Table of Contents

Course Learning Objectives: 4

Chapter 1 - Income Statement: Accounting and Reporting  Section 1. 1

Revenue, Expenses, Gains, and Losses. 1

Revenues. 1

Expenses. 2

Gains and Losses. 2

Income Statement Formats. 3

Nonrecurring Gains or Losses. 5

Research and Development Costs. 8

Share-Based Payment 13

Models Used to Value Employee Share Options. 15

The Black-Scholes Option-Pricing Model 15

Lattice-Based Models. 17

Nonvested and Restricted Stock. 25

Employee Stock Purchase Plans. 26

Cash-Settled Share-Based Liability Awards. 26

Share-Based Compensation Plan Disclosures. 27

Microsoft 28

Tax Aspects. 31

Deferred Compensation Arrangements. 31

Advertising Costs. 32

Sales Incentives. 32

Insurance Costs. 33

Life Insurance. 33

Casualty Insurance. 34

Business Interruption Insurance. 36

Restructuring Charges. 37

Costs Associated With Exit or Disposal Activities. 37

Website Development Costs. 38

Income Statement Presentation Starting with Income from Continuing Operations. 38

Chapter 1  Section 1 Review Questions. 40

Chapter 1 - Income Statement: Accounting and Reporting  Section 2. 41

Discontinued Operations and Related Disposal of Long-Lived Asset Considerations. 41

Exceptions to the One-Year Requirement That Must Exist for Held-for-Sale Classification. 42

Other Held-for-Sale Considerations. 43

Held-for-Sale Measurement Considerations. 43

Changing the Decision to Sell 44

Discontinued Operations. 45

Classification as a Discontinued Operation. 45

Reporting the Gain or Loss from Operations of the Discontinued Component 46

Reporting and DisclosureLong-Lived Asset or Disposal Group That Has Been Sold or Is Classified For Sale 48

Earnings per Share. 48

Basic Earnings per Share. 49

Diluted Earnings per Share. 52

Antidilutive Securities. 55

Share-Based Payment Transactions. 56

Earnings per Share and Specialized Disclosures on the Income Statement 56

Business Combinations. 56

Disclosures. 56

Chapter 1  Section 2 Review Questions. 58

Chapter 1 - Income Statement: Accounting and Reporting  Section 3. 60

Comprehensive Income. 60

Disclosures Associated with Operations. 64

Change in Accounting Principle. 64

Change in Accounting Estimate. 67

Personal Financial Statements. 69

Chapter 1  Section 3 Review Questions. 73

Review Question Answers. 75

Chapter 1  Section 1 Review Questions Feedback. 75

Chapter 1  Section 2 Review Questions Feedback. 78

Chapter 1  Section 3 Review Questions Feedback. 83

Glossary. 87

Index. 90

Final Examination. 92