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Financial Accounting, 8th Edition PDF

1268 Pages·2016·33.208 MB·English
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Craig Deegan’s Financial Accounting 8e continues to be the market-leading and most F highly regarded product for the changing needs of today’s instructors and students. i New to this edition: n • Redesigned: content is more concise, accessible and easy to use a • Currency: comprehensive and up-to-date coverage of areas such as financial statement n presentation, the conceptual framework for financial reporting, accounting for leases, c revenue recognition, financial instruments and corporate social responsibility reporting i • Digital resources: for the first time, Financial Accounting offers a complete digital a package, including LearnSmart and SmartBook, which provide an adaptive and l individualised learning experience unique to each student A c c o Connect is proven to deliver better results for you. Proven content integrates seamlessly u with enhanced digital tools to create a personalised learning experience that provides you with n precisely what you need, when you need it. t Ensure maximum learning impact with SmartBook, the first and only adaptive reading i experience designed to change the way you read and learn. It creates a personalised reading n experience by highlighting the most impactful concepts you need to learn at that moment in time. g To learn more about McGraw-Hill SmartBook®, visit http://www.mheducation.com.au/student-smartbook 8th Edition D E E G A N (cid:44)(cid:54)(cid:37)(cid:49)(cid:3)(cid:28)(cid:26)(cid:27)(cid:20)(cid:26)(cid:23)(cid:22)(cid:26)(cid:25)(cid:23)(cid:19)(cid:21)(cid:21) (cid:3) (cid:28) (cid:26)(cid:27)(cid:20)(cid:26)(cid:23)(cid:22) (cid:26)(cid:25)(cid:23)(cid:19)(cid:21)(cid:21) www.mhhe.com/au/deegan8e deegan accounting full cover without banner.indd 1 05/13/16 11:08 AM 35.73mm spine width Financial Accounting dee64022_Prelims_i-xxiv.indd i 05/20/16 12:55 PM To my beautiful daughter Cassie for being the best daughter a dad could ever have dee64022_Prelims_i-xxiv.indd ii 05/20/16 12:55 PM Craig Deegan Financial Accounting 8e ddeeee6644002222__PPrreelliimmss__ii--xxxxiivv..iinndddd iiiiii 0055//2200//1166 1122::5555 PPMM Copyright © 2016 McGraw-Hill Education (Australia) Pty Ltd Additional owners of copyright are acknowledged in on-page credits. Every effort has been made to trace and acknowledge copyrighted material. The authors and publishers tender their apologies should any infringement have occurred. Reproduction and communication for educational purposes The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of the pages of this work, whichever is the greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the institution (or the body that administers it) has sent a Statutory Educational notice to Copyright Agency Limited (CAL) and been granted a licence. For details of statutory educational and other copyright licences contact: Copyright Agency Limited, Level 15, 233 Castlereagh Street, Sydney NSW 2000. Telephone: (02) 9394 7600. Website: www.copyright.com.au Reproduction and communication for other purposes Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Act, no part of this publication may be reproduced, distributed or transmitted in any form or by any means, or stored in a database or retrieval system, without the written permission of McGraw-Hill Education (Australia) Pty Ltd, including, but not limited to, any network or other electronic storage. Enquiries should be made to the publisher via www.mheducation.com.au or marked for the attention of the permissions editor at the address below. National Library of Australia Cataloguing-in-Publication Data Author: Deegan, Craig Michael Title: Financial accounting / Craig Michael Deegan. Edition: 8th edition. ISBN: 9781743764022 (pbk.) Notes: Includes index. Subjects: Accounting—Australia. Accounting—Standards—Australia. Financial statements—Standards—Australia. Dewey Number: 657.021894 Published in Australia by McGraw-Hill Education (Australia) Pty Ltd Level 2, 82 Waterloo Road, North Ryde NSW 2113 Product managers: Lisa Coady and Robert Ashworth Product developer: Cynthia Morali Research coordinator: Carolina Bodin Content producer: Genevieve MacDermott Permissions editor: Haidi Bernhardt Copyeditor: Alison Moore Indexer: Shelley Barons Cover design: Jane Cameron Typeset in Proxima Nova Light 10/13.5pt by SPi Global, India Printed in China on 65gsm matt art by 1010 Printing Int. Ltd dee64022_Prelims_i-xxiv.indd iv 05/20/16 12:55 PM abouT The auThor Craig Deegan CRAIG DEEGAN, BCom (University of NSW), MCom (Hons) (University of NSW), PhD (University of Queensland), FCA, is Professor of Accounting in the School of Accounting at RMIT University in Melbourne. Craig has taught at both undergraduate and postgraduate level for about three decades. Prior to working in the university sector Craig worked as a chartered accountant. His research has tended to focus on various social and environmental accountability and financial accounting issues and has been published in a number of leading international accounting journals, including: Accounting, Organizations and Society; Accounting and Business Research; Accounting, Accountability and Auditing Journal; Accounting and Finance; British Accounting Review; Critical Perspectives on Accounting; Journal of Business Ethics; Australian Accounting Review; and The International Journal of Accounting. According to Google Scholar, Craig’s work accounting journals and he has been the recipient has attracted approximately 12,000 citations making him of various teaching and research awards, including one of the most highly cited researchers internationally teaching prizes sponsored by KPMG, and the Institute of within the accounting and/or finance literature. Chartered Accountants in Australia. He was the inaugural Craig has regularly provided consulting services recipient of the Peter Brownell Manuscript Award, an to corporations, government, and industry bodies on annual research award presented by the Accounting and issues pertaining to financial accounting and corporate Finance Association of Australia and New Zealand. He social and environmental accountability, he was former was also awarded the University of Southern Queensland Chairperson of the Triple Bottom Line Issues Group of Individual Award for Research Excellence. the Institute of Chartered Accountants in Australia, for Craig is also the author of the leading financial a number of years was involved in developing the CPA accounting theory textbook, Financial Accounting Theory, Program of CPA Australia, and for many years was a now in its fourth edition. Financial Accounting Theory is judge on the Australian Sustainability Reporting Awards. widely used throughout Australia as well as in many other He is on the editorial board of a number of academic countries. abouT The auThor v dee64022_Prelims_i-xxiv.indd v 05/20/16 12:55 PM ConTenTs in brief PART 1 THE AUSTRALIAN ACCOUNTING ENVIRONMENT 1 Chapter 1 an overview of the australian external reporting environment 2 Chapter 2 The conceptual framework for financial reporting 48 PART 2 THEORIES OF ACCOUNTING 83 Chapter 3 Theories of financial accounting 84 PART 3 ACCOUNTING FOR ASSETS 139 Chapter 4 an overview of accounting for assets 140 Chapter 5 Depreciation of property, plant and equipment 180 Chapter 6 revaluations and impairment testing of non-current assets 202 Chapter 7 inventory 234 Chapter 8 accounting for intangibles 258 Chapter 9 accounting for heritage assets and biological assets 300 PART 4 ACCOUNTING FOR LIABILITIES AND OWNERS’ EQUITY 343 Chapter 10 an overview of accounting for liabilities 344 Chapter 11 accounting for leases 376 Chapter 12 accounting for employee benefits 427 Chapter 13 share capital and reserves 457 Chapter 14 accounting for financial instruments 481 Chapter 15 revenue recognition issues 548 Chapter 16 The statement of profit or loss and other comprehensive income, and the statement of changes in equity 585 Chapter 17 accounting for share-based payments 625 Chapter 18 accounting for income taxes 656 PART 5 ACCOUNTING FOR THE DISCLOSURE OF CASH FLOWS 695 Chapter 19 The statement of cash flows 696 PART 6 INDUSTRY-SPECIFIC ACCOUNTING ISSUES 741 Chapter 20 accounting for the extractive industries 742 PART 7 OTHER DISCLOSURE ISSUES 779 Chapter 21 events occurring after the end of the reporting period 780 Chapter 22 segment reporting 794 vvii ConTenTs in brief dee64022_Prelims_i-xxiv.indd vi 05/20/16 12:55 PM Chapter 23 related party disclosures 820 Chapter 24 earnings per share 839 PART 8 ACCOUNTING FOR EQUITY INTERESTS IN OTHER ENTITIES 869 Chapter 25 accounting for group structures 870 Chapter 26 further consolidation issues i: accounting for intragroup transactions 924 Chapter 27 further consolidation issues ii: accounting for non-controlling interests 966 PART 9 FOREIGN CURRENCY 1007 Chapter 28 accounting for foreign currency transactions 1008 Chapter 29 Translating the financial statements of foreign operations 1028 PART 10 CORPORATE SOCIAL-RESPONSIBILITY REPORTING 1049 Chapter 30 accounting for corporate social responsibility 1050 ONLINE CHAPTERS Chapter 31 further consolidation issues iii: accounting for indirect ownership interests Chapter 32 accounting for investments in associates and joint ventures Appendix A Present value of $1 1122 Appendix B Present value of an annuity of $1 1124 Appendix C Calculating present values 1126 ConTenTs in brief vii dee64022_Prelims_i-xxiv.indd vii 05/20/16 12:55 PM ConTenTs in fuLL about the author v Contents in brief vi Preface xvii acknowledgments xviii aaCsb statement xix how to use this book xx Digital resources xxii Credits xxiv PART 1 The ausTraLian aCCounTinG environMenT 1 CHAPTER 1 an overvieW of The ausTraLian eXTernaL rePorTinG environMenT 2 Accounting, accountability and the role of financial accounting 3 Learning objectives 2 Financial accounting defined 4 summary 43 Users’ demand for general purpose financial statements 4 Key terms 43 Sources of external financial reporting regulations 6 end-of-chapter exercises 43 The process of Australia adopting accounting standards issued review questions 44 by the International Accounting Standards Board 25 Challenging questions 44 Structure of the International Accounting Standards Board 34 references 46 International cultural differences and the harmonisation of accounting standards 37 Accounting standards change across time 38 The use and role of audit reports 38 All this regulation—is it really necessary? 39 CHAPTER 2 The ConCePTuaL fraMeWorK for finanCiaL rePorTinG 48 Australia’s use of the IASB conceptual framework 49 Learning objectives 48 What is a conceptual framework? 49 summary 78 Benefits of a conceptual framework 50 Key terms 79 Current initiatives to develop a revised conceptual framework 50 end-of-chapter exercises 79 Structure of the conceptual framework 52 review questions 79 Building blocks of a conceptual framework 54 Challenging questions 80 Measurement principles 73 references 81 A critical review of conceptual frameworks 74 The conceptual framework as a normative theory of accounting 77 viii ConTenTs in fuLL dee64022_Prelims_i-xxiv.indd viii 05/20/16 12:55 PM PART 2 Theories of aCCounTinG 83 CHAPTER 3 Theories of finanCiaL aCCounTinG 84 Introduction to theories of financial accounting 85 Learning objectives 84 Why discuss theories in a book such as this? 85 summary 126 Definition of theory 86 Key terms 127 Positive Accounting Theory 87 end-of-chapter exercises 127 Accounting policy selection and disclosure 101 review questions 128 Accounting policy choice and ‘creative accounting’ 102 Challenging questions 131 Some criticisms of Positive Accounting Theory 103 further reading 134 Normative accounting theories 105 references 134 Systems-oriented theories to explain accounting practice 109 Theories that seek to explain why regulation is introduced 122 PART 3 aCCounTinG for asseTs 139 CHAPTER 4 an overvieW of aCCounTinG for asseTs 140 Introduction to accounting for assets 141 Learning objectives 140 Numbering of Australian Accounting Standards 141 summary 173 Definition of assets 142 Key terms 173 General classification of assets 149 end-of-chapter exercises 174 How to present a statement of financial position 150 review questions 174 Determination of future economic benefits 153 Challenging questions 176 Acquisition cost of assets 157 references 179 Accounting for property, plant and equipment—an introduction 158 Assets acquired at no cost 169 Possible changes in the requirements pertaining to financial statement presentation 170 CHAPTER 5 DePreCiaTion of ProPerTY, PLanT anD eQuiPMenT 180 Introduction to accounting for depreciation of property, plant and equipment 181 Learning objectives 180 Depreciable amount (base) of an asset 182 summary 195 Determination of useful life 183 Key terms 196 Method of cost apportionment 184 end-of-chapter exercises 196 Depreciation of separate components 187 review questions 196 When to start depreciating an asset 188 Challenging questions 198 Revision of depreciation rate and depreciation method 188 Land and buildings 189 Modifying existing non-current assets 191 Disposition of a depreciable asset 191 Depreciation as a process of allocating the cost of an asset over its useful life: further considerations 193 Disclosure requirements 194 ConTenTs in fuLL iX dee64022_Prelims_i-xxiv.indd ix 05/20/16 12:55 PM

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