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I N D EX

A. C. Nielsen Company, 657n.16 AASB (Australian Accounting Standards Board), 1360 Abbott Laboratories, 183, 873874 Abdel-khalik, A. Rashad, 1129n.19 Abnormal shortages, 456 Abrams, J., 993n.1 Absences, compensated, 648650 Accelerated Cost Recovery System (ACRS), 564 Accounting, ethics in, 19 Accounting changes. see Change(s) in accounting Accounting cycle, 7398 adjusted trial balance, 90 adjusting entries, 8182 closing, 9294 journalizing, 7576 post-closing trial balance, 94 posting, 7680 preparing financial statements, 9192 reversing entries, 95 steps of, 95 transactions and other events, identifying/ recording, 7375 trial balance, 8081 Accounting information system, 6873 Accounting policies on balance sheets, 191, 192 disclosure of, 13161319 MD&A of, 13391340 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, 101102 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, 337342 increase in, 1256 indirect method of analyzing, 1250 net, accounts receivable, 12671269, 1277 recognition of, 324326 trade, 336 uncollectible, 326331 valuation of, 326331 Accounts receivable written off, 330331 Accruals as class of adjusting entries, 81 in reversing entries illustration, 105106 Accrual basis accounting cash basis accounting vs., 101104 conversion to cash basis accounting, 103104 for warranties, 655 Accrued expenses adjusting entries for, 87 as class of adjusting entries, 81 Accrued interest, adjusting entries for, 8788 Accrued revenue(s) adjusting entries for, 8687 as class of adjusting entries, 81 overstatement of, 1207 Accrued salaries, adjusting entries for, 8889 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), 10851089 Accumulated rights, 649 Acid-test ratio, 666 Acquisition costs, 507511, 555 ACRS (Accelerated Cost Recovery System), 564 AcSB (Accounting Standards Board) (Canada), 1360 AcSEC. see Accounting Standards Executive Committee Activity method for depreciation, 543544 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, 109110 Adjustments, 8190 for accruals, 8690 for bad debts, 8990 for deferrals, 8286 defined, 6869 for depreciation, 8485 for insurance, 8283 prior period, 147 for statement presentation, 85 types of, 8182 for unearned revenues, 8586 on worksheet, 108109 Adjustments columns, 108 Administrative expenses, on income statement, 136 Adolph Coors Company, 662 Adverse opinion, 1338 Advertising costs, 607, 13311332 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, 488489 Allied Products Corporation, 755 Allowance method, 327, 328, 442443 Alltel Corp., 643 Almost Family, Inc., 89 Altera International, 872 Alternative minimum tax (AMT), 1005 Alterra Healthcare Corp., 181182 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, 11581159, 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, 1213 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, 289290, 695696, 12661267 corridor, 10641065, 10751076, 1088 defined, 540 effective-interest method, of bond, 289290 of intangible assets, 591593 of limited-life intangible assets, 1266 on postretirement benefit plans, 1088 of prior service costs, 10601061, 1086 straight-line, 1061 of trademark, 1279 on units-of-production basis, 596n.5 years-of-service, 10601061 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, 268269 Annualized approach, 1332 Annual reports, on World Wide Web, 56 Annuity(-ies), 286288 Annuity due, 278279, 286 future value of, 278279 present value of, 283286 Ante, S. E., 444 Antidilutive securities, 817, 819821, 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, 654655 Asset(s) on balance sheet, 180 current assets, 181184 depreciable base for, 540 gains/losses in (pensions), 10631064 held for disposal, 553 in lessee accounting, 1124 noncurrent, 184186 pensions, 10631064 recognition of, 999 replacement of fixed, 549 sales price of, 1142 transfer of, 717 Asset expenditures, 508509 Asset-linked bonds, 691 Asset retirement obligations (AROs), 659, 714 Asset reversions, 10781079 Asset turnover ratio, 560561 Asset valuation, 507 Astra Zeneca Plc., 597 Atlantic Richfield, 558 AT&T, 74, 545, 615, 800801, 1082 Attmore, R. H., 1091 Attribution period, 10841085 Auditing Standards Board, 13 Auditors report, 13351338 emphasis of matter in, 1337 and expectation gap, 1346n.26 on going concern of entity, 1337 and lack of consistency, 1337 and managements responsibilities for financial statements, 1340n.18 qualified/adverse/disclaimer opinion, 13371338 standards for, 13351336 unqualified/clean opinion, 1337 Australian Accounting Standards Board (AASB), 1360 Available-for-sale securities, 152n.21, 182, 858, 861865, 868870, 873, 882 Average cost method, 460 for cost flow assumption, 395396 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 adjusting entries for, 8990 failure to adjust for, 12071208 Bahree, B., 557 Balance sheet(s), 69, 178197 accounting policies on, 191 and cash flows statement, 12471248, 1253, 1256, 1260 classification in, 179191 classified, 179 columns on, 110 comparative, 1275 contingencies on, 191, 192 contractual situations on, 191193 current assets on, 181184 debit vs. credit balances on, 1274 deferred tax reporting on, 10111013 elements of, 180 errors on, 12051208 events after preparation of, 13231324 example, 97 fair values on, 191, 193194 format of, 189191 under GAAP/iGAAP, 206 liabilities on, 180, 186188 limitations of, 179 noncurrent assets on, 184186 owners equity on, 189 presentation of, 154 stockholders equity on, 72, 765766 usefulness of, 178179 Balance sheet (percentage-of-receivables) approach, 328330 Ball, J., 557 Banks as lessors, 1117, 1148n.17 treatment of purchases/sales of loans/securities by, 1246n.2 Bank, David, 645 Bank accounts, 347348 Bank charges, reconciling, 349352 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, 349352 Bankruptcies, of retailers, 437 Bankruptcy-prediction model, 191 Bank statements, 349 Bargain purchases, 964 Bargain purchase option, 1123, 1144 Bargain purchase option test, 11211122 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

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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, 710713, 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 Bloomingdales, 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, 702703 corporate listings, 691692 effective-interest method for, 697700 and extinguishment of debt, 701703 face value of, 692 and interest date, 694696 between interest dates, issuance, 696 issuance of, 690, 700701 monitoring investments in, 691692 notes vs., 703 par on interest date, issuance at, 694695 premium, 693 types of, 691 Bond amortization, effective-interest method of, 289290 Bond covenants, 688689 Bond discounts, amortization of, 12661267 Bondholders, 1349 Bond indenture, 691 Bonds payable, 690703 and contra accounts, 700 decrease in, 1258 discount, 700 increase in, 1255 Bond premium(s) amortization of, 12661267 valuation of, 692696 Bonus agreements, 650651 Bonus payments, and change in accounting method, 1203 Book depreciation, tax depreciation vs., 566567 Book of original entry, 69 Book value (bonds), 85, 697n.3 Book value method, 755 Book value per share, 768, 772773 BOP Clothing Co., 686687 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, 750751 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, 868869, 1094, 1244 Canada, 13581360 Cannondale Corporation, 55 CAP. see Committee on Accounting Procedure Capettini, Robert, 505n.9 Capital allocation, 4 Capital assets errors, 1198 Capital expenditures, 508509 Capitalization criteria avoiding, 11481149 for lessee, 11211124 for lessor, 1131 Capitalization period, 494 Capitalized lease accounting, 1118n.1, 11201124 bargain purchase option test in, 11211122 economic life test in, 1122 recovery of investment test in, 11221124 transfer of ownership test in, 1121 Capital leases, 11211124 Capital lease method, 11241129 Capital maintenance approach, 134n.5 Capital One Financial, 177 Capital stock, 742743, 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, 181182, 320323, 1245n.1, 1269n.7 alternate terminology for, 320n.2 on balance sheets, 181182 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, 320322 restricted cash vs., 321322 Cash balances, physical protection of, 349 Cash-balance pension plans, 1078n.19 Cash basis accounting and accounting theory, 101102 accrual-basis accounting vs., 101104 conversion to accrual basis, 103104 financial statements, 101 modified cash basis, 102 of pension plan, 1055n.10 theoretical weaknesses of, 104105 warranties, 655 Cash controls, 347352 and bank balances reconciliation, 349352 and imprest petty cash system, 348349 and physical protection of cash balances, 349 using bank accounts, 347348 Cash crunch, 203 Cash debt coverage ratio, 204 Cash deposits, returnable, 643644 Cash discounts, 325326, 392, 499 Cash dividends, 758759 on common stock, 758n.12 on treasury stock, 759 Cash dividends payable, 1269 Cash flows, 7n.3 classification of, 1245 evaluating, 12461247 free, 204205 net income vs., 203 Cash flow hedge, 893894 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, 12631264 for income taxes, 1263 for operating expenses, 12621263 special rules applying to, 1265 to suppliers, 1262 Cash ratio, 323 Cash rebates, 657

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I-4 Index
Cash receipts classes of, 1261 from customers, 12611262 and direct method, 12631264 special rules applying to, 1265 Cash-related items, 322323 Caterpillar, Inc., 84, 382, 407, 604, 875, 886, 1117, 1325 Caterpillar Financial Services Corp., 1117, 11241127, 1130, 11321146 CBS, 750 CDs (certificates of deposit), 320n.1 Ceiling (upper), 439440 Ceiling and Floor, 438445 Cendant, 17 Century 21, 595 Certificates of deposit (CDs), 320n.1 Change(s) in accounting (general), 1182 guidelines for, 12011202 motivations for, 12031204 Change(s) in accounting estimate, 146, 148, 11951197, 1201 Change(s) in accounting principle, 148, 11821194, 1201 accounting for/reporting of, 11911192 direct/indirect effects of, 1193 disclosure of, 1320 and impracticability, 11931194 prospective reporting of, 1183 and retained earnings adjustment, 1192 retrospective, 11841190 Change in cash, determining, 1248, 1249, 1253, 1256 Change in reporting entity, 1197, 1201 Change-in-the-present-value method, 11451146 Channel stuffing, 936 Chase, 1117 Checks bouncing, 351352 outstanding, 350 paper, 349n.16 postdated, 320 Check fraud, 349n.16 Checking accounts, 347348 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, 654655, 13191320 Clarcor Inc., 649 Class B common stock, 744 Classified balance sheets, 179180 Clean opinion. see Unqualified opinion Clorox Co., 759 Closing, 9294 Closing entries, 69, 9394, 98 Closing prices, 9294 CNC (Conseil Nationale de la Comptabilit), 1360 Coach Inc., 1313 Coastal Corp., 1064 The Coca-Cola Company, 18, 20, 64, 81, 127, 172, 257258, 377, 484485, 584, 590, 597, 608, 632633, 685, 738, 791, 809, 811, 852, 858, 870, 885, 890, 902, 927, 987, 1045, 1051, 1111, 1239, 1244, 13081309, 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, 501502 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, 13541355 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, 12001201 Compensated absences, 648650 Compensating balances, 321 Compensation plans, 796811 convertible debt accounting, 797798 convertible preferred stock, 798799 debt and equity classifications of, 796 dilutive securities issuance in, 816n.14 effective, 803 and FASB, 796n.1 GAAP/iGAAP standards, 825 stock compensation plans, 803811 stock warrants, 799803 Competition, 1357 Completed-contract accounting method, 938, 943944, 960 Completion-of-production basis, 948 Complex capital structure EPS, 816822, 824 antidilution, 820821 contingent issue agreement, 820 convertible securitiesdiluted EPS, 817819 options and warrantsdiluted EPS, 819820 presentation and disclosure of, 821822 simple vs., 812813 Components, 141 Component depreciation, 547n.6 Composite depreciation rate, 546 Composite life, 546 Composite methods for depreciation, 545547 Compounded continuously, 269n.4 Compounded daily, 269 Compound interest, 266269 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, 267269, 308317 variables fundamental to, 270 Comprehensive dollar-value LIFO method, 402403 Comprehensive income, 152154, 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, 138139 Conditional expenses, 651 Conglomerate (diversified) companies reporting, 13241329 ConocoPhillips, 749 Conseil Nationale de la Comptabilit (CNC), 1360 Consigned goods, 387388, 965966 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, 651662 on balance sheets, 191, 192 defined, 192 disclosure of, 1320 errors in, 1198 GAAP/iGAAP standards, 714 presentation of, 664665 Contingent-fee-basis litigation, 1342n.21 Contingent liabilities. see Loss contingencies Contingent shares, 820 Continuing franchise fees, 964 Continuously compounded, 269n.4

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Index I-5
Contra accounts, and bonds payable, 700 Contract-related intangible assets, 595 Contractual situations, on balance sheets, 191193 Contra items, 196 Contributions, accounting for, 506507 Contributory pension plans, 1050 Control device, 453 Convenience financial statements, 1350 Convergence, of U.S. and international standards, 1183n.1, 13561360 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, 796797, 833 Convertible debt accounting, 797798, 825 Convertible preferred stock, 755, 798799, 833 Convertible securities, 817819 Cookie jar reserves, 134 Coolidge, C., 1202 Coon, William R., 401n.8 Copyrights, 594 Corning, 823 Corporate bond listings, 691692 Corporate capital, 744753 Corporate form, 742743 capital stock/share system, 742743 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 GAAP/iGAAP standards, 1212 in income statement, 148 reporting, 11971201 Corridor amortization, 10641065, 10751076, 1088 Cost, 438 Cost allocation, 395n.4, 540551. See also Depreciation Cost approach, 500n.4 Cost-benefit constraint, 1271 Cost flow assumption, 386 average cost method for, 395396 and first-in, first-out, 396397 identification, 394395 and last-in, first-out, 397398 Costs included in inventory, 386 period costs, 392 product costs, 391392 and treatment of purchase discounts, 392393 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, 555556 Cost-recovery accounting method, 956958 Cost-to-cost basis, 939941 Cost-to-retail ratio, 445 Coughlan, J. D., 541n.1 Counterbalancing errors, 12051207 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.), 6971, 178 Credit balance, 69 Credit cards, 339n.12 Creditors, 203 disclosure of claims by, 13191320 short-term, 1349 Creditor calculations, 720721 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, 181184 on balance sheets, 181184 cash, 181182 Current cash debt coverage ratio, 204 Current liability(-ies), 638651. See also specific types, e.g.: Accounts payable(s) analysis of, 665666 on balance sheets, 186187 declared cash dividends as, 759 presentation of, 662665 Current maturities of long-term debt, 641 Current operating performance approach, 141 Current ratios, 398, 665666 Current receivables, 323 Current tax expense (benefit), 1018 Cushing, Barry E., 409n.19 Customary form, of balance sheets, 190n.11 Customer-related intangible assets, 593594 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.), 6971 Debt(s) compensation plans, 796 continuation of, 718722 current maturities of, 641 dead-weight, 702 extinguishment of, 701703 failure to adjust for bad, 12071208 issue cost (SFAS No. 6), 700n.5 long-term (see Long-term debt) settlement of, 717718 Debtor accounting, 718n.15 Debtor calculations, 719720 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, 544545 Deductible amounts, 994 Deductible temporary differences, 1001, 1018 Deep-discount bonds, 691 Defaults, 953954 Deferrals, adjusting entries for, 8286 Deferred annuities, 286288 Deferred income taxes, 9931000 changes in, 1267 and changes in tax rate, 10041005 Congressional acts affecting, 1005n.2 under GAAP and iGAAP, 1019 on income statements, 10001001 Deferred-payment contracts, 499500 Deferred taxes, disclosure of, 1320 Deferred tax amounts, 993 Deferred tax assets, 993, 9971000, 1018 asset recognition for, in company records, 999 recognized as loss carryforwards, 1008n.4 valuation allowance for, 9991000 Deferred tax benefits, 997, 1018 Deferred tax consequences, 1018 Deferred tax expense, 995, 1018 Deferred tax liabilities, 993995, 1018 in company assessments, 996 Congressional acts affecting, 1005n.2 and SFAS No. 6, 996 and SFAS No. 109, 996 Defined-benefit plans, 10511052, 1080

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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, 11191124, 1267 Deluxe Corp., 352 de Mesa Graziano, Cheryl, 931 Dennys, 962 Depletion, 554559 acquisition costs of, 555 defined, 540 development costs of, 555 exploration costs of, 555 issues in oil and gas industry, 557559 and liquidating dividends, 557 and recoverable reserves, 556 restoration costs of, 555 Depletion base, 554555 Deposits legally restricted, 322 in transit, 350 Deposit method, 958959 Depositor errors, reconciling, 350 Depreciable base, for assets, 540 Depreciable tax life. see Recovery periods Depreciation, 540551 Accumulated Depreciation account, 559 activity method for, 543544 adjusting entries for, 8485 and asset vs. liability accounting, 1124 changes in method of, 1196 decreasing-charge methods for, 544545 defined, 540 factors involved in process of, 540 failure to record, 1207 GAAP/iGAAP standards, 562 group and composite methods for, 545547 hybrid or combination methods for, 547 issues in airline industry, 541n.2 under partial periods, 548549 post-September 11, 2001 measures, 564n.1 rate revision for, 550 and replacement of fixed assets, 549 straight-line method for, 543544 tax methods for, 564567 Depreciation expense, 1254, 1257 Derivatives, 884900 basic accounting principles for, 886889 cash flow hedge, 893894 characteristics of, 889 disclosures for, 897 embedded, 895 and fair hedge value, 891893 hedging, 890894 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, 13151316 Diluted earnings per share, 816821 convertible securities, 817819 factors in, 818819 illustration of, 831834 options and warrants, 819820 reconciliation for basic and, 821 Dilutive securities, 796, 816 Diners Club, 338 Dingell, John, 27 Direct costs, incremental vs. internal, 1145 Direct-financing leases, 11311135 initial direct costs in, 1145 sales-type vs., 11411142 Direct method, 442443 for accounts receivable (net), 12681269 for determining net cash flow from operating activities, 1250, 12601264 GAAP/iGAAP standards, 1283 indirect vs., 1251, 12641265 special rules applying to, 1265 Direct write-off method, 327328 Disclaimer of an opinion, 1338 Disclosure(s), 343n.14 of change in accounting estimate, 11961197 for derivatives, 897 of fair value, 905908 in financial statements, 947 of franchisors, 965 full (see Full disclosure in financial reporting) GAAP/iGAAP standards, 1347 of interest rates, 265n.2 of lease data, 11461148 of operating activities, 1265 as present value-based measurement, 265 of restrictions on retained earnings, 764765 and Sarbanes-Oxley Act of 2002, 661 for securities, 881 and Statement of Position 94-6, 192 techniques of, 194197 Disclosureeffectiveness project, 1315n.2 Discontinued operations, 137, 141142, 148, 834n.20 Discounts, cash, 325326 Discount bonds, 692, 693, 700, 708n.13 Discounting, 272273 Discount notes, 705 Discount rate, of postretirement benefit obligation, 1086n.28 Discover, 330, 338 Discrete approach, 1330, 1334 Diversified (conglomerate) companies reporting, 13241329 Dividends. See also Stock dividends; specific types, e.g.: Liquidating dividends cash, 758759, 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, 771772 Dollar-value LIFO method, 401406, 452, 463465 and AICPA Task Force on LIFO Inventory Problems, 442n.1 comprehensive, 402403 for determining cost of single item, 442n.1 example, 401402 and price index selection, 403405 specific-goods pooled approach vs., 401406 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), 6971 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, 1011 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), 150151, 811 calculating, 150n.18 for complex capital structure, 816822 computations, 811824 diluted, 816821 illustration of, 830834 on income statement, 137, 137n.9 interim reporting of, 13321333 for simple capital structure, 812816 Eastern Air Lines, 1079 Eastman Kodak Company, 55, 145n.15, 329, 438, 510, 575, 1016, 1315 Eavis, P., 198, 330 eBay, 904 Ebbers, Bernie, 2627 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, 699700 asset vs. liability accounting with, 1124 of bond amortization, 289290 for bonds, 697700 for bonds issued at discount, 697698 for bonds issued at premium, 698699

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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 Elmers Restaurants, 1167 El Paso Corporation, 557 El Paso Energy, 1005 Elstrom, P., 393 Ely, Michael, 1272n.9 Embedded derivatives, 895 Embraer, 13091310 Emerging Issues Task Force (EITF), 12, 143 Employees, as pension beneficiaries, 1052 Employee discounts, 457 Employee payroll deductions, 648 Employee-related liabilities, 646651 Employee Retirement Income Security Act (ERISA) (1974), 10761078 Employee stock purchase plans (ESPPs), 808809 Employer(s) payroll taxes paid by, 648 and pension plan risks, 1052 Enacted tax rate, 1004 Ending inventory, misstated, 389390 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, 658661 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 as worksheet entry, 1279 Equipment lease-versus buy analysis, 1341n.16 Equity on balance sheets, 180 owners, 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, 870872, 12151218 changing from, 12151216 changing to, 12161217 and fair value options, 873874 GAAP/iGAAP standards, 1212 and retrospective application, 1197n.6 Equity securities, 866872 Erickson, Naomi, 1083n.25 Eralp, Osman, 617 Ernst and Young, 741 Errors, accounting, 12051214 on balance sheet and income statement, 12051208 correction of, 146 counterbalancing, 12051207 example of, 11991200, 12081210 fraud vs., 1322 on income statements, 1205 noncounterbalancing, 12071208 preparation of financial statements with corrections to, 12101211 reporting correction of, 11971201 types of, 1198 ESM Government Securities, Inc., 1346 eSpeed, 596 ESPPs (employee stock purchase plans), 808809 Este 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, 1718, 1346n.26 Expected cash flow approach, 290292 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 under GAAP/iGAAP, 155 on income statement, 136137 pension, 10551057 postretirement, 1086 prepaid (see Prepaid expenses) Expense expenditures, 508509 Expense recognition errors, 1198 Expenses subject to year-endadjustment, 1332 Expense warranty approach, 655656 Exploration costs of depletion, 555 Extensible business reporting language (XBRL), 1343 External environment, fraud and, 1345 External events, 68, 7475 External indexes, 403n.9, 405n.10 Extinguishment of debt, 701703 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, 142144, 148 interim reporting of, 1332 reporting, 12711272 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, 12071208 Failure to record accrued wages, 1206 Failure to record prepaid expenses, 1206 Faircloth, Lauch, 27 Fair hedge value, 891893 Fair value(s) of asset, 506 on balance sheets, 191, 193194 of derivatives, 886n.14 disclosure of, 905908 and EITF Issue No. 86-29, 504n.8 under GAAP/iGAAP, 345 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, 898899 Fair value method changing from, 1216 changing from equity method to, 12151216 of stock compensation, 805, 809811 for unrealized gains/losses, 1257n.5 Fair value options, 873874 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

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I-8 Index
FASAC (Financial Accounting Standards Advisory Council), 910 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.), 646647 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), 646647 FIFO. See First-in, first-out Fifth Third Bancorp., 5 Final reconciling entry, 12801281 Financial accounting, as discipline, 4, 6 Financial Accounting Foundation, 9, 26 Financial Accounting Standards Advisory Council (FASAC), 910 Financial Accounting Standards Board (FASB), 26 on accounting changes, 11821183 Accounting Standards Codification, 1315 APB vs., 910 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, 1011 and Emerging Issues Task Force, 12 and financial engineering, stance on, 710n.14 and financial statements, 179180 and GAAP, 912 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, 13581360 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, 10561057, 1070n.14 on postretirement benefits accounting, 10821083, 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, 7475 on uncertain tax positions, 10161017 Financial components approach, 340 Financial engineering, 710n.14 Financial flexibility, 179, 199, 204 Financial forecasts, 13411343 Financial income, 992, 10011004 Financial information, types of, 1314 Financial instruments, 193 Financial liquidity, 204 Financial markets, 1356 Financial position, statement of. see Balance sheet(s) Financial projections, 13411343 Financial reporting, 4. See also Reporting accuracy of, 23 and expectations gap, 1718 of international accounting standards, 18 objectives of, 67 and politically-influenced standard setting, 1517 Financial Reporting Standards Board (FRSB), 1360 Financial statement(s), 4 correcting errors on, 11991201 defined, 69 elements of, 134135 example of, 210238 general-purpose, 7 installment-sales transactions presentation, 955956 interest rate swap presentation, 899900 inventory accounting for, 442n.2 maintaining monthly vs. quarterly, 96 managements responsibilities for, 1340 for merchandising company, 9698 notes to the (see Balance sheet(s)) and ownership structure, 72 pecentage-of-completion presentation, 942943 pension plan reporting in (see Pension plan reporting) preparing, 9192 preparing, with error corrections, 12101211 presenting, 864865 worksheet preparation of, 110 Financial statement analysis, 13491355 comparative analysis, 1353 percentage analysis, 13541355 perspective on, 13491350 ratio analysis, 13501352 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, 396397 and LIFO, 398399 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), 439440 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, 962965 Franchise agreement, 963 Franchise fees, continuing, 964 Franchisors cost, 965 Fraud check, 349n.16 recorded by ChexSystems, 352 Fraudulent financial reporting, 13441346 accounting errors vs., 1322 causes of, 13451346 National Commission on, 1322n.6 Freddie Mac, 337, 890 Free cash flow, 204205, 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, 13141316 of auditors reports, 13351338 criteria for accounting/reporting choices in, 1346 current reporting issues with, 13411346 and differential disclosure, 13151316 of diversified companies, 13241329 on financial forecasts/projections, 13411343 and fraudulent reporting, 13441346 increase in reporting requirements, 1315 of interim reports, 13301335 on Internet, 1343 issues with, 13211335 of managements reports, 13381340

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Index I-9
and notes to financial statements, 13161321 of post-balance-sheet events, 13231324 as principle, 13141315 of special transactions/events, 13211322 and stock markets, 1316 Functional expense classification, 137 Fund (term), 1050n.1 Funds from operations (FFO), 547n.7 Fuqua Industries, 406407 F.U.T.A. (Federal Unemployment Tax Act), 647 Future deductible amounts, 997 Future tax consequences, 1017 Future tax rates, 10041005 Future tax savings, 1007 Future value of an annuity due, 278281 of annuity, 278279 of an ordinary annuity of 1 (table), 267268 computing for unknown, 270 of deferred annuity, 286288 of 1 (table), 267268 of single sum, 271272 as variable in compound interest, 270 GAAP. see Generally accepted accounting principles Gage. J., 177 Gains, 1270 on financial statements, 135 on income statements, 137 on pension plans, 10631067 and postretirement expense, 1086, 1088 Gain contingencies, 651652 Gains trading, 880 The Gap, 1116 Gap fillers, 598 Gap Inc., 457, 590, 645 Gateway, 1315 General checking account, 347348 General Dynamics, 49 General Electric (GE), 49, 55, 132, 145, 329, 608, 643, 741, 809, 811, 885, 890, 1082, 1084, 1111, 13241325 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, 813 and variable interest entities, 902 General Mills, Inc., 89, 360, 604 General Motors (GM), 38, 40, 337, 380381, 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, 224226, 235236 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, 597601 economic consequences of, 16 impairment of, 602603 recording, 598600 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, 450451 Grothe, M., 1181 Group methods for depreciation, 545547 Guarantees, 655657, 657n.15, 665n.20. See also Warranties Guaranteed residual value, 1123 in capitalization of lease, 1149 in lessee accounting, 11371138 in lessor accounting, 11401141 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, 186187, 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, 10831084 Healthsouth, 32 Hedging, 885, 890894 Held-to-maturity debt securities, 182, 859861, 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, 11471148, 1197, 1244 Hickok, Richard S., 938n.16 Historical cost, 179180 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, 11621163, 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, 11221124 Illegal acts, 1322 Imhoff, Eugene A., Jr., 1352n.30 Impaired note receivable, 336337 Impairments, 551554, 875 GAAP/iGAAP standards, 552, 553 measuring, 354356, 552553 of receivables, 352356 recognizing, 352354, 551552 recoverability tests for, 552, 601 and SFAS No. 114, 718n.16 Impairment loss, 354356, 553 under GAAP/iGAAP, 612 GAAP/iGAAP standards, 562

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I-10 Index
Impairment test, 592, 612 Implicit interest rate, 332333, 11231124 Impracticability, 11931194 Imprest bank accounts, 348 Imprest petty cash system, 348349 Imprest system for petty cash disbursements, 348349 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, 132135 alternate terminology for, 132n.2 and cash flows statement, 12481249, 1253, 1256, 1260 columns on, 110 and comprehensive income, 152154 condensed, 138139 deferred tax reporting on, 10001001, 10131015 and earnings per share, 150151 errors on, 12051208 example, 96 and extraordinary gains, 149 and extraordinary losses, 149 format of, 134139 illustration of, 1276 intermediate components of, 136137 and intraperiod tax allocation, 148149 irregular items reported on, 139140 limitations of, 132133 and quality of earnings, 132133 and retained earnings statement, 151152 segmented, 1325 single-step, 135136 and unusual gains and losses, 144145 usefulness of, 132133 Income statement (percentage-of-sales) approach, 328 Income statement method. see Direct method Income taxes, accounting for, 9921018, 1265n.6 accounting objectives, 996997 asset-liability method, 1017 on balance sheet, 10111013 deferred taxes, 9931000, 1018, 1267 depreciation, 564567 and future deductible amounts, 997 and future taxable amounts, 993994 on income statement, 137, 10001001, 10131015 interim reporting, 1332 interperiod tax allocation (example), 10211028 LIFO, 407n.13 and net operating losses, 10061011 as operating cash outflows, 12711272 and uncertain tax positions, 10161017 and withholding, 647648 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, 403405 Indirect method, 442443 for accounts receivable (net), 12671268 for determining net cash flow from operating activities, 12501251, 12591260 direct vs., 12641265 GAAP/iGAAP standards, 1283 special rules applying to, 1265 Induced conversions, 797798 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, 963964 Initial operating-losses, 607 Inland Steel, 543 Input, in depreciation, 543 Installment-sales accounting method, 948956 Instruments, financial, 193 In-substance defeasance, 701n.7 Insurance, adjusting entries for, 8283 Intangibility index, 588589 Intangible assets, 588603, 609611. See also specific types, e.g.: Limited-life intangibles amortization of, 591593 on balance sheets, 186 characteristics of, 591 defined, 590 impairment of, 601603 limited-life, 1266 presentation of, 609611 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, 699700 capitalization of, 392n.3, 392n.8, 495 components of, 291 computation of, 265266 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, 333335, 639640, 705706 Interest rate(s), 495 in capitalization of lease, 1149 choosing, 291, 335 computation of, 285 disclosure requirement, 265n.2 implicit, 332333 imputed, 335 as variable in interest computation, 265 Interest rate risk, 890 Interest rate swap, 899900 Interest revenue, 326, 498 Interest tables, 267268 Interim period tax, 1332 Interim reports, 13301335 continuing controversy about, 13341335 GAAP/iGAAP standards, 1347 requirements for, 13301331 unique problems of, 13311335 Internal controls, 17 under GAAP/iGAAP, 99 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, 992993 Internal Revenue Service (IRS), 66 and indexes, 405n.10 and LIFO conformity rule, 409 and purchases-only-approach, 465n.2 International accounting convergence. See Convergence, of U.S. and international standards International accounting standards, 18, 13561360 accounting changes and errors, 1212 on cash and cash equivalents, 1245 challenge of, 1357 convergence of FASB and, 13591360 disclosure, 1347 IASB in, 13581359 IOSCO, 1358 for leases, 1151 national standard setters, 1358 present environment, 1356 rationale for understanding, 13561357 International Accounting Standards Board (IASB), 18, 20, 6465, 813, 817, 1080, 1183n.1, 1344, 13581359 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 Convergence, of U.S. and international standards and income taxes, 1018 valuation of long-term debt, 692 International Lease Finance Corp. (ILFC), 1120 International Organization of Securities Commissions (IOSCO), 1358

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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, 148149 Intrinsic value, 887 Intuit Inc., 182183 Inventory(-ies), 382386. See also related headings, e.g.: Periodic inventory system alternative method for estimating, 449n.10 analysis of, 459 average days to sell, 459 on balance sheets, 183184 basis of valuation of, 181 control, 383386 costs included in, 391393 defined, 382 disclosure of, 1319 estimating, using gross profit percentage, 449n.10 GAAP/iGAAP standards, 1212 gross profit method for, 449451 increase in, 12561257 land as, 491 management of, 436437 method selection for, 409411 misstated, 390391 at net realizable value, 445 presentation of, 457459 purchases of, 406n.11 valuation of, 386, 410411, 445448 as worksheet entry, 1278 Inventory cost flow, 383 Inventory errors, 389391, 1198 Inventory methods, 385.1, 408n.18 Inventory turnover ratio, 459 Investing activities, 198, 201, 1245, 1246 Investment(s), 856881 available-for sale securities, 861865, 868870 in common stock, 1267 in debt securities, 858865 derivatives, 884900 equity method for accounting, 870872 equity securities, 866872 fair value controversy, 880 and FASB interpretation No. 46(R), 903, 904, 908 held-to-maturity securities, 859861 holdings of less than 20%, 867870 impairment of value, 875 long-term, 184185 PPE, 491 security, 858n.1 short-term, 181183 in stock, as worksheet entry, 1278 trading securities, 865866, 870 transfers between categories, 879 variable-interest entities, 902904 Investment accounting approaches, 858 Investment carrying amount, 12151216 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 in income statement, 148 on income statement, 139140 summary of, 147148 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 Walters 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, 534535, 604, 633, 749, 886, 1329 Jones, S. D., 49, 1128 Journal(s), 69, 7576 Journal entry, general, 7576 Journalizing, 7576 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, 127128, 459, 490, 604, 745, 766, 791, 852853, 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, 585586 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, 11141115, 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 as worksheet entry, 1278 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, 406407 approach comparisons, 405406 and cost flow assumption, 397398 disadvantages of, 407408 external indexes computations, 405n.10 and FIFO, 398399 and future earning hedge, 407 specific-goods, 400401 tax benefits, 406407, 409 Lavelle, Louis, 795n.1 Lawsuits, 1341n.18 Layers, 399400 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, 11456 and disclosing lease data, 11461148 and initial direct costs, 1145 by lessee, 11201129 by lessor, 11301135 and residential values, 11361141 for sales-type leases, 11411144 special problems in, 11351148 unsolved problems in, 11481150 Leases and leasing, 11161160 accounting for (see Lease accounting) advantages of, 11181119 classifications of, 11311132 conceptual nature of, 11191120 and disclosure, 1320 economics of, 1130 environment for, 11161120 examples of, 11531157 GAAP/iGAAP standards, 1151 lessor types in, 11161117 operating leases, 710 term of lease, 1118, 1122, 1136n.13 Lease receivable, 11321135, 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

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I-12 Index
Lessee accounting, 11201129 of assets vs. liabilities, 1124 for bargain purchase option, 1144 capitalization criteria for, 11211124 capital lease method of, 11241127 capital vs. operating, 11281129 operating method of, 11271128 for residual value, 11371140 for sale-leasebacks, 1158 Lessor accounting, 11301135 benefits of, 1130 and classification of leases, 11311132 direct-financing method of, 11321135 and economics of leasing, 1130 for initial direct costs, 1145 operating method of, 1135 for residual value, 11401141 for sale-leasebacks, 1158 for sales-type leases, 11411144 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, 186188 contingent (see Loss contingencies) current vs. noncurrent lease, 11451146 defined, 638 employee-related, 646651 environmental, 660 and fair value option, 874 in lessee accounting, 1124, 1129 long-term, 188 pension, 1064 Liability approach, 1017 Liability awards, share-based, 827828 Liability measurements, 714 Liability valuation account, 700 Liberty International, 585586 Licenses, 595 Liesman, S., 15, 140, 999 LIFO. see Last-in, first-out LIFO conformity rule, 409 LIFO liquidations, 399401, 408n.15, 443n.3 LIFO matches, 406 LIFO method, dollar-value, 401406 LIFO reserve, 398399 LIFO retail methods, 452, 462466 changing from conventional retail method to, 465466 and stable prices, 462463 Limited Brands Inc., 990991 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, 400401 Liquidity ratios, 208, 1350, 1351 Litigation, 654655, 13411343 Lloyds 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, 288289 Long-term borrowing, 322 Long-term contract losses, 944947 Long-term debt, 690 analysis of, 713 current maturities of, 641 on financial statements, 690 off-balance-sheet financing, 709711 presentation of, 711712 reporting, 709713 and SAF Opinions No. 5, 709 and SAF Opinions No. 6, 709 Long-term investments, 184185 Long-term liabilities, 688713 on balance sheets, 188 bonds payable, 690703 long-term notes payable, 703708 and reporting and analysis of debt, 709713 Long-term notes payable, 703708 Loomis, Carol J., 603 Loss(es) accumulated other comprehensive loss, 765n.19 from continuing operations, 834n.21 on financial statements, 135 in income statement, 137 on pension plans, 10631067 and postretirement expense, 1086 in sale-leasebacks, 1158 on sale of equipment, 1257 and SFAS No. 6, 135n.7 Loss carrybacks, 1006 Loss carryforwards, 1006 deferred tax assets recognized as, 1008n.4 example, 10071011 operating, 10081009 period length for, 1007n.3 with valuation allowance, 10091010 without valuation allowance, 10081009 Loss contingencies, 352, 652666 coupons, 657 environmental liabilities, 659660 and FASB, 323, 652 guarantee and warranty costs, 655657 litigations, claims, and assessments, 654655 of no-par stock, 745746 premiums, 657658 self-insurance, 661662 Loss measurement, 144 Loudder, Martha L., 609n.16 Lower (floor), 439440 Lower-of-cost-or-market (LCM) applying, 441442 and net realized value, 439440 in practice, 445n.5 and recording market instead of cost, 442444 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 McDonalds Corporation, 4, 20, 49, 81, 135, 584585, 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, 510511 Maker, 331 Mallorca Ltd, 769 Management, 13381340, 1349 Managements discussion and analysis (MD&A), 13381340 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, 599600 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 Managements discussion and analysis Means, Grady, 489 Means, Kathryn, 495n.3 Medicare, 646647 Mehring, James, 703 Meineke Mufflers, 962 Mellors, F., 1078n.19 Mercedes-Benz, 608

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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, 377378, 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), 564567 example of, 564566 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 Moodys Investors Service, 694 Moran, M., 823 More likely than not, 999 Morgan Stanley, 608, 865 Morgenson, Gretchen, 37, 47, 177, 1321 Mortgages, 708709 Mortgage notes payable, 708709 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, 2627 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 Nestl Group, 714 Net cash flow direct method of determining, 1250 indirect method of determining, 12501251, 1265 from investing/financing activities, 1248, 12511252, 12541255, 12571258 from operating activities, 12491251, 12531254, 12561261, 1270 Net income cash flows vs., 204 and indirect method, 1265 Net increase in cash, 201 Net losses, 137n.9, 12691270 Net method, 392393 Net of cash discounts, 392 Net operating loss (NOL), 10061011 Net periodic postretirement benefit cost, 1086 Net realizable value, 445, 460 Net realized value (NRV), 439440 Net settlement, 889 Net working capital, 187 Neutrality, 1204 New allowance account, 443 New average unit cost, 395396 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, 12721273 Non-consolidated subsidiary, 709 Noncontributory pension plans, 1050 Noncounterbalancing errors, 1205, 12071208 Noncurrent assets, 184186 Noncurrent receivables, 323 Nondetachable stock warrants, 802 Nonfinancial measurements, 5 Non-interest bearing notes. see Zerointerest-bearing notes Nonmonetary assets, 501506, 512, 562 Nonpublic enterprise, 812n.12 Nonqualified stock-option plans, 827 Nonreciprocal transfers, 506 Nonrecognized subsequent events, 13231324 Nontrade receivables, 323324 No-par stock, 745746 Norby, William C., 33n.3 Nordstrom, 436, 438 Norfolk Southern Corporation, 55, 1064 Normal shortages, 456 Normand, Troy, 2627 Norris, Floyd, 356, 799, 1312 Nortel, 5, 318319, 488489 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, 707708 common, 13191321 discount, 705 interest-bearing, 331, 333335, 705706 issuance of, at face value, 332, 703704 issuance of, for property, goods, and services, 335, 706 of noncash investing/financing activities, 1272 not issued at face value, 332335, 704706 as present value-based measurement, 264 Notes payable, 639641, 703n.10, 706709, 1269 Notes receivable, 323 disposition of, 337342 fair value option for, 336 impaired, 336337 recognition of, 331335 valuation of, 335336 Notes to the financial statements, 188n.10 accounting policies in, 13161319 as disclosure technique, 195 pension plan reporting within, 1058, 10721074, 1076 postretirement benefits reporting within, 10901091 Notional amount, 887 Not-sufficient funds (NSF) checks, 350 Noven Pharmaceuticals, Inc., 432433 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), 646647 Obligations (postretirement benefits), 1085 Obsolescence, 541 Occidental Petroleum, 377, 1078 Off-balance-sheet financing, 709711 disclosure of, 1320 forms of, 709710 and leases, 1118, 1119, 1129 rationale for, 710 and SEC stance on, 710 Ohio Edison, 1157 Oil and gas industry, depletion issues in, 557559

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I-14 Index
Old age, survivor, and disability insurance (O.A.S.D.I), 646647 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, 12491251, 12531254 net income vs. net cash flow from, 12491250 and securitizing receivables, 1251 on statement of cash flows, 198, 1245, 1246, 12561257 Operating cycle, 639 Operating expense computation, 103104 Operating leases, 710, 1132, 1135, 1145 Operating lease method, 11271129, 1135 Operating loss carryforwards, 10081009 Operating segments, 13261328, 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, 281283, 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, 548549 Participating preferred stock, 754755 Participating securities, 820n.21 Par value as basis for fair value, 746 of bonds, 692 of stock issued, 760, 763764 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, 767768 Payroll deductions, 648 example of, 648 income tax withholding, 647648 Social Security taxes, 646647 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, 641642 Pensions, 264, 1320 Pension Benefit Guaranty Corporation (PBGC), 1048, 1053n.6, 10771079 Pension obligations, 10531054 Pension plan(s), 10501082 accounting for (see Pension plan accounting) actuaries role in accounting for, 1053 assets in, 1052n.4 defined-benefit, 10511052 defined-contribution, 1051 financial health of, 1069 funding of, 10501051 nature of, 10501052 net funded status of, 1055 reporting (see Pension plan reporting) stock market value of, 1051n.3 trends in, 10481049 worksheet for, 10581059 Pension plan accounting, 10531057 actual return on plan assets, 1057 actuaries role in, 1053 employers obligation in, 10531054 expense components in, 10551056 interest on liability, 1057 service cost in, 1056 Pension plan assets, actual return on, 1057 Pension plan gains/losses, 10631067 assets, smoothing unexpected gains/losses on, 10631064 calculations for, 10661067 corridor amortization, 10641065 example of unrecognized, 10651066 liability, smoothing unexpected gains/losses on, 1064 Pension plan reporting ERISA, 10761078 within financial statements, 10691079 within notes to financial statements, 10721074 terminations, pension, 10781079 2013 entries/worksheet example, 10751076 Pension poison pills, 1079n.20 Pension Protection Act, 1076n.15 Pension Reform Act (1974), 10761078 Pension terminations, 10781079 Pension worksheet, 10581059 amortization of unrecognized prior service costs, 10601061 gain or loss, 10631067 2010 entries, 10581060 2011 entries, 10621063 2012 entries, 10671069 2013 entries, 10751076 Pep Boys, 904 The Pepsi Bottling Group (PBG), 16 PepsiCo. Beverages, 35 PepsiCo, Inc., 35, 64, 127, 144, 172, 186, 257258, 377, 484485, 584, 607, 632633, 641, 685, 738739, 745, 791, 852, 856, 858, 927, 987, 10131015, 1017, 1045, 1111, 1239, 13081309, 13381340, 1377 PepsiCo. International, 35 Percentage analysis, 13541355 Percentage markup, 450n.11 Percentage-of-completion accounting method, 937938, 946947 Percentage-of-receivables approach, 328330 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, 384385 Periodic rent, 285286 Permanent accounts, 69, 93 Permanent differences, 1002 Permits, 595 Perpetual inventory system, 383385, 442 Petroleum Equipment Tools Inc., 512 Petty cash disbursements, imprest system for, 348349 Petty cash funds, 320, 348349 Pfizer Inc., 589 PharMor, 1315 Phillips, Michael M., 187 Physical factors, of depreciation, 541 Physical goods included in inventory, 386 consigned goods, 387388 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, 511512 and involuntary conversion, 512 problems with, 512 sale of, 511512 Pledge, 338n.10

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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.78, 407n.13 Porter, J., 1313 Positive intent, 859 Postage stamps on hand, 320 Post-balance-sheet events (subsequent events), 13231324, 1347 Post-closing trial balance, 69, 94 Postdated checks, 320 Postemployment benefits, 648n.8 Posting, 7680 closing entries, 9394 defined, 69 Postretirement benefits, 264, 650n.9 disclosures of, 10901091 eligibility for, 1085n.26 obligations under, 1085 pension vs. healthcare, 10831084 Postretirement benefits accounting, 10821091 actuarial assumptions/conceptual issues of, 1091 costs, reporting, 1271 expense under, 1086 FASB on, 10821083 gains/losses recognition, 1088 illustrative entries of, 10861089 provisions of, 10841086 2011 entries and worksheet, 10871089 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., 485486 Practice Bulletins, 12 Preemptive privilege, 803 Preemptive right, 743 Preferred dividends in arrears, 643 Preferred stock, 743, 745, 754756, 831. See also Common stock; specific types, e.g.: Convertible preferred stock accounting and reporting of, 755756 convertible, 798799 convertible bonds vs., 755 dividends from, 812813 features of, 754755 participating, 754755, 772n.23 redeemable, 755 Preferred stock outstanding, 754n.9, 756 Premier Parks, 542 Premiums, 657658 Premium amortization, of bonds, 695696 Premium bonds, 692696 Prepaid expenses adjusting entries for, 8283 on balance sheets, 184 basis of valuation of, 181 as class of adjusting entries, 81 decrease in, 1257 failure to record, 1206 increase in, 1254 as worksheet entry, 1278 Preparing financial statements, 9192 Prepayments as class of adjusting entries, 81 in reversing entries illustration, 106107 Present value, 262, 263 of annuity, 284286 of annuity due, 283286 of annuity due of 1 (table), 267 of an ordinary annuity, 284285 of an ordinary annuity of 1 (table), 267 of benefits, 1054n.7 computing for unknown, 270271 of deferred annuity, 287288 measurement, 290292 of 1 (table), 267 of ordinary annuity, 281283 of single sum, 272274 solving for, 270271 as variable in compound interest, 270 Present value-based measurements, 264265 Pretax financial income, 992, 10011004 Price index selection, 403405 Priceline.com, 37, 932933 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), 10601061, 1086 Probability, degree of, 654 The Procter & Gamble Company, 63, 112, 127, 171172, 193, 210238, 257, 305306, 376, 382, 484, 584, 588589, 604, 632, 684, 738, 767, 790, 811, 852, 886n.12, 927, 987, 10441045, 1111, 1177, 1239, 1308, 1317, 1377 Product costs, 391392 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, 10531057 Project financing arrangement, 710 Promissory note, 331 Property, goods, or services, 335 Property, plant, and equipment (PPE), 490 acquisition and valuation of, 490498 analysis of, 560561 on balance sheets, 185 and cost of buildings, 491492 and cost of equipment, 492 and cost of land, 491 disclosure of, 1319 and interest costs during construction, 493498 observations for, 498 presentation of, 559560 and self-constructed assets, 492493 valuation of, 498507 Property dividends, 759 Property-rights approach, 1120, 1149 Proportional method, 746, 800801 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, 390391, 1207 Purchase allowances, 456, 456n.13 Purchase commitments, valuation of, 446448 Purchased goodwill, 598599 Purchased intangibles, 590 Purchase discounts, 392393, 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, 10871089 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, 388389 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, 208209, 13501352 Raw materials inventory, 382 Raymark Corporation, 664 R&D. see Research and development (R&D) costs

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I-16 Index
Reacquisition price, 701702 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, 323344. See also Accounts receivable(s) analysis of, 344 on balance sheets, 183 basis of valuation of, 181 classifying, 343 defined, 323 derecognizing, 345 disappearing, 749 impairment of, 352356 presentation of, 343 with recourse, 340341 sales of, 339343 securitizing, 1251 trade, 323 without recourse, 340 Receivables turnover ratio, 344 Reclassification adjustments, 876879 Recognized subsequent events, 1323 Reconciliation method. see Indirect method Reconciliation to international standards, 1357, 1360 Reconciling entry, final, 12801281 Reconciling items, 350 Record, date of (stock dividends), 758 Recourse defined, 339n.13 receivables with, 340341 receivables without, 340 Recoverability tests, 552, 601602 Recoverable reserves, 556 Recovery of investment test (90% test), 11221124, 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, 13211322 Relative sales value, 446 Reliance Power Ltd, 741 Rendleman, Richard, Jr., 802n.6 Rent-Way, Inc., 134 Repairs, 510511 Replacements, 455n.12, 509 Reported amounts, 993994 Reporting, 4, 13411346 change in entity, 1197 of change in principle, 11861187 of correction of error, 11971201 criteria for accounting/reporting choices, 1346 on financial forecasts/projections, 13411343 fraudulent financial reporting, 13441346 Internet financial reporting, 1343 requirements, 1315 Repossessions (installment sales), 953954 Research and development (R&D) costs, 587609 accounting for, 605606 under contractual arrangements, 605n.13 of extractive industries, 605n.12 under GAAP/iGAAP, 612 identifying, 604605 and investors, 609n.16 presentation of, 609, 611 Reserves, cookie jar, 134 Reserves errors, 1198 Residual interest, 744 Residual value, 1130, 11361141 guaranteed vs. unguaranteed, 1136 and lease payments, 11361137 lessee accounting for, 11371140 lessor accounting for, 11401141 meaning of, 1136 Restatement, 1199n.8, 1206 Restaurant chains, 11271128 Restoration costs, of depletion, 555 Restricted cash, 321 Restricted stock plans, 807808 Restricted-stock units, 808n.10 Restrictions on retained earnings, 764765, 1273 Restructuring, 145n.15, 717722 continuation of debt, 718722 settlement of debt, 717718 Restructuring charge, 145 Retail inventory methods, 452457 concepts of, 453 with conventional method, 453456 evaluation of, 457 special items relating to, 456457 Retail methods, 465466 Retained earnings change in, 1258, 1277 disclosures of restrictions on, 764765 illustration of statement of, 1276 increase in, 1255 reporting restrictions on, 1273 restrictions of, 152 restrictions on, 764765 statement of, 97 on statement of stockholders equity, 152n.22 as worksheet entry, 1277 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, 11831190 accounting for, 1191 and equity method, 1197n.6 example of, 11881190 impracticability of, 11931194 reporting of, 11861187 Returnable cash deposits, 643644 Reuters Group, 596 Revaluation model, 206 Revaluation surpluses, 769 Revell, Janice, 173 Revenue(s) on financial statements, 134 in income statement, 137 overstatement of accrued, 1207 understatement of unearned, 1206 Revenue bonds, 691 Revenue expenditures, 508509 Revenue recognition, 930966 after delivery, 948959 for consignments, 965966 current environment, 932935 before delivery, 937948 errors, 1198 for franchises, 962965 at point of sale (delivery), 935937 and SFAC No. 3, 933n.5 and SFAC No. 5, 933n.5, 933n.6, 937n.14, 948n.2122 for special sales transactions, 962966 Reverse stock splits, 63 Reversing differences, 1002 Reversing entries, 95, 105110 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), 884900 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., 868869 Sales with buyback agreement, 388 conditions for, 341 and FASB, 341 with high rates of return, 388389 on installment, 389 with recourse, 340341 secured borrowing vs., 341342

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Index I-17
of treasury stock, 752753 without recourse, 340341 Sales agreements, 388389 Sales discounts, 325326, 456 Sale-leasebacks, 11571160 asset use determination in, 11571158 example of, 11581159 as term, 1157 Sales price of asset, 1142 Sales-type leases, 11311132, 11411145 Sales-warranty approach, 656657 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, 13331334 SEC. see Securities and Exchange Commission Second income statement, 153 Secret reserves, 748 Secured bonds, 691 Secured borrowing, 338, 341342 Securities, 858n.1 available-for-sale, 152n.21, 861865, 868870 disclosure for, 881 equity, 866872 held-to-maturity, 859861 holdings between 20% and 50%, 870872 holdings of less than 20%, 867869 holdings of more than 50%, 872 short-term available-for-sale, 1269 on statement of cash flows, 1246n.2 trading, 865866, 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, 89 and FASB, 8, 8n.6 and GAAP standards development, 8 IDEA database, 1344 on interim reporting, 13341335 as IOSCO member, 1358 and managements 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, 13251329 disadvantages of, 13251326 identifying operating segments for, 13261328 illustration of, 1329 measurement principles for, 1328 objectives of, 1326 principles of, 1326 types of information in, 13281329 Self-insurance, 661662 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, 102103 Settlement of debt, 717718 7-Eleven Stores, 962 Seven Bank Ltd, 741 75% test, 1122 Sewer, Andy, 744 Shares, reacquisition of, 749753 Share price appreciation, 827 Share system, 742743 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, 181183 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, 201202 Significant noncash transactions, 12721273 Simple capital structure EPS, 812816, 824 complex vs., 812813 comprehensive example of, 815816 preferred stock dividends, 812813 stock dividends/stock splits, 814815 weighted-average number of shares outstanding, 813814 Simple interest, 266 Simpson, Glenn, 991 Single-period statements, correcting errors on, 1200 Single-step income statements, 135136 Single sum future value of, 271272 present value of, 272274 Single-sum problems, 270275 and future values of an annuity due, 278281 and present value of annuity due, 283286 and present value of ordinary annuity, 281283 solving for unknown in, 274275 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, 10631064 Social Security, 267, 646647 Soft assets, 5 Software costs, 608 accounting for, 614617 capitalized, 615616 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 Sothebys Holdings, 387 Sougiannis, Theodore, 609n.16 Southern California Edison, 755 Southwest Airlines, 85, 488489, 510511, 885, 1048, 1114, 1115, 1178, 1244 SPEs. see Special purpose entities Special assessments, 491 Special journals, 76 Special purpose entities (SPEs), 342343, 709710, 902, 1115 Specific-goods LIFO approach, 400401 Specific-goods pooled approach, 401406 Specific-goods pooled LIFO approach, 400401 Specific identification, 868n.6 Specific indexes, 403n.9 Specific items, 148 Speculators, and derivatives, 885

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I-18 Index
Sprint Nextel, 633 Staff positions, 11 Standard account form, 76 Standardized cost system, 445n.4 Standard & Poors Corporation, 694 Standards-setting government intervention in, 2728 international, 13561360 in political environment, 1517 Stanga, Keith G., 401n.6, 407n.13 Staples, 439 Starbucks Corp., 55, 490, 859, 911, 1116, 1129 Start-up costs, 606607 State corporate law, 742 Stated interest rate, 331n.9 Stated rate, 269, 692 Stated value method, 751 Statement of cash flows, 69, 197205 classification of cash flows on, 12451247 content and format of, 198199 format of, 1247 GAAP/iGAAP standards, 1283 purpose of, 197198, 1244 usefulness of, 203204, 1244 Statement of cash flows preparation, 200202, 12471282 and accounts receivable (net), 12671269 and adjustments similar to depreciation, 12661267 and extraordinary items, 12711272 final, 1282 and gains, 1270 indirect vs. direct method in, 12591266 and net losses, 12691270 and postretirement benefit costs, 1271 and significant noncash transactions, 12721273 sources for information used on, 1259 steps in, 12471248 and stock options, 12701271 2009 example of, 12481252 2010 example of, 12531255 2011 example of, 12551258 and working capital changes, 1269 worksheet used for (see Statement of cash flows worksheet) Statement of cash flows worksheet, 12731282 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, 12751277 reasons for using, 12731274 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.2122 No. 6 (Elements of Financial Statements of Business Enterprises), 135n.7, 700n.5, 709, 744 Statements of Financial Accounting Standards, 11, 26, 11481150 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 Statements), 1202n.10 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, 153154, 766 Statement on Auditing Standards No. 54 (Illegal Acts by Clients), 1322n.7 No. 58 (Reports on Audited Financial Statements), 1335n.13 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., 11241127, 1130, 11321134, 11361141, 11441146 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, 747748 issuance of, with other securities, 746747 rights and privileges of, 742743 as worksheet entry, 1280 Stock appreciation rights (SARs), 827829 equity awards, 827 example of, 828829 liability awards, 827828 Stock-based compensation plans, 803811 accounting for, 811 debate over stock option accounting, 809811 disclosure of, 09 employee stock purchase plans, 808809 and fair value, 265 reporting issue with, 804805 restricted-stock, 807808 stock appreciation rights, 827829 Stock dividends, 643, 760761, 761n.15 in EPS computation, 814815 and par value, 763764 reporting, 1273 stock splits vs., 763764 Stockholders, 743, 1349 Stockholders equity, 72, 189, 740768 analysis of, 767768 on balance sheet, 765766 and corporate capital, 744753 in corporation, 742 presentation of, 765766 and SFAS No. 6, 744n.2 statement of (see Statement of stockholders equity) Stock investment, as worksheet entry, 1278 Stock markets, 1316 Stock options, 803, 12701271 in diluted EPS computation, 819820 errors in, 1198 reduced use of, 794795 Stock right, 743n.1, 803 Stock splits, 762763 in 1990s, 763 in EPS computation, 814815 reporting, 1273 reverse, 763 stock dividends vs., 763764 Stock warrants, 743n.1, 799803 conceptual questions regarding, 802 in diluted EPS computation, 819820 incremental method, 801 issued with other securities, 800 proportional method, 800801 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, 543544 Strand, W. K., 541n.1 Strict cash basis, 101 Strike price, 887

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Index I-19
Strohs Brewery Co., 1078 Stuart, A., 131 Study Group on Establishment of Accounting Principles, 9 Subprime mortgage crisis, 342343, 353354 Subsequent events. see Post-balance-sheet events Subsequent events (post-balance-sheet events), 13231324 Subsidiary ledger, 69 Substitution approach, 509510 Successful-efforts concept, 557558 Sullivan, Scott, 2627 Summary of Significant Accounting, 192 Summers, Lawrence, 18 Sum-of-the-years-digits method, 544 Sunbeam, 17, 49, 937, 1202 Sunder, Shyam, 409n.20 Sunshine Mining, 32, 691 SunTrust Banks, 5, 17, 330 Supersession, 541 SUPERVALU Inc., 433 Supporting schedules, 196 Sweden, 1122 Swensens, Inc., 963n.30 Swieringa, R. J., 1145n.15 Switzerland, 1122 Synthetic lease, 1115, 1118 T-account, 75 Taco Bell, 193 Take-or-pay contract, 710 Takeover protection covenants, 797n.2 Tangreti, Robert, 1346 Target Corporation, 56, 198, 326, 330, 385, 436, 438, 452, 462, 490, 569, 1184 Tastee Freeze, 962 Tasty Baking Company, 1147, 1178 Taxes. See also Income taxes, accounting for corporate, 646n.6 disclosure of, 1320 employer payroll, 648 errors in, 1198 and leasing, 1130 Social Security, 646647 unemployment, 647 Taxable amounts, 994 Taxable income, 992993, 10011004, 1018 Taxable temporary differences, 1001, 1018 Tax depreciation, book depreciation vs., 566567 Tax-planning strategy, 1018 Tax rates, 10041005 Tax Reform Act of 1986, 564 TCBY, 962 Technological feasibility, 615, 617 Technology-related intangible assets, 595597 Teco Energy, 177 Temporary accounts, 93 Temporary differences, 993, 10011002, 1018 examples of, 10031004 originating, 1002 originating/reversing aspects of, 1002 and SFAS No. 6, 996 Tenet Healthcare, 319 Tenneco, Inc., 800 Tergesen, Ann, 751, 1251 Term bonds, 691 Terminations, pension, 10781079 Texaco, 329 TGI Fridays, 962 TGK-7 (Volzhskaya TGK), 741 TheStreet.com, 689 Third-party guarantors, 1123, 1149 3M, 767 Three-column form of account, 77 Timberland, 177 Time diagram, 270 Timelines, 5 Times interest earned ratio, 713 Time value concepts, 264270 applications of, 264265 and compound interest, 266269 and interest, 265 and simple interest, 266 variables fundamental to, 270 Timex, 438 Timmons, H., 694 T J International, 431432 Tomkins PLC, 260 Tootsie Roll Industries, 173, 560561, 759, 10901091, 13171319, 1330 Total comprehensive income, 766n.20 Townsend, Leah, 17n.12, 68n.1 Toyota, 132, 595 Toys R Us, 1244 Trade accounts payable. see Accounts payable(s) Trade accounts receivable, 336 Trade discounts, 324325 Trade loading, 936 Trademark (trade name), 593, 1279 Trade notes payable. see Notes payable Trade receivables, 323 Trading, 182 debt securities, 859 on the equity, 767 Trading securities, 865866, 870, 1269 Traditional LIFO, 399 Transactions, 68, 75 and cash flows statement, 1248 identifying and recording, 7375 Transaction approach, 134 Transfer agents, 743 Transfers between investment categories, 879 Transfer of ownership test, 1121 Transfers-in, 456 Transwitch, 444 Travel advances, 320 Treasury bills, 320n.1 Treasury stock (shares), 750 acquisitions of, 751n.8 as assets, 750n.6 buyback of, 756n.11 and capital stock, 750 cash dividends on, 759 under GAAP and iGAAP, 769 purchase of, 751752 retiring, 753 sale of, 752753 Treasury-stock method, 820, 831 Trial balance, 63, 8081. See also specific types, e.g.: Adjusted trial balance Trial balance columns, 108 Triggers, debt-rating, 1321 Triple smoothing, 1067 Troubled debt accounting for, 716722 restructuring, 717722 True-Value Hardware, 452 Trump Hotels & Casino Resorts (DJT), 823 Trusts, 1051, 1052 Trustees, 1051 Tucker, Reed, 597 Turner, Lynn, 749 Turner, Ted, 750 Turnover ratios, 1350n.28 TWA, 1079 Twarowski, C., 1343n.22 Tweedie, Sir David, 1347 Two-class common shares, 820n.21 TXU Corp., 1116 Tyco International, 1321n.4, 1345 UAL, Inc., 1178 Unamortized bond issue costs, 700 Uncertain tax positions, 10161017, 1019 Uncollectible accounts receivable, 326331, 953 Underfunded pension plans, 1054, 1070, 1078n.16 Understatement of unearned revenue, 1206 Underwriters Labs Inc., 1195 Unearned revenues, 644 adjusting entries for, 8586 as class of adjusting entries, 81 understatement of, 1206 Unemployment taxes, 647 Unexpected (deferred) asset gain or loss, 1066 Unfiled suits, 654 Unguaranteed residual value, 1123 in lessee accounting, 11381140 in lessor accounting, 11401141 for sales-type lease, 1143, 1144 Uniform Commercial Code, 743 Uniform Stock Transfer Act, 743 Union Planters, 927928 Uniroyal Technology Corporation (UTC), 258 Unisys Corp., 1064 Unit approach, and Accounting Standards Executive Committee (AcSEC), 547n.6 United Airlines, 178, 658, 716, 885, 1048, 1079, 1114, 1115 United Kingdom, 1342, 13571360 United Parcel Service (UPS), 36, 552 United States aging population of, 1053 standards in, 1357, 1360 United States Steel, 742 Unit LIFO, 399 Units-of-production approach, 555 Universal Pictures, 1325 Unqualified opinion, 1337 Unrealized holding gain, 336 Unrealized holding loss, 336 Unrecognized gains/losses in pension plan, 10651066 in postretirement benefits, 1089 Unsecured bonds, 691 Unusual gains or losses, 144145, 148

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I-20 Index
Upper (ceiling), 439440 UPS Capital, 1117 Upton, Wayne, Jr., 179n.5 US Airways, 178, 1079 USX Corp., 329 Valuation of accounts receivable, 326331 of inventories, 386, 445448 at net realizable value, 445 of notes receivables, 335336 and purchase commitments, 446448 and SFAS No. 157, 500n.4 using relative sales value, 446 Valuation allowance, 10101011, 1018 for deferred tax asset, 9991000 evidence for, 10101011 loss carryforward with, 10091010 loss carryforward without, 10081009 Vames, Steven, 643, 689 The Vanguard Group, 692 Variable-interest entities (VIEs), 902904 Variable-rate mortgage, 709 Varshney, A., 1116 Vatter, William J., 326n.5 Verifiable benchmark, 42 Verity, Inc., 1011 Verizon Communications Inc., 1084 Vermont Teddy Bear Co., 1309 Vertical percentage analysis, 1354 Vested (term), 805n.8 Vested benefits, 1053, 1055 Vested rights, 649 Viacom Inc., 1116 Vickrey, Don, 761n.15 VIEs. see Variable-interest entities Vincent, Linda, 547n.7 VISA, 338, 339n.12, 741 Vishay Technologies, 444 Visteon, 17 Vivendi Universal Entertainment, 1325 Vodafone/Mannesmann, 20, 1356 W. R. Grace, 40, 134 W. T. Grant Company, 198, 203, 1243, 1273 Wachovia, 809 Wages, failure to record accrued, 1206 Walgreen Co., 55, 82, 112, 172, 180, 387, 748, 1129 Wallman, Steven H., 40n.10 Wal-Mart, Inc., 64, 236, 301, 382, 386, 436, 452, 462, 470, 488489, 491, 645, 749 Walt Disney Company, 35, 591, 594, 744 Want Want China Holdings, 741 Warrants. see Stock warrants Warranties, 655657. See also Guarantees accrual method for, 655 cash-basis method for, 655 tax deduction for, 997 Washington Mutual, 633 The Washington Post, 809, 811 Waste Management, 538 Watered stock, 748 Watts, Ross L., 1203n.11 Webber, Andrew Lloyd, 594 Webber Inc., 416 Weber, R. P., 1015n.7 Webvan, 763 Weighted-average accumulated expenditures, 494495, 495n.3 Weighted-average method, 395 Weighted-average number of shares outstanding, 813814, 830 Weil, J., 49, 140, 319, 603, 749, 865, 999 Weirton Steel, 1079 Welch, David, 1049 Welfare benefits, 1082 Wells Fargo, 1117 Western Airlines, 1078 Westinghouse Electric Corporation, 987 Weyerhaeuser Company, 143, 184, 447 Wheat, Francis, 9 Wheat Committee, 9 Wheeler, J. E., 1015n.7 Wherehouse Entertainment Inc., 797n.2 Whole Foods Market, 1129 WHX Corporation, 547 Wiebold, Incorporated, 791 Wilbert, James, R., 1086n.27 Willamette Industries, 195, 551 Williams Companies, 710 Williams-Sonoma Inc., 904 William Wrigley Jr. (company), 438 Wingfield, Nick, 593n.3 Wolverton, Troy, 811 Working capital, 187, 1269 Working capital ratio, 665 Work in process inventory, 382 Worksheet(s) adjustments entered on, 108109 pension (see Pension worksheet) preparation of, 110 statement of cash flows (see Statement of cash flows worksheet) WorldCom, 2, 17, 2627, 204, 508, 1315, 1345 Wright, David W., 1352n.30 Write-offs, 140141, 538539, 999 Written off, accounts receivable, 330331 XBRL (extensible business reporting language), 1343 Xerox, 17, 331, 595, 1144, 1273 Yahoo, Inc., 47, 55, 323, 795, 1006, 1015, 1016 Year-end-adjustment, expenses subject to, 1332 Years-of-service amortization, 10601061 Young, S., 937 Zeff, Stephen A., 17n.10, 761n.14 Zero-interest-bearing notes, 331333, 640641, 704705 Zero-interest debenture bonds, 691 Zimmerman, Jerold L., 1203n.11 Zion, David, 564n.1, 1069, 1116 Z-scores, 191 Zuckerman, G., 703

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