上財(cái)會(huì)計(jì)學(xué)院院長(zhǎng)高級(jí)財(cái)務(wù)會(huì)計(jì)（美國(guó)會(huì)計(jì)）課件

1、Introduction toAdvanced Accounting1. Classification of Financial Accounting Fundamental accounting: Basic procedures and techniques of accounting are introduced. Intermediate accounting: Basic theories and methods of financial accounting are discussed. Advanced accounting: Application of financial a

2、ccounting theories and methods in specific industries and transactions is described.2. Topics of Advanced Accounting Business combination and CFS Partnership and branch accounting Issues in special reporting Accounting for foreign operations Governmental and nonprofit organization accounting other t

3、opics 3. References Floyd A. Beams: Advanced Accounting, 10th ed. 2009 Legal requirements, accounting standards (CAS, 2006) and systems in PRC Newspapers and Journals - Journal of Accountancy - Journal of Accounting Education - 會(huì)計(jì)研究 - 財(cái)務(wù)與會(huì)計(jì)4. Grading policy Your grade in this course will be determin

4、ed as follows: Class participation and test 10% Assignments 20% Term examination 70% Total 100% Chapter 1Business Combinationadditional readings: CAS 1. Concepts, Reasons and Legal Form of B.C.11. Concepts1) definitions general meaning: the union of business entities FASB Statement No. 141: p.21 of

5、textbook2) characteristics the economic entity is formed one single management team control 3) classification horizontal integration vertical integration conglomeration12. Reasons1) profitability2) operating efficiencies3) diversification of business risksbusiness expansion thru. combination or cons

6、truction ? cost advantage lower risk fewer operating delays avoidance of takeovers intangible assets acquisition tax advantages 13. Legal form of B.C.1) merger acquisition of net assets the acquiring company continues to be a SLE. the acquired company ceases to exist as a SLE, and its books are clos

7、ed. the acquiring firm records separate assets and liabilities A + B = A2) consolidation a new firm is formed the acquired firms normally cease to continue as SLEs. the new firm records the separate assets and liabilities A + B = C3) acquisition majority (50%) equity interest acquisition the positio

8、n of SLE of each company is unchanged the acquiring company records an Investment in S the acquired company maintains its books as before 14. Types of considerations given up: cash non-cash assets debt stock15. Antitrust Law1) Proposed business combinations are reviewed by federal agencies. 2) State

9、 agencies review business combinations for possible violations of state statutes. 2. Brief Background on Accounting for B.C.1) much of the controversy concerning accounting requirements for B.C. involved the Pooling of interests method, which became generally accepted in 19502) APB Opinion No. 16 (1

10、970): 12 conditions 3) pooling of interests valuation: BV goodwill may not be created at the date of combination the income of the combining companies for the entire year is included in the pooled entity4) FASB Statement No. 141 (2001): the pooling of interests method was eliminated for all transact

11、ions initiated after June 30, 2001. prior combinations accounted for by the pooling of interests method will be allowed to continue as acceptable financial reporting practice for past business combinations.5) principal reasons for eliminating the pooling of interests method pooling provides less rel

12、evant information to users pooling ignores economic value exchanged in the transaction and makes subsequent performance evaluation impossible comparing firms using the alternative methods is difficult for investors.6) IFRS 3 (2004): use the acquisition method3. Application of the Acquisition Method1

13、) the acquisition method follows the cost principle for recording a business combination cost is measured by the cash disbursed, the fair value of property given up, or the fair value of securities issued. This is fair value rule. goodwill may be recognized. the income of the acquired company is inc

14、luded only after the date of B.C. the retained earnings of the acquired firm is not carried forward to the acquiring entity.2) costs of B.C. direct costs of registering and issuing securities are charged against additional paid-in capital. other direct costs and other indirect costs of combining are

15、 expensed. illustrations (p.23-24)3) cost allocation procedures determine the fair values of all identifiable tangible and intangible assets acquired and liabilities assumed. include: - identifiable intangibles resulting from legal or contractual rights, or separable from the entity - research and d

16、evelopment in process - contractual and some noncontractual contingencies use fair values determined, in preferential order, by:- established market prices- present value of estimated future cash flows, discounted based on observable measures- other internally derived estimations exceptions to fair

17、value rule - deferred tax assets and liabilities FASB Statement No. 109 and FIN No. 48- pensions and other benefits FASB Statement No. 158- operating and capital leases FASB Statement No. 13 and FIN. No. 21- goodwill on the books of the acquired firm is assigned no value. 4) recognition and measurem

18、ent of the acquiring firm first, fair values are assigned to all identifiable tangible and intangible assets acquired and liabilities assumed. - a list of intangible assets that meet the criteria for recognition. (P.26) - intangible assets must meet either a separability or a contractual-legal crite

19、rion. if cost is greater than fair value of the identifiable net assets acquired, the excess cost is assigned to goodwill. if fair value is greater than cost, the excess fair value is recognized as a gain from bargain purchase 5) contingent consideration in a purchase B.C. contingent consideration i

20、s an additional payment made to the previous stockholders of the acquired company contingent on future events or transactions. the contingent consideration may include the distribution of cash, other assets, or the issuance of debt or equity securities. contingent consideration that is determinable

21、at the date of acquisition is recorded as part of the combination cost. contingent consideration that is not determinable at the date of acquisition is recorded when the contingency is resolved and the consideration is issued or becomes issuable. a contingency involving future earnings levels is rec

22、ognized at fair market value as an additional cost of the acquired company. if the contingency is based on security prices, the recorded cost of the acquired company should not change. When the contingency is resolved, the fair market value of the additional consideration is applied to proportionate

23、ly reduce securities issued and recorded at the date of acquisition. illustration G and H 4. The Goodwill Controversy1) goodwill is defined as the excess of the investment cost over the fair value of assets received and is no longer amortized for financial reporting purposes. 2) firms must periodica

24、lly assess goodwill for impairment in its value. An impairment occurs when the recorded value of goodwill is greater than its fair value. when an impairment occurs, firms must write down goodwill to a new estimated amount and record a loss in calculating net income of a period. the treatment of good

25、will has not retroactively changed, but firms will cease amortizing all previously recorded goodwill. goodwill and all other intangibles that have indefinite useful lives will be periodically reviewed and adjusted for value impairment. impairment losses on goodwill and all other intangibles will be

26、considered a loss due to a change in accounting principle the first time it is recognized. 3) the standard also redefines the reporting entity in accounting for intangible assets. Firms will treat goodwill and other intangible assets as assets of the business reporting unit. these intangible assets

27、will be reported based on their fair value at acquisition date. 4) internally developed intangibles that are not specifically identifiable, have indeterminate lives, or are inherent in a continuing business related to the entity will not be recognized as an asset, but expensed (the same treatment wi

28、ll continue for acquired research and development costs).5) recognizing and measuring impairment losses related to goodwill, a two-step processstep one compares book values to fair values at the business reporting unit level. If fair value is less than book value, an impairment has occurred. step tw

29、o measures the impairment. The loss cannot exceed the book value of the goodwill. Previously recognized impairment losses cannot be reversed.the impairment test is conducted at least annually.6) amortization versus non-amortization amortization is required for intangible assets with a finite useful

30、life. the method of amortization should reflect the expected pattern of consumption of the economic benefits of the asset. if a pattern is not determinable, straight-line amortization is acceptable. firms will not amortize intangibles with an indefinite life that cannot be estimated. Like goodwill,

31、these assets should be periodically evaluated for possible impairments. 5. Disclosure of B.C.(P.31-33)6. SARBANES-OXLEY ACT OF 20021) the new rules focus primarily on corporate governance, auditing, and internal control issues.2) the law has far-reaching implications for accounting and auditing prof

32、essions (P.33-34).7. China CAS 201) B.C. under non-identical control: the acquisition method.2) B.C. under identical control: the method similar to the pooling of interests.Chapter 2 Accounting for Stock Investmentadditional readings: CAS 1. Fair Value/Cost Method and Equity Method11. Fair value/Cos

33、t method1) characteristics records an investment at cost recognizes dividend in excess of earnings are considered as a return of investment (reduction of investment) 2) conditions for cost method no ability to influence: 20% ownership testIf the stock is marketable, the investment should be accounte

34、d for at fair value12. Equity method1) characteristics initially records an investment at cost recognizes the share of the investees earnings as income dividends received reduce the carrying amount of the investment adjusts the investment account to recognize the share of the investees earnings afte

35、r the date of acquisition, by * eliminating unrealized gains and losses * amortizing the FMV-BV differential incomplete equity method vs. equity methodnote: equity method goodwill shall not be tested for impairment. 2) conditions for equity method significant influence over the financial and operati

36、ng policies of the investee, indicated by * representation on the board of directors * participation in policy making processes * material intercompany transaction * interchange of managerial personnel * technological dependency 2050% ownership (US) control the financial and operating policies of th

37、e investee: over 50% ownership if no influence or control, even more than 20% or 50% ownership interest held, only cost method is used13. Comparison of cost method to equity method percentage of outstanding voting stock acquired0% 20% 50% 100%1. level of economic influence | nominal |sig. influence|

38、 control |2. valuation basis | cost m. | equity method |3. balance sheet presentation | investment account | CFS |illustration (P46-47)2. Equity Method (One-line Consolidation)21. Equity method and full consolidation1) one-line consolidation investment account is reported in a single amount on one l

39、ine of the investors B/S investment income is reported in a single amount on one line of the investors I/S2) exceptions for one-line consolidation extraordinary items cumulative effect of an accounting change effect of discontinued operations prior period adjustment illustration: p.57-583) full cons

40、olidation investment account is replaced by investees assets and liabilities in consolidated B/S investment income is replaced by investees revenue and expenses in consolidated I/S Ps income and owners equity under equity method are as same as those in the CFS 4) illustration assumptions* no cost-BV

41、 differential * no intercompany transactionTable 2-1: Balance Sheet P (equity m) S (80%) Consolidated E.Other assets 520 200 720Investment in S 80 - - total assets 600 200 720 Liabilities 100 100 200Minority interest - - 20Owners equity 500 100 500 total equity 600 200 720Table 2-2: Income Statement

42、 P (ex. S) S (80%) P (e.m) C. E.Sales 100 30 100 130Cost of sales 50 10 50 60Gross profit 50 20 50 70 Other expenses 20 10 20 30Operating income 30 10 30 40Income from S - - 8 -Income before MII - - - 40MI income - - - (2)Net income 30 10 38 38 the difference between the two procedures stems from *

43、consolidated statements focus on economic entity* equity method focuses on parent (investor) company22. Application of the equity method 1) equity method at acquisition valuation: FMV of considerations given up equity securities exchange: registration and issuance costs are charged against addl PIC

44、other direct costs are added to the acquisition cost 2) assignment and amortization of cost-BV differentials FMV-BV differential: be assigned to related assets and liabilities cost-FMV differential: goodwill or negative goodwill if BVcost, check whether assets are overvalued examples: p.4853 3) disc

45、losures for equity investees the name of each investee and ownership percentage accounting policies of stock investment cost-BV differential and accounting for the differential related party transactions (p.58-60) other important information3. Interim Acquisition of an Investment Interest31. Determi

46、nation of the underlying equity1) investees stockholders equity= beginning balance + income earned from year beginning to acquisition date-dividends declared during the period underlying equity=investees stockholders equity%2) basic assumptioninvestees income is earned evenly thru. the year32. Deter

47、mination of the investment income1) investment income = investees income realized from the acquisition date to the year end %+/- amortization of FMV-BV differential33. Stock purchases directly from the investee1) the number of shares increases when investor purchases stock directly from the investee

48、2) interest % = shares acquired total shares after acquisition4. Changes in Ownership Interest41. From cost method to equity method Par.19m of APB opinion No. 18 requires retroactive application of the equity method of accounting when an investors ownership interest reaches 20%1) to convert the inve

49、stment cost to an equity basis investees undistributed earnings amortization of FMV-BV differential 42. From equity method to cost method1) discontinuation of the equity method2) no adjustment to investment cost5. Equity Method Investments1) many of the rules regarding goodwill from business combina

50、tions (parent acquiring a controlling interest in a subsidiary) also apply to goodwill arising from use of the equity method2) one notable exception is the rule regarding goodwill impairments impairment tests for equity investments continue to follow guidance from APB Opinion No. 18 which require im

51、pairment tests be performed based on fair value versus book value of the investment taken as a whole. Assumptions and Summary of the chapter: p.64 and 65Chapter 2 Accounting for Stock Investmentadditional readings: CAS 1. Fair Value/Cost Method and Equity Method11. Fair value/Cost method1) character

52、istics records an investment at cost recognizes dividend in excess of earnings are considered as a return of investment (reduction of investment) 2) conditions for cost method no ability to influence: 20% ownership testIf the stock is marketable, the investment should be accounted for at fair value1

53、2. Equity method1) characteristics initially records an investment at cost recognizes the share of the investees earnings as income dividends received reduce the carrying amount of the investment adjusts the investment account to recognize the share of the investees earnings after the date of acquis

54、ition, by * eliminating unrealized gains and losses * amortizing the FMV-BV differential incomplete equity method vs. equity methodnote: equity method goodwill shall not be tested for impairment. 2) conditions for equity method significant influence over the financial and operating policies of the i

55、nvestee, indicated by * representation on the board of directors * participation in policy making processes * material intercompany transaction * interchange of managerial personnel * technological dependency 2050% ownership (US) control the financial and operating policies of the investee: over 50%

56、 ownership if no influence or control, even more than 20% or 50% ownership interest held, only cost method is used13. Comparison of cost method to equity method percentage of outstanding voting stock acquired0% 20% 50% 100%1. level of economic influence | nominal |sig. influence| control |2. valuati

57、on basis | cost m. | equity method |3. balance sheet presentation | investment account | CFS |illustration (P46-47)2. Equity Method (One-line Consolidation)21. Equity method and full consolidation1) one-line consolidation investment account is reported in a single amount on one line of the investors

58、 B/S investment income is reported in a single amount on one line of the investors I/S2) exceptions for one-line consolidation extraordinary items cumulative effect of an accounting change effect of discontinued operations prior period adjustment illustration: p.57-583) full consolidation investment

59、 account is replaced by investees assets and liabilities in consolidated B/S investment income is replaced by investees revenue and expenses in consolidated I/S Ps income and owners equity under equity method are as same as those in the CFS 4) illustration assumptions* no cost-BV differential * no i

60、ntercompany transactionTable 2-1: Balance Sheet P (equity m) S (80%) Consolidated E.Other assets 520 200 720Investment in S 80 - - total assets 600 200 720 Liabilities 100 100 200Minority interest - - 20Owners equity 500 100 500 total equity 600 200 720Table 2-2: Income Statement P (ex. S) S (80%) P