558n.12
Pacter, Paul A., 1217n.15
Paid-in capital, 745, 765n.18
Paid-in capital in excess of par, 745
Pan American Airlines, 1078n.17, 1079
Panera Bread Company, 40
Paper checks, 349n.16
Parenthetical explanations, 194
Parking transactions, 388
Partial period depreciation, 548–549
Participating preferred stock, 754–755
Participating securities, 820n.21

Par value
as basis for fair value, 746
of bonds, 692
of stock issued, 760, 763–764
Par value method, 751
Par-value stock, 745
Passage of title rule, 387
“Past event,” 1193n.3
Patents, business-method, 596
Paychex, 323
Payee, 331
Payment, date of (stock dividends), 758
Payout ratio, 767–768
Payroll deductions, 648
example of, 648
income tax withholding, 647–648
Social Security taxes, 646–647
unemployment taxes, 647
Payroll taxes, 648
PBGC. see Pension Benefit Guaranty
Corporation
PCAOB. see Public Company Accounting
Oversight Board
Pegg, Janet, 1015n.8
Penalty for failure to renew/extend
lease, 1123
Penn Central Railroad, 641–642
Pensions, 264, 1320
Pension Benefit Guaranty Corporation
(PBGC), 1048, 1053n.6, 1077–1079
Pension obligations, 1053–1054
Pension plan(s), 1050–1082
accounting for (see Pension plan
accounting)
actuaries’ role in accounting for, 1053
assets in, 1052n.4
defined-benefit, 1051–1052
defined-contribution, 1051
financial health of, 1069
funding of, 1050–1051
nature of, 1050–1052
net funded status of, 1055
reporting (see Pension plan reporting)
stock market value of, 1051n.3
trends in, 1048–1049
worksheet for, 1058–1059
Pension plan accounting, 1053–1057
actual return on plan assets, 1057
actuaries’ role in, 1053
employer’s obligation in, 1053–1054
expense components in, 1055–1056
interest on liability, 1057
service cost in, 1056
Pension plan assets, actual return on, 1057
Pension plan gains/losses, 1063–1067
assets, smoothing unexpected
gains/losses on, 1063–1064
calculations for, 1066–1067
corridor amortization, 1064–1065
example of unrecognized, 1065–1066
liability, smoothing unexpected
gains/losses on, 1064
Pension plan reporting
ERISA, 1076–1078
within financial statements, 1069–1079
within notes to financial statements,
1072–1074

terminations, pension, 1078–1079
2013 entries/worksheet example,
1075–1076
Pension poison pills, 1079n.20
Pension Protection Act, 1076n.15
Pension Reform Act (1974), 1076–1078
Pension terminations, 1078–1079
Pension worksheet, 1058–1059
amortization of unrecognized prior
service costs, 1060–1061
gain or loss, 1063–1067
2010 entries, 1058–1060
2011 entries, 1062–1063
2012 entries, 1067–1069
2013 entries, 1075–1076
Pep Boys, 904
The Pepsi Bottling Group (PBG), 16
PepsiCo. Beverages, 35
PepsiCo, Inc., 35, 64, 127, 144, 172, 186,
257–258, 377, 484–485, 584, 607,
632–633, 641, 685, 738–739, 745, 791,
852, 856, 858, 927, 987, 1013–1015,
1017, 1045, 1111, 1239, 1308–1309,
1338–1340, 1377
PepsiCo. International, 35
Percentage analysis, 1354–1355
Percentage markup, 450n.11
Percentage-of-completion accounting
method, 937–938, 946–947
Percentage-of-receivables approach,
328–330
Percentage-of-sales approach, 328
Performance approach, current
operating, 140
Periods, compounding, 268
Period costs, 1331
interest as, 392
in inventory, 392
Periodic inventory system, 384–385
Periodic rent, 285–286
Permanent accounts, 69, 93
Permanent differences, 1002
Permits, 595
Perpetual inventory system, 383–385, 442
Petroleum Equipment Tools Inc., 512
Petty cash disbursements, imprest system
for, 348–349
Petty cash funds, 320, 348–349
Pfizer Inc., 589
PharMor, 1315
Phillips, Michael M., 187
Physical factors, of depreciation, 541
Physical goods included in inventory, 386
consigned goods, 387–388
goods in transit, 387
and sales agreements, 388
Physical inventory count, 385
Pier 1 Imports, 204
Pillsbury, 1332
Pinnacle West Corporation, 1157
Pizza Hut, 962
Plant assets, 490
dispositions of, 511–512
and involuntary conversion, 512
problems with, 512
sale of, 511–512
Pledge, 338n.10


Index · I-15
Plugs, 598
PNC, 5, 1117
Points (note), 708
Polaroid, 595
Political costs, 1203
Politicization, 24
Polo Ralph Lauren, 744
Pools, 400, 401nn.7–8, 407n.13
Porter, J., 1313
Positive intent, 859
Postage stamps on hand, 320
Post-balance-sheet events (subsequent
events), 1323–1324, 1347
Post-closing trial balance, 69, 94
Postdated checks, 320
Postemployment benefits, 648n.8
Posting, 76–80
closing entries, 93–94
defined, 69
Postretirement benefits, 264, 650n.9
disclosures of, 1090–1091
eligibility for, 1085n.26
obligations under, 1085
pension vs. healthcare, 1083–1084
Postretirement benefits accounting,
1082–1091
actuarial assumptions/conceptual issues
of, 1091
costs, reporting, 1271
expense under, 1086
FASB on, 1082–1083
gains/losses recognition, 1088
illustrative entries of, 1086–1089
provisions of, 1084–1086
2011 entries and worksheet, 1087–1089
2012 amortization of unrecognized net
gain/loss, 1089
Postretirement expense, 1086
Potlatch Corporation, 724
PPE. see Property, plant, and equipment
Prab Command, Inc. (U.S.), 485
Prab Limited (U.K.), 485
Prab Robots, Inc., 485–486
Practice Bulletins, 12
Preemptive privilege, 803
Preemptive right, 743
Preferred dividends in arrears, 643
Preferred stock, 743, 745, 754–756, 831.
See also Common stock; specific types,
e.g.: Convertible preferred stock
accounting and reporting of, 755–756
convertible, 798–799
convertible bonds vs., 755
dividends from, 812–813
features of, 754–755
participating, 754–755, 772n.23
redeemable, 755
Preferred stock outstanding, 754n.9, 756
Premier Parks, 542
Premiums, 657–658
Premium amortization, of bonds, 695–696
Premium bonds, 692–696
Prepaid expenses

decrease in, 1257
failure to record, 1206
increase in, 1254
Preparing financial statements, 91–92
Prepayments
in reversing entries illustration, 106–107
Present value, 262, 263
of annuity, 284–286
of annuity due, 283–286
of annuity due of 1 (table), 267
of an ordinary annuity, 284–285
of an ordinary annuity of 1 (table), 267
of benefits, 1054n.7
computing for unknown, 270–271
of deferred annuity, 287–288
measurement, 290–292
of 1 (table), 267
of ordinary annuity, 281–283
of single sum, 272–274
solving for, 270–271
as variable in compound interest, 270
Present value-based measurements,
264–265
Pretax financial income, 992, 1001–1004
Price index selection, 403–405
Priceline.com, 37, 932–933
PricewaterhouseCoopers, 99, 932n.1, 958,
1052, 1283
Prime Motor Inn, 203
Primerica (formerly American Can), 593
Principal, 265
Principal amount (bonds), 692
Principle-based accounting standards, rulebased vs., 15
Prior period adjustments, 147, 1197
Prior service costs (PSC), 1060–1061, 1086
Probability, degree of, 654
The Procter & Gamble Company, 63, 112,
127, 171–172, 193, 210–238, 257,
305–306, 376, 382, 484, 584, 588–589,
604, 632, 684, 738, 767, 790, 811, 852,
886n.12, 927, 987, 1044–1045, 1111,
1177, 1239, 1308, 1317, 1377
Product costs, 391–392
Product guarantees. see Guarantees
Production variable method, 547
Profitability ratios, 208, 1350, 1351
Profit margin on sales ratio, 561
Progress Energy, 794
Projected benefit obligation, 1053–1057
Project financing arrangement, 710
Promissory note, 331
Property, goods, or services, 335
Property, plant, and equipment (PPE), 490
acquisition and valuation of, 490–498
and cost of buildings, 491–492
and cost of equipment, 492
and cost of land, 491
disclosure of, 1319
and interest costs during construction,
493–498
observations for, 498

and self-constructed assets, 492–493
Property dividends, 759
Property-rights approach, 1120, 1149
Proportional method, 746, 800–801
Proposed Statements of Financial Accounting
Standards, 13
Pro rata portion, 492
Prorating, 699
Proved reserves, 557
PSC. see Prior service costs
Public Company Accounting Oversight
Board (PCAOB), 17, 1322n.5
Pulitzer Inc., 603
Pulliam, Susan, 381
Purchases, misstatement/overstatement of,
390–391, 1207
Purchase allowances, 456, 456n.13
Purchase commitments, valuation of,
446–448
Purchased goodwill, 598–599
Purchased intangibles, 590
Purchase discounts, 392–393, 456
Purchase returns, 456
Purchases-only-approach, 465n.2
Pure rate of interest, 291
Put option, 887n.15
Quaker Foods, 35
Quaker Oats Company, 1194, 1202
Quaker State Oil Refining Corp., 653
Qualcomm Inc., 595, 596, 762, 823
Qualified opinion, 1337
Qualified pension plans, 1050
Qualifying assets, 494
Quality of earnings, 133
Quality ratings (bonds), 694
Quanex Corporation, 189
Quantum Corporation, 343n.14
Quarterly financial statements, 96
Quest Company, 1087–1089
Questcor Pharmaceuticals Inc., 759
Qwest Communications, 506, 930, 932, 1150
R. G. Barry & Co., 74
R. J. Reynolds, 36
Rabigh Refining and Petrochemical
Company, 741
Ranchers Exploration and Development
Corp., 759
Rate of gross profit, 450n.11
Rate of interest, 270
Rate(s) of return, 388–389
on common stock equity, 767
on sales, 561
Rate of return on assets (ROA), 561
Ratios, 208. See also specific ratios, e.g.: Cash
debt coverage ratio
activity, 1350, 1351
coverage, 1350, 1351
liquidity, 1350, 1351
profitability, 1350, 1351
Ratio analysis, 208–209, 1350–1352
Raw materials inventory, 382
Raymark Corporation, 664
R&D. see Research and development
(R&D) costs


I-16 · Index
Reacquisition price, 701–702
Readily determinable fair value, 908
Real accounts, 69
Real economic loss, 1158n.22
Real estate investment trusts (REITs),
547n.7
Realizable revenues, 933
Realized revenues, 933
Really Useful Group, 595
Rearrangements, costs of, 510
Reasonableness test, 1196n.5
Receivables, 323–344. See also Accounts
receivable(s)
analysis of, 344
classifying, 343
defined, 323
derecognizing, 345
disappearing, 749
presentation of, 343
with recourse, 340–341
sales of, 339–343
securitizing, 1251
trade, 323
without recourse, 340
Receivables turnover ratio, 344
Reclassification adjustments, 876–879
Recognized subsequent events, 1323
Reconciliation method. see Indirect method
Reconciliation to international standards,
1357, 1360
Reconciling entry, final, 1280–1281
Reconciling items, 350
Record, date of (stock dividends), 758
Recourse
defined, 339n.13
receivables with, 340–341
receivables without, 340
Recoverability tests, 552, 601–602
Recoverable reserves, 556
Recovery of investment test (90% test),
1122–1124, 1149
Recovery periods, 564
Redeemable preferred stock, 755
Reed, Jack, 337
Reeve, James M., 401n.6, 407n.13
Refinancing, 642
Refunding, 702
Regions Bank, 927
Registered bonds, 691
Registrars, 743
Reilly, David, 337
Reinstallation costs, 510
Reither, Cheri L., 877n.9
REITs (real estate investment trusts),
547n.7
Related-party transactions, disclosure of,
1321–1322
Relative sales value, 446
Reliance Power Ltd, 741
Rendleman, Richard, Jr., 802n.6
Rent-Way, Inc., 134
Repairs, 510–511
Replacements, 455n.12, 509
Reported amounts, 993–994

Reporting, 4, 1341–1346
change in entity, 1197
of change in principle, 1186–1187
of correction of error, 1197–1201
criteria for accounting/reporting
choices, 1346
on financial forecasts/projections,
1341–1343
fraudulent financial reporting,
1344–1346
Internet financial reporting, 1343
requirements, 1315
Repossessions (installment sales), 953–954
Research and development (R&D)
costs, 587–609
under contractual arrangements, 605n.13
of extractive industries, 605n.12
identifying, 604–605
and investors, 609n.16
presentation of, 609, 611
Reserves, cookie jar, 134
Reserves errors, 1198
Residual interest, 744
Residual value, 1130, 1136–1141
guaranteed vs. unguaranteed, 1136
and lease payments, 1136–1137
lessee accounting for, 1137–1140
lessor accounting for, 1140–1141
meaning of, 1136
Restatement, 1199n.8, 1206
Restaurant chains, 1127–1128
Restoration costs, of depletion, 555
Restricted cash, 321
Restricted stock plans, 807–808
Restricted-stock units, 808n.10
Restrictions on retained earnings,
764–765, 1273
Restructuring, 145n.15, 717–722
continuation of debt, 718–722
settlement of debt, 717–718
Restructuring charge, 145
Retail inventory methods, 452–457
concepts of, 453
with conventional method, 453–456
evaluation of, 457
special items relating to, 456–457
Retail methods, 465–466
Retained earnings
change in, 1258, 1277
disclosures of restrictions on, 764–765
illustration of statement of, 1276
increase in, 1255
reporting restrictions on, 1273
restrictions of, 152
restrictions on, 764–765
statement of, 97
on statement of stockholders’
equity, 152n.22
Retained earnings adjustment, 1192
Retained earnings statement, 152
Retired shares, 753
Retirement benefits. see Postretirement
benefits
Retirement of convertible debt, 798

Retrospective adjustment, 145
Retrospective changes in accounting
principle, 1183–1190
accounting for, 1191
and equity method, 1197n.6
impracticability of, 1193–1194
reporting of, 1186–1187
Returnable cash deposits, 643–644
Reuters Group, 596
Revaluation model, 206
Revaluation surpluses, 769
Revell, Janice, 173
Revenue(s)
overstatement of accrued, 1207
understatement of unearned, 1206
Revenue bonds, 691
Revenue expenditures, 508–509
Revenue recognition, 930–966
after delivery, 948–959
for consignments, 965–966
current environment, 932–935
before delivery, 937–948
errors, 1198
for franchises, 962–965
at point of sale (delivery), 935–937
and SFAC No. 3, 933n.5
and SFAC No. 5, 933n.5, 933n.6, 937n.14,
948n.21–22
for special sales transactions, 962–966
Reverse stock splits, 63
Reversing differences, 1002
Reversing entries, 95, 105–110
Rhone-Poulenc Rorer (RPR), 433
Richard, Christine, 689
Richardson, A. W., 1145n.15
Right of return, 935
Risk, 178n.2
cash flow, 893
exchange rate, 890
interest rate, 890
Risk management (derivatives), 884–900
Rite-Aid, 17
RJR Nabisco, 690, 1331
ROA (rate of return on assets), 561
Rohde, L., 596
Romero, Simon, 1150
Royal Dutch/Shell, 557
Rule-based accounting standards, 15
Rural Electrification Corp, 741
Ryder System, 177
S. C. Johnson, 141
Sack, Robert J., 19, 1346
Safe harbor rule, 1342, 1343
Safeway, 452
St. Regis Pulp Co., 868–869
Sales
with buyback agreement, 388
conditions for, 341
and FASB, 341
with high rates of return, 388–389
on installment, 389
with recourse, 340–341
secured borrowing vs., 341–342


Index · I-17
of treasury stock, 752–753
without recourse, 340–341
Sales agreements, 388–389
Sales discounts, 325–326, 456
Sale-leasebacks, 1157–1160
asset use determination in, 1157–1158
as term, 1157
Sales price of asset, 1142
Sales-type leases, 1131–1132, 1141–1145
Sales-warranty approach, 656–657
Sales tax payable, 645
Sales transactions, 934
Salvage value, 540, 1136n.13
Sampling, statistical, 385.1
Sandberg, Jared, 508
San Diego Gas and Electric (SDGE), 904
SARs. see Stock appreciation rights
Sarbanes-Oxley Act of 2002, 1322, 1340, 1346
and auditing standards, 13
and “big GAAP versus little
GAAP,” 1316n.3
and disclosure, 661
key provisions of, 17
revenue recognition, 932n.2
and SEC, 661
Section 404 of, 17
Sauter, Douglas, 13
Savings certificates, money-market, 320n.1
SBC Communications Inc., 1084
Schiesel, Seth, 1150
Schipper, Katherine, 1315n.2
Schneider, David, 489
Scholtes, S., 694
Scott, Richard A., 949n.23
Scott, Rita K., 949n.23
Scott Paper, 1158
Scribner, Edmund, 764n.17
Seaboard Corporation, 324
Searfoss, D., 1083n.25
Sears Holdings, 326, 385, 437, 452
Sears Roebuck, 326, 436, 1015
Seasonality, 1333–1334
SEC. see Securities and Exchange Commission
Second income statement, 153
Secret reserves, 748
Secured bonds, 691
Secured borrowing, 338, 341–342
Securities, 858n.1
available-for-sale, 152n.21, 861–865,
868–870
disclosure for, 881
equity, 866–872
held-to-maturity, 859–861
holdings between 20% and 50%, 870–872
holdings of less than 20%, 867–869
holdings of more than 50%, 872
short-term available-for-sale, 1269
on statement of cash flows, 1246n.2
trading, 865–866, 870, 1269
Securities and Exchange Commission
(SEC), 26
and American Institute of Certified
Public Accountants, 7
on cash flow classification, 1266
and Caterpillar, 1325
on differential disclosure, 1315

and earnings management, 133
enforcement by, 8–9
and FASB, 8, 8n.6
and GAAP standards development, 8
IDEA database, 1344
on interim reporting, 1334–1335
as IOSCO member, 1358
and management’s responsibilities for
financial statements, 1340
on MD&A, 1338
and off-balance-sheet financing, 710
in private sector, 8
and Sarbanes-Oxley Act of 2002, 661
on timeliness of information, 1335
Securities Fair Value Adjustment
account, 863
Securitization, 283, 339, 341, 353
Securitizing receivables, 1251
Segment disclosures, 1325–1329
disadvantages of, 1325–1326
identifying operating segments for,
1326–1328
illustration of, 1329
measurement principles for, 1328
objectives of, 1326
principles of, 1326
types of information in, 1328–1329
Self-insurance, 661–662
Sender, Henny, 204, 506
Senyak, C., 1015n.8
Sepracor, Inc., 838
September 11, 2001 terrorist attacks, 12
depreciation measures taken after, 564n.1
effect on airlines, 178
reporting extraordinary items after, 143
Serial bonds, 691
Service costs, 1056, 1086
Service lives, 541
Service period, 805
Service revenue, 102–103
Settlement of debt, 717–718
7-Eleven Stores, 962
Seven Bank Ltd, 741
75% test, 1122
Sewer, Andy, 744
Shares, reacquisition of, 749–753
Share price appreciation, 827
Share system, 742–743
Shatner, William, 932
Shaustyuk, K., 823
Sherwin-Williams Company, 258
Short, Daniel G., 408n.17, 410n.22
Short account, 348
Shortages, normal/abnormal, 456
Short-term available-for-sale securities, 1269
Short-term borrowing, 322
Short-term creditors, 1349
Short-term financing, 326n.4
Short-term investments, 181–183
Short-term nontrade notes payable, 1269
Short-term obligations, 641n.5
Short-term paper, 320n.1
Short-term receivables, 323
Showa Shell Sekiyu, 886n.12
Shwiff, K., 1144
Sick pay, 649
Sidel, Robin, 187

Siebel Systems, 1315
Significant influence, 870
Significant noncash activities, 201–202
Significant noncash transactions, 1272–1273
Simple capital structure EPS, 812–816, 824
complex vs., 812–813
comprehensive example of, 815–816
preferred stock dividends, 812–813
stock dividends/stock splits, 814–815
weighted-average number of shares
outstanding, 813–814
Simple interest, 266
Simpson, Glenn, 991
Single-period statements, correcting errors
on, 1200
Single-step income statements, 135–136
Single sum
future value of, 271–272
present value of, 272–274
Single-sum problems, 270–275
and future values of an annuity due,
278–281
and present value of annuity due, 283–286
and present value of ordinary annuity,
281–283
solving for unknown in, 274–275
Skinner, D. J., 1011
Small stock dividends, 761, 761n.15
Smart Choice Automotive, 1202
Smith, Alison, 451
Smooth earnings, and change in
accounting method, 1203
Smoothing unexpected gains/losses,
1063–1064
Social Security, 267, 646–647
Soft assets, 5
Software costs, 608
capitalized, 615–616
reporting, 616
Software industry, 614n.17
Solectron Corporation, 55
Solomon, Deborah, 508
Solvency, 179, 199
Solvency ratios, 1350n.28
Sonic Foundry Corporation, 299
SOP (Statements of Position), 12
SoRIE (Statement of recognized income
and expense), 769
Sotheby’s Holdings, 387
Sougiannis, Theodore, 609n.16
Southern California Edison, 755
Southwest Airlines, 85, 488–489, 510–511,
885, 1048, 1114, 1115, 1178, 1244
SPEs. see Special purpose entities
Special assessments, 491
Special journals, 76
Special purpose entities (SPEs), 342–343,
709–710, 902, 1115
Specific-goods LIFO approach, 400–401
Specific-goods pooled approach, 401–406
Specific-goods pooled LIFO approach,
400–401
Specific identification, 868n.6
Specific indexes, 403n.9
Specific items, 148
Speculators, and derivatives, 885


I-18 · Index
Sprint Nextel, 633
Staff positions, 11
Standard account form, 76
Standardized cost system, 445n.4
Standard & Poor’s Corporation, 694
Standards-setting
government intervention in, 27–28
international, 1356–1360
in political environment, 15–17
Stanga, Keith G., 401n.6, 407n.13
Staples, 439
Starbucks Corp., 55, 490, 859, 911, 1116, 1129
Start-up costs, 606–607
State corporate law, 742
Stated interest rate, 331n.9
Stated rate, 269, 692
Stated value method, 751
Statement of cash flows, 69, 197–205
classification of cash flows on, 1245–1247
content and format of, 198–199
format of, 1247
purpose of, 197–198, 1244
usefulness of, 203–204, 1244
Statement of cash flows preparation,
200–202, 1247–1282
and accounts receivable (net), 1267–1269
and adjustments similar to depreciation,
1266–1267
and extraordinary items, 1271–1272
final, 1282
and gains, 1270
indirect vs. direct method in, 1259–1266
and net losses, 1269–1270
and postretirement benefit costs, 1271
and significant noncash transactions,
1272–1273
sources for information used on, 1259
steps in, 1247–1248
and stock options, 1270–1271
2009 example of, 1248–1252
2010 example of, 1253–1255
2011 example of, 1255–1258
and working capital changes, 1269
worksheet used for (see Statement of
cash flows worksheet)
Statement of cash flows worksheet, 1273–1282
accounts receivable (net), 1277
building depreciation and amortization
of trademark, 1279
change in retained earnings, 1277
common stock/related accounts, 1280
equipment and accumulated
depreciation, 1279
final reconciling entry, 1280
guidelines for using, 1274
illustration of completed, 1281
inventories, 1278
investment in stock, 1278
land, 1278
noncash charges/credits, 1280
prepaid expense, 1278
preparing, 1275–1277
reasons for using, 1273–1274
Statements of Financial Accounting Concepts, 12
No. 1, 1314, 1339
No. 3, 933n.5

No. 5 (“Recognition and Measurement
in Financial Statements of Business
Enterprises”), 141n.12, 709, 933n.6,
935n.11, 937n.14, 948n.21–22
No. 6 (“Elements of Financial Statements
of Business Enterprises”), 135n.7,
700n.5, 709, 744
Statements of Financial Accounting Standards,
11, 26, 1148–1150
FASB Standards Statement, 11
No. 6 (“Elements of Financial
Statements”), 1083n.23
No. 13 (“Accounting for Leases”),
1129n.10, 1145, 1151
No. 34 (“Capitalization of Interest
Cost”), 495n.3
No. 58 (“Reports on Audited Financial
No. 109 (“An Empirical Investigation of
Its Incremental Value-Relevance
Relative to APB No. 11”), 996
No. 114 (“Accounting by Creditors for
Impairment of a Loan”), 718n.15,
718n.16
No. 128 (“Earnings Per Share”), 820n.17
No. 130 (“Reporting Comprehensive
Income”), 766n.20, 908
No. 133 (“Accounting for Derivative
Instruments and Hedging
Activities”), 900
No. 145 (“Recission of FASH Statements
No. 4, 44, and 64, and Technical
Corrections”), 702n.9
Statement of financial position, 178. See also
Balance sheet(s)
Statement of recognized income and
expense (SoRIE), 155, 769
Statement of retained earnings, 97
Statement of stockholders’ equity, 152n.22,
153–154, 766
Statement on Auditing Standards
No. 54 (“Illegal Acts by Clients”),
1322n.7
No. 58 (“Reports on Audited Financial
No. 99 (“Consideration of Fraud in a
Financial Statement Audit”), 1322n.5,
1346n.27
No. 101 (“Interim Financial Information”),
1335n.11
Statements of Position (SOP), 12
Statistical sampling, 385.1
Stauffer Chemical Company, 406
Stead, D., 1321
Sterling Construction Corp., 1124–1127,
1130, 1132–1134, 1136–1141,
1144–1146
Sternstein, Aliya, 1315n.1
Stickney, Clyde P., 1243
Stires, David, 811
STMicroelectronics (STM), 799
Stock. See also specific types, e.g.: Preferred
stock
buybacks (see Buyback(s))
change related to investment in
common, 1267
costs of issuing, 748

dividend distributions, 757
issuance of, 501, 745
issuance of, below par value, 745n.3
issuance of, in noncash transaction,
747–748
issuance of, with other securities, 746–747
rights and privileges of, 742–743
Stock appreciation rights (SARs), 827–829
equity awards, 827
liability awards, 827–828
Stock-based compensation plans, 803–811
accounting for, 811
debate over stock option accounting,
809–811
disclosure of, 09
employee stock purchase plans, 808–809
and fair value, 265
reporting issue with, 804–805
restricted-stock, 807–808
stock appreciation rights, 827–829
Stock dividends, 643, 760–761, 761n.15
in EPS computation, 814–815
and par value, 763–764
reporting, 1273
stock splits vs., 763–764
Stockholders, 743, 1349
Stockholders’ equity, 72, 189, 740–768
on balance sheet, 765–766
and corporate capital, 744–753
in corporation, 742
statement of (see Statement of
stockholders’ equity)
Stock investment, as worksheet entry, 1278
Stock markets, 1316
Stock options, 803, 1270–1271
in diluted EPS computation, 819–820
errors in, 1198
reduced use of, 794–795
Stock right, 743n.1, 803
Stock splits, 762–763
in 1990s, 763
in EPS computation, 814–815
reporting, 1273
reverse, 763
stock dividends vs., 763–764
Stock warrants, 743n.1, 799–803
conceptual questions regarding, 802
in diluted EPS computation, 819–820
incremental method, 801
issued with other securities, 800
proportional method, 800–801
rights to subscribe to additional
shares, 803
Storey, Reed K., 32n.1
Storey, Sylvia, 32n.1
Stott, David, 547n.7
Straight-line amortization, 1061
Straight-line method for depreciation,
543–544
Strand, W. K., 541n.1
Strict cash basis, 101
Strike price, 887


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