xvi PREFACE What’s New in the Eighth Edition? Revising a program as successful as Intermediate Accounting takes careful consideration and a strong vision of what a textbook and digital solution should be. New features aren’t piled on for their own sake; the Spiceland team only implements changes that constitute real improvements that have been identifi ed through extensive research with users. The result is a program that never loses its original strengths as it gains in usefulness and fl exibility with each revision. Pervasive changes throughout the program include updating and revising all real-world illustrations, amounts and discussions involving Dell to PetSmart; revising the Air France-KLM IFRS case to refl ect fi nancial statements for the year ended December 31, 2013; and updating and revising all real-world illustrations, amounts and discussions involving other companies in the text and end-of-chapter material. Chapter 1 ENVIRONMENT AND THEORETICAL STRUCTURE OF FINANCIAL ACCOUNTING • Changed opening case to introduce PetSmart, and featured PetSmart throughout chapter. • Updated discussion of the convergence process to refl ect latest SEC reports and decisions. • Included Additional Consideration box introducing the Private Company Council and private company exceptions to GAAP. • Modifi ed the discussion of fi nancial reporting concepts to refl ect the new revenue recognition standard. • Added Where We’re Headed box to discuss the FASB’s exposure draft on disclosure. • Revised Real World Case to show current fi nancial statements from The Gap, Inc. Chapter 2 REVIEW OF THE ACCOUNTING PROCESS • Added assignment materials on adjusting entries. Chapter 3 THE BALANCE SHEET AND FINANCIAL DISCLOSURES • All real-world illustrations, amounts, and discussion throughout involving other companies were updated to include most recent amounts. • Revised the section on usefulness and limitations of the balance sheet. • Revised the section on classifi cation of balance sheet elements—assets, liabilities, and equity. • Redesigned Illustration 3–1 to show basic elements and their subclassifi cations. • Redesigned Illustration 3–2 to make the fl ow of the operating cycle more apparent. • Expanded the discussion of restricted cash in the section on cash and cash equivalents. • Updated the Where We’re Headed box on the FASB’s Financial Statement Presentation project. • Updated references throughout to AICPA Professional Standards related to auditor’s responsibilities with respect to fi nancial statements. • Replaced term “irregularities” with “fraud” in the section on noteworthy events and transactions and in the glossary. • Modifi ed the appendix on reporting segment information to include real-world analyses of Abbott Laboratories, Inc. • Modifi ed Ethics Case 3–16 to include geographic disclosure of operations in politically sensitive areas and in tax haven areas. Chapter 4 THE INCOME STATEMENT, COMPREHENSIVE INCOME, AND THE STATEMENT OF CASH FLOWS • Revised the chapter and assignment materials to incorporate the change in GAAP eliminating the extraordinary item classifi cation. • Revised the section on discontinued operations to refl ect the new FASB Accounting Standards Update. • Moved the Interim Reporting Appendix from Chapter 5 to Chapter 4 for better placement. • Added assignment materials on operating versus nonoperating income and the indirect method of presenting cash fl ows from operating activities in the statement of cash fl ows. • Added a PetSmart Analysis Case related to income statement information. Chapter 5 REVENUE RECOGNITION AND PROFITABILITY ANALYSIS • Created Parts A and B to provide comprehensive coverage of the new revenue recognition standard. Part A introduces revenue recognition at a point in time, over a period of time, and for contracts with multiple performance obligations. Part B provides in-depth coverage of the fi ve-step revenue recognition process and how it relates to various common sales arrangements. • Created all new assignment material to support coverage of the new revenue recognition standard. • Modifi ed coverage of long-term contracts, and included that material as Part C. • Modifi ed profi tability analysis discussion to analyze Costco and Walmart, and included that material as Part D. • Created an Appendix that covers GAAP that is superseded by the new revenue recognition standard, including installment and cost-recovery methods, accounting for software and other multiple-element contracts, and accounting for franchises. Chapter 6 TIME VALUE OF MONEY CONCEPTS • Replaced the introductory Financial Reporting Case to feature the role of the time value of money on Powerball winnings. • Enhanced explanations throughout the chapter on the distinction between interest rates and discount rates.
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