高级财务会计 陈信元 Introduction and chapter 1

1、1. 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 accounting theories and methods in

2、specific industries and transactions is described.11/29/202112. 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 topics 3. references flo

3、yd a. beams: advanced accounting, 10th ed. 2009 legal requirements, accounting standards (cas, 2006) and systems in prc11/29/2021211/29/20213additional readings: cas no.201. concepts, reasons and legal form of b.c.11. concepts1) definitions general meaning: the union of business entities fasb statem

4、ent no. 141: p.21 of textbook2) characteristics the economic entity is formed one single management team control11/29/20214 3) classification horizontal integration vertical integration conglomeration12. reasons1) profitability2) operating efficiencies3) diversification of business risksbusiness exp

5、ansion thru. combination or construction ? cost advantage lower risk fewer operating delays avoidance of takeovers intangible assets acquisition tax advantages11/29/20215 13. legal form of b.c.1) merger acquisition of net assets the acquiring company continues to be a sle. the acquired company cease

6、s to exist as a sle, and its books are closed. 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 = c11/29/202163) acquisition

7、majority (50%) equity interest acquisition the position 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 c

8、ombinations are reviewed by federal agencies. 2) state agencies review business combinations for possible violations of state statutes. 11/29/2021711/29/20218 prior combinations accounted for by the pooling of interests method will be allowed to continue as acceptable financial reporting practice fo

9、r past business combinations.5) principal reasons for eliminating the pooling of interests method pooling provides less relevant information to users pooling ignores economic value exchanged in the transaction and makes subsequent performance evaluation impossible comparing firms using the alternati

10、ve methods is difficult for investors.6) ifrs 3 (2004): use the acquisition method11/29/202193. application of the acquisition method1) 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,

11、or the fair value of securities issued. this is fair value rule. goodwill may be recognized. the income of the acquired company is included only after the date of b.c. the retained earnings of the acquired firm is not carried forward to the acquiring entity.11/29/2021102) costs of b.c. direct costs

12、of registering and issuing securities are charged against additional paid-in capital. other direct costs and other indirect costs of combining are expensed. illustrations (p.23-24)3) cost allocation procedures determine the fair values of all identifiable tangible and intangible assets acquired and

13、liabilities assumed. include: - identifiable intangibles resulting from legal or contractual rights, or separable from the entity - research and development in process - contractual and some noncontractual contingencies11/29/202111 11/29/2021124) recognition and measurement of the acquiring firm fir

14、st, 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 criterion. if cost is greater than

15、 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 11/29/2021135) contingent consideration in a purchase b.c. contingent consideration is an additional p

16、ayment 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 at the date of ac

17、quisition 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. 11/29/202114 a contingency involving future earnings levels is recogni

18、zed 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 proportionately r

19、educe securities issued and recorded at the date of acquisition. illustration g and h 11/29/20211511/29/20211611/29/2021174) 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 r

20、ecognized as an asset, but expensed (the same treatment will continue for acquired research and development costs).5) recognizing and measuring impairment losses related to goodwill, a two-step processlstep one compares book values to fair values at the business reporting unit level. if fair value i

21、s less than book value, an impairment has occurred. lstep two measures the impairment. the loss cannot exceed the book value of the goodwill. previously recognized impairment losses cannot be reversed.lthe impairment test is conducted at least annually.11/29/2021186) amortization versus non-amortization amortization is required for intangible assets with a finite useful life. the method of amortization should reflect the expected pattern of consumpt