DEDICATION TO Our wives, Donna, Enid, and Mary, for their love, support, and encouragement DIRECTOR Michael McDonald ACQUISITIONS EDITOR Veronica Visentin SENIOR MANAGER Emily Marcoux ASSOCIATE DEVELOPMENT EDITOR Courtney Jordan EDITORIAL SUPERVISOR Terry Ann Tatro SENIOR CONTENT MANAGER Dorothy Sinclair SENIOR PRODUCTION EDITOR Jane Lee Kaddu MARKET DEVELOPMENT MANAGER Chris DeJohn SENIOR DESIGNER Maureen Eide SENIOR PHOTO EDITOR Mary Ann Price EDITORIAL ASSISTANT Anna Durkin MARKETING ASSISTANT Ashley Migliaro COVER PHOTO © saytong suksaeng/Shutterstock CHAPTER OPENER PHOTO © saytong suksaeng/Shutterstock This book was set in STIX by Aptara®, Inc. and printed and bound by Markono Print Media and printed in Singapore. The cover was printed by Markono Print Media and printed in Singapore. This book is printed on acid-free paper.
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To order books or for customer service, please call 1-800-CALL WILEY (225-5945). ISBN-13: 978-1-119-37300-1 The inside back cover will contain printing identifi cation and country of origin if omitted from this page. In addition, if the ISBN on the back cover diff ers from the ISBN on this page, the one on the back cover is correct. Printed in Singapore 10 9 8 7 6 5 4 3 2 1 Contents CHAPTER 1 Financial Reporting and Accounting Standards CHAPTER 2 Conceptual Framework for Financial Reporting CHAPTER 3 The Accounting Information System CHAPTER 4 Income Statement and Related Information CHAPTER 5 Statement of Financial Position and Statement of Cash Flows CHAPTER 6 Accounting and the Time Value of Money CHAPTER 7 Cash and Receivables CHAPTER 8 Valuation of Inventories: A Cost-Basis Approach CHAPTER 9 Inventories: Additional Valuation Issues CHAPTER 10 Acquisition and Disposition of Property, Plant, and Equipment CHAPTER 11 Depreciation, Impairments, and Depletion CHAPTER 12 Intangible Assets CHAPTER 13 Current Liabilities, Provisions, and Contingencies CHAPTER 14 Non-Current Liabilities CHAPTER 15 Equity CHAPTER 16 Dilutive Securities and Earnings per Share CHAPTER 17 Investments CHAPTER 18 Revenue Recognition CHAPTER 19 Accounting for Income Taxes CHAPTER 20 Accounting for Pensions and Postretirement Benefits CHAPTER 21 Accounting for Leases CHAPTER 22 Accounting Changes and Error Analysis CHAPTER 23 Statement of Cash Flows CHAPTER 24 Presentation and Disclosure in Financial Reporting Appendix A Specimen Financial Statements: Marks and Spencer Group plc Appendix B Specimen Financial Statements: adidas AG Appendix C Specimen Financial Statements: Puma Group Index EULA From the Authors Globalization is occurring rapidly.
As economic and other interactions increase among countries, capital markets must provide high-quality financial information. A need therefore exists for high-quality financial reporting standards that meet this objective. Fortunately, International Financial Reporting Standards (IFRS) has broad international acceptance, being used in some form by more than 115 countries around the world. One securities regulator noted that IFRS is best positioned to serve as the single set of high- quality accounting standards.
Change Is the Only Constant Most countries want rapid action related to the acceptance of IFRS. A number of countries have already switched from their own version of accounting standards to IFRS. Students and instructors need educational materials related to IFRS in order to meet this new challenge. Our objective in revising Intermediate Accounting, IFRS Edition, was therefore to continue to provide the tools needed to understand what IFRS is and how it is applied in practice.
The emphasis on fair value, the proper accounting for financial instruments, and the new developments related to leasing, revenue recognition, and financial statement presentation are examined in light of current practice. In addition, given the rapid changes taking place, we provide and discuss the new Conceptual Framework to understand how these issues will likely be resolved in the future. “If this textbook helps you appreciate the challenges, worth, and limitations of financial reporting, if it encourages you to evaluate critically and understand financial accounting concepts and practice, and if it prepares you for advanced study, professional examinations, and the successful and ethical pursuit of your career in accounting or business in a global economy, then we will have attained our objectives.” A Look at Global Accounting While IFRS has achieved broad acceptance, not all countries have adopted it. companies still follow U.
generally accepted accounting principles (U. GAAP) in preparing their financial statements. In fact, the differences between IFRS and U. GAAP may provide certain companies with a competitive advantage, so understanding these differences may be important in analyzing company performance.
In addition, the IASB and the FASB are working together to converge their standards as appropriate. Accordingly, we have included a Global Accounting Insights section at the end of selected chapters, to highlight the important differences that remain between IFRS and U. GAAP, as well as the ongoing joint convergence efforts to resolve them. As a result, students truly gain a global accounting education by studying this textbook.
Intermediate Accounting Works Intermediate Accounting, Sixteenth Edition (based on U. GAAP) is the market-leading textbook in providing the tools needed to understand what U. GAAP is and how it is applied in practice. With this IFRS Third Edition, we strive to continue to provide the material needed to understand this subject area using IFRS.
The book is comprehensive and up-to-date, and provides the instructor with flexibility in the topics to cover. We also include proven pedagogical tools, designed to help students learn more effectively and to answer the changing needs of this course. We are excited about Intermediate Accounting, IFRS Third Edition. We believe it meets an important objective of providing useful information to educators and students interested in learning about IFRS.
Suggestions and comments from users of this textbook will be appreciated. Please feel free to e-mail any one of us at AccountingAuthors@yahoo. Kieso Somonauk, Illinois Jerry J. Weygandt Madison, Wisconsin Terry D.
Warfield Madison, Wisconsin Author Commitment DON KIESO Donald E. Kieso, PhD, CPA, received his bachelor's degree from Aurora University and his doctorate in accounting from the University of Illinois. He has served as chairman of the Department of Accountancy and is currently the KPMG Emeritus Professor of Accountancy at Northern Illinois University. He has public accounting experience with Price Waterhouse & Co.
(San Francisco and Chicago) and Arthur Andersen & Co. He has done post-doctorate work as a Visiting Scholar at the University of California at Berkeley and is a recipient of NIU's Teaching Excellence Award and four Golden Apple Teaching Awards. Professor Kieso is the author of other accounting and business books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Illinois CPA Society. He has served as a member of the Board of Directors of the Illinois CPA Society, then AACSB's Accounting Accreditation Committees, the State of Illinois Comptroller's Commission, as Secretary-Treasurer of the Federation of Schools of Accountancy, and as Secretary-Treasurer of the American Accounting Association.
Professor Kieso is currently serving on the Board of Trustees and Executive Committee of Aurora University, as a member of the Board of Directors of Kishwaukee Community Hospital, and as Treasurer and Director of Valley West Community Hospital. From 1989 to 1993, he served as a charter member of the National Accounting Education Change Commission. He is the recipient of the Outstanding Accounting Educator Award from the Illinois CPA Society, the FSA's Joseph A. Silvoso Award of Merit, the NIU Foundation's Humanitarian Award for Service to Higher Education, a Distinguished Service Award from the Illinois CPA Society, and in 2003 an honorary doctorate from Aurora University.
JERRY WEYGANDT Jerry J. Weygandt, PhD, CPA, is Arthur Andersen Alumni Emeritus Professor of Accounting at the University of Wisconsin— Madison. He holds a Ph. in accounting from the University of Illinois.
Articles by Professor Weygandt have appeared in The Accounting Review, Journal of Accounting Research, Accounting Horizons, Journal of Accountancy, and other academic and professional journals. These articles have examined such financial reporting issues as accounting for price-level adjustments, pensions, convertible securities, stock option contracts, and interim reports. Professor Weygandt is author of other accounting and financial reporting books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Wisconsin Society of Certified Public Accountants. He has served on numerous committees of the American Accounting Association and as a member of the editorial board of the Accounting Review; he also has served as President and Secretary-Treasurer of the American Accounting Association.
In addition, he has been actively involved with the American Institute of Certified Public Accountants and has been a member of the Accounting Standards Executive Committee (AcSEC) of that organization. He has served on the FASB task force that examined the reporting issues related to accounting for income taxes and served as a trustee of the Financial Accounting Foundation. Professor Weygandt has received the Chancellor's Award for Excellence in Teaching and the Beta Gamma Sigma Dean's Teaching Award. He is on the board of directors of M & I Bank of Southern Wisconsin.
He is the recipient of the Wisconsin Institute of CPA's Outstanding Educator's Award and the Lifetime Achievement Award. In 2001, he received the American Accounting Association's Outstanding Educator Award. TERRY WARFIELD Terry D. Warfield, PhD, is the PwC Professor in Accounting at the University of Wisconsin—Madison.
from Indiana University and a Ph. in accounting from the University of Iowa. Professor Warfield's area of expertise is financial reporting, and prior to his academic career, he worked for five years in the banking industry. He served as the Academic Accounting Fellow in the Office of the Chief Accountant at the U.
Securities and Exchange Commission in Washington, D. Professor Warfield's primary research interests concern financial accounting standards and disclosure policies. He has published scholarly articles in The Accounting Review, Journal of Accounting and Economics, Research in Accounting Regulation, and Accounting Horizons, and he has served on the editorial boards of The Accounting Review, Accounting Horizons, and Issues in Accounting Education. He has served as president of the Financial Accounting and Reporting Section, the Financial Accounting Standards Committee of the American Accounting Association (Chair 1995–1996), and on the AAA-FASB Research Conference Committee.
He also served on the Financial Accounting Standards Advisory Council of the Financial Accounting Standards Board, and he currently serves as a trustee of the Financial Accounting Foundation. Professor Warfield has received teaching awards at both the University of Iowa and the University of Wisconsin, and he was named to the Teaching Academy at the University of Wisconsin in 1995. Professor Warfield has developed and published several case studies based on his research for use in accounting classes. These cases have been selected for the AICPA Professor-Practitioner Case Development Program and have been published in Issues in Accounting Education.
What's New? This IFRS Third Edition expands our emphasis on student learning and improves upon a teaching and learning package that instructors and students have rated the highest in customer satisfaction. Based on extensive reviews, focus groups, and interactions with other intermediate accounting instructors and students, we have developed a number of new pedagogical features and content changes, designed both to help students learn more effectively and to answer the changing needs of the course. Wiley Engage Wiley Engage for Intermediate Accounting: IFRS Third Edition is an innovative, dynamic online environment—designed to help you administer your course in a personalized way. Utilizing Wiley Engage in your course provides you with the following tools and resources to create and manage effective activities and assessment strategies: Complete online version of the textbook for seamless integration of all content.