,Brief Contents
1 The Environment and Conceptual 16 Investments
Framework of Financial Reporting
17 Revenue Recognition
2 The Accounting Information System
18 Accounting for Income Taxes
3 Income Statement, Related Information,
19 Accounting for Pensions and Postretirement
and Revenue Recognition
Benefits
4 Balance Sheet and Statement of
20 Accounting for Leases
Cash Flows
21 Accounting Changes and Error Analysis
5 Accounting and the Time Value of Money
22 Statement of Cash Flows
6 Cash and Receivables
23 Full Disclosure in Financial Reporting
7 Valuation of Inventories: A Cost-Basis
Approach
A PPE NDI X A Private Company Accounting
8 Inventories: Additional Valuation Issues
A PPE NDI X B Specimen Financial Statements:
9 Acquisition and Disposition of Property, The Procter & Gamble Company
Plant, and Equipment
A PPE NDI X C Specimen Financial Statements:
10 Depreciation, Impairments, and The Coca-Cola Company
Depletion
A PPE NDI X D Specimen Financial Statements:
11 Intangible Assets PepsiCo, Inc.
12 Current Liabilities and Contingencies COM PA NY I NDE X
13 Long-Term Liabilities SUBJ ECT INDE X
14 Stockholders’ Equity LI ST OF ACCOUNTS
15 Dilutive Securities and Earnings
per Share
iv
, New to This Edition
The last few years have brought many changes to the teaching and learning environment. As a result, we scrutinized every
line, every section, every chapter of Intermediate Accounting, to make sure our text best meets the needs of today’s students and
instructors. The most significant changes throughout the text include:
• MORE headings and bulleted/numbered lists to highlight key information.
• NEW “What, Why, and How” chapter opening feature.
• NEW Chapter Roadmap organized by learning objectives.
• NEW Analytics in Action feature in every chapter.
• NEW numbered examples throughout the discussion.
• NEW “Put It into Practice” feature at the end of each learning objective.
• ADDED T-accounts, where appropriate, to illustrate effects of accounting entries on account balances.
Changes by chapter are as follows.
Content Changes by Chapter
Chapter 1: The Environment and Conceptual • MOVED discussion of accounting changes and errors to
Framework of Financial Reporting an appendix.
(previously Chapters 1 and 2)
• NEW discussion of the historical cost principle. Chapter 4: Balance Sheet and Statement of Cash Flows
(previously Chapter 5)
• REVISED illustration of the organizational structure for
setting accounting standards. • NEW illustration comparing the operating cycles of a
merchandising company and a manufacturing company.
• NEW Accounting Matters feature about (1) a situation
in which the Codification did not cover a certain type of • NEW Accounting Matters feature on (1) how cruise lines
transaction and (2) neutrality. navigated the Covid-19 pandemic. (2) cryptocurrency
and how it is reported on the balance sheet, (3) how
• UPDATED Accounting Matters feature on materiality.
companies delay payments to suppliers to increase finan-
cial flexibility, and (4) comparing Netflix’s net income to
Chapter 2: The Accounting Information System
operating cash flow.
(previously Chapter 3)
• MOVED discussion of footnotes and techniques of disclo-
• NEW discussion on computerized and manual account-
sure to an appendix.
ing systems.
• UPDATED discussion of the journal and ledger. Chapter 5: Accounting and the Time Value of Money
• NEW graphic highlighting the steps of the accounting (previously Chapter 6)
cycle as they are discussed throughout the chapter. • NEW inclusion of an Excel solution in the margin for
• NEW illustrations on (1) the principles of an efficient and time value of money examples throughout the chapter.
effective accounting information system, (2) the transac- • NEW appendix demonstrating the use of Excel and finan-
tion identification process, (3) journalizing and posting, cial calculators to solve time value of money problems.
and (4) summary of the accounting cycle.
Chapter 6: Cash and Receivables (previously Chapter 7)
• NEW Accounting Matters features on (1) the use of bots
in accounting and (2) blockchain. • NEW inclusion of an Excel solution in the margin for
time value of money examples throughout the chapter.
Chapter 3: Income Statement, Related Information, • EXPANDED discussion of the effective-interest method
and Revenue Recognition (previously of amortization of a discount on notes receivable.
Chapter 4)
• NEW Accounting Matters feature on (1) why cryptocur-
• NEW discussion on (1) the fundamentals of revenue rec- rency is not reported as cash and (2) how receivables are
ognition, with practice and homework, and (2) the qual- denominated in foreign currencies.
ity of earnings.
• REMOVED discussion of the fair value option for report-
• REVISED illustration and discussion of the components ing receivables.
of the multiple-step income statement.
vii
, viii NEW TO THIS EDITION
Chapter 7: Valuation of Inventories: A Cost-Basis • EXPANDED discussion of bargain purchase accounting.
Approach (previously Chapter 8) • NEW Accounting Matters feature on (1) reporting crypto-
• NEW discussion comparing the inventory valuation currencies, (2) Disney’s revenue from intangible assets,
methods and the basis for selecting an inventory method. and (3) research and development costs.
• EXPANDED discussion of inventory cost flow, including • NEW illustration on different types of intangibles.
an illustration of the computation of cost of goods sold. • UPDATED Accounting Matters box on goodwill
• NEW illustrations for (1) FOB shipping point and FOB impairments.
destination and consigned goods and (2) product versus
period costs. Chapter 12: Current Liabilities and Contingencies
(previously Chapter 13)
• REMOVED discussion of special sales agreements and
high rates of return. These topics are covered in depth in • NEW discussion on valuation and reporting of current
Chapter 17. liabilities.
• EXPANDED discussions of (1) unearned revenues relat-
Chapter 8: Inventories: Additional Valuation Issues ed to gift cards, customer advances, and service type war-
(previously Chapter 9) ranties, and (2) presentation and analysis, featuring Best
• NEW Accounting Matters feature about (1) how compa- Buy, Microsoft, Walmart, and General Electric.
nies handle excess inventory situations and (2) how some • UPDATED discussion of classification for refinancing of
companies experienced significant increases in gross short-term debt.
margin during the Covid-19 pandemic.
• NEW illustration on payroll deductions.
• REMOVED discussion of using an allowance for inventory
• NEW Accounting Matters feature on salary, benefits, and
market adjustments.
generation Z.
• NEW illustrations on (1) purchase commitment disclo-
sures from actual companies, (2) the advantages of the Chapter 13: Long-Term Liabilities (previously Chapter 14)
retail inventory method, and (3) the pros and cons of in- • STREAMLINED types of bonds discussion.
ventory management.
• EXPANDED discussion of mortgage bonds.
Chapter 9: Acquisition and Disposition of Property, • MOVED off-balance sheet financing to Presentation and
Plant, and Equipment (previously Chapter 10) Decision Analysis section.
• NEW discussions on (1) the cost of land improvements and • NEW illustration on notes and bonds payable.
(2) accounting for asset retirement costs and obligations. • NEW graphical presentation of time value material with
• EXPANDED discussion and NEW illustration on building Excel solutions presented.
acquisition costs, showing if the building is purchased, con- • NEW Accounting Matters box on (1) hot market for bonds
structed by an independent contractor, or self-constructed. and (2) the use of environmental, social and governance
• NEW illustrations on (1) the decision rule for amount of (ESG) bonds to fund ESG projects.
interest to capitalize, (2) how to calculate avoidable inter-
est, and (3) expenditures over the life of a vehicle and how Chapter 14: Stockholders’ Equity (previously Chapter 15)
to account for them. • NEW discussions on (1) characteristics and advantages of
• REMOVED discussion on cash discounts when valuing a corporation and (2) retiring treasury stock.
fixed assets. • EXPANDED discussions on (1) forming a corporation and
components of stockholders’ equity and (2) treasury stock.
Chapter 10: Depreciation, Impairments, and Depletion
• NEW Accounting Matters feature on (1) SPACS, (2) Class
(previously Chapter 11)
(B) stock, and (3) stock splits.
• REVISED discussions on (1) group and composite method
• NEW illustration on redeemable preferred stock.
of depreciation, (2) recognition and measurement of
impairments, and (3) the continuing controversy related Chapter 15: Dilutive Securities and Earnings per Share
to full cost and successful efforts accounting. (previously Chapter 16)
• NEW illustrations on (1) physical and economic factors • NEW discussions on (1) dilution of ownership (and NEW
affecting depreciation and (2) impairments. illustration), (2) stock compensation plans related to re-
• NEW Accounting Matters feature on depreciation choices. stricted-stock and restricted-stock-unit plans, (3) trends
in stock compensation, and (4) usefulness of earnings per
Chapter 11: Intangible assets (previously Chapter 12) share information.
• REVISED discussion on (1) the valuation of purchased • REVISED discussion of convertibles and stock warrants.
and internally created intangibles and (2) the recognition,
• Updated Accounting Matters feature on convertible debt
measurement, and impairment of both limited-life and
issuances.
indefinite-life impairments.
1 The Environment and Conceptual 16 Investments
Framework of Financial Reporting
17 Revenue Recognition
2 The Accounting Information System
18 Accounting for Income Taxes
3 Income Statement, Related Information,
19 Accounting for Pensions and Postretirement
and Revenue Recognition
Benefits
4 Balance Sheet and Statement of
20 Accounting for Leases
Cash Flows
21 Accounting Changes and Error Analysis
5 Accounting and the Time Value of Money
22 Statement of Cash Flows
6 Cash and Receivables
23 Full Disclosure in Financial Reporting
7 Valuation of Inventories: A Cost-Basis
Approach
A PPE NDI X A Private Company Accounting
8 Inventories: Additional Valuation Issues
A PPE NDI X B Specimen Financial Statements:
9 Acquisition and Disposition of Property, The Procter & Gamble Company
Plant, and Equipment
A PPE NDI X C Specimen Financial Statements:
10 Depreciation, Impairments, and The Coca-Cola Company
Depletion
A PPE NDI X D Specimen Financial Statements:
11 Intangible Assets PepsiCo, Inc.
12 Current Liabilities and Contingencies COM PA NY I NDE X
13 Long-Term Liabilities SUBJ ECT INDE X
14 Stockholders’ Equity LI ST OF ACCOUNTS
15 Dilutive Securities and Earnings
per Share
iv
, New to This Edition
The last few years have brought many changes to the teaching and learning environment. As a result, we scrutinized every
line, every section, every chapter of Intermediate Accounting, to make sure our text best meets the needs of today’s students and
instructors. The most significant changes throughout the text include:
• MORE headings and bulleted/numbered lists to highlight key information.
• NEW “What, Why, and How” chapter opening feature.
• NEW Chapter Roadmap organized by learning objectives.
• NEW Analytics in Action feature in every chapter.
• NEW numbered examples throughout the discussion.
• NEW “Put It into Practice” feature at the end of each learning objective.
• ADDED T-accounts, where appropriate, to illustrate effects of accounting entries on account balances.
Changes by chapter are as follows.
Content Changes by Chapter
Chapter 1: The Environment and Conceptual • MOVED discussion of accounting changes and errors to
Framework of Financial Reporting an appendix.
(previously Chapters 1 and 2)
• NEW discussion of the historical cost principle. Chapter 4: Balance Sheet and Statement of Cash Flows
(previously Chapter 5)
• REVISED illustration of the organizational structure for
setting accounting standards. • NEW illustration comparing the operating cycles of a
merchandising company and a manufacturing company.
• NEW Accounting Matters feature about (1) a situation
in which the Codification did not cover a certain type of • NEW Accounting Matters feature on (1) how cruise lines
transaction and (2) neutrality. navigated the Covid-19 pandemic. (2) cryptocurrency
and how it is reported on the balance sheet, (3) how
• UPDATED Accounting Matters feature on materiality.
companies delay payments to suppliers to increase finan-
cial flexibility, and (4) comparing Netflix’s net income to
Chapter 2: The Accounting Information System
operating cash flow.
(previously Chapter 3)
• MOVED discussion of footnotes and techniques of disclo-
• NEW discussion on computerized and manual account-
sure to an appendix.
ing systems.
• UPDATED discussion of the journal and ledger. Chapter 5: Accounting and the Time Value of Money
• NEW graphic highlighting the steps of the accounting (previously Chapter 6)
cycle as they are discussed throughout the chapter. • NEW inclusion of an Excel solution in the margin for
• NEW illustrations on (1) the principles of an efficient and time value of money examples throughout the chapter.
effective accounting information system, (2) the transac- • NEW appendix demonstrating the use of Excel and finan-
tion identification process, (3) journalizing and posting, cial calculators to solve time value of money problems.
and (4) summary of the accounting cycle.
Chapter 6: Cash and Receivables (previously Chapter 7)
• NEW Accounting Matters features on (1) the use of bots
in accounting and (2) blockchain. • NEW inclusion of an Excel solution in the margin for
time value of money examples throughout the chapter.
Chapter 3: Income Statement, Related Information, • EXPANDED discussion of the effective-interest method
and Revenue Recognition (previously of amortization of a discount on notes receivable.
Chapter 4)
• NEW Accounting Matters feature on (1) why cryptocur-
• NEW discussion on (1) the fundamentals of revenue rec- rency is not reported as cash and (2) how receivables are
ognition, with practice and homework, and (2) the qual- denominated in foreign currencies.
ity of earnings.
• REMOVED discussion of the fair value option for report-
• REVISED illustration and discussion of the components ing receivables.
of the multiple-step income statement.
vii
, viii NEW TO THIS EDITION
Chapter 7: Valuation of Inventories: A Cost-Basis • EXPANDED discussion of bargain purchase accounting.
Approach (previously Chapter 8) • NEW Accounting Matters feature on (1) reporting crypto-
• NEW discussion comparing the inventory valuation currencies, (2) Disney’s revenue from intangible assets,
methods and the basis for selecting an inventory method. and (3) research and development costs.
• EXPANDED discussion of inventory cost flow, including • NEW illustration on different types of intangibles.
an illustration of the computation of cost of goods sold. • UPDATED Accounting Matters box on goodwill
• NEW illustrations for (1) FOB shipping point and FOB impairments.
destination and consigned goods and (2) product versus
period costs. Chapter 12: Current Liabilities and Contingencies
(previously Chapter 13)
• REMOVED discussion of special sales agreements and
high rates of return. These topics are covered in depth in • NEW discussion on valuation and reporting of current
Chapter 17. liabilities.
• EXPANDED discussions of (1) unearned revenues relat-
Chapter 8: Inventories: Additional Valuation Issues ed to gift cards, customer advances, and service type war-
(previously Chapter 9) ranties, and (2) presentation and analysis, featuring Best
• NEW Accounting Matters feature about (1) how compa- Buy, Microsoft, Walmart, and General Electric.
nies handle excess inventory situations and (2) how some • UPDATED discussion of classification for refinancing of
companies experienced significant increases in gross short-term debt.
margin during the Covid-19 pandemic.
• NEW illustration on payroll deductions.
• REMOVED discussion of using an allowance for inventory
• NEW Accounting Matters feature on salary, benefits, and
market adjustments.
generation Z.
• NEW illustrations on (1) purchase commitment disclo-
sures from actual companies, (2) the advantages of the Chapter 13: Long-Term Liabilities (previously Chapter 14)
retail inventory method, and (3) the pros and cons of in- • STREAMLINED types of bonds discussion.
ventory management.
• EXPANDED discussion of mortgage bonds.
Chapter 9: Acquisition and Disposition of Property, • MOVED off-balance sheet financing to Presentation and
Plant, and Equipment (previously Chapter 10) Decision Analysis section.
• NEW discussions on (1) the cost of land improvements and • NEW illustration on notes and bonds payable.
(2) accounting for asset retirement costs and obligations. • NEW graphical presentation of time value material with
• EXPANDED discussion and NEW illustration on building Excel solutions presented.
acquisition costs, showing if the building is purchased, con- • NEW Accounting Matters box on (1) hot market for bonds
structed by an independent contractor, or self-constructed. and (2) the use of environmental, social and governance
• NEW illustrations on (1) the decision rule for amount of (ESG) bonds to fund ESG projects.
interest to capitalize, (2) how to calculate avoidable inter-
est, and (3) expenditures over the life of a vehicle and how Chapter 14: Stockholders’ Equity (previously Chapter 15)
to account for them. • NEW discussions on (1) characteristics and advantages of
• REMOVED discussion on cash discounts when valuing a corporation and (2) retiring treasury stock.
fixed assets. • EXPANDED discussions on (1) forming a corporation and
components of stockholders’ equity and (2) treasury stock.
Chapter 10: Depreciation, Impairments, and Depletion
• NEW Accounting Matters feature on (1) SPACS, (2) Class
(previously Chapter 11)
(B) stock, and (3) stock splits.
• REVISED discussions on (1) group and composite method
• NEW illustration on redeemable preferred stock.
of depreciation, (2) recognition and measurement of
impairments, and (3) the continuing controversy related Chapter 15: Dilutive Securities and Earnings per Share
to full cost and successful efforts accounting. (previously Chapter 16)
• NEW illustrations on (1) physical and economic factors • NEW discussions on (1) dilution of ownership (and NEW
affecting depreciation and (2) impairments. illustration), (2) stock compensation plans related to re-
• NEW Accounting Matters feature on depreciation choices. stricted-stock and restricted-stock-unit plans, (3) trends
in stock compensation, and (4) usefulness of earnings per
Chapter 11: Intangible assets (previously Chapter 12) share information.
• REVISED discussion on (1) the valuation of purchased • REVISED discussion of convertibles and stock warrants.
and internally created intangibles and (2) the recognition,
• Updated Accounting Matters feature on convertible debt
measurement, and impairment of both limited-life and
issuances.
indefinite-life impairments.
