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vi PREFACE
^ They encourage students to think in greater depth about the topics and expand their
reasoning skills. Discussion skills are also developed through use of the questions as
springboards for class interaction.
THEORY BLENDED WITH APPLICATION

With a strong tradition of combining sound theoretical foundations with a hands-on, learn-by-
example approach, the twelfth edition continues its prominent leadership position in advanced
accounting classrooms across the country. The authors build upon Advanced Accounting’s clear
writing style, comprehensive coverage, and focus on conceptual understanding.
Realizing that students reap the greatest benefits when they can visualize the application of
theories, Advanced Accounting closely links theory and practice by providing examples through
relevant exhibits and tables that are common to real-world accounting. When students can visu-
alize the concept being discussed and apply it directly to an example, their understanding
greatly improves. This focus on conceptual understanding makes even the most complex topics
approachable.
Assignments are clearly defined. End-of-chapter questions are used to reinforce theory, and
exercises are short, focused applications of specific topics in the chapter. These exercises are very
helpful when students use them as preparation for possible class presentations. The book’s prob-
lems, which are designed to be more comprehensive than the exercises, often combine topics
and are designed to work well as after-class assignments. For group projects, the cases found in
the business combinations chapters provide an innovative way to blend theoretical and numeri-
cal analysis.
ENHANCED COVERAGE
Advanced Accounting reflects changes in accounting procedures and standards while improving
on those features that aid in student comprehension.
^ Chapter 1
^ New material on Goodwill including ability of non-public companies to amortize
goodwill and new impairment procedures for goodwill.
^ Expanded coverage of contingent consideration in the purchase of a business.
^ Chapter 2
^ New, simplified procedure for valuation schedule that covers all potential situations.
^ Introduction of Variable Interest Entities (VIE) as another application of consolidation
procedures.
^ Expanded and updated coverage of reverse acquisitions.
^ Chapter 3
^ New information on disclosure for an intraperiod purchase.
^ Chapter 4
^ Updated end-of-chapter material.
^ Chapter 5
^ Chapter 6
^ Improved coverage of amortizations of excess cost as they impact cash flow statement.
^ Section on nonconsolidated investments has been moved to an appendix.
^ Updated consolidated statement of cash flows example.
^ Revised coverage of consolidated earnings per share.
^ Revised coverage of taxation of consolidated companies including foreign subsidiaries.
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
PREFACE vii
^ Chapter 7
^ Updated coverage on sale of parent interest in a subsidiary.
^ Chapter 8
^ Revised discussion of subsidiary stock dividends.
^ New section called ‘‘Parent Company Shares Purchased by Subsidiary.’’
^ Section on stick swap has been removed.
^ The reciprocal method of consolidating ownership of parent shares by the subsidiary has
been eliminated.
^ Special Appendix 1: Accounting for Influential Investments
^ Revised content to reflect current FASB Codification updates.
^ Updated section called ‘‘Fair Value Option.’’
^ Updated end-of-appendix material.
^ Special Appendix 2: Variable Interest Entities

^ Defining a VIE.
^ Application of the consolidations model to a VIE.
^ Chapter 9
^ Updated discussion of the scale of international activity and how it relates to foreign
currency transactions, foreign currency translation, and international standard setting.
^ Added coverage of the current positions of the Financial Accounting Standards Board
(FASB), the International Accounting Standards Board (IASB), and the Securities and
Exchange Commission (SEC) regarding convergence to IFRS.
^ Chapter 10
^ Simplified entries necessary to account for derivatives.
^ Revised end-of-chapter materials place a greater focus on the impact of hedging on both
financial position and operating results.

^ Updated coverage of highlights of the IASB’s proposed standard on hedging are set forth
in the ‘‘IASB Perspectives’’ feature.

^ Chapter 11
^ New illustration of the consolidation of a U.S. parent and a foreign subsidiary.
^ Incorporated new standards as they relate to consolidations.
^ Chapter 12
^ End-of-chapter materials have been updated and revised.
^ All footnotes have been changed to reference relevant sections of the Accounting
Standards Codification (ASC).

^ Chapter 13
Standards Codification.
^ Chapter 14
^ Chapter 15
^ Include a discussion of deferred inflows of resources and deferred outflows of resources.
^ Updated entries for examples.
viii PREFACE
^ Chapter 16
^ Chapter 17
^ Chapter 18
^ Chapter 19
^ Chapter 20
^ Revised exclusions and rates are employed and an explanation for this logic is set forth at
the beginning of the chapter.
^ Updated pedagogical aspects of accounting for estates and trusts are firmly set forth.
^ Updated website material is conveyed regarding Congressional actions concerning estate
taxation (www.cengagebrain.com).
^ Chapter 21
^ Appendix
^ Applies the equity method to nonconsolidated (influential) investments.
^ Updated coverage includes the fair value option.
FLEXIBILITY
The book’s flexible coverage of topics allows for professors to teach the course at their own pace
and in their preferred order. There are no dependencies between major sections of the text
except that coverage of consolidations should precede multinational accounting if one is to
understand accounting for foreign subsidiaries. It is also advisable that students master the mod-
ule on derivatives before advancing to the chapter on foreign currency transactions. The book
contains enough coverage to fill two advanced courses, but when only one semester is available,
many professors find it ideal to cover the first four to six chapters in business combinations.
The text is divided into the following major topics:
Business Combinations—Basic Topics (Chapters 1–6)

Chapter 1 demonstrates the FASB rules for assigning the cost of an acquired company to its
assets and liabilities. Goodwill impairment replaces amortization and is fully explained.
Chapters 2 through 5 cover the basics of preparing a consolidated income statement and
balance sheet. In 1977, we introduced two schedules that have been much appreciated by stu-
dents and faculty alike—the determination and distribution of excess schedule and income dis-
tribution schedule. The determination and distribution schedule (quickly termed the D&D
schedule by students) analyzes the difference between the fair value of the acquired company
and the underlying equity of the subsidiary. The D&D schedule has been reconfigured to
revalue the entire company, including the noncontrolling interest. It provides a check figure for
all subsequent years’ worksheets, details all information for the distribution of differences
PREFACE ix
between book and fair values, and reveals all data for the amortization of the differences. The
schedule provides rules for all types of acquisition situations. The income distribution schedule
(known as the IDS) is a set of T accounts that distributes income between the noncontrolling
and controlling interests. It also provides a useful check function to ensure that all intercom-
pany eliminations are properly accounted for. These chapters give the student all topics needed
for the CPA Exam. (For easy reference, the text contains a callout in the margin, as shown here,
that ties the narrative to the worksheets. In addition, the related narrative pages are indicated in Worksheet 3-1: page 150
the upper right side of each worksheet. This allows the reader to quickly locate important
explanations.)
With regard to the alternative worksheet methods and why we follow the approaches we do,
consider the method used to record the investment in the subsidiary’s and the parent’s books.
There are two key points of general agreement. The first is that it doesn’t really matter which
method is used, since the investment account is eliminated. Second, when the course is over, a
student should know how to handle each method: simple equity, full (we call it sophisticated)
equity, and cost. The real issue is which method is the easiest one to learn first. We believe the
winner is simple equity, since it is totally symmetric with the equity accounts of the subsidiary.
It simplifies elimination of subsidiary equity against the investment account. Every change in
subsidiary equity is reflected, on a pro rata basis, in the parent’s investment account. Thus, the
simple equity method becomes the mainline method of the text. We teach the student to con-
vert investments maintained under the cost method to the simple equity method. In practice,
most firms and the majority of the problems in the text use the cost method. This means that
the simple equity method is employed to solve problems that begin as either simple equity or
cost method problems.
We also cover the sophisticated equity method, which amortizes the excess of cost or book
value through the investment account. This method should also adjust for intercompany profits
through the investment account. The method is cumbersome because it requires the student to
deal with amortizations of excess and intercompany profits in the investment account before
getting to the consolidated worksheet, which is designed to handle these topics. This means
teaching consolidating procedures without the benefit of a worksheet. We cover the method
after the student is proficient with a worksheet and the other methods. Thorough understand-
ing of the sophisticated method is important so that it can be applied to influential investments
that are not consolidated. (This is covered in the Appendix.)
Another major concern among advanced accounting professors has to do with the work-
sheet style used. There are three choices: the horizontal (trial balance) format, the vertical
(stacked) method, and the balance sheet only. Again, we do cover all three, but the horizontal
format is our main method. Horizontal is by far the most appealing to students. They have used
it in both introductory and intermediate accounting. It is also the most likely method to be
found in practice. On this basis, we use it initially to develop all topics. We cover the vertical
format but not until the student is proficient with the horizontal format. There is no difference
in the elimination procedures; only the worksheet logistics differ. It takes only one problem
assignment to teach the students this approach so they are prepared for its possible appearance
on the CPA Exam. The balance-sheet-only format has no reason to exist other than its use as a
CPA Exam testing shortcut. We cover it in the Appendix.
Chapter 6 may be more essential for those entering practice than it is for the CPA Exam. It
contains cash flow for consolidated firms, consolidated earnings per share, and taxation issues.
Support schedules guide the worksheet procedures for consolidated companies, which are taxed
as separate entities. Taxation is the most difficult application of consolidation procedures. Every
intercompany transaction is a tax allocation issue. Teaching the tax allocation issues with every
topic as it is introduced is very confusing to students. We prefer to have the students fully
understand worksheet procedures without taxes and then introduce taxes.
Business Combinations—Specialized Topics (Chapters 7 and 8)

These chapters deal with topics that occasionally surface in practice and have seldom appeared
on the CPA Exam. Studying these chapters perfects the students’ understanding of consolida-
tions and stockholders’ equity accounting, thus affording a valuable experience. Chapter 7 deals
with piecemeal acquisitions of an investment in a subsidiary, sale of the parent’s investment,
x PREFACE
and the impact of preferred stock in the subsidiary’s equity structure. Chapter 8 deals with the
impact of subsidiary equity transactions including stock dividends, sale of common stock
shares, and subsidiary reacquisitions of shares. The chapter also considers indirect or three-tier
ownership structures and reciprocal holdings where the subsidiary owns parent shares.
Accounting for equity method investments is located in the Appendix that follows Chapter 8.
The methods used for consolidations are adapted to influential investments. The IDS schedule
used to distribute consolidated net income is used to calculate investment income.
Multinational Accounting and Other Reporting Concerns

(Chapters 9–11 and Module)
As business has developed beyond national boundaries, the discipline of accounting also has
evolved internationally. As our global economy develops, so, too, does the demand for reliable
and comparable financial information. Chapter 9 discusses the international accounting envi-
ronment and current efforts to converge U.S. generally accepted accounting principles with
international standards.
The use of derivative financial instruments and the related accounting is a very complex
subject that is discussed in a separate module. The principles set forth in FASB Codification are
set forth in a clear manner. The module may be used to support a standalone topic dealing
with derivatives or as a preface to the multinational chapter dealing with foreign currency
transactions. Regardless of how one chooses to use the module, students will benefit from an
understanding of this important topic. The nature of derivatives is discussed along with a more
in-depth look at the common types of derivative instruments. The basic accounting for deriva-
tives held as an investment is illustrated. Options, futures, and interest rate swaps are used for
illustrative purposes. The accounting for derivatives that are designated as a hedge is illustrated
for both fair value and cash flow hedges. More specifically, the use of a derivative to hedge a
recognized transaction (asset or liability), an unrecognized firm commitment, or a forecasted
transaction is discussed and illustrated. Throughout the module, illustrative entries and
graphics are used to improve the students’ understanding of this topic.
Chapter 10 discusses the accounting for transactions that are denominated or settled in a
foreign currency. Following this discussion, the hedging of such transactions with the use of for-
ward contracts is introduced. Hedging foreign currency recognized transactions, unrecognized
firm commitments, and forecasted transactions is discussed in order to illustrate the business
purpose and special accounting associated with such hedging strategies in an international set-
ting. The chapter is not overly complicated, given the fact that the concept of hedging and the
special accounting given hedges have already been discussed in a separate module on derivatives
and related accounting issues.
Chapter 11 demonstrates the remeasurement and/or translation of a foreign entity’s finan-
cial statements into a U.S. investor’s currency. Wherever possible, examples of footnote disclo-
sure relating to international accounting issues are presented.
The usefulness of financial information naturally increases if it is communicated on a timely
basis. Therefore, interim financial statements and reporting requirements are now widely
accepted. In Chapter 12, the concept of an interim period as an integral part of a larger annual
accounting period is set forth as a basis for explaining the specialized accounting principles of
interim reporting. Particular attention is paid to the determination of the interim income tax
provision including the tax implications of net operating losses. Chapter 12 also examines seg-
mental reporting and the various disclosure requirements. A worksheet format for developing
segmental data is used, and students are able to review the segmental footnote disclosure for a
large public company.
Accounting for Partnerships (Chapters 13 and 14)

Chapters 13 and 14 take students through the entire life cycle of a partnership, beginning with
formation and ending in liquidation. Although new forms of organization such as the limited
liability corporation are available, partnerships continue to be a common form of organization.
Practicing accountants must be aware of the characteristics of this form of organization and the
unique accounting principles. The accounting aspects of profit and loss agreements, changes in
PREFACE xi
the composition of partners (admissions and withdrawals), and partnership liquidations are
fully illustrated. The end-of-chapter material in this area focuses on evaluating various alterna-
tive strategies available to partners, for example, deciding whether it would be better to liquidate
a partnership or admit a new partner.
Governmental and Not-for-Profit Accounting (Chapters 15–19)

Chapters 15–19 provide comprehensive coverage of accounting and financial reporting of state
and local governments, colleges and universities, health care entities, and not-for-profit organi-
zations. Since the eleventh edition of this text was released, standards-setting bodies have issued
several accounting, auditing, and financial reporting standards that impact topics covered in
these chapters. This edition discusses recent developments in state and local government
accounting and financial reporting.
Chapter 15 covers the unique accounting and financial reporting issues of state and local
governments. It describes the basics of accounting and financial reporting of the general fund
and account groups. The chapter incorporates GASB guidance on accounting for revenues and
expenditures using a financial resources measurement focus and a modified accrual basis of
accounting. The unique ways of accounting for capital assets and long-term debt are detailed.
Chapter 16 details accounting for the specialized funds of government, e.g., those estab-
lished to account for restricted operating resources, long-term construction projects or acquisi-
tion of major fixed assets, and servicing of principal and interest on long-term debt. The
chapter also covers the unique accounting for various trust funds, including permanent funds
and proprietary (business-type) funds. Illustrated examples include accounting for pensions,
postretirement benefits other than pensions, recognition of assets and liabilities and related dis-
closures arising from securities lending transactions, accounting for certain investments at fair
value, and accounting for landfill operations.
Chapter 17 presents the required governmental basic financial statements. The unique fea-
tures of the funds-based statements, which maintain the traditional measurement focus and basis
of accounting for both governmental and proprietary funds, and the government-wide state-
ments, which use the flow of economic resources measurement focus and full accrual basis of
accounting for both the government and proprietary activities, are detailed. The chapter
includes a discussion of the requirement for governments to report all capital assets, including
reporting of infrastructure assets. Detailed illustrations help to clarify the requirements to report
depreciation or use the modified approach. The chapter contains a sample government-wide
statement of net assets that reports governmental and proprietary activities in separate columns
and a program- or function-oriented statement of activities. The requirements for the manage-
ment’s discussion and analysis (MD&A) are highlighted. End-of-chapter problems are designed
to link theory to practice through the use of electronic working papers and supporting sched-
ules. Additional coverage surrounds key issues in governmental audit, including the single audit
requirements, from AICPA, OMB, and GAO authoritative sources.
Chapter 18 begins with an overall summary of the accounting and financial reporting stand-
ards as they apply to all not-for-profit organizations. Coverage of ASC 958 is included.
Expanded illustrations enable the student to better grasp the unique requirements for revenue
and expense recognition of not-for-profit organizations. External financial statements are illus-
trated without a funds structure. Since the FASB standards have shifted financial reporting away
from fund accounting, funds are viewed as internal control and management tools throughout
this chapter. The appendix to the chapter includes a discussion of the fund structure tradition-
ally used in not-for-profit organizations and illustrates financial statements incorporating the
funds.
Chapter 19 offers a complete description of accounting for private and governmental uni-
versities and private and governmental health care organizations. The concepts from Chapters
15–18 are applied to college and university accounting. A comparison of the governmental and
nongovernmental reporting requirements and/or practices is highlighted to enable the student
to gain a better understanding of differences between them. Updated illustrations and end-of-
chapter materials are also designed to compare and contrast the government and private-sector
requirements.
xii PREFACE
Fiduciary Accounting (Chapters 20 and 21)

The role of estate planning and the use of trusts are important to many individuals and present
some unique accounting principles. The tax implications of estate planning are discussed so that
the student has a basic understanding of this area. Various accounting reports necessary for the
administration of an estate or trust are illustrated in Chapter 20. Current estate tax rates and
unified credit amounts are set forth in the chapter.
No business is immune from financial difficulty. Chapter 21 discusses various responses to
such difficulties, including troubled debt restructuring, quasi-reorganizations, corporate liqui-
dations, and corporate reorganizations.
UNPARALLELED SUPPORT
Supplementary Materials for the Instructor
Solutions Manual. This manual provides answers to all end-of-chapter ‘‘Understanding the
Issues’’ questions and solutions to all exercises, problems, and cases. The electronic files for this
ancillary can be found on the Instructor’s Resource CD and in the Instructor Resources section
of the text’s Web site (www.cengagebrain.com).
Test Bank. Consisting of a variety of multiple-choice questions and short problems and the
related solutions, this test bank had been updated. The content includes testing questions for
the text chapters and the derivatives module.
PowerPoint® Slides. Instructor PowerPoint presentations are available in electronic format.
Instructor Web Site (www.cengagebrain.com). All supplemental materials are available online
at www.cengagebrain.com.
Valuable Supplementary Material for the Student
Excel® Tutorial and Working Papers. Provided on the text’s Web site (www.cengagebrain
.com), this step-by-step tutorial carefully guides students as they learn how to set up worksheets
in Excel and apply their consolidations knowledge learned in Chapters 1–6 of the text.
Acknowledgments
In preparation for the new edition, the following individuals shared detailed ideas and sugges-
tions for changes and improvements, of which many have been implemented in this twelfth
edition text and supplements. We thank them all for their timely information:
Constance Crawford, Ramapo College of New Jersey

Jolene Lampton, Park University
Anne Oppegard, Augustana College (SD)
Tracey Niemotko, Mount Saint Mary College
Farima Fakoor, Golden Gate University
Patricia Davis, Keystone College
Alex Gialanella, New England College
Richard Griffin, The University of Tennessee at Martin
Christopher Kwak, De Anza College
June Hanson, UIU
Joseph Adamo, Cazenovia College
Lianzan Xu, William Paterson University of New Jersey
Michael Miller, Sullivan University
James Jackson, Institute of Technology Clovis CA
Lisa Martin, Texas Tech
Denise Patterson, California State University, Fresno
Gary Olsen, Carroll University
Marie Archambault, Marshall University
Jyoti Prasad Choudhury, College of The Bahamas
Robert Mahan, Milligan College
Thomas Badley, Baker College
Bernard Bugg, Shaw University
Tami Park, University of Great Falls
Brad Van Kalsbeek, University of Sioux Falls
Paul Fischer
William Taylor
Rita Cheng
About the Authors
Paul M. Fischer is the Jerry Leer Professor of Accounting and Accounting Area Chair at the
University of Wisconsin, Milwaukee. He teaches intermediate and advanced financial
accounting and has received both the AMOCO Outstanding Professor Award and the School
of Business Administration Advisory Council Teaching Award. He also teaches continuing
education classes and provides executive training courses for several large corporations. He
earned his undergraduate accounting degree at Milwaukee and earned an MBA and Ph.D. at
the University of Wisconsin, Madison. Dr. Fischer is a CPA and is a member of the American
Institute of CPAs, the Wisconsin Institute of CPAs, and the American Accounting Association.
He is a past president of the Midwest Region of the American Accounting Association.
Dr. Fischer has previously authored Cost Accounting: Theory and Applications (with Frank),
Financial Dimensions of Marketing Management (with Crissy and Mossman), journal articles,
and computer software. He actively pursues research and consulting interests in the areas of
leasing, pension accounting, and business combinations.
William J. Taylor has primarily taught financial accounting and auditing at both the
undergraduate and graduate levels. In addition, he was involved in providing executive training
courses for several large corporations and through an executive MBA program. He has been
recognized for his teaching excellence and has received both the AMOCO Outstanding
Professor Award and the School of Business Administration Advisory Council Teaching Award.
He earned his Ph.D. from Georgia State University and is a CPA and a CVA (Certified
Valuation Analyst). His professional experience includes working for Deloitte and Touche and
Arthur Andersen & Co. in their audit practices. His private consulting activities include
business valuations, litigation services, and issues affecting closely held businesses. Dr. Taylor is
a member of the American Institute of CPAs and the National Association of Certified
Valuation Analysts. He serves as a director and officer for a number of organizations.
Rita H. Cheng currently serves as Professor of Accounting at Northern Arizona University.

Dr. Cheng has primarily taught government, not-for-profit accounting and advanced financial
accounting. She has published numerous journal articles and technical reports and is often
asked to speak on government and not-for-profit accounting topics. She has been recognized
for her teaching excellence and is a recipient of the University of Wisconsin-Milwaukee School
of Business Administration Advisory Council Outstanding Teaching Award and the Sheldon
B. Lubar School of Business Executive MBA Teacher of the Year Award. She earned her Ph.D.
from Temple University, an MBA from University of Rhode Island, and an undergraduate
degree in accounting from Bishop’s University. Dr Cheng is a CPA and a Certified Government
Financial Manager. Her research focuses on the quality of accounting and financial reporting by
state and local governments and the influence of accounting regulation on corporate business
competitiveness. She is a member of the Government and Nonprofit Section of the American
Accounting Association and has served as the GNP Section’s president. Dr. Cheng has
coordinated the academic response to several GASB proposed standards and also testified
before the Governmental Accounting Standards Board.
BRIEF CONTENTS xv
Brief Contents Chapter 12

Interim Reporting and Disclosures about
Segments of an Entity 657
Part 1
Combined Corporate Entities
and Consolidations Part 3
Partnerships
Chapter 1
Business Combinations: New Rules Chapter 13
for a Long-Standing Business Practice 3 Partnerships: Characteristics, Formation,
Chapter 2 and Accounting for Activities 701
Consolidated Statements: Date of Chapter 14
Acquisition 55 Partnerships: Ownership Changes
Chapter 3 and Liquidations 725
Consolidated Statements: Subsequent
to Acquisition 117
Chapter 4 Part 4
Intercompany Transactions: Merchandise, Governmental and Not-for-Profit
Plant Assets, and Notes 205 Accounting
Chapter 5 Chapter 15
Intercompany Transactions: Bonds Governmental Accounting: The General
and Leases 265 Fund and the Account Groups 765
Cash Flow, EPS, and Taxation 325 Governmental Accounting: Other
Chapter 7 Governmental Funds, Proprietary
Special Issues in Accounting for an Funds, and Fiduciary Funds 827
Investment in a Subsidiary 375 Chapter 17
Chapter 8 Financial Reporting Issues 889
Subsidiary Equity Transactions, Indirect Chapter 18
Subsidiary Ownership, and Subsidiary Accounting for Private Not-for-Profit
Ownership of Parent Shares 435 Organizations 935
Special Appendix 1 Chapter 19
Accounting for Influential Investments 481 Accounting for Not-for-Profit Colleges
Special Appendix 2 and Universities and Health Care
Variable Interest Entities SA2-1 Organizations 975
Part 2
Part 5
Multinational Accounting and
Other Reporting Concerns Fiduciary Accounting
The International Accounting Environment 497 Estates and Trusts: Their Nature
and the Accountant’s Role 1031
Module
Derivatives and Related Accounting Issues 509 Chapter 21
Debt Restructuring, Corporate
Chapter 10 Reorganizations, and Liquidations 1061
Foreign Currency Transactions 547
Comprehensive Annual Financial Report
Chapter 11 City of Milwaukee, Wisconsin 1091
Translation of Foreign Financial
Statements 597 Index 1115
xvi CONTENTS
Contents Consolidating with a Noncontrolling Interest 69

Analysis of Complicated Purchase with a Noncontrolling
Interest 70 Determination and Distribution of Excess
Schedule 71 Formal Balance Sheet 72 Adjustment
Part 1 of Goodwill Applicable to NCI 73 No Goodwill on
Combined Corporate Entities the Noncontrolling Interest 74 Gain on Purchase of
and Consolidations Subsidiary 76 Valuation Schedule Strategy 77
Parent Exchanges Noncash Assets for Controlling
Chapter 1 Interest 79
Business Combinations: New Rules Preexisting Goodwill 79
for a Long-Standing Business Practice 3 Ownership of a Prior Noncontrolling Interest 81
Economic Advantages of Combinations 4 Push-Down Accounting 82
Appendix: Reverse Acquisition 83
Tax Advantages of Combinations 5
Reverse Acquisition with Noncontrolling Interest 87
Acquisition of Control 6
Accounting Ramifications of Control 8
Chapter 3
Evolution of Accounting Methods 8 Consolidated Statements: Subsequent
Applying the Acquisition Method 9 to Acquisition 117
Valuation of Identifiable Assets and Liabilities 14 Accounting for the Investment in a Subsidiary 118
Applying the Acquisition Model 16 Recording Equity Method 118 Cost Method 119 Example of
Changes in Value During Measurement Period 19 the Equity and Cost Methods 119
Recording Contingent Consideration 21 Accounting Elimination Procedures 120
for the Acquisition by the Acquiree 22
Effect of Simple Equity Method on Consolidation 121
Tax Issues 23 Effect of Cost Method on Consolidation 128
Tax Loss Carryovers 23 Tax Values in an Effect of Sophisticated Equity Method on
Acquisition 25 Nontaxable Exchange 25 Consolidation 130
Required Disclosure 27 Determination of the Method Being Used 132
Goodwill Accounting after the Acquisition 30 Complicated Purchase, Several Distributions
Allocating Goodwill to Reporting Units 30 Reporting
of Excess 132
Unit Valuation Procedures 30 Impairment Procedures Intraperiod Purchase Under the Simple Equity
for Goodwill after Acquisition 32 Method 138
Intraperiod Purchase Under the Cost Method 140
Appendix: Estimating the Value of Goodwill 34 Disclosure for an Intraperiod Purchase 140
Summary: Worksheet Technique 141
Goodwill Impairment Losses 142
Chapter 2 Appendix A: The Vertical Worksheet 143
Consolidated Statements: Date of Appendix B: Tax-Related Adjustments 144
Acquisition 55
Levels of Investment 56
Chapter 4
Function of Consolidated Statements 57
Intercompany Transactions: Merchandise,
Criteria for Consolidated Statements 58 Plant Assets, and Notes 205
Techniques of Consolidation 58 Intercompany Merchandise Sales 206
Reviewing an Asset Acquisition 59 Consolidating a No Intercompany Goods in Purchasing Company’s
Stock Acquisition 60 Inventories 207 Intercompany Goods in Purchasing
Adjustment of Subsidiary Accounts 61 Company’s Ending Inventory 209 Intercompany
Goods in Purchasing Company’s Beginning and Ending
Analysis of Complicated Purchases—100% Interest 62 Inventories 211 Eliminations for Periodic
Determination and Distribution of Excess Inventories 213 Effect of Lower-of-Cost-or-Market
Method on Inventory Profit 213 Losses on
Schedule 64
Intercompany Sales 214
Formal Balance Sheet 65 Bargain Purchase 65
CONTENTS xvii
Intercompany Plant Asset Sales 214 Subsidiary Preferred Stock 389

Intercompany Sale of a Nondepreciable Asset 215 Determination of Preferred Shareholders’ Claim on
Intercompany Sale of a Depreciable Asset 216 Retained Earnings 389 Apportionment of Retained
Earnings 390 Parent Investment in Subsidiary
Intercompany Debt 219 Preferred Stock 393
Sophisticated Equity Method: Intercompany
Transactions 220 Appendix: Worksheet for a Consolidated
Unrealized Profits of the Current Period 221
Balance Sheet 395
Unrealized Profits of Current and Prior Periods 221 Investment Account 396 Merchandise Sales 396
Plant Asset Sales 396 Investment in Bonds 396
Appendix: Intercompany Profit Eliminations Leases 396 Illustration 397
on the Vertical Worksheet 224
Chapter 8
Chapter 5 Subsidiary Equity Transactions, Indirect
Intercompany Transactions: Bonds Subsidiary Ownership, and Subsidiary
and Leases 265 Ownership of Parent Shares 435
Intercompany Investment in Bonds 265
Subsidiary Stock Dividends 435
Bonds Originally Issued at Face Value 266 Bonds Not
Parent Using the Simple Equity Method 436
Originally Issued at Face Value 269 Purchase of Only a
Parent Using the Sophisticated Equity Method 438
Portion of the Bonds 270 Interest Method of
Parent Using the Cost Method 439
Amortization 271
Subsidiary Sale of Its Own Common Stock 440
Intercompany Leases 273
Sale of Subsidiary Stock to Noncontrolling
Operating Leases 273 Capitalized Leases 274
Shareholders 440 Parent Purchase of Newly Issued
Intercompany Transactions Prior to Subsidiary Stock 444
Business Combination 278 Subsidiary Purchase of Its Own Common Stock 446
Appendix: Intercompany Leases with
Purchase of Shares as Treasury Stock 446 Resale of
Unguaranteed Residual Value 279
Shares Held in Treasury 447
Chapter 6 Indirect Holdings 448
Cash Flow, EPS, and Taxation 325 Level One Holding Acquired First 448 Level Two
Consolidated Statement of Cash Flows 325 Holding Exists at Time of Parent’s
Purchase 452 Connecting Affiliates 453
Cash Acquisition of Controlling Interest 325 Noncash
Acquisition of Controlling Interest 327 Adjustments Parent Company Shares Purchased
Resulting from Business Combinations 328 by Subsidiary 454
Preparation of Consolidated Statement of Cash Flows 329
Consolidated Earnings Per Share 333 Special Appendix 1
Taxation of Consolidated Companies 337 Accounting for Influential Investments 481
Consolidated Tax Return 338 Complications Caused Calculation of Equity Income 482
by Goodwill 341 Separate Tax Returns 341
Complications Caused by Goodwill 347 Amortization of Excesses 482 Intercompany
Transactions by Investee 483
Chapter 7 Tax Effects of Equity Method 484

Special Issues in Accounting for an Unusual Equity Adjustments 486
Investment in a Subsidiary 375 Investee with Preferred Stock 486 Investee Stock
Transactions 486 Write-Down to Market
Parent Acquisition of Stock Directly from Value 486 Zero Investment Balance 486
Subsidiary 375 Intercompany Asset Transactions by Investor 487
Parent Purchase of Additional Subsidiary Shares 377 Intercompany Bond Transactions by
Investor 487 Gain or Loss of Influence 488
Sale of Parent’s Investment in Common Stock 381
Disclosure Requirements 488
Sale of Entire Investment 381
Sale of Portion of Investment 384 Fair Value Option 489
xviii CONTENTS
Special Appendix 2 Alternative International Monetary Systems 548

Variable Interest Entities SA2-1 The Mechanics of Exchange Rates 549
Defining a VIE SA2-1 Accounting for Foreign Currency Transactions 552

Primary Beneficiary SA2-1 Unsettled Foreign Currency Transactions 554
Consolidation Procedures, Date of
The Exposure to Foreign Currency Exchange
Acquiring Control SA2-2
Risk and the use of Derivatives 555
Consolidation Procedures, Subsequent
Periods SA2-3 Characteristics of Derivatives 556 Common Types of
Derivatives 557
Accounting for Derivatives that are
Part 2 Designated as a Hedge 560
Multinational Accounting and Special Accounting for Fair Value Hedges 561
Other Reporting Concerns Special Accounting for Cash Flow Hedges 562
Chapter 9 Examples of the Accounting for Fair

The International Accounting Environment 497 Value Hedges 564
Hedging an Existing Foreign-Currency-Denominated
The Scope of International Business Activities 498 Asset or Liability 564 Special Hedging
Foreign Currency Transactions 499 Complications 569 Hedging an Identifiable Foreign
Foreign Currency Translation 500 Currency Firm Commitment 570
Harmonization of Accounting Standards 502
Examples of the Accounting for Cash
Factors Influencing the Development of
Flow Hedges 575
Accounting 502 The International Accounting
Standards Board 503 Hedging a Foreign Currency Forecasted
Transaction 575 Summary of Hedging
Convergence to International Accounting Transactions 585 Disclosures Regarding Hedges of
Standards 505 Foreign Currency Exposure 587
Module
Derivatives and Related Accounting Issues 509
Chapter 11
Derivatives: Characteristics and Types 510 Translation of Foreign Financial
Characteristics of Derivatives 510 Common Types of Statements 597
Derivatives 511 Summary of Derivative Statement of Financial Accounting
Instruments 519
Standards No. 52 598
Accounting for Derivatives that are Functional Currency Identification 599
Designated as a Hedge 520 Objectives of the Translation Process 602
Special Accounting for Fair Value Hedges 521 An Basic Translation Process: Functional
Example of a Fair Value—Inventory Transaction Hedge
Currency to Reporting Currency 610
Using a Futures Contract 523 An Example of a Fair
Value—Firm Commitment Hedge Using a Forward Demonstrating the Current Rate/Functional
Contract 525 An Example of a Fair Value—Hedge Method 611 Consolidating the Foreign
against a Fixed Interest Notes Payable Using an Interest Subsidiary 614 Gains and Losses Excluded from
Rate Swap 528 Special Accounting for Cash Flow Income 617 Unconsolidated Investments: Translation
Hedges 530 An Example of a Cash Flow—Hedge for the Cost or Equity Method 619
against a Forecasted Transaction Using an Option 532
Remeasured Financial Statements: Foreign
An Example of a Cash Flow—Hedge against a Variable
Currency to Functional Currency 621
Interest Notes Payable Using an Interest Rate Swap 535
Books of Record Not Maintained in Functional
Disclosures Regarding Derivative Currency 621 Remeasurement when Functional
Instruments and Hedging Activities 537 Currency Is the Same as the Parent/Investor’s
Currency 623 Remeasurement and Subsequent
Translation when Functional Currency Is Not the Same as
Chapter 10
the Parent/Investor’s Currency 627 Summary of
Foreign Currency Transactions 547 Translation and Remeasurement Methodologies 631
The International Monetary System 548
CONTENTS xix
Chapter 12 History of Governmental Financial Reporting 767

Interim Reporting and Disclosures about Organization and Processes of the FASB and the
Segments of an Entity 657 GASB 768 Jurisdictions of the FASB and the
GASB 768 GASB Objectives of Financial
Interim Reporting 657
Reporting 769 Measurement Focus and Basis of
Approaches to Reporting Interim Accounting 770
Data 658 Accounting Principles Applicable to Interim
Reporting 658 Accounting for Income Taxes in Governmental Accounting Structure of Funds 771
Interim Statements 662 Accounting for Discontinued Governmental Funds 772 Accounting for Transactions
Operations 675 Accounting for a Change in of Governmental Funds 772
Accounting Principle 676 Disclosures of Summarized
Interim Data 677 Use of Budgetary Accounting 778
General Ledger Entries 778 Subsidiary Ledger
Disclosures about Segments of an Entity 678
Entries 778
Current Standards Regarding Segmental Reporting 679
Overview of General Fund Procedures 779
Accounting for the General Fund—An Expanded
Part 3 Example 782 Closing the General Fund 792
Partnerships Financial Reports of the General Fund 793
Balance Sheet 793 Statement of Revenues,
Chapter 13 Expenditures, and Changes in Fund Balances 793
Partnerships: Characteristics, Formation,
and Accounting for Activities 701 Accounting for General Capital Assets and
General Long-Term Obligations 795
Characteristics of a Partnership 701
Accounting and Financial Reporting for General Capital
Relationship of Partners 702 Legal Liability of a Assets 795 Accounting and Financial Reporting for
Partnership 702 Underlying Equity Theories 703 General Long-Term Debt 798
Formation and Agreements 703 Acceptable
Accounting Principles 704 Partner Review of Entries for the General Fund and
Dissociation 704 Tax Considerations 705 Account Groups 800
Appendix: Summary of Accounting Principles 804
Accounting for Partnership Activities 705
Principle 1—Accounting and Reporting
Contributions and Distributions of Capital 705 Capabilities 805 Principle 2—Fund Accounting
The Allocation or Division of Profits and Losses 707 System 805 Principle 3—Types of Funds 805
Principle 4—Number of Funds 806
Chapter 14 Principle 5—Reporting Capital Assets 806
Principle 6—Valuation of Capital Assets 806
Partnerships: Ownership Changes
Principle 7—Depreciation of Capital
and Liquidations 725 Assets 806 Principle 8—Reporting Long-Term
Ownership Changes 726 Liabilities 806 Principle 9—Measurement Focus and
Basis of Accounting in the Basic Financial
Admission of a New Partner 726 Withdrawal of a
Statements 806 Principle 10—Budgeting, Budgetary
Partner 737
Control, and Budgetary Reporting 807
Partnership Liquidation 740 Principle 11—Transfer, Revenue, Expenditure, and
Expense Account Classification 807
Liquidation Guidelines 740 Lump-Sum
Principle 12—Common Terminology and
Liquidations 743 Installment Liquidations 745
Classification 807 Principle 13—Annual Financial
Reports 807
Part 4
Governmental and Not-for-Profit Chapter 16
Accounting Governmental Accounting: Other
Governmental Funds, Proprietary
Chapter 15 Funds, and Fiduciary Funds 827
Governmental Accounting: The General Other Governmental Funds 827
Fund and the Account Groups 765
Special Revenue Funds 827 Permanent
Commercial and Governmental Accounting: Funds 830 Capital Projects Funds 831 Debt
A Comparison 766 Service Funds 834
xx CONTENTS
Proprietary Funds 843 Summary 956

Enterprise Funds 844 Internal Service Funds 851 Appendix: Optional Fund Accounting for
Voluntary Health and Welfare Organizations 957
Fiduciary Funds: Trust and Agency Funds 852
VHWO Funds 957 Illustrative Funds-Based Financial
Private-Purpose Trust Funds 852 Investment Trust Statements for Voluntary Health and Welfare
Funds 854 Pension Trust Funds 854 Agency Organizations 959
Funds 857
Governmental Accounting—Interactions Chapter 19
among Funds 859 Accounting for Not-for-Profit Colleges
and Universities and Health Care
Organizations 975
Chapter 17
Financial Reporting Issues 889 Accounting for Colleges and Universities
(Public and Private) 976
Annual Financial Reporting 889
Funds 976 Accounting for Revenues 977
Reporting Entity 891
Accounting for Expenses 977 Accounting for
Highlights and Illustrative Examples Contributions 978 Donor-Imposed Restrictions and
of the Reporting Model 892 Reclassifications 978 University Accounting and
Management’s Discussion and Analysis 892 Funds- Financial Reporting within Existing Fund
Based Statements 897 Government-Wide Financial Structure 979 Financial Statements 988
Statements 908 The Statement of Net
Accounting for Providers of Health Care
Position 908 The Statement of Activities 909
Converting Funds-Based Statements to Government- Services—Governmental and Private 995
Wide Statements 910 Generally Accepted Accounting Principles 995
Funds 995 Classification of Assets and
Practice Converting Funds-Based Statements Liabilities 996 Classification of Revenues, Expenses,
to Government-Wide Statements 913 Gains, and Losses 996 Accounting for Donations/
Reconciliation of Government Fund Balance Sheet and Contributions Received 999 Medical Malpractice
Government-Wide Net Position 917 Claims 1000 Illustrative Entries 1001 Financial
Statements of a Private Health Care Provider 1005
Reporting and Auditing Implementation Governmental Health Care Organizations 1006
and Issues 920
Audits of State and Local Governments 920 The Part 5
Statistical Section 921 Other Financial Reporting Fiduciary Accounting
Issues 921
Chapter 20
Estates and Trusts: Their Nature
Chapter 18 and the Accountant’s Role 1031
Accounting for Private Not-for-Profit
Organizations 935 The Role of Estate Planning 1031
Communicating through a Will 1032
Not-for-Profit Organizations 936
Development of Accounting Principles 936 Settling a Probate Estate 1032
Identifying the Probate Principal or Corpus of an
Accounting for Private Not-for-Profit
Estate 1032 Identifying Claims against the Probate
Organizations 937 Estate 1034 Measurement of Estate
Accounting for Revenues, Gains, and Income 1035 Summary of Items Affecting Estate
Contributions 937 Accounting for Principal and Income 1036 Distributions of
Expenses 940 Financial Statements 940 Property 1036 The Charge and Discharge
Statement 1039
Accounting for Voluntary Health
and Welfare Organizations 942 Tax Implications of an Estate 1041
Accounting Principles and Procedures 942 Public Estate Reduction with Gifts 1042 Federal Estate
Support 943 Revenues 944 Program and Taxation 1044 Marital Deduction 1045
Supporting Services Costs 945 Closing Valuation of Assets Included in the Gross
Entries 946 Financial Statements 946 Illustrative Estate 1047 Other Taxes Affecting an Estate 1048
Transactions for a Voluntary Health and Welfare
Organization 947 The Budget 956
Trust Accounting Issues 1048
Financial Accounting for Trusts 1049
CONTENTS xxi
Chapter 21 Solutions Available through the Bankruptcy

Debt Restructuring, Corporate Code 1070
Reorganizations, and Liquidations 1061 Commencement of a Bankruptcy Case 1070
Corporate Reorganizations—Chapter 11 1071
Relief Procedures not Requiring Court Action 1062
Corporate Liquidations—Chapter 7 1073
Debt Extinguishments, Modifications, and
Restructurings 1062 Transfer of Assets in Full Preparation of the Statement of Affairs 1075
Settlement 1066 Granting an Equity Preparation of Other Accounting Reports 1078
Interest 1066 Modification of
Terms 1066 Combination Comprehensive Annual Financial Report
Restructurings 1067 Quasi- City of Milwaukee, Wisconsin 1091
Reorganizations 1068 Corporate Liquidations 1069
Index 1115
PART
Chapter 1: Business Combinations:

Combined Corporate Entities
and Consolidations
Chapter 6: Cash Flow, EPS, and Taxation

1
New Rules for a Long-Standing
Chapter 7: Special Issues in Accounting for an
Business Practice
Investment in a Subsidiary
Chapter 2: Consolidated Statements:
Chapter 8: Subsidiary Equity Transactions,
Date of Acquisition
Indirect Subsidiary Ownership, and
Chapter 3: Consolidated Statements: Subsidiary Ownership of Parent Shares
Subsequent to Acquisition
Special Accounting for Influential
Chapter 4: Intercompany Transactions: Appendix 1: Investments
Merchandise, Plant Assets, and Notes
Special Variable Interest Entities
Chapter 5: Intercompany Transactions: Bonds Appendix 2:
and Leases
T
he acquisition of one company by another is a Board (IASB). Some minor differences still exist between
commonplace business activity. Frequently, a com- U.S. GAAP and international rules. They are described in
pany is groomed for sale. Also, the recent prolifera- Chapter 2. Throughout this book, a new feature called
tion of new technology businesses and financial services ‘‘IASB Perspectives’’ will address the ever-changing rela-
firms that merge into larger companies is an expected, and tionship between U.S. GAAP and International Financial
often planned for, occurrence. For three decades, prior to Reporting Standards (IFRS).This feature is not found in
2001, accounting standards for business combinations had all chapters, but has been included where applicable.
remained stable. Two models of recording combinations There are two types of accounting transactions to accom-
had coexisted. The pooling-of-interests method brought plish a combination. The first is to acquire the assets and
over the assets and liabilities of the acquired company at liabilities of a company directly from the company itself by
existing book values. The purchase method brought the ac- paying cash or by issuing bonds or stock. This is called a direct
quired company’s assets and liabilities to the acquiring asset acquisition and is studied in Chapter 1. The assets and
firm’s books at fair market value. FASB Statement No. 141, liabilities of the new company are directly recorded on the
issued in July 2001, ended the use of the pooling method parent company’s books. All of the theory involving acquisi-
and gave new guidance for recording business combinations tions is first explained in this context.
under purchase accounting principles. The more common way to achieve control is to acquire
Two new FASB Statements issued in 2007 brought a controlling interest, usually over 50%, in the voting com-
major changes to accounting for business combinations. mon stock of another company. The acquiring company
FASB Statement 14lr required that all accounts of an simply records an investment account for its interest in the
acquired company be recorded at fair value, no matter the new company. Both companies maintain their own account-
percentage of interest acquired or the price paid. FASB ing records. However, when two companies are under com-
Statement 160 required new rules for accounting for the mon control, a single set of consolidated statements must
interest not acquired by the acquiring firm. This interest is be prepared to meet external reporting requirements. The in-
known as the noncontrolling interest. It is now recorded at vestment account is eliminated and the individual assets and
fair value on the acquisition date and is considered a part of liabilities of the acquired company are merged with those of
the stockholder’s equity of the consolidated firm. the parent company. Chapters 2 through 8 provide the meth-
The contents of FASB Statements 14lr and 160 are now ods for consolidating the separate statements of the affiliated
incorporated into FASB ASC 805 and 810, respectively. firms into a consolidated set of financial statements. The
ASC stands for Accounting Standards Codification. These consolidation process becomes a continuous activity, which
statements are unique in that they were produced in a is further complicated by continuing transactions between
joint effort with the International Accounting Standards the affiliated companies.
Another random document with
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misma crueldad, te deleitas y
recibes contentamiento en verme
metido en este piélago de
persecuciones. Bien creo que, si
alguno se puede llamar infierno,
fuera de aquel en que los
condenados perpetuamente
padecen, que será éste en que
agora yo me veo, que según son
semejantes mis penas á las
suyas, la mayor diferencia que me
parece que hay es que ellos sin
redención penarán para siempre y
tú podrías restituirme y ponerme
en la cumbre de la gloria de tu
gracia, viéndome yo con algún
favor de manera que pensasen
ser restituido en ella, y no tan
desfavorecido como con
respuestas tan desabridas me he
hallado. Pero ¿de qué me agravio
que, si bien lo miro todo, poca
razón tengo de quexarme, pues
que todo el amor está en mí para
contigo, sin dexar ninguno ni
parte dél para que tú lo puedas
tener conmigo? Yo tengo la fe tan
entera, la amistad tan cumplida, la
ley tan verdadera, que todo esto
se queda en mí y tú estás tan
libre y exenta, que para lo que
aprovecharán mis agravios será
para que te rías dellos con
aquella libertad que has
mostrado, teniéndome á mí en
una prisión y cautiverio perpetuo;
lo que siento que me puede
quedar de lo passado es la
contemplación de una tristeza
dulce, trayendo á mi memoria
aquellas palabras de «tiempo
bueno, que dicen, fue tiempo y
horas ufanas, en que mis días
gozaron, aunque en ellas se
sembraron las simientes de mis
canas; yo me vi ser bien amado,
mi deseo en alta cima contemplar
en lo passado; la memoria me
lastima»; el tiempo, Belisia mía,
me da bien el pago de no haber
sabido gozarlo, y con verme cual
me veo lo tengo por mejor que
haber passado un punto de lo que
por tu voluntad mostrabas y
querías; cuando quiero quexarme
de mí mesmo, la razón riñe
conmigo, diciendo que no me
quexe del buen comedimiento
que tuve, pues que consigo tiene
el galardón y contigo queda la
culpa de la ingratitud y
desconocimiento de lo mucho que
me debes. Si el tiempo fuera más
largo no me maravillara tanto de
ver esta mudanza, aunque
ninguna cosa había de bastar
para hacerla; pero siendo tan
breve, paréceme que aquel amor
que me mostraste, aquel
sentimiento que vi para verme á
mí siempre sin libertad ninguna,
aquella fe que estonces se me
puso delante tan verdadera,
aquellas lágrimas con que parecía
sellarse la affición y voluntad que
se mostraba, que todo estaba
colgado de un hilo tan delgado
que sólo el viento bastó para
quebrarlo. Cuando me acuerdo de
algunas cosas que por mí
pasaron, paréceme imposible lo
que veo, por que no eran prendas
de tan poca fuerza que tan presto
habían de olvidarse, y assí ando
con el juicio desatinado,
buscando cuál podría ser la
causa; porque en mí no ha habido
falta sino de los servicios, y ésta
no creo que bastaría, pues no
sufre pensarse que tú me habrías
de tener amor ni affición por solo
interese; por otra parte, combate
una sospecha celosa, á la cual no
quiero dar crédito, porque
siempre cuanto á esto has estado
bien acreditada para conmigo.
Bien sé que te irás enojada con
carta tan larga, pues se leerá ya
sin gusto habiéndolo perdido de
todas las cosas que tocan á quien
la escribe, y si soy porfiado,
suplícote, señora mía, me
perdones, que lo hago con
determinación de no enojarte más
con otras, porque en esto quiero
que conozcas el deservicio que
será, teniendo en menos mi fatiga
y tormento que no darte á ti
pesadumbre con serte más
importuno; viviré los pocos días y
tristes que tuviere con aquella fe
que de mí se ha conocido y con la
voluntad y affición que siempre he
mostrado, y con el dolor y trabajo
que por galardón de todo esto has
querido darme, con el cual quedo,
y con aquel verdadero deseo de
servirte, que no se acabará en
tanto que no se acabare la vida
que tú has querido que tan
miserablemente muera en el
tiempo que viviere».
Y inviada esta carta, supe que
había venido á sus manos y no
con pequeña diligencia, que para
ello se puso, porque yo con gran
difficultad quería oir ni ver cosa
que á mí me tocasse, y viendo
que no quería responder, aunque
por otra cosa no esperé algunos
días, me vine harto desconsolado
y affligido, pero todavía con
alguna esperanza, que del todo
no me había desamparado,
porque pensaba que por ventura
Belisia lo hacía por probarme, ó
que le habían dicho de mí alguna
cosa que, sabiendo después no
ser verdadera, le haría
arrepentirse de la aspereza y
inhumanidad con que me trataba.
Y pasados algunos días, no sé si
por estorbar que yo no le diese
más importunidad con palabras ni
cartas, ó si por ventura holgó de
desesperarme del todo, me
escribió una carta breve, que más
verdaderamente se pudiera decir
sentencia de mi muerte, la cual
decía desta manera:
CARTA DE BELISIA Á TORCATO

«Tus cartas, Torcato, y tus
importunidades me son tan
enojosas que me fuerzan á
escrebirte para que de mí lo
entiendas y acabes de conocer mi
voluntad, la cual está tan diferente
de lo que solía, que lo que
estonces me agradaba es la cosa
que más agora aborrezco, y de lo
passado estoy tan arrepentida
que no puedo consolarme en
tanto que te viere determinado en
tu porfía sin provecho; si en algún
tiempo me tuviste verdadero
amor, el mío no era fingido, y con
él te pagué lo que merecías, y
como las cosas no pueden
permanecer siempre en un ser,
antes se truecan y mudan cada
hora, no te maravillarás con
mucha razón de ver que en mí
haya habido esta mudanza, para
lo cual no he tenido otra ocasión
sino parecerme que era cosa que
me convenía para tornar á cobrar
el sosiego que por tu causa he
tenido mucho tiempo perdido; lo
que te ruego es que si, como
siempre mostraste, deseas
contentarme, que olvides las
cosas passadas, echándolas
fuera de tu memoria como si
jamás no hubieran sido, y si no
pudieres hacerlo será necesario
que te hagas fuerza y que
procures de ponerte en aquella
libertad con que yo quedo, y si
todavía te acordares de algunas
dellas, podrás hacer cuenta que
pasaron en sueños sin ser
verdaderas, y assí como á cosa
de sueño las olvida, que por lo
mucho que te quise y aun agora
te quiero, te doy el consejo que
para mí he tomado, el cual
holgaría que siguieses, pues todo
lo demás será acrecentar en la
pena que publicas, sin
aprovecharte más de para
trabajar en vano y darme á mí
fatiga para que con justa razón y
causa pueda tenerme por
agraviada, ¡ay! porque esta será
la postrera mía; también estarás
cierto de que no recibiré ninguna
tuya, y así te aviso que no te
pongas en desasosegarme más
con ella, pues será perder el
tiempo y el trabajo que en ello se
pusiere. Y fuera desto, yo te
deseo el mesmo bien y alegría
que tú me deseas, con el cual
plega á Dios que, habiéndome
olvidado, tan presto te veas
cuanto yo verte, sin ninguna
memoria de mí, para mayor bien
mío y tuyo, he deseado».
Las palabras desta carta alteraron
tanto mi juicio, que á muchas
veces me hallé sin él para
desesperarme, y deseaba que la
tierra dentro de sí vivo me
sumiese ó que por otro algún
acaecimiento ó desastre se me
acabase la vida, y cierto yo me
tornara del todo loco, si la razón
que conmigo peleaba no me
venciera; pero con todo esto no
podía acabar de hallarme en
ninguna compañía que pudiese
apartarme de mi pensamiento, el
cual jamás en otra cosa se
ocupaba, y andando como habéis
visto por los montes é desiertos
deshabitados y por las montañas
más ásperas, muchas veces era
causa de que mi ganado
padeciese, y de lástima dél me
venía adonde mejores pastos
hallaba; y adonde yo más
descanso tenía era en este florido
bosque, por causa desta hermosa
fuente, en el cual dando voces y
gemidos, sin ser de ninguno
entendido mi mal, un día tendido
en el mesmo lugar donde
estamos, sobre la verde yerba
deste prado, creciendo en mí la
pasión por estar considerando el
agravio que el Amor y la mi
Belisia me hacían, dando un
profundo sospiro, que parescía
llevar consigo mis entrañas,
comencé á decir desta manera:
EXCLAMACIÓN DE TORCATO
¿A quién enderezaré mis
clamores y gemidos, que con
alguna lástima procure
socorrerme? ¿A quién rogaré que
escuche mi doloroso llanto, para
que, oyéndolo, de mi rabioso mal
se compadezca? ¿A quién
publicaré mis rabiosas cuitas y
fatigas, para que, con
entenderlas, me procure dar
algún consuelo? Hienda mis
dolorosas voces el aire,
rompiendo las embarazosas
nubes, y pasando aquella región
del fuego, menor que el que á mí
me abrasa, preséntense en los
soberanos cielos pidiendo la
ayuda y socorro que en la tierra
me ha faltado, en la cual no hay
cosa que contra mí no se muestre
enemiga. Todas me son
contrarias. Todas me amenazan
con la muerte. Todas me la
procuran, sin que ninguna dellas
pueda dármela, por no me dar el
descanso que con ella recibiría.
¡Oh, Fortuna cruel, mudable,
ciega, mentirosa, traidora,
engañosa, sin ninguna fe,
inconstante, perversa, maliciosa y
sobre todo la mayor enemiga del
bien que los mortales tener
pueden! Porque tú mesma, que
se lo das forzada y por no poder
hacer otra cosa, después con
todas tus fuerzas procuras
quitárselo, pareciéndote que
cuanto mayor mal hicieres á los
que con algún bien tienes en
parte satisfechos, quitándoselo
muestras ser mayor poder el tuyo,
el cual jamás conocen las gentes
en la prosperidad hasta que con
mayor adversidad y tribulaciones
no están amenazados, para que
no puedan gozarla, teniendo
siempre temor de tu inconstancia
y condición sin ninguna firmeza.
Dime, tirana, perversa,
perseguidora de aquellos á quien
sientes tener algún contento,
arrepintiéndote de habérselo
dado, ¿para qué me pusiste en la
cumbre del mi deseo? ¿para qué
me favoreciste? ¿para qué me
quesiste poner ante mis ojos la
gloria que podías darme en la
vida, si con quitármela tan presto
me habías de dexar en tantas y
tan escuras tinieblas, negándome
la esperanza de poderla gozar en
ningún tiempo?
¡Oh, baxa tierra fementida, que
jamás das cosa que prometes,
jamás cumples cosa que digas,
siempre son al revés tus obras de
las señales que muestras! ¿con
qué palabras podré encarecer el
agravio que de ti recibo, pues al
tiempo que pensaba llegar á la
cumbre de tu rueda con tantas
angustias y trabajos me has
derrocado della, poniéndome en
el centro de los abismos?
¡Oh, cruel enemiga de todo mi
bien, ocasión de todo mi mal!
¿qué te han merecido las obras y
deseos de un pobre pastor para
que contra él tan poderosamente
quisieses mostrarte airada,
executando tu dañosa condición,
llena de mortal ponzoña contra
mí, persiguiéndome hasta
ponerme en el más mísero estado
de todos los nacidos? ¡Oh,
verdugo cruel de aquellos á
quien, cumpliendo sus deseos,
has hecho dichosos, porque
siempre en la mayor prosperidad
les armas los lazos de las
mayores adversidades! No quiero
maravillarme de que conmigo
hayas hecho lo mesmo, pues que,
con ser propio officio tuyo, heciste
lo que hacer sueles con todos los
mortales, y assí, dexándote para
quien eres, será bien dexarte
hacer y cumplir tu voluntad
buscando algunas fuerzas más
poderosas que las tuyas para que
de tu falso poder puedan librarme.
A la Muerte.
¡Oh, Muerte, dichosa para mí si,
oyendo mis llantos, mis sospiros y
gemidos dolorosos, quisieses
socorrerme, para hacer dichoso
con tu acelerada venida al más
desdichado y sin ventura pastor
de todos los pastores! Tú que
sola eres socorro de los afflegidos
cuerpos, tú que sueles consolar á
los que más han menester tu
consuelo, y tú que das alivio á los
que con necesidad te lo piden,
ayúdame, socórreme, no me
niegues tu favor en tiempo que la
muerte que me darías sería más
verdadera vida que la que agora,
muriendo con ella, sostiene este
miserable cuerpo cercado de
tantas angustias y tribulaciones;
usa agora conmigo de aquella
piedad que sueles tener de los
que con necesidad te llaman;
respóndeme, pues que te llamo;
recíbeme en tu compañía, pues
que te busco; no me niegues lo
que te pido, ni dexes de executar
en mí tu officio, pues yo tan de
veras lo quiero y lo desseo; no
seas contra mí tan cruel como la
Fortuna lo ha sido, porque la
herida de la flecha de tu arco
poderoso no me dará dolor, ni yo
huiré mi cuerpo para recibirla,
antes con muy gran
contentamiento estaré
esperándola, conosciendo el bien
que con ella rescibo. Más
agradable me será la sepoltura
que me dieres que los verdes
campos y prados y las deleitosas
florestas en que la Fortuna tan
contra mi voluntad me trae; tú
sola serás mi descanso y mi
reposo, y contigo fenecerán todas
mis penas, mis ansias y mis
trabajos. ¿Para qué tardas tanto?
¿cómo no vienes? ¿cómo no me
socorres? ¡También me quexaré
de ti! ¡También publicaré que me
haces agravio! Mira que es
crueldad la que conmigo usas, y
tanto será mayor cuanto más te
detuvieres en hacer lo que te
ruego, que ya el cuerpo querría
verse sin la compañía de mi alma
y el alma anda huyendo de la de
mi cuerpo y no espera sino tu
voluntad y tu mandamiento. No
dilates más tu venida, para quien
con tanto desseo y con tan gran
agonía la está esperando para
alivio de sus rabiosos tormentos y
passiones.
Al Tiempo.
Y tú, Tiempo, que con tu ligero
movimiento se hacen y deshacen
todas las cosas, poniendo las alas
que en ti tienen principio, ¿por
qué me haces agravio en no
poner fin á la terrible pasión y á
las rabiosas cuitas que contigo
me cercaron? ¿por qué te
muestras tan largo con ellas?
Abrevia tu veloz corrida, haciendo
conmigo la mudanza que sueles,
pues el más verdadero officio que
tienes es no dexar cosa ninguna
estar mucho tiempo en un ser, y
assí como para mi mal tan presto
te mudaste, haciéndote de bueno
malo, de alegre triste, de dichoso
desaventurado, podrías si
quisieses convertir al contrario tus
obras, para que yo no pudiese
con tanta razón mostrar el agravio
que de ti tengo por el daño que de
ti rescibo, siendo el mayor de
todos cuantos hacerme pudieras.
¡Oh, Tiempo, que un tiempo para
mí fuiste dulce, alegre, sereno y
claro, el más apacible y lleno de
deleites de cuantos tiempos por
mí, no por otro ninguno, han
passado! ¿por qué te has tornado
tan presto triste y amargo y tan
escuro que mis ojos no pueden
ver ni mirar si no son tinieblas
más escuras y espantables que
las de la mesma muerte? ¡Oh,
tiempo bueno, que por mí como
sombra pasaste, no dexando más
de la memoria para mayor
tribulación del que en ti piensa
continuamente! ¿cómo te trocaste
en malo y tan malo que ninguno
para este desventurado pastor á
quien has dexado tan sin
esperanza puede haber en el
mundo que peor sea?
A Belisia.
Y tú, vida de la vida que conmigo
contra mi voluntad vive, ¿qué
razón podrás dar de ti que pueda
excusarte de la más ingrata,
inhumana, cruel y despiadada
pastora de todas las nacidas?
Mira que el amor verdadero con
otro amor se paga, y tú con un
extraño y fiero desamor quieres
que yo quede pagado de lo
mucho que te quise y quiero, y de
lo que he padecido y padezco por
tu causa. ¿Es este el galardón de
mi rabiosa pena, la lástima que
mostrabas de mis angustias, la
affición con que mostrabas dolerte
mis lágrimas? ¡Oh, Belisia,
Belisia! escucha mis versos y
entiende lo que por ellos te digo,
para que tú mesma te conozcas y
sientas la razón que yo tengo
para sentir mi agravio de tu
crueldad, que por ello quiero
publicar lo que contra mí haces,
para que otros se guarden de no
caer en el pozo de desventuras
en que por tu causa estoy metido.
Escucha, Belisia, que mi voz,
triste como de cisne que con ella
solemniza su muerte, ayudada
con las cuerdas de mi rabel, que
otras veces en versos que loaban
tu beldad, gracias y hermosura se
empleaban, dirán agora lo que de
ti y tus condiciones he conocido,
las cuales has descubierto contra
un pobre pastor que, atado de
pies y de manos, y, lo que peor
es, ciega la voluntad y libertad,
flacas fuerzas halla en sí para
poderlas resistir.
Las Furias infernales

temorosas,
que al son de mis querellas
han venido,
de mi mal espantable muy
medrosas
al centro del abismo se han
huido;
las Parcas, que al vivir son
enojosas,
de acortarme tal vida se han
tenido;
tú sola me procuras mal
eterno,
más que rabiosa Furia del
infierno.
Los ángeles que fueron
condenados
y en diablos espantables
convertidos,
de mi rabioso mal muy
espantados,
escuchan mis clamores y
gemidos,
paréceles ser poco
atormentados
mirando mis tormentos tan
crecidos,
y tú, cruel más que leona fiera,
no quieres contentarte sin que
muera.
Ninguno por justicia
condenado
que tenga ya la soga á la
garganta,
con esperar la muerte
fatigado,
jamás se viera estar con pena
tanta;
tu ingratitud me tiene en tal
estado
que cosa más del mundo no
me espanta,
pues te precias y quieres dar
la muerte
á quien no quiere vida sin
quererte.
Los tigres y leones muy
furiosos,
los osos y las onzas muy
ligeras,
los lobos muy crueles y
rabiosos,
las bestias que se cuentan por
más fieras,
siendo animales brutos muy
medrosos
de mí se van huyendo muy de
veras;
tú sola, que mi sangre estás
bebiendo,
de mi rabioso mal te estás
reyendo.
¿Qué víbora ó serpiente
ponzoñosa,
qué basilisco fiero ó qué
dragón,
qué áspide cruel muy
enconosa,
qué bravo cocodrilo y sin
razón
podrán tener tu condición
dañosa
ni tu duro y sangriento
corazón?
¡Oh, corazón cruel, áspero y
fuerte,
que lo que más te aplace es
dar la muerte!
¿Qué corazón de acero ó de
diamante
puede ser que no ablande mi
fatiga?
Y tú, en tu crueldad firme y
constante,
con más rabia te muestras mi
enemiga.
No hay nadie que lo sepa á
quien no espante,
que no conozca y sienta y que
no diga
que tu desamor fiero assí te
agrada
como á sangrienta loba
encarnizada.
Acabando de cantar estos versos,

con la ayuda que mis lágrimas
hacían para solemnizarlos y con
la fatiga que mi espíritu padecía
pensando en las cosas que por
mí pasaban, de cansado venció á
mis ojos un pesado sueño que sin
poder resistirlo dexó todos mis
miembros sepultados en el olvido
que consigo traer suele; sola mi
memoria estaba velando, y de tal
manera me representaba
durmiendo las cosas pasadas
como si presentes las tuviera;
pero descuidándose un poco,
venció la imaginación, la cual en
sueños me puso delante lo que
agora contaros quiero, que más
verdaderamente me pareció
haberlo visto pasando por mí
derecho que no haberlo soñado ni
que fingidamente se me
representasse.
PARTE SEGUNDA
CUENTA TORCATO EL SUEÑO
Parecíame que lo que en la

fantasía se me representaba mis
ojos lo vían palpablemente, y que
sin saber de qué manera ni por
quién era llevado, en muy breve
tiempo caminaba muy grande
espacio y cantidad de tierra,
discurriendo por diversas
provincias y regiones con una
velocidad tan arrebatada que mis
pies apenas tocaban la pesada
tierra, y habiendo hecho fin á mi
tan larga jornada con algún
cansancio del trabajoso camino,
me hallé en un muy verde y
florido prado, con tanta diversidad
de hermosas flores y rosas, que
con diversos colores al suelo
matizaban, dando de sí un olor
muy perfecto y suave, del cual mi
fatigado cuerpo era recrecido que
del todo me sentí vuelto en mis
corporales fuerzas, y echando los
ojos alrededor de donde estaba,
vi cosas que me pusieron tan
grande espanto y admiración, que
aun agora en volverlas á mi
memoria para contarlas me
espantan y tienen confuso,
pareciéndome que apenas sabré
decirlas. Era este hermoso y
aplacible prado todo alrededor
cercado de unas florestas muy
espesas y deleitosas en los ojos
que las miraban, porque demás
de ser los árboles muy altos,
verdes y floridos, y todos puestos
con muy gran orden y concierto,
estaban cargados de muchas y
diversas frutas maduras, y en tan
gran perfición, que sólo en verlas
ponía gran deleite y
contentamiento á mis ojos que las
miraban, viendo que las hojas con
un manso y amoroso viento se
andaban meneando á una parte y
á otra, haciendo un sordo ruido
agradable á mis oídos, y sus
sombras, con que la fuerza de la
calor del sol hurtaban, me ponían
en agonía de gozarlas cuando
con mi ganado á sestear me
venía; andaban por ellas muy
gran cantidad de diversos
animales bravos y mansos,
envueltos los unos con los otros,
sin hacerse daño ninguno.
Y en las cimas de los árboles
estaban sentados grande
abundancia de aves y páxaros de
diversos colores y raleas, grandes
y pequeños, los cuales con sus
arpadas y differentes lenguas
cantando hacían una música y
armonía tan acordada que yo
jamás quisiera dexar de oirla si
permitido me fuera; y después
revolando todos por el aire,
trocando sus lugares, tornaban
como de principio á proseguir en
la suavidad de su canto.
Estaban estas florestas cercadas
de una muy alta montaña, que por
todas partes igualmente parecía
levantarse, llevando por sí
tendidos en gran cantidad los
montes y florestas, hasta que en
el remate della se hacía un muro
tan alto, que parecían comunicar
con las nubes las almenas que
con muy gran orden y concierto
estaban edificadas. Era este muro
triangulado, y de un ángulo á otro
de diferentes colores; porque la
una parte estaba hecha de unas
piedras coloradas, que en la
fineza parecía ser muy
verdaderos rubís; en medio desta

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THEORY BLENDED WITH APPLICATION

^ Special Appendix 2: Variable Interest Entities

financial position and operating results.

in the ‘‘IASB Perspectives’’ feature.

Standards Codification (ASC).

Business Combinations—Basic Topics (Chapters 1–6)

Business Combinations—Specialized Topics (Chapters 7 and 8)

Multinational Accounting and Other Reporting Concerns

Accounting for Partnerships (Chapters 13 and 14)

Governmental and Not-for-Profit Accounting (Chapters 15–19)

Fiduciary Accounting (Chapters 20 and 21)

Valuable Supplementary Material for the Student

Constance Crawford, Ramapo College of New Jersey

Rita H. Cheng currently serves as Professor of Accounting at Northern Arizona University.

Brief Contents Chapter 12

Contents Consolidating with a Noncontrolling Interest 69

Intercompany Plant Asset Sales 214 Subsidiary Preferred Stock 389

Chapter 7 Tax Effects of Equity Method 484

Special Appendix 2 Alternative International Monetary Systems 548

Defining a VIE SA2-1 Accounting for Foreign Currency Transactions 552

Chapter 9 Examples of the Accounting for Fair

Chapter 12 History of Governmental Financial Reporting 767

Proprietary Funds 843 Summary 956

Chapter 21 Solutions Available through the Bankruptcy

Chapter 1: Business Combinations:

Chapter 6: Cash Flow, EPS, and Taxation

CARTA DE BELISIA Á TORCATO

Las Furias infernales

Acabando de cantar estos versos,

Parecíame que lo que en la

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