ACC 927 Intermediate Financial Accounting II is the second of two intermediate financial accounting courses that expand on the knowledge acquired in the Introductory Accounting course. Students will study and review the accounting process, function, and reporting as it relates to the significant liability and equity accounts of the balance sheet, and related significant income statement accounts.
This course will focus on the current financial reporting requirements and practices for liabilities and shareholders’ equity for companies reporting under IFRS and PE GAAP (ASPE) standards. Financial accounting focuses on providing information useful to external decision makers, primarily investors and creditors. As you progress through the course, keep in mind how the topic being covered promotes this goal. If the financial information provided by accountants loses this focus, financial information is rendered useless. Financial standards help guide the preparer in providing useful information. By January 2011 publicly traded companies are required to follow International Financial Reporting Standards (IFRS). These standards are included in the new five part CICA Handbook, specifically under Part I. The text used in this course embodies these standards and also compares them to the accounting standards for private enterprises (ASPE). Private enterprises will follow a simpler, but similar, set of standards as outlined in the CICA Handbook, Part II. Intermediate Financial Accounting II focuses primarily on public companies, though we will occasionally point out requirements for private companies as well when appropriate. Over the last several years, many of the standards in the CICA Handbook (included for the time being as Part V of the CICA Handbook) have been converging with IFRS so the impact of the new standards is not as great as you might expect.
Each of the chapters in your text compares IFRS and private enterprise GAAP as well as outlines accounting issues still expected to be undergoing changes. Understanding this section will help keep you aware of changes in accounting standards, why they are being proposed, and problems in implementation.
For your information, the remaining two parts of the new CICA Handbook cover Accounting for Pensions and Accounting for Not for Profits. These parts will not be studied in this course, but you will explore them in subsequent courses.
ACC 927 Intermediate Financial Accounting II concentrates on four major topic areas:
- Liabilities and Equity
- Income Taxes and Earnings per Share
- Pensions and Leases
- Cash Flow Statement and Other Accounting Issues
Liabilities and Equity reviews the basic definitions, classification, and accounting of liability and equity accounts. Basic types of liabilities are reviewed, and the accounting for contingent and non-financial liabilities is covered in depth. The student will study the valuation, classification, and derecognition of long term debt. The corporate form of business organization is reviewed and accounting for issues involving shareholders equity, including its presentation, share transactions, and dividend payments is explored. Students will be introduced to complex financial instruments and stock option plans.
In the topics on Earnings per Share (EPS), the usefulness and calculation of EPS and diluted EPS will be studied for simple and complex capital structures respectively. In the study of Income Taxes, the student will be introduced to the differences between accounting net income and taxable income and how to accurately calculate tax expenses, assets and liabilities based on these differences. Other tax issues, such as loss carry overs and intraperiod tax allocation reporting are also introduced.
The topic on Pensions and Leases will introduce students to reporting and accounting for liabilities that require considerable professional judgment to report accurately. Issues regarding the measurement, recording, classification, presentation, and disclosure related to these two liabilities are explored at length. Students will focus primarily on defined benefit plans for pensions, and on the differences between operating and capital leases for both the lessor and the lessee.
The Cash Flow Statement (also called the Statement of Cash Flows) and its usefulness will be studied using both the direct and indirect method. Changes in accounting policy, changes in accounting estimates, and a correction of an error in a prior period and the effect of these changes or errors on financial statements will be explored. A variety of other measurement and disclosure issues, such as those related to subsequent events and related party transactions, will be discussed.
Lecture notes are provided in each module to supplement the text reading. Read only those text pages referenced in the notes because not all topics or appendixes in the text are included. Examples to supplement your understanding of the concepts studied in the course are found in The Study Guide to Accompany Intermediate Accounting and you will be directed to complete specific examples in the Guide. However, the Guide provides other examples, tools, hints and suggestions that you will find useful in your study of Intermediate Financial Accounting.