Financial Accounting

1 Financial Accounting Theory and Analysis Text and Cases 12 th Edition By Richard G. Schroeder Myrtle W. Clark Jack M. Cathey Solutions Manual For Part 1: Solution Manual: Page 1-334 Part 2: Web Case Solutions: page

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2 Using the Codification to Solve the FASB ASC Cases Prior to attempting to use the codification website to solve the FASB ASC cases, it is recommended that you read “Test Driving the Codification,” by Carolyn Ford and C.William Thomas, Journal of Accountancy, December, 2008. Available at http://www.journalofaccountancy.com/Issues/2008/Dec/TestDrivingtheCodification.htm and review the tutorials on the codification website.Overview of the Codification The Financial Accounting Standards Board codification (FASB ASC) is organized into general topics listed on the left-hand side of the home page (General Principles, Presentation, etc.). Clicking on any of the general topics will bring up what the FASB terms a “landing page.” Each landing page contains a list of sub topics for that link. For example, clicking on the general topic Assets brings up list of seven sub topics (Cash and Cash Equivalents, Receivables, etc.). Notice that each of the subtopics is identified by a three-digit number.This allows for access via the go to function that we will discuss later.Clicking on any of the subtopics brings up a second link to what are termed sections and contain the content specific area of the FASB ASC. All Subtopics have a set of standard Sections unless there is nothing to include in a particular standard section, in which case that standard Section is left out of the Subtopic and therefore the FASB ASC. There are sixteen standard Sections for each Subtopic. Sections are indicated by a two-digit number between 00 and 99. Some of the most frequently used sections are: 25 Recognition, 30 Initial Measurement 35 Subsequent Measurement, 50 Disclosure and Implementation Guidance and Instructions.Each Section has Paragraph numbers that start over at the beginning of each Section. Each Paragraph, therefore, has a two-part number. The first number is the Section number, and the second part is the Paragraph number within that Section. The Paragraphs are where “substantive content” of the FASB ASC is found. The rest of the levels only exist to organize the information in the Paragraphs and help navigate to the information contained in them. In order to view the specific content areas, it is necessary to click on the JOIN ALL SECTIONS tab found on each section page. For example, assume we are interested in the authoritative literature on accounting for sales of products when a right to return exists. First, click on the topic Revenue at the left- hand side of the home page, then on the landing page Revenue Recognition. Next, click on the products subsection. Finally click the JOIN ALL SECTIONS tab and all of the paragraph content will appear. Page down through the material and you will find that Paragraph 25-1 contains the authoritative guidance for accounting for sales of products with a right to return.The home page also gives other options for navigating the FASB ASC. Two of these are the SEARCH function and the GO TO option. We have found that using these functions is an easy way to start navigating the FASB ASC. To use the search method of navigating the FASB ASC, first, type the general topic in the search box at the top Part 1 2 / 4

3 right of the FASB ASC home page. This will give you some references to specific FASB ASC sections where the topic is discussed.Choose the section that seems most appropriate and type the reference number in the GO TO box at the top left-hand side of the FASB ASC homepage. Once you are redirected to the desired section, click combine sections and all of the information on the topic will be displayed. You can then browse through the material to find the appropriate subsection that addresses the case issue. Let’s use this option to find the authoritative literature on accounting for sales of products with a right to return Type “right to return,” in the search box at the top right of the FASB ASC web page. You will get references to the place where this issue is discussed. Seven possibilities appear, but in reviewing we see that the criteria are contained in 605-15-25-1. Type this number in the box next to the GO TO link at the top left-hand side of the FASB ASC homepage. This will redirect you to the content specific paragraph that discusses accounting for sales of products where a right of return exists. (Note: in some searches you may be redirected to the section outline. If so, click the JOIN ALL SECTIONS tab and all of the paragraph content will appear.If the issue involves accessing a previous specific pronouncement, it is also possible to access the topic through the cross reference function. On the home page, select Cross Reference. This feature allows you to access the relevant FASB ASC section by citing the original source. To use this feature, first access the drop down menu under Standard Type. (Standard Type refers to the authoritative body that originally issued the pronouncement. For example, the Financial Accounting Standards Boards uses the acronym FAS. A discussion of the acronyms for the various standard types is contained through a link in the directions). Next, use the drop down menu under standard number and choose the appropriate number. Then click GENERATE REPORT. When the results appear, click on the first paragraph number at the far right side. Next, click on the 3-digit topic at the top under Table of Contents. When the results appear, click and expand and all of the subtopics will appear. Choose the subtopic you wish to view and then combine sections and the relevant authoritative literature will be displayed.For example, to answer case 9-3, choose FAS from the drop down Standard Type menu. Then choose 143 from the standard number drop down menu. (Please note that the standard number for asset retirement obligations was misidentified in the case. It should be 143 not 144). Click on GENERATE REPORT and when the results appear, click on 05-4 on the first line under paragraph number. When the results appear, click 410 Asset Retirement and Environmental Obligations. When the results appear, the most appropriate section seems to be 20 Asset Retirement Obligations. Select it and then click the JOIN ALL SECTIONS tab and all of the paragraph content will appear.Finding original source material still contained in the Codification 3 / 4

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Several of the FASB ASC cases ask for EITF pronouncements related to a particular topic. In order to find original source material from the EITF or any other

authoritative body use the following steps:

• Find the relevant topic in the FASB ASC
• Click expand for the relevant subtopic
• Click the JOIN ALL SECTIONS tab
• From the menu select Printer-friendly with

sources

• Page through the material to find content originally sourced from the EITF

ƒ Page/Print functions

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