Contents xiii4.b. Relative versus Absolute Measures 4.c. Rules of Thumbs Used in Practice 4.d. Choosing Benchmarks 4.e. Normalizing Benchmarks 4.f. Deciding Percentages 4.g. Volatility 4.h. Industry Type 4.i. Capital Structure 4.j. Company Life Cycle 4.k. Pervasiveness 4.l. Degree of Aggregation 5. Comparative Information 5.a. Basic Period in Focus 5.b. Materiality in Prior Period 5.c. Corresponding Figures versus Comparative Financial Statements Approach 5.d. Third Statement of Financial Position 5.e. Materiality in Future Periods 5.f. Uncorrected Immaterial Misstatements Adding Up to Materiality in the Current Period 5.g. Effect of Changes of Materiality Benchmarks 5.h. Effect of Misstatement of Comparative Information 5.i. Counterbalancing and Noncounterbalancing Misstatements 5.j. Structure of the Notes 5.k. Effect on Financial and Forensic Analysis 6. Estimates 6.a. Risk of Material Misstatement of an Accounting Estimate 6.b. Inherent Level of Imprecision of an Accounting Estimate 6.c. The Linkage between Estimation Uncertainty and Materiality 6.d. Judgmental Misstatements 6.e. The Linkage between Inherent Imprecision and Misstatements 6.f. Management Bias 6.g. Effect of Materiality on Changes in Estimates 6.h. Linkage between Materiality and Sources of Estimation Uncertainty 6.i. Critical Accounting Estimates 6.j. Effect on Reliability of Materiality of a Misstatement of Estimate
Aircraft operating lease agreements typically require a lessee to perform certain activities to maintain the leased aircraft and return it to the original condition. Company practice of accounting for maintenance reserves is diverse, challenging and conflicting. The new lease standards often diverge, as FASB, 2019, Topic 842 (U.S. GAAP) rarely, if ever, capitalizes those costs as part of the right-of-use asset, while IASB, 2016, IFRS 16 generally does so. This article builds a comprehensive framework that reconciles IFRS and U.S. GAAP and finally solves issues that the IATA has so far characterized as problematic, but unfortunately academics have failed to adequately address. It also finds out that U.S. GAAP and IFRS may lead to unlike accounting for lease maintenance arrangements of different form but equivalent substance, and that there is an asymmetry between the original asset and the object of capitalization of decommissioning costs. Finally, after a thorough review of financial statements of 53 sampled airlines on the accounting for decommissioning costs and maintenance reserves, for the first time in a public document this article fully reveals the detailed findings and codifies them within an unprecedented precise comparison of U.S. GAAP and IFRS on the subject. Certain inconsistencies in accounting differently for unlike form but like substance are also noted.
appropriately structures the book so that it is useful to the large majority of introductory accounting students who will not be accounting majors. Indeed, he challenges these students to consider carefully whether modern accounting, in light of the financial turmoil that began in 2007, is meeting the needs of users of accounting information. He writes in the preface, "I believe that you have a responsibility to evaluate critically every concept you are about to learn. And I also believe that you have a responsibility to use these concepts to evaluate critically every business decision, every company, every senior manager, and every board member you encounter in your careers. I want you to decide for yourself, as your understanding of financial accounting matures, whether you think that the accounting profession is doing its job."By issuing such a challenge to his readers, the author is of course issuing a challenge to himself. If he expects students to analyze accounting so critically, he must provide them with the tools to do so, and he must stimulate their thinking along such lines. I believe he largely succeeds in this task. I have taught introductory accounting for almost 20 years, and as I read this book, I found myself continually noting particularly felicitous phrasing that I could use to crystallize concepts for my students. Professor Monger has a flair for precise, clear explanations. I also found, time and again, flow charts that I could adapt for use in my course.My primary concern with the text is its focus on IFRS, which limits its usefulness for potential U.S. adopters. Given the current pace and status of IFRS convergence with U.S. GAAP, some of the accounting standards in the book will not be appropriate for U.S. courses for at least a few years. A few obvious examples include the revaluation reserve that affects owners' equity and the complete omission of Last-In, First-Out inventory valuation. Other phrases are uncommon in the U.S., such as "scrip issue" instead of stock dividend and "diminishing balance" instead of declining balance depreciation ͑though the latter phrase is mentioned in passing͒. I do not believe these issues affect the usefulness of the text for non-U.S. users. Indeed, I do not believe they have much effect on the usefulness of the text for U.S. students who do not intend to be accounting majors. However, unless this text is paired with an IFRS-based intermediate accounting text, accounting majors in the U.S. may find the different terminology and standards confusing.The text is divided into five parts and 13 chapters. For the most part, these chapters are the ones found in any introductory text, with two significant exceptions ͑Chapters 6 and 13, discussed below͒. Part I, which includes three chapters, provides students with a general understanding of financial reports. Chapter 1, "The Financial Accounting Reporting System," answers the most basic questions: What is accounting, what are the financial statements, and what is GAAP? Chapter 2, "Accounting Standards and Ethics,"...
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