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Accounting
company
10 th
edition
leo | knapp | mcgowan | sweeting
brief contents
CHAPTER 1 Nature and regulation of companies 1
CHAPTER 2 Financing company operations 37
CHAPTER 3 Company operations 91
CHAPTER 4 Fundamental concepts of corporate governance 155
CHAPTER 5 Fair value measurement 197
CHAPTER 6 Accounting for company income tax 237
CHAPTER 7 Financial instruments 297
CHAPTER 8 Foreign currency transactions and forward exchange contracts 349
CHAPTER 9 Property, plant and equipment 395
CHAPTER 10 Leases 453
CHAPTER 11 Intangible assets 515
CHAPTER 12 Business combinations 567
CHAPTER 13 Impairment of assets 633
CHAPTER 14 Disclosure: legal requirements and accounting policies 687
CHAPTER 15 Disclosure: presentation of financial statements 735
CHAPTER 16 Disclosure: statement of cash flows 799
CHAPTER 17 Translation of financial statements into a presentation currency 861
CHAPTER 18 Consolidation: controlled entities 905
CHAPTER 19 Consolidation: wholly owned subsidiaries 931
CHAPTER 20 Consolidation: intragroup transactions 991
CHAPTER 21 Consolidation: non-controlling interest 1047
CHAPTER 22 Consolidation: other issues 1109
CHAPTER 23 Associates and joint ventures 1177
CHAPTER 24 Joint arrangements 1237
CHAPTER 25 Insolvency and liquidation 1277

contents
Preface xiv Practice questions 81
Supplementary materials xv References 89
Acknowledgements xvi
CHAPT E R 3
CHAPTER 1 Company operations 91
Nature and regulation of companies 1 3.1 The elements of financial statements 93
1.1 The nature of a company 2 3.2 Recognition criteria for the elements 98
1.2 Different types of companies 3 3.3 Measurement and classification of the
elements 103
1.3 Forming a company 7
3.4 Dividends 108
1.4 Administering a company 9
3.5 Reserves 116
1.5 Funding a company 9
3.6 Accounting policies 118
1.6 Background to the Corporations Act 2001 12
3.7 The statement of profit or loss and other
1.7 Accounting regulation of companies 14
comprehensive income 123
1.8 Other important regulatory organisations 25
3.8 Retained earnings and the statement of changes
1.9 General purpose financial reports, the reporting entity in equity 129
concept and differential reporting 26
3.9 The statement of financial position 130
Learning summary 32
Learning summary 133
Key terms 32
Key terms 133
Review questions 33
Demonstration problems 133
Case studies 33
Review questions 139
References 34
Case studies 140
Practice questions 142
CHAPTER 2 References 154
Financing company operations 37

CHAPT E R 4
2.1 Accounting for share issues 38
2.2 Undersubscription and oversubscription 44 Fundamental concepts of corporate
2.3 Forfeiture and reissue of shares 47 governance 155
2.4 Share issue costs and formation costs 51 4.1 Corporate governance defined 156
2.5 Subsequent issues of equity shares 54 4.2 Different theories, different corporate governance
2.6 Share options 56 implications 157
2.7 Redeemable preference shares 57 4.3 Corporate collapses and the global financial
2.8 Conversion of shares 61 crisis 160
2.9 Share buy-backs 63 4.4 The role of regulators and regulation 162
2.10 Debentures 66 4.5 Directors’ and officers’ duties 166
Learning summary 71 4.6 Major issues for listed companies 172
Key terms 71 4.7 Key corporate governance issues for
Demonstration problems 71 accountants 180
Review questions 74 4.8 International corporate governance and future
Case studies 75 developments 183
Learning summary 186 6.7 Other disclosures 263
Key terms 187 6.8 Additional issues 264
Review questions 187 Learning summary 271
Case studies 188 Key terms 272
Practice questions 193 Demonstration problems 272
References 194 Review questions 280
Case studies 281
CHAPTER 5 Practice questions 284
Reference 296
Fair value measurement 197
5.1 The need for a standard on fair value CHAPT E R 7
measurement 198
5.2 The definition of fair value 199
Financial instruments 297
5.3 Application to non-financial assets 204 7.1 What is a financial instrument? 299
5.4 Application to liabilities 214 7.2 What is a financial asset? 300
5.5 Application to measurement of equity 7.3 What is a financial liability? 302
instruments 218 7.4 What is a derivative instrument? 303
5.6 Issues relating to measurement of fair value of 7.5 What is an equity instrument? 305
financial instruments 218
7.6 Distinguishing between financial liabilities and equity
5.7 Disclosure 219 instruments 306
5.8 Some questions about fair value 7.7 Compound financial instruments — convertible
measurement 224 notes 310
Learning summary 229 7.8 Consequential effects of classifications for interest,
Key terms 229 dividends, gains and losses 312
Review questions 230 7.9 Recognition of a financial asset or financial
Case studies 230 liability 313
7.10 Offsetting a financial asset and a financial
References 235
liability 315
7.11 Derecognition of a financial asset or a financial
CHAPTER 6 liability 316
7.12 Initial measurement of a financial asset or a financial
Accounting for company liability 318
income tax 237 7.13 Subsequent measurement of a financial
asset 321
6.1 The benefit of information on current and 7.14 Subsequent measurement of a financial
deferred tax 238 liability 326
6.2 Income tax in the financial statements 239 7.15 Disclosures 331
6.3 General principles of accounting for income Learning summary 336
tax 241
Key terms 336
6.4 Taxable profit 244 Demonstration problems 337
6.5 Current tax 247 Review questions 340
6.6 Deferred tax 252 Case studies 341
viii Contents
Practice questions 342 Learning summary 432
References 347 Key terms 432
CHAPTER 8 Case studies 440
Foreign currency transactions and References 452
forward exchange contracts 349
8.1 The need for translation of foreign currency CHAPT E R 1 0
amounts 350
8.2 The means of translation: exchange rates 353 Leases 453
8.3 Foreign exchange differences 354 10.1 What is a lease? 455
8.4 Accounting for foreign currency monetary items 356 10.2 Two way classification of leases: finance or
8.5 Exchange differences for non-monetary operating 456
items 365 10.3 Classification guidance 457
8.6 Foreign exchange risk 369 10.4 Form over substance: incentives to misclassify
8.7 Forward exchange contracts without hedging 370 leases 464
8.8 Forward exchange contracts with hedging 374 10.5 Interpretations relevant to identifying finance
8.9 Disclosures 382 leases 466
Learning summary 383 10.6 Accounting for finance leases by lessees 467
Key terms 384 10.7 Accounting for operating leases by lessees 472
Demonstration problems 384 10.8 Disclosures by lessees 473
Review questions 386 10.9 Accounting for finance leases by non-manufacturer
Practice questions 387 or non-dealer lessors 475
References 393 10.10 Accounting for finance leases by manufacturer or
dealer lessors 480
CHAPTER 9 10.11 Accounting for operating leases by
lessors 481
Property, plant and equipment 395 10.12 Disclosures by lessors 483
10.13 Applied issue: accounting for lease
9.1 The nature of property, plant and equipment 396 incentives 485
9.2 Initial recognition of property, plant and 10.14 Applied issue: sale and leaseback
equipment 398 transactions 487
9.3 Initial measurement of property, plant and 10.15 Applied issue: a new proposed model for lease
equipment 400 accounting 490
9.4 Measurement subsequent to initial recognition 405 Learning summary 495
9.5 The cost model 406 Key terms 495
9.6 The revaluation model 414 Demonstration problems 496
9.7 Choosing between the cost model and the revaluation Review questions 503
model 427 Case studies 504
9.8 Derecognition 428 Practice questions 506
9.9 Disclosure 430 References 513
Contents ix
CHAPTER 11 Practice questions 618
References 631
Intangible assets 515
11.1 The nature of intangible assets 518
CHAPT E R 1 3
11.2 Recognition and initial measurement 528
11.3 Measurement subsequent to initial Impairment of assets 633
recognition 537
11.4 Retirements and disposals 541 13.1 Introduction to AASB 136 634
11.5 Disclosure 541 13.2 When to undertake an impairment test 635
11.6 Proposals for changes in accounting for intangible 13.3 Impairment test for an individual asset 637
assets 546 13.4 Cash-generating units — excluding
11.7 Innovative measures of intangibles 548 goodwill 645
Learning summary 551 13.5 Cash-generating units and goodwill 652
Key terms 551 13.6 Reversal of an impairment loss 659
Demonstration problem 551 13.7 Disclosure 663
Review questions 553 Learning summary 668
Case studies 554 Key terms 668
Practice questions 559 Demonstration problems 668
References 565 Review questions 673
Case studies 673
CHAPTER 12 References 686
Business combinations 567

CHAPT E R 1 4
12.1 The nature of a business combination 568
12.2 Accounting for a business combination — basic Disclosure: legal requirements and
principles 570 accounting policies 687
12.3 Accounting in the records of the acquirer 574
12.4 Accounting in the records of the acquirer: recognition 14.1 General purpose financial statements 688
and measurement of assets acquired and liabilities 14.2 Annual reporting requirements 690
assumed [step 3] 574 14.3 Half-year financial report 698
12.5 Accounting in the records of the acquirer: goodwill 14.4 Accounting policies 698
and gain on bargain purchase [step 4] 580 14.5 Changes in accounting estimates 717
12.6 Accounting by the acquirer: shares acquired in an 14.6 Errors 718
acquiree 594 14.7 Impracticability in respect of retrospective
12.7 Accounting in the records of the acquiree 597 adjustments for accounting policy changes or
12.8 Subsequent adjustments to the initial accounting for a correction of errors 720
business combination 601 14.8 Materiality 721
12.9 Disclosure — business combinations 604 14.9 Events occurring after the end of the reporting
Learning summary 609 period 723
Key terms 609 Learning summary 725
Demonstration problems 609 Key terms 725
Review questions 616 Demonstration problems 726
Case studies 616 Review questions 727
x Contents
Case studies 728 Learning summary 829
Practice questions 729 Key terms 829
References 734 Demonstration problem 830
Disclosure: presentation of financial References 860
statements 735
15.1 A complete set of financial statements 736 CHAPT E R 1 7
15.2 General features of a complete set of financial Translation of financial statements into
statements 737
15.3 Statement of financial position 741
a presentation currency 861
15.4 Statement of profit or loss and other comprehensive 17.1 Introduction to AASB 121 862
income 751 17.2 Functional and presentation currencies 864
15.5 Statement of changes in equity 764 17.3 The translation process 870
15.6 Notes 767 17.4 Translation into the functional currency — the
15.7 Future developments 772 temporal method 872
Learning summary 775 17.5 Translation from the functional currency into
Key terms 775 the presentation currency — the current rate
Demonstration problems 775 method 878
Review questions 784 17.6 Disclosure 882
Case studies 785 Learning summary 885
Practice questions 786 Key terms 885
References 798 Demonstration problem 885
Disclosure: statement of References 904
cash flows 799
16.1 Benefits of cash flow information 800 CHAPT E R 1 8
16.2 Format of the statement of cash flows 801 Consolidation: controlled entities 905
16.3 Cash and cash equivalents 803
16.4 Classification of cash flows 805 18.1 Consolidated financial statements 906
16.5 Techniques for preparing the statement of cash 18.2 Control as the criterion for consolidation 909
flows 807 18.3 Preparation of consolidated financial
16.6 Reconstruction of accounts approach 809 statements 915
16.7 Statement of financial position approach 815 18.4 Investment entities 917
16.8 Reconciliation of profit to net cash from operating 18.5 Business combinations and consolidation 918
activities (indirect method of presentation) 817 18.6 Disclosure 920
16.9 Note disclosures 819 Learning summary 924
16.10 Additional issues 821 Key terms 924
16.11 Limitations of the statement of cash flows 826 Review questions 924
Contents xi
Case studies 925 Case studies 1030
Reference 930 Practice questions 1031
CHAPTER 19 CHAPT E R 2 1
Consolidation: wholly owned Consolidation: non-controlling

subsidiaries 931 interest 1047
19.1 The consolidation process 932 21.1 Non-controlling interest explained 1048
19.2 Consolidation worksheets 933 21.2 Effects of an NCI on the consolidation process 1051
19.3 The acquisition analysis 935 21.3 Calculating the NCI share of equity 1058
19.4 Worksheet entries at the acquisition date 939 21.4 Adjusting for the effects of intragroup
transactions 1071
19.5 Worksheet entries subsequent to the acquisition
date 945 21.5 Gain on bargain purchase 1075
19.6 Revaluations in the records of the subsidiary at Learning summary 1077
acquisition date 957 Key term 1077
19.7 Disclosure 958 Demonstration problem 1077
19.8 Reverse acquisitions 961
Case studies 1091
Key terms 964
Review questions 976 CHAPT E R 2 2
Case studies 976
Practice questions 978 Consolidation: other issues 1109
22.1 Direct and indirect non-controlling interest 1110
CHAPTER 20 22.2 Sequential acquisitions 1111
22.3 Non-sequential acquisitions 1119
Consolidation: intragroup 22.4 Reciprocal ownership 1123
transactions 991 22.5 Changes in ownership interests 1128
20.1 Rationale for adjusting for intragroup
Key terms 1135
transactions 992
20.2 Transfers of inventory 994 Review questions 1158
20.3 Transfers of property, plant and equipment 1001 Case studies 1158
20.4 Transfers between inventory and Practice questions 1158
non-current assets 1005
20.5 Intragroup services 1008
20.6 Intragroup dividends 1009 CHAPT E R 2 3
20.7 Intragroup borrowings 1012
Associates and joint ventures 1177
Key terms 1016 23.1 Identifying associates and joint ventures 1180
Demonstration problems 1016 23.2 The equity method of accounting: rationale and
Review questions 1030 application 1183
xii Contents
23.3 Applying the equity method: basic principles 1185 Case studies 1263
23.4 Applying the equity method: goodwill and fair value Practice questions 1265
adjustments 1188 References 1276
23.5 Applying the equity method: other issues 1194
23.6 Applying the equity method: inter-entity CHAPT E R 2 5
transactions 1199
23.7 Share of losses of the associate 1204 Insolvency and liquidation 1277
23.8 Disclosure 1206
25.1 Insolvency and administration 1278
25.2 Winding up in insolvency and by the court 1289
Key terms 1213
25.3 Voluntary winding up 1291
Demonstration problem 1213
Review questions 1221 25.4 Powers of the liquidator 1294
Case studies 1222 25.5 The liquidator’s accounts 1297
Practice questions 1223 25.6 Proof of debts 1298
References 1236 25.7 Priority of payment of debts 1298
25.8 Rights of contributories 1305
CHAPTER 24 25.9 Accounting for liquidation 1309
25.10 Receivership 1315
Joint arrangements 1237 Learning summary 1318
Key terms 1318
24.1 Joint arrangements: characteristics and
classification 1239
24.2 Accounting for joint arrangements 1245
Case studies 1329
24.3 Accounting by a joint operator 1248 Practice questions 1333
24.4 Disclosure 1257 References 1349
Key terms 1259 Appendix: Present value tables 1351
Demonstration problem 1259 Glossary 1353
Review questions 1263 Index 1364
Contents xiii
preface
The 10th edition of Company Accounting has been written during a time of many changes in
international financial reporting standards.
As a result of these changes and in response to market demand we have made a significant
number of content revisions and have also included several new chapters in the tenth edition:
• Chapter 7 Financial instruments
• Chapter 8 Foreign currency transactions and forward exchange contracts
• Chapter 17 Translation of financial statements into a presentation currency
• Chapter 23 Associates and joint ventures
• Chapter 24 Joint arrangements
This edition retains the strengths and hallmarks of this book, including attention to detail, prac-
tical application of accounting standards, provision of a conceptual basis, and depth of analysis.
We thank the many academics who have adopted this text over the years. We appreciate your
support and continued interest in our work. Your appreciation of what we write as evidenced by
your willingness to use the text gives us immense satisfaction. We would encourage all adopters
of the text to write to us with ideas, corrections and comments.
Ken Leo, Jeffrey Knapp, Susan McGowan and John Sweeting
August 2015
xiv Preface
supplementary materials
Company Accounting 10th edition is supported with an extensive teaching and learning resources
supplementary package.
• WileyPLUS is a research-based online environment for effective teaching and learning. With
WileyPLUS, lecturers can prepare, assign and grade accounting activities simply and in a
time-efficient manner. WileyPLUS increases student confidence through an innovative design
that allows greater engagement, which leads to improved learning outcomes. For more infor-
mation, contact your John Wiley & Sons sales consultant or visit www.wileyplus.com.
• A solutions manual containing worked solutions to all end-of-chapter discussion questions,
exercises, problems, case studies and activities is available for lecturers who prescribe this
text. The solutions manual has been thoroughly checked for accuracy and correctness.
• The PowerPoint presentation contains over 1000 slides with summaries of key concepts and
processes presented in the chapter as well as key diagrams and worked examples from the text.
Supplementary materials xv
acknowledgements
The authors and publisher would like to thank the following copyright holders, organisations and indi-
viduals for their permission to reproduce copyright material in this book.
Images:
• Oxford University Press Australia: 163 ‘By permission of Oxford University Press’. ‘Corporate
Governance: Theories, Principles and Practice’, Farrar, J H, 2005, Oxford University Press, South
Melbourne, p. 348; 164 ‘Corporate Governance: Theories, Principles and Practice’, Farrar, J H, 2005,
Oxford University Press, South Melbourne, p. 349. • Oxford University Press UK: 165 ‘By permission of
Oxford University Press’. ‘Responsive Regulation: Transcending the Deregulation Debate’ by Ian Ayres &
John Braithwaite (1992), adapted Fig. 2.1, p. 35, Oxford University Press UK. • Pearson Education US: 184
Tricker, Robert I, International Corporate Governance, 1st Edition, © 1995, p. 45. Reprinted by permission
of Pearson Education, Inc., Upper Saddle River, N.J. • Australian Accounting Standards Board (AASB): 317
© Commonwealth of Australia 1991; 1242 © Commonwealth of Australia 2012; 1244 © Commonwealth
of Australia 2011. All legislation herein is reproduced by permission but does not purport to be the official
or authorised version. It is subject to Commonwealth of Australia Copyright. The Copyright Act 1968
permits certain reproduction and publication of Commonwealth legislation. In particular, s. 182A of the
Act enables a complete copy to be made on behalf of a particular person. For reproduction or publication
beyond that permitted by the Act, permission should be sought in writing from the Commonwealth avail-
able from the Australian Accounting Standards Board. Requests in the first instance should be addressed
to the Administration Director, Australian Accounting Standards Board, PO Box 204, Collins Street West,
Melbourne, Victoria, 8007. • American Accounting: 524 Figure 1 from ‘Overpriced Shares, Ill-Advised
Acquisitions, and Goodwill Impairment’ by Gu and Lev, The Accounting Review, vol. 86, no. 6, November
2011, p. 1996 © American Accounting Association. Used with permission. • Brookings Institution Press: 525
from ‘Intangibles: Management, Measurement and Reporting’ by Baruch Lev, Brookings Institution
Press, Washington DC, 2001, p. 18. • MSCI: 525 Seeking Alpha/MSCI. • © Skandia Insurance Company
Limited: 549. • Bernard Marr: 549 Adapted from ‘Management Accounting Guideline — Impacting Future
Value: How to Manage Your Intellectual Capital’ by Bernard Marr, published by CMA Canada, AICPA and
CIMA, 2005, p. 6. • © Intangible Business Limited: 591, 592. • Peter Gerhard: 1058 Reproduced with per-
mission from Peter Gerhardy.
Text:
• © Woolworths Limited: 47–8. • © Australian Securities & Investments Commission: 60, 1282–8.
Reproduced with permission. • Kim Wyatt: 76 ‘Who really wins from an off-market share buyback?’ by
Kim Wyatt and Jarrod McDonald, InTheBlack, October 2004, pp. 54–7. Reproduced with permission from
the authors. • Copyright Agency Limited: 80 O’Sullivan, M 2010, ‘Investor Prepares for fight as Transurban
issues shares’ © News Limited, Sydney Morning Herald, 25 May; 80–1 Tasker, S 2012 ‘Companies cautious
on floats’, The Australian, 19 December, p. 18; 188 Speedy, B 2013, ‘Bid rules to stop inside-trading direc-
tors’, The Australian, 16 November; 189 Speedy, B 2013, ‘DJs execs in share trading probe’, The Australian,
12 November; 191–2 McCrann, T 2012, ‘Two strikes rule does nothing’, The Australian, 15 December; 192
England, C 2013 ‘Shareholders fighting back’, The Advertiser, 25 January, p. 23 ; 554 James, D 2001, ‘Hail
the “age of access”’, BRW, 27 April. Reproduced with the permission of Journalists Copyright and Fairfax;
1330 ‘Government to reverse rules on shareholders during insolvency’, published in The Herald Sun, 2 June
2010 © 2010 AAP. AAP content is owned by or licensed to Australian Associated Press Pty Limited and
found at http://www.heraldsun.com.au/news/breaking-news/reversing-high-court-creditor-ruling-on-sons-
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Governance Council, Association of Superannuation Funds of Australia Ltd, ACN 002 786 290, Australian
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Watkins: 181–2 Reproduced with the permission of Sherron Watkins. • Ernst & Young Global: 200 from
Ernst & Young Global comment letter — ‘Invitation to comment — Fair Value Measurement’, dated
28 September 2009. Reproduced by permission of Ernst & Young (c) 2012 EYGM Limited. All rights
reserved. • IFRS Foundation: 203, 207, 208, 209, 210, 213, 215, 216, 216–17, 217, 220–1, 221–2, 223, 298,
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2006, with permission from Elsevier http://www.sciencedirect.com/science/journal; 232 Reprinted from
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described in SFAS 157’, pp. 101–14 © 2008, with permission from Elsevier http://www.sciencedirect.com/
science/journal; 516 from ‘Internally generated intangible assets: framing the discussion’ by E Jenkins &
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Annual Report 2013, pp. 82, 86, 94; 607–8 © Boral Limited; 654–5 Boral Ltd Annual Report 2013, Note 4
extract, Note 15, pp. 72; 769–70 © Boral Ltd. • West Australian Newspapers: 505 from ‘Bunnings to sell,
lease back $200m of stores’ by Cathy Bolt, The West Australian, 17 February 2007; 557 from ‘A history of
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Limited: 517–18, 666–7, 771. • Financial Accounting Standards Board (FASB): 520 The FASB material is
copyrighted by the Financial Accounting Foundation (FAF), 401 Merritt 7, PO Box 5116, Norwalk,
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• Rosalind Whiting: 555–6 ‘Sporting glory — the great intangible’ by Rosalind Whiting & Kyla Chapman,
Australian CPA, February 2003, pp. 24–7. • © Private Media: 565. • © Nokia: 637. • © Amcor Limited:
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Banking Group Limited: 747. • © American Accounting Association: 865 from ‘The Rationale Underlying
the Functional Currency Choice’ by Lawrence Revsine, The Accounting Review, vol. LIX, no. 3, July 1984,
pp. 504–14. • Ernst & Young USA: 869 from ‘Foreign reporting requirements. A comprehensive guide —
Foreign currency matters’, Revised December 2011 © 2011 Ernst & Young LLP, Score no. BB2103; 870
from ‘Foreign reporting requirements. A comprehensive guide — Foreign currency matters’, Revised
December 2011 © 2011 Ernst & Young LLP, Score no. BB2103. • Australian Accounting Standards Board
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mission should be sought in writing from the Australian Accounting Standards Board. Requests in the first
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Box 204, Collins Street West, Melbourne, Victoria, 8007; 1244 © Commonwealth of Australia 2011. All
legislation herein is reproduced by permission but does not purport to be the official or authorised version.
Acknowledgements xvii
It is subject to Commonwealth of Australia Copyright. The Copyright Act 1968 permits certain reproduction
and publication of Commonwealth legislation. In particular, s. 182A of the Act enables a complete copy to
be made on behalf of a particular person. For reproduction or publication beyond that permitted by the Act,
permission should be sought in writing from the Commonwealth available from the Australian Accounting
Standards Board. Requests in the first instance should be addressed to the Administration Director,
Australian Accounting Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria, 8007.
• © Tabcorp Holdings Limited: 762 Concise Annual Report 2013. • © Sigma Pharmaceuticals Limited: 763,
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of Australia; 156 © Commonwealth of Australia, Department of the Prime Minister and Cabinet 2011.
• Kate Lahey: 1329–30 Originally published as ‘Elderslie liquidator targets Hewson’ by Kate Lahey,
12 June 2010 © Kate Lahey/Courtesy of The Sydney Morning Herald. • Anthony Black: 1331–2
‘A crystal clear result’ by Anthony Black. Originally published InTheBlack magazine, February 2010. This
article was written by the financial journalist, Anthony Black, who has extensive experience writing on
corporate and financial matters. For enquiries on past articles refer to anthonyblack3@bigpond.com.
Every effort has been made to trace the ownership of copyright material. Information that will enable the
publisher to rectify any error or omission in subsequent editions will be welcome. In such cases, please
contact the Permissions Section of John Wiley & Sons Australia, Ltd who will arrange for the payment of
the usual fee.
xviii Acknowledgements
1
CHAPTE R
Nature and regulation

of companies
Chapter aim
This chapter provides an introduction to the corporate form of business organisation by examining
the nature of a company and the regulation relating to company formation, administration and
funding. In addition we consider the legislation and bodies that establish and regulate the require-
ments for financial reporting, including accounting standards, in the context of corporations.
Learning objectives
After studying this chapter, you should be able to:
1 summarise the nature and attributes of a company (p. 2)
2 discuss the different types of companies which may be formed under the
Corporations Act 2001 (p. 3)
3 describe the necessary documentation for forming a company (p. 7)
4 describe the types of records needed to manage a company (p. 9)
5 compare and contrast shares and debentures, and discuss the reasons for issuing disclosure
documents (p. 9)
6 discuss the background and purpose of the Corporations Act 2001 by which companies are
formed, administered and dissolved (p. 12)
7 evaluate the reasons for the development of accounting standards and describe the current
arrangements for establishing accounting standards in Australia, subject to global influences
in the standard-setting process (p. 14)
8 discuss the roles played by the Australian Securities and Investments Commission (ASIC)
and the Australian Securities Exchange Limited (ASX) (p. 25)
9 analyse the concepts of general purpose financial reporting and the reporting entity (p. 26)
10 describe the current differential reporting requirements (p. 28).
Before you begin

Before studying this chapter, you should:
• revise the nature of the sole trader and partnership forms of business
• recall the nature of assets, liabilities and equity
• recall the basic assumptions made by accountants in accounting for an entity.
Introduction
Accounting for corporations (companies) can be an interesting and challenging activity. This
book is written assuming that the reader has an understanding of the basic accounting double-
entry system and the issues facing sole trader or partnership businesses. If a sole trader or a
partnership business decides that its activities are to be reorganised as a company, or if a business
is to begin its life as a company, this book should prove invaluable as a source of information to
account for the corporate form of organisation.
The prevalence of the corporate form of organisation is evident by the fact that there are almost
2 million registered companies in Australia (ASIC, 2012). This popularity is due to the advantages
this form of organisation provides, owing to its nature and unique attributes. However, this also
results in corporations being subject to greater government regulation than are sole traders and
partnerships. This regulation comes in various forms, the main features emphasised in this book
being the corporate law and accounting standards; however, additional regulation is imposed on
companies wishing to list their shares on a securities exchange. The study of company accounting
begins by asking the obvious question: ‘What is a company and why do people form companies?’
ARNI
1.1 The nature of a company

NG
LE
1
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OB
JECTI
V
Summarise the nature and A company is a form of organisation established in accordance with the Corporations Act 2001
attributes of a company. (hereafter generally referred to as the Act). A company comes into existence in Australia only when
it has been registered by the Australian Securities and Investments Commission (ASIC) (s. 119 of
the Act). Once registered, the company has all the powers as set out in s. 124(1) of the Act:
A company has the legal capacity and powers of an individual both in and outside this jurisdiction.
A company also has all the powers of a body corporate, including the power to:
(a) issue and cancel shares in the company;
(b) issue debentures (despite any rule of law or equity to the contrary, this power includes a power
to issue debentures that are irredeemable, redeemable only if a contingency, however remote,
occurs, or redeemable only at the end of a period, however long);
(c) grant options over unissued shares in the company;
(d) distribute any of the company’s property among the members, in kind or otherwise;
(e) give security by charging uncalled capital;
(f) grant a floating charge over the company’s property;
(g) arrange for the company to be registered or recognised as a body corporate in any place outside
this jurisdiction;
(h) do anything that it is authorised to do by any other law (including a law of a foreign country).
A company limited by guarantee does not have the power to issue shares.
Even if the management of a company is not acting in the company’s interests, the company
still has the legal capacity to carry out those actions (s. 124(2)). Furthermore, a company may
specify, in a separate constitution, its objectives; an action of the company is not invalid merely
because it is contrary to these objectives (s. 125(2)).
A company may or may not have a name. If no name is given, then a company is to be
known by its Australian company number (ACN) (s. 148(1)). All companies are given an ACN
on registration (s. 118(1)), and a company is required by s. 153 to set out its name and ACN on
all of its public documents and negotiable instruments. A company is entitled to change its name
(s. 157), but its ACN remains with the company throughout its life, and its rights and obligations
do not change merely because of the name change (s. 161). On the introduction of the goods
and services tax (GST) into Australia, all companies were required also to have an Australian
business number (ABN) and to register for the GST.
One of the chief reasons for forming a company is that the corporate form of organisation
permits individuals to have limited liability. This means that the shareholders of the company
are liable only to the extent of any amounts unpaid on their shares in the winding-up of the
company (s. 516). Contrast this with the partnership form of organisation, where each partner
is jointly and severally liable for all partnership debts, (i.e. unlimited liability). If one or more
2 Company Accounting | Tenth Edition

partners are insolvent, the remaining solvent partners are liable to meet all losses and debts out
of their private assets.
The principle of ‘limited liability’ was first established legally by the Companies Act of
1856 in England. A company was given a legal identity separate and distinct from its members,
and was not affected by the death or disability of any one of its members. The formation of a
company is thus considered to have a number of advantages over the partnership and sole trader
forms of organisation.
• A company’s members are liable for only a limited amount of business debts to the extent of the
amount unpaid on their shares, whereas partnerships and sole traders have unlimited liability.
• A company has a legal existence distinct from its owners, managers, operators, employees and
agents. It is an artificial, legally created entity, separate and distinct from its owners. Hence, it
has rights in perpetuity in that it is not affected by the death, disability or retirement of any of
its members.
• Members are allowed to sell their shares at any time to another person without having to
obtain permission from the other members, provided that a proper instrument of transfer has
been delivered to the company (s. 1071B).
• A company is entitled to raise large amounts of funds by issuing shares, debentures and notes,
particularly if it is a public company.
Incorporation brings with it several other features apart from limited liability. As a result of
its separate legal existence, a company has its own property, its own rights, and its own obli-
gations. A company’s money and other assets belong to the company, not the owners, and the
money must be used for the company’s purposes. Furthermore, a company has the powers of an
individual, including the powers to own, as well as dispose of, assets and to enter into contracts.
Finally, a company has the power to sue other parties, and can be sued by others.
Since the owners of many companies enjoy the benefits of limited liability, they must, in
return, be more accountable to society for their actions. This has led to increased regulation of
companies over time to ensure the accountability of owners and managers. Many of these regu-
lations are referred to as ‘corporate governance’, which is discussed further in chapter 4.
learning • Companies are formed and administered under the Corporations Act 2001, which is adminis-
tered throughout Australia by the Australian Securities and Investments Commission (ASIC).
check • A company has the legal powers of a natural person as well as the power of a body cor-
porate, including the right to issue shares and debentures in order to raise funds, the right to
own assets and enter contracts, and the right to sue other parties.
• The major benefit of forming a company is the limited liability it provides to shareholders/
members. As a result, the company must be accountable to society for its actions.
ARNI
1.2 Different types of companies

NG
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2
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V
Discuss the different Two main types of companies are permitted to be registered under the Corporations Act, namely
types of companies which a proprietary company and a public company (s. 112). According to s. 112, the Act permits pro-
may be formed under the
Corporations Act 2001.
prietary companies and public companies to be classified as follows.
• Proprietary companies:
– limited by shares
– unlimited with a share capital
• Public companies:
– limited by shares
– limited by guarantee
– unlimited with share capital
– no liability company.
A trade union cannot be registered as a company under the Act (s. 116).
Chapter 1 | Nature and regulation of companies 3

1.2.1 Proprietary companies
Proprietary companies are the most common type of company operating in Australia, usually in
the small-business sector. As an aid to small business, Part 1.5 of the Act provides a guide to the
setting up and running of such a business operating as a proprietary company. Several important
aspects of this type of company are specified in the Act, as presented below.
• A proprietary company must have a share capital, (i.e. it can be limited only by shares, and not
by guarantee (s. 112)).
• A proprietary company must have at least one shareholder (s. 114), and cannot have more
than 50 shareholders (not including employee shareholders) (s. 113(1)). Furthermore, it needs
to have (at least) one director (s. 201A), who can be the sole shareholder and who must ordi-
narily reside in Australia. A proprietary company need not have a secretary (s. 204A(1)).
• There is no need for a proprietary company to place any restriction on the transfer of its shares.
• In relation to the funding of operations, a proprietary company is restricted to the extent that it
must not engage in any fundraising activity under Chapter 6D of the Act which would require
the company to lodge a disclosure document with ASIC. This means that proprietary com-
panies cannot raise funds directly from the public, although shares can be offered to existing
shareholders or employees (s. 113(3)).
• A proprietary company must have the word ‘Proprietary’ or the abbreviation ‘Pty’ as part of its
name. If it is a limited proprietary company, the additional word ‘Limited’ or the abbreviation
‘Ltd’ must also be part of its name (ss. 148–149). In contrast, an unlimited proprietary company
will not have the word ‘Limited’ or the abbreviation ‘Ltd’ as part of its name.
• Proprietary companies are to be classified as either ‘large’ or ‘small’. The large/small classifi-
cation is particularly important in relation to the accounting requirements imposed on a pro-
prietary company. A company’s classification can change from one financial year to another as
the circumstances change. A small proprietary company is defined in s. 45A(2) as one which
satisfies at least two of the following tests:
(a) the consolidated revenue for the financial year of the company and the entities it controls (if
any) is less than $25 million . . .
(b) the value of the consolidated gross assets at the end of the financial year of the company and
the entities it controls (if any) is less than $12.5 million . . .
(c) the company and the entities it controls (if any) have fewer than 50 . . . employees at the end of
the financial year.
If a proprietary company is not classified as ‘small’, then it is ‘large’ and is subject to
additional reporting obligations under the Act. Determination of consolidated revenue and
consolidated gross assets must occur in line with current accounting standards, and part-time
employees must be counted as an appropriate fraction of a full-time equivalent (s. 45A (5) and
(6)). The need to comply with accounting standards is particularly important when using the
gross assets test; hence, where required leases must be capitalised in accordance with AASB
117 Leases, all acquired goodwill must be recognised in accordance with AASB 3 Business
Combinations, and income tax must be accounted for in accordance with AASB 112 Income
Taxes. According to the technical standards staff of the Institute of Chartered Accountants in
Australia (ICAA), ‘gross assets’ are total consolidated current and non-current assets measured
at their carrying amounts, which means non-current assets are net of accumulated depreci-
ation, and receivables are net of any allowance for doubtful debts (ICAA 1996).
• The Act does not require a small proprietary company to prepare formal financial statements
or to have them audited (ss. 292(2) and 301(2)), but they must maintain sufficient accounting
records to allow annual accounts to be prepared and audited. Audited accounts must be pre-
pared if requested by shareholders holding at least 5% of the voting shares in the company, or
by ASIC (ss. 293 and 294). If the shareholders so request, a small proprietary company does
not have to prepare its financial statements in accordance with applicable accounting standards
(s. 296(1)).
• Large proprietary companies must prepare annual reports in accordance with accounting stan-
dards (s. 296) that give a true and fair view of the financial position and performance of the
4 Company Accounting | Tenth Edition

company (s. 297), have them audited (s. 301) and send them to shareholders, either in elec-
tronic or hard form. They must also lodge these financial reports with ASIC.
• A small proprietary company is required to prepare financial reports if it is controlled by a
foreign company for all or part of a year, and that foreign company has not lodged financial
statements with ASIC covering the small proprietary company’s profit or loss (s. 292(2)).
Most proprietary companies are small businesses, and the Act includes a ‘small business
guide’ in Part 1.5, following s. 111J, to help small businesses understand the sections of the Act
which apply particularly to them.
1.2.2 Public companies

A public company is any company that is not a proprietary company (s. 9). Unlike a proprietary
company, a public company is not required to have a share capital, and may be a company limited
by guarantee (i.e. one in which members guarantee to contribute a certain amount in the event of
liquidation). If the company is limited, this means that the company was formed on the basis of
having the liability of its members limited to the respective amounts that members undertake to
contribute to the property of the company if it is wound up (ss. 516–518). However, most public
companies are limited companies having a share capital. Generally speaking, the ownership of a
public company is widely spread, with large numbers of people owning a relatively small number
of shares. The main advantage of the public company is that it is entitled to issue a disclosure
document inviting the public to subscribe for any shares, debentures, notes or loans, and to have
these shares, debentures etc. listed for easy transferability on one or more of Australia’s securities
exchanges. Since the activities of many public companies can significantly affect the wellbeing of
the general public, many sections of the Act appear to be enacted for the protection of the ‘public
interest’. For example, public companies generally have additional rules in relation to:
• the appointment, age, removal, voting when there are vested interests, and disclosure of any
shareholdings of the directors to the securities exchange (Chapters 2D and 2E of the Act)
• the appointment of a registered auditor (s. 301)
• the preparation of financial statements in accordance with accounting standards and regu-
lations (ss. 292 and 296).
A public company, as with a proprietary company, need have only one member; however, a
public company is required to have at least three directors, two of whom must ordinarily reside in
Australia (s. 201A(2)). It must also appoint a secretary who is an Australian resident (s. 204A(2)).
1.2.3 Other titles for companies

Many companies with special titles are identified in the Act; for example, companies may be
described as listed corporations, disclosing entities, foreign companies, and no liability com-
panies. Most of these companies are also public companies which are identified for other par-
ticular reasons. A brief introduction and discussion of these companies, some of which are
considered further in later chapters, follows.
Listed corporations
A listed corporation is a public company which is included in an official list of a securities
exchange. Such a company is entitled to have its shares actively traded on the securities exchange
in any of Australia’s capital cities. The Australian Securities Exchange (ASX) has a set of Listing
Rules which such companies are required to follow in relation to many aspects of business
conduct, as well as admission, suspension of trading, and removal from the ASX list.
Disclosing entities
A disclosing entity is defined in s. 111AC of the Act as an entity which has issued ‘enhanced
disclosure’ (ED) securities; in other words, it is an entity which:
• has its shares listed on the ASX, or
• is issuing securities (other than debentures) for which a disclosure document has been lodged
with ASIC, or
Chapter 1 | Nature and regulation of companies 5

Another random document with
no related content on Scribd:
reconcile their habits, views, and interests with those of the South
and West. The latter are beginning to rule with a rod of iron.”
Pickering knew that the Federalist majority in Massachusetts was
none too great. The election in May, four months later, showed a
Federalist vote of 30,000 against a Republican minority of 24,000,
while in the Legislature Harrison Gray Otis was chosen Speaker by
129 votes to 103. Pickering knew also that his colleague, Senator
Adams, was watching his movements with increasing ill-will, which
Pickering lost no chance to exasperate. Nothing could be more
certain than that at the first suggestion of disunion Senator Adams
and the moderate Federalists would attack the Essex Junto with the
bitterness of long-suppressed hatred; and if they could not command
fourteen votes in the Legislature and three thousand in the State, a
great change must have occurred since the year before, when they
elected Adams to the Senate for the long term over Pickering’s head.
Pickering concealed his doings from his colleague; but Tracy was not
so cautious. Adams learned the secret from Tracy; and the two
senators from Massachusetts drew farther and farther apart, in spite
of the impeachments, which tended to force them together.
The Essex Junto, which sent Pickering to Washington, and to
which he appealed for support, read his letter with evident
astonishment. George Cabot, Chief-Justice Parsons, Fisher Ames,
and Stephen Higginson, who were the leaders consulted,[104]
agreed that the scheme was impracticable; and Cabot, as gently as
possible, put their common decision into words.
“All the evils you describe,” he said,[105] “and many more, are to
be apprehended; but I greatly fear that a separation would be no
remedy, because the source of them is in the political theories of our
country and in ourselves. A separation at some period not very remote
may probably take place,—the first impression of it is even now
favorably received by many; but I cannot flatter myself with the
expectation of essential good to proceed from it while we retain
maxims and principles which all experience, and I may add reason
too, pronounce to be impracticable and absurd. Even in New England,
where there is among the body of the people more wisdom and virtue
than in any other part of the United States, we are full of errors which
no reasoning could eradicate if there were a Lycurgus in every village.
We are democratic altogether; and I hold democracy in its natural
operation to be the government of the worst.
“There is no energy in the Federal party, and there could be none
manifested without great hazard of losing the State government.
Some of our best men in high stations are kept in office because they
forbear to exert any influence, and not because they possess right
principles. They are permitted to have power if they will not use it.... I
incline to the opinion that the essential alterations which may in future
be made to amend our form of government will be the consequences
only of great suffering or the immediate effects of violence. If we
should be made to feel a very great calamity from the abuse of power
by the National Administration, we might do almost anything; but it
would be idle to talk to the deaf, to warn the people of distant evils. By
this time you will suppose I am willing to do nothing but submit to fate.
I would not be so understood. I am convinced we cannot do what is
wished; but we can do much, if we work with Nature (or the course of
things), and not against her. A separation is now impracticable,
because we do not feel the necessity or utility of it. The same
separation then will be unavoidable when our loyalty to the Union is
generally perceived to be the instrument of debasement and
impoverishment. If it is prematurely attempted, those few only will
promote it who discern what is hidden from the multitude.”
Cabot’s letter, more clearly than any writing of Alexander

Hamilton himself, expressed the philosophy and marked the tactics
of their school. Neither Cabot nor Hamilton was a lively writer, and
the dust which has gathered deep on their doctrines dulls whatever
brilliancy they once possessed; but this letter showed why Cabot
was considered the wisest head in his party, to whose rebuke even
Hamilton was forced to bow. For patient and willing students who
have groped in search of the idea which, used by Hamilton and
Jefferson, caused bitterer feeling and roused deeper terrors than civil
war itself, Cabot’s long and perhaps pedantic letter on the policy of
disunion was full of meaning. “We shall go the way of all
governments wholly popular,—from bad to worse,—until the evils, no
longer tolerable, shall generate their own remedies.” Democracy
must end in a crisis, experience and reason pronounced it
impracticable and absurd, Nature would in due time vindicate her
own laws; and when the inevitable chaos should come, then
conservative statesmanship could set society on a sound footing by
limiting the suffrage to those citizens who might hold in their own
right two thousand dollars value in land. Meanwhile disunion would
be useless, and the attempt to bring it about would break up the
Federalist party. “A war with Great Britain manifestly provoked by our
rulers” was the only chance which Cabot foresaw of bringing the
people of New England to a dissolution of the Union.
Pickering was not so intelligent as Cabot, Parsons, and Ames;
his temper was harsher than theirs; he was impatient of control, and
never forgot or wholly forgave those who forced him to follow
another course than the one he chose. Cabot’s letter showed a
sense of these traits; for though it was in the nature of a command or
entreaty to cease discussing disunion, if the Federalist party in
Massachusetts were to be saved, it was couched in gentle language,
and without affecting a tone of advice suggested ideas which ought
to guide Federalists in Congress. Pickering was to wait for the crisis.
Inaction was easy; and even though the crisis should be delayed five
or ten years,—a case hardly to be supposed,—no step could be
taken without a blunder before the public should be ready for it. With
this simple and sound principle to guide them, conservatives could
not go wrong. Cabot there left the matter.
Such gentleness toward a man of Pickering’s temper was a
mistake, which helped to cost the life of one whom conservatives
regarded as their future leader in the crisis. Pickering was restive
under the sense that his friends preferred other counsellors; whereas
his experience and high offices, to say nothing of his ability, entitled
him, as he thought, to greater weight in the party than Hamilton,
Cabot, or Rufus King. Backed by Tracy, Griswold, and other men of
standing, Pickering felt able to cope with opposition. His rough sense
and democratic instincts warned him that the fine-drawn political
theories of George Cabot and Theophilus Parsons might end in
impotence. He could see no reason why Massachusetts, once
corrupted, might not wallow in democratic iniquities with as much
pleasure as New York or Pennsylvania; and all that was worth saving
might be lost before her democracy would consent to eat the husks
of repentance and ask forgiveness from the wise and good. Cabot
wanted to wait a few months or years until democracy should work
out its own fate; and whenever the public should yearn for repose,
America would find her Pitt and Bonaparte combined in the political
grasp and military genius of Alexander Hamilton. Pickering, as a
practical politician, felt that if democracy were suffered to pull down
the hierarchy of New England, neither disunion nor foreign war, nor
“a very great calamity” of any kind, could with certainty restore what
had once been destroyed.
Cabot’s argument shook none of Pickering’s convictions; but the
practical difficulty on which the home Junto relied was fatal unless
some way of removing it could be invented. During the month of
February, 1804, when the impeachment panic was at its height in
Congress, Pickering, Tracy, and Plumer received letter after letter
from New England, all telling the same story. The eminent Judge
Tapping Reeve, of Connecticut, wrote to Tracy:[106] “I have seen
many of our friends; and all that I have seen and most that I have
heard from believe that we must separate, and that this is the most
favorable moment.” He had heard only one objection,—that the
country was not prepared; but this objection, which meant that the
disunionists were a minority, was echoed from all New England. The
conspirators dared not openly discuss the project. “There are few
among my acquaintance,” wrote Pickering’s nephew, Theodore
Lyman,[107] “with whom I could on that subject freely converse; there
may be more ready than I am aware of.” Plumer found a great
majority of the New Hampshire Federalists decidedly opposed.
Roger Griswold, toward the end of the session, summed up the
result in his letter to Oliver Wolcott:—
“We have endeavored during this session to rouse our friends in
New England to make some bold exertions in that quarter. They
generally tell us that they are sensible of the danger, that the Northern
States must unite; but they think the time has not yet arrived.
Prudence is undoubtedly necessary; but when it degenerates into
procrastination it becomes fatal. Whilst we are waiting for the time to
arrive in New England, it is certain the democracy is making daily
inroads upon us, and our means of resistance are lessening every
day. Yet it appears impossible to induce our friends to make any
decisive exertions. Under these circumstances I have been induced to
look to New York.”
The representatives of the wise and good looked at politics with
eyes which saw no farther than those of the most profligate
democrat into the morality of the game. Pickering enjoyed hearing
himself called “honest Tim Pickering,” as though he were willing to
imply a tinge of dishonesty in others, even in the Puritan society of
Wenham and Salem. Griswold was to the end of his life a highly
respected citizen of Connecticut, and died while governor of the
State. That both these worthy men should conspire to break up the
Union implied to their minds no dishonesty, because they both held
that the Republican majority had by its illegal measures already
destroyed the Constitution which they had sworn to support; but
although such casuistry might excuse in their own consciences the
act of conspiracy, neither this reasoning nor any other consistent
with self-respect warranted their next step. Griswold’s remark that
the procrastination of New England had led him to look to New York
was not quite candid; his plan had from the first depended on New
York. Pickering had written to Cabot at the outset, “She must be
made the centre of the confederacy.” New York seemed, more than
New England, unfit to be made the centre of a Northern confederacy,
because there the Federalist party was a relatively small minority. If
Massachusetts and Connecticut showed fatal apathy, in New York
actual repulsion existed; the extreme Federalists had no following.
To bring New York to the Federalism of Pickering and Griswold, the
Federalist party needed to recover power under a leader willing to do
its work. The idea implied a bargain and an intrigue on terms such as
in the Middle Ages the Devil was believed to impose upon the
ambitious and reckless. Pickering and Griswold could win their game
only by bartering their souls; they must invoke the Mephistopheles of
politics, Aaron Burr.
To this they had made up their minds from the beginning. Burr’s
four years of office were drawing to a close. The Virginians had paid
him the price he asked for replacing them in power; and had it been
Shylock’s pound of flesh, they could not have looked with greater
care to see that Burr should get neither more nor less, even in the
estimation of a hair, than the exact price they had covenanted to pay.
In another year the debt would be discharged, and the Virginians
would be free. Burr had not a chance of regaining a commanding
place among Republicans, for he was bankrupt in private and public
character. In New York the Clintons never ceased their attacks, with
the evident wish to drive him from the party. Cheetham, after
publishing in 1802 two heavy pamphlets, a “Narrative” and a “View,”
attempted in 1803 to crush him under the weight of a still heavier
volume, containing “Nine Letters on the Subject of Aaron Burr’s
Political Defection.” Nov. 16, 1803, the “Albany Register” at length
followed Cheetham’s lead; and nearly all the other democratic
newspapers followed the “Register,” abandoning Burr as a man who
no longer deserved confidence.
Till near the close of 1803 the Vice-President held his peace. The
first sign that he meant energetic retaliation was given by an
anonymous pamphlet,[108] which won the rare double triumph of
political and literary success, in which ability and ill temper seemed
to have equal shares. The unexpected appearance of “Aristides”
startled New York. This attack recalled the scandal which Alexander
Hamilton had created four years before by his pamphlet against his
own President. “Aristides” wrote with even more bitterness than
Hamilton, and the ferocity of his assault on the personal and political
characters of the Republican leaders made the invectives of
Hamilton and Cheetham somewhat tame; but the scandal in each
case was due not so much to personalities of abuse as to breaches
of confidence. “Aristides” furnished to the enemies of the Clintons
and Livingstons an arsenal of poisoned weapons; but what was
more to the purpose, his defence of Burr was strong. That it came
directly from the Vice-President was clear; but the pamphlet showed
more literary ability than Burr claimed, and the world was at a loss to
discover who could be held responsible for its severities. Cheetham
tried in vain to pierce the incognito. Not till long afterward was
“Aristides” acknowledged by Burr’s most intimate friend, William
Peter Van Ness.
An attempt to separate what was just from what was undeserved
in Van Ness’s reproaches of the Clintons and Livingstons would be
useless. The Clintons and Livingstons, however unprincipled they
might be, could say that they were more respectable than Burr; but
though this were true so far as social standing was concerned, they
could not easily show that as a politician the Vice-President was
worse than his neighbors. The New England Federalists knew well
that Burr was not to be trusted, but they did not think much worse of
him than they thought of De Witt Clinton, or John Armstrong, or
Edward Livingston, at this moment removed from office by Jefferson
for failing to account for thirty thousand dollars due to the United
States Treasury. As a politician Burr had played fast and loose with
all parties; but so had most of his enemies. Seeing that he was about
to try another cast of the dice, all the political gamblers gathered
round to help or hurt his further fortunes; and Van Ness might fairly
have said that in the matter of principle or political morality, none of
them could show clean hands.
Although Vice-President until March, 1805, Burr announced that
he meant to offer himself as a candidate for the post of governor of
New York in April, 1804. At the same time Governor Clinton privately
gave warning of his own retirement. De Witt Clinton was annoyed at
his uncle’s conduct, and tried to prevent the withdrawal by again
calling Jefferson to his aid and alarming him with fear of Burr.
“A certain gentleman was to leave this place yesterday morning,”
wrote De Witt to the President.[109] “He has been very active in
procuring information as to his probable success for governor at the
next election. This, I believe, is his intention at present, although it is
certain that if the present Governor will consent to be a candidate, he
will prevail by an immense majority.... Perhaps a letter from you may
be of singular service.”
Jefferson declined to interfere, putting his refusal on the ground
of Burr’s candidacy.
“I should think it indeed a serious misfortune,” was his reply,[110]
“should a change in the administration of your government be
hazarded before its present principles be well established through all
its parts; yet on reflection you will be sensible that the delicacy of my
situation, considering who may be competitors, forbids my
intermeddling even so far as to write the letter you suggest. I can
therefore only brood in silence over my secret wishes.”
No real confidence ever existed between Jefferson and the
Clintons. A few days after these letters were written, “Aristides”
betrayed the secret that Governor Clinton, in the spring of 1800,
declared Jefferson to be “an accommodating trimmer, who would
change with times and bend to circumstances for the purposes of
personal promotion.” This revelation by “Aristides,” supported by the
names of persons who heard the remark, forced Governor Clinton
into an awkward denial of the charge, and led to an exchange of
letters[111] and to professions of confidence between him and
Jefferson; but time showed that neither the Governor nor his nephew
loved the Virginians more than they were loved by Burr.
The threads of intrigue drew together, as they were apt to do
before a general election. The last week in January came. Three
days before Senator Pickering wrote his conspiracy letter to George
Cabot, a letter which implied co-operation with Burr in making him
governor of New York, Burr asked for a private interview with
Jefferson, and formally offered him the choice between friendship or
enmity. The President thought the conversation so curious that he
made a note of it.
“He began,” said Jefferson,[112] “by recapitulating summarily that
he had come to New York a stranger, some years ago; that he found
the country in possession of two rich families,—the Livingstons and
Clintons; ... that since, those great families had become hostile to him
and had excited the calumnies which I had seen published; that in this
Hamilton had joined, and had even written some of the pieces against
him.... He observed, he believed it would be for the interest of the
Republican cause for him to retire,—that a disadvantageous schism
would otherwise take place; but that were he to retire, it would be said
he shrank from the public sentence, which he would never do; that his
enemies were using my name to destroy him, and something was
necessary from me to prevent and deprive them of that weapon,—
some mark of favor from me which would declare to the world that he
retired with my confidence.”
Jefferson, with many words but with his usual courtesy, intimated
that he could not appoint the Vice-President to an Executive office;
and Burr then united his intrigues with those of Pickering and
Griswold. Thenceforth his chance of retaining power depended on
the New York election; and his success in this election depended on
the Federalists. Before George Cabot had yet written his answer to
Pickering’s questions, Pickering could no longer resist the temptation
to act.
The effect of what passed at Washington was instantly felt at
Albany. Toward the middle of February, about three weeks after
Jefferson had civilly rejected the Vice-President’s advances, Burr’s
friends in the New York legislature announced that they should hold
a caucus February 18, and nominate him as candidate for governor.
The Federalists at once called a preliminary caucus to decide
whether they should support Burr. Alexander Hamilton, who
happened to be engaged in law business at Albany, Feb. 16, 1804,
attended the Federal caucus, and used his influence in favor of the
regular Clinton candidate against Burr’s pretensions. The drift of his
argument was given in an abstract of reasons which he drew up for
the occasion.[113] Unfortunately the strongest of these reasons was
evidently personal; the leadership of Hamilton would not tolerate
rivalry from Burr. Hamilton pointed out that Burr’s elevation by the
Federalists of New York would present him as their leader to the
Federalists of New England, and would assist him to disorganize
New England if so disposed; that there “the ill-opinion of Jefferson,
and jealousy of the ambition of Virginia, is no inconsiderable prop of
good opinions; but these causes are leading to an opinion that a
dismemberment of the Union is expedient. It would probably suit Mr.
Burr’s views to promote this result,—to be the chief of the Northern
portion; and placed at the head of the State of New York, no man
would be more likely to succeed.”
If the Union was to be severed, Hamilton was the intended chief
of the Northern portion; but he wanted no severance that should
leave the germs of the democratic disease. His philosophy was that
of George Cabot, William Pitt, and Talleyrand; he waited for the
whole country to come to its senses and restore sound principles,
that democracy might everywhere die out or be stifled. Burr’s
methods were democratic, and would perpetuate in a Northern
confederacy the vices of the Union; they would break up the
conservative strength without weakening democracy. Within a few
days the danger which Hamilton foresaw came to pass. Burr’s little
band of friends in the Legislature, Feb. 18, 1804, set him in
nomination; and a large majority of Federalists, in defiance of
Hamilton’s entreaties, meant to vote for him.
As the situation became clearer, Hamilton’s personal feeling
became public. While at Albany, February 16, he dined with Judge
Taylor, and at table talked of the political prospect. One of the
company, Dr. Charles D. Cooper, an active partisan, wrote an
account of the conversation to a certain Mr. Brown near Albany:
“General Hamilton and Judge Kent have declared, in substance, that
they looked upon Mr. Burr to be a dangerous man, and one who
ought not to be trusted with the reins of government.” The letter was
printed, and went the rounds of the press. As it roused some
question and dispute, Cooper wrote again: “I could detail to you a
still more despicable opinion which General Hamilton has expressed
of Mr. Burr.” This letter also was printed; the “Albany Register” of
April 24 contained the correspondence.
The news of Burr’s nomination reached Washington at the
moment when Pickering and Tracy received answers to their
disunion scheme; and it served to keep them steady to their plan.
The Federalists, who professed to consider Hamilton their leader,
seldom followed his advice; but on this occasion they set him
somewhat unkindly aside. Too much in awe of Hamilton to say
directly to his face that he must be content with the place of Burr’s
lieutenant, they wrote letters to that effect which were intended for
his eye.
Of all Federalist leaders, moderate and extreme, Rufus King, who
had recently returned from London, stood highest in the confidence
of his party. He was to be the Federalist candidate for Vice-
President; he had mixed in none of the feuds which made Hamilton
obnoxious to many of his former friends; and while King’s manners
were more conciliatory, his opinions were more moderate, than those
of other party leaders. To him Pickering wrote, March 4, 1804, in a
tone of entreaty:—
“I am disgusted with the men who now rule, and with their
measures. At some manifestations of their malignancy I am shocked.
The cowardly wretch at their head, while like a Parisian revolutionary
monster prating about humanity, would feel an infernal pleasure in the
utter destruction of his opponents.”
After avowing his hopes of disunion, Pickering next touched the
New York election:[114]—
“The Federalists here in general anxiously desire the election of
Mr. Burr to the chair of New York, for they despair of a present
ascendency of the Federalist party. Mr. Burr alone, we think, can
break your democratic phalanx, and we anticipate much good from his
success. Were New York detached, as under his administration it
would be, from the Virginia influence, the whole Union would be
benefited. Jefferson would then be forced to observe some caution
and forbearance in his measures. And if a separation should be
deemed proper, the five New England States, New York, and New
Jersey would naturally be united.”
Rufus King was as cautious as Pickering was indiscreet. He
acknowledged this letter in vague terms of compliment,[115] saying
that Pickering’s views “ought to fix the attention of the real friends of
liberty in this quarter of the Union, and the more so as things seem
to be fast advancing to a crisis.” Even King’s cool head was
possessed with the thought which tormented Hamilton, Cabot,
Ames, Pickering, Griswold, and Tracy,—the crisis which was always
coming, and which, in the midst of peace, plenty, and contentment
such as a tortured world had seldom known, overhung these wise
and virtuous men like the gloom of death.
A week later Roger Griswold followed Pickering’s example by
writing to another of Hamilton’s friends, Oliver Wolcott, who
apparently sent the letter to Hamilton.[116] A Congressional caucus,
February 25, nominated George Clinton as the Republican candidate
for Vice-President by sixty-five votes against forty-one,—Burr’s
friends absenting themselves. This nomination showed some
division between the Northern and Southern democrats; but
Griswold rightly argued that nothing could be done in Congress,—
the formation of a Northern interest must begin at home, and must
find its centre of union in Burr. The arguments for this course were
set forth with entire candor.
“I have wished to ascertain,” wrote Griswold, “the views of Colonel
Burr in relation to the general government; but having had no intimacy
with him myself, and finding no one on the spot calculated, or indeed
authorized, to require an explanation, I have obtained but little
information. He speaks in the most bitter terms of the Virginia faction,
and of the necessity of a union at the northward to resist it; but what
the ultimate objects are which he would propose, I do not know. It is
apparent that his election is supported in New York on the principle of
resisting Virginia and uniting the North; and it may be presumed that
the support given to him by Federal men would tend to reconcile the
feelings of those democrats who are becoming dissatisfied with their
Southern masters. But it is worthy of great consideration whether the
advantage gained in this manner will not be more than
counterbalanced by fixing on the Northern States a man in whom the
most eminent of our friends will not repose confidence. If Colonel Burr
is elevated in New York to the office of governor by the votes of
Federalism, will he not be considered, and must he not in fact
become, the head of the Northern interest? His ambition will not suffer
him to be second, and his office will give him a claim to the first rank.”
Having proposed this question, Griswold argued it as one in
which the interests of New York must yield to the larger interests
behind, and decided that “unpleasant as the thing may be,” Burr’s
election and consequent leadership of the Federalist party was “the
only hope which at this time presents itself of rallying in defence of
the Northern States.... What else can we do? If we remain inactive,
our ruin is certain. Our friends will make no attempts alone. By
supporting Mr. Burr we gain some support, although it is of a doubtful
nature, and of which, God knows, we have cause enough to be
jealous. In short, I see nothing else left for us.”
Had this been all, though it was a rude blow to Hamilton, it might
have passed as a difference of opinion on a point of party policy; but
Griswold’s object in writing these excuses was to explain that he had
already done more, and had even entered into personal relations
with Colonel Burr in view of a bargain. What this bargain was to be,
Griswold explained:—
“I have engaged to call on the Vice-President as I pass through
New York. The manner in which he gave me the invitation appeared to
indicate a wish to enter upon some explanation. He said he wished
very much to see me, and to converse, but his situation in this place
did not admit of it, and he begged me to call on him at New York. This
took place yesterday in the library. Indeed, I do not see how he can
avoid a full explanation with Federal men. His prospects must depend
on the union of the Federalists with his friends, and it is certain that his
views must extend much beyond the office of governor of New York.
He has the spirit of ambition and revenge to gratify, and can do but
little with his ‘little band’ alone.”
Even George Cabot deserted Hamilton, and wrote from Boston to
Rufus King a long letter, in the tone of indolent speculation which
irritated restless fighters like Pickering and Griswold:[117]—
“An experiment has been suggested by some of our friends, to
which I object that it is impracticable, and if practicable would be
ineffectual. The thing proposed is obvious and natural; but it would
now be thought too bold, and would be fatal to its advocates as public
men; yet the time may soon come when it will be demanded by the
people of the North and East, and then it will unavoidably take place.”
He explained his favorite thesis,—the last resource of failing
protestants,—that things must be worse before they were better; but
closed by wishing success to Burr. “I should rejoice to see Burr win
the race in your State, but I cannot approve of aid being given him by
any of the leading Federalists.”
Ten days later, March 27, Congress adjourned; and
thenceforward the intrigue centred about Burr and Hamilton in New
York. No sooner did Griswold reach that city, a week afterward, on
his way from Washington to Connecticut, than he kept his
engagement with Burr, and the conversation strengthened him in his
policy.[118] Burr was cautious, but said that in his present canvass
“he must go on democratically to obtain the government; that if he
succeeded, he should administer it in a manner that would be
satisfactory to the Federalists. In respect to the affairs of the nation,
Burr said that the Northern States must be governed by Virginia, or
govern Virginia, and that there was no middle course; that the
democratic members of Congress from the East were in this
sentiment,—some of those from New York, some of the leaders in
Jersey, and likewise in Pennsylvania.” Further than this he would not
go; and Griswold contented himself with such vague allurements.
On the other hand, Rufus King’s library was the scene of grave
dissensions. There Pickering went, April 8, to urge his scheme of
disunion, and retired on the appearance of his colleague, Senator
Adams, who for the first and last time in his life found himself fighting
the battle of Alexander Hamilton, whom he disliked as decidedly as
Pickering professed to love him. As the older senator left the house
at his colleague’s entrance, King said to Adams:[119] “Colonel
Pickering has been talking to me about a project they have for a
separation of the States and a Northern Confederacy; and he has
also been this day talking of it with General Hamilton. Have you
heard anything of it at Washington?” Adams replied that he had
heard much, but not from Colonel Pickering. “I disapprove entirely of
the project,” said King; “and so, I am happy to tell you, does General
Hamilton.”
The struggle for control between Hamilton and the conspirators
lasted to the eve of the election,—secret, stifled, mysterious; the
intrigue of men afraid to avow their aims, and seeming rather driven
by their own passions than guided by the lofty and unselfish motives
which ought to inspire those whom George Cabot emphatically
called the best! The result was a drawn battle. Hamilton prevented
leading Federalists from open committal of the party, but he could
not prevent the party itself from voting for Burr. The election took
place April 25, 1804; and although Burr succeeded in carrying to the
Federalists a few hundred voters in the city of New York, where his
strength lay, giving him there a majority of about one hundred in a
total vote of less than three thousand, he polled but about twenty-
eight thousand votes in the State against thirty-five thousand for the
Clinton candidate. The Federalists gained nothing by supporting him;
but only a small portion of the party refused him their aid.
The obstinacy of Pickering and Griswold in pressing Burr on the
party forced Hamilton to strain his strength in order to prevent what
he considered his own humiliation. That all Hamilton’s doings were
known to Burr could hardly be doubted. When the election closed, a
new era in Burr’s life began. He was not a vindictive man, but this
was the second time Hamilton had stood in his way and vilified his
character. Burr could have no reason to suppose that Hamilton was
deeply loved; for he knew that four fifths of the Federal party had
adopted his own leadership when pitted against Hamilton’s in the
late election, and he knew too that Pickering, Griswold, and other
leading Federalists had separated from Hamilton in the hope of
making Burr himself the chief of a Northern confederacy. Burr never
cared for the past,—the present and future were his only thought; but
his future in politics depended on his breaking somewhere through
the line of his personal enemies; and Hamilton stood first in his path,
for Hamilton would certainly renew at every critical moment the
tactics which had twice cost Burr his prize.
Pickering and Griswold saw their hopes shattered by the result of
the New York election. They gained at the utmost only an agreement
to hold a private meeting of leading Federalists at Boston in the
following autumn;[120] and as Hamilton was to be present, he
probably intended to take part only in order to stop once for all the
intrigues of these two men. Such an assemblage, under the
combined authority of Cabot, King, and Hamilton, could not have
failed to restore discipline.
Nearly two months passed after the New York election, when, on
the morning of June 18, William P. Van Ness, not yet known as
“Aristides,” appeared in Hamilton’s office. He brought a note from
Vice-President Burr, which enclosed newspaper-cuttings containing
Dr. Cooper’s report of Hamilton’s “despicable” opinion of Burr’s
character. The paragraph, Burr said, had but very recently come to
his knowledge. “You must perceive, sir, the necessity of a prompt
and unqualified acknowledgment or denial of the use of any
expression which would warrant the assertions of Dr. Cooper.”
General Hamilton took two days to consider the subject; and then
replied in what Burr thought an evasive manner, but closed with two
lines of defiance: “I trust on more reflection you will see the matter in
the same light with me; if not, I can only regret the circumstance, and
must abide the consequences.”[121]
These concluding words were the usual form in which men
expressed themselves when they intended to accept a challenge to
a duel. At first sight, no sufficient reason for accepting a challenge
was shown by Hamilton’s letter, which disavowed Dr. Cooper’s report
so far as Burr was warranted in claiming disavowal. Hamilton might
without impropriety have declined to give further satisfaction. In truth,
not the personal but the political quarrel drew him into the field; he
knew that Burr meant to challenge, not the man, but the future
political chief, and that an enemy so bent on rule must be met in the
same spirit. Hamilton fought to maintain his own right to leadership,
so rudely disputed by Burr, Pickering, and Griswold. He devoted
some of his moments before the duel to the task of explaining, in a
formal document, that he fought only to save his political influence.
[122] “The ability to be in future useful, whether in resisting mischief
or effecting good, in those crises of our public affairs which seem
likely to happen, would probably be inseparable from a conformity
with public prejudice in this particular.”
Always the crisis! Yet this crisis which brought Hamilton in July to
the duelling-ground at Weehawken was not the same as that which
Pickering and Griswold had so lately tried to create. Pickering’s
disunion scheme came to a natural end on Burr’s defeat in April. The
legislatures of the three Federalist States had met and done nothing;
all chance of immediate action was lost, and all parties, including
even Pickering and Griswold, had fallen back on their faith in the
“crisis”; but the difference of opinion between Hamilton and the New
Englanders was still well defined. Hamilton thought that disunion,
from a conservative standpoint, was a mistake; nearly all the New
Englanders, on the contrary, looked to ultimate disunion as a
conservative necessity. The last letter which Hamilton wrote, a few
hours before he left his house for the duelling-ground, was a short
and earnest warning against disunion, addressed to Theodore
Sedgwick, one of the sternest Massachusetts Federalists of
Pickering’s class.[123]
“Dismemberment of our empire,” said Hamilton, “will be a clear
sacrifice of great positive advantages, without any counterbalancing
good; administering no relief to our real disease, which is democracy,
—the poison of which, by a subdivision, will only be the more
concentred in each part, and consequently the more virulent.”
The New Englanders thought this argument unsound, as it
certainly was; for a dissolution of the American Union would have
struck a blow more nearly fatal to democracy throughout the world
than any other “crisis” that man could have compassed. Yet the
argument showed that had Hamilton survived, he would probably
have separated from his New England allies, and at last, like his
friends Rufus King and Oliver Wolcott, would have accepted the
American world as it was.
The tragedy that actually happened was a fitter ending to this
dark chapter than any tamer close could have been. Early on the
morning of July 11, in the brilliant sunlight of a hot summer, the two
men were rowed to the duelling-ground across the river, under the
rocky heights of Weehawken, and were placed by their seconds face
to face. Had Hamilton acted with the energy of conviction, he would
have met Burr in his own spirit; but throughout this affair Hamilton
showed want of will. He allowed himself to be drawn into a duel, but
instead of killing Burr he invited Burr to kill him. In the paper
Hamilton left for his justification, he declared the intention to throw
away his first fire. He did so. Burr’s bullet passed through Hamilton’s
body. The next day he was dead.
As the news spread, it carried a wave of emotion over New
England, and roused everywhere sensations strangely mixed. In
New York the Clinton interest, guided by Cheetham, seized the
moment to destroy Burr’s influence forever. Cheetham affected to
think the duel a murder, procured Burr’s indictment, and drove him
from the State. Charges were invented to support this theory, and
were even accepted as history. In the South and West, on the other
hand, the duel was considered as a simple “affair of honor,” in which
Burr appeared to better advantage than his opponent. In New
England a wail of despair arose. Even the clergy, though shocked
that Hamilton should have offered the evil example of duelling, felt
that they had lost their champion and sword of defence. “In those
crises of our public affairs which seemed likely to happen,”
Hamilton’s genius in council and in the field had been their main
reliance; he was to be their Washington, with more than
Washington’s genius,—their Bonaparte, with Washington’s virtues.
The whole body of Federalists, who had paid little regard to
Hamilton’s wishes in life, went into mourning for his death, and held
funeral services such as had been granted to no man of New
England birth. Orators, ministers, and newspapers exhausted
themselves in execration of Burr. During the whole summer and
autumn, undisturbed by a breath of discord or danger, except such
as their own fears created, they bewailed their loss as the most fatal
blow yet given to the hopes of society.
The death of Hamilton cleared for a time the murky atmosphere
of New York and New England politics. Pickering and Griswold,
Tracy and Plumer, and their associates retired into the background.
Burr disappeared from New York, and left a field for De Witt Clinton
to sacrifice in his turn the public good to private ambition. The bloody
feuds of Burr’s time never again recurred. The death of Hamilton and
the Vice-President’s flight, with their accessories of summer-morning
sunlight on rocky and wooded heights, tranquil river, and distant city,
and behind all, their dark background of moral gloom, double
treason, and political despair, still stand as the most dramatic
moment in the early politics of the Union.
CHAPTER IX.
President Jefferson was told from day to day of the
communications that passed between Burr and the Connecticut
Federalists. Of all members of the Government, the most active
politician was Gideon Granger, the Postmaster-General, whose
“intimacy with some of those in the secret,” as Jefferson afterward
testified, gave him “opportunities of searching into their
proceedings.”[124] Every day during this period Granger made a
confidential report to the President; and at the President’s request
Granger warned De Witt Clinton of Burr’s intrigues with the
Federalists. What passed in Rufus King’s library and in Burr’s private
room seemed known at once by Granger, and was reported within a
few days to Jefferson, who received the news with his innate
optimism, warranted by experience.[125]
“It will be found in this, as in all other similar cases, that crooked
schemes will end by overwhelming their authors and coadjutors in
disgrace, and that he alone who walks strict and upright, and who in
matters of opinion will be contented that others should be as free as
himself, and acquiesce when his opinion is fairly overruled, will attain
his object in the end.”
If Jefferson and his Virginia friends in 1798, when their own
opinions were overruled, had expressed the idea of acquiescence as
strongly, the nation might perhaps have been saved the necessity of
proving later the truth of his words; but Jefferson could afford to treat
with contempt the coalition between Burr and Pickering, because, as
he wisely said, it had no cohesive force to hold it together, no
common principle on which to rest. When Burr’s defeat in April and
Hamilton’s death in July dissolved the unnatural connection,
Jefferson let the secret die; he wanted no scandal. He stood a little in
awe of the extreme Federalists, whom he called incurables, and was
unwilling to exasperate them without an object.
The Administration had every reason to rejoice that Burr’s
factious influence in the State of New York was at an end; for other
causes of anxiety gave the President more personal annoyance. The

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(eBook PDF) Company Accounting 10th

Edition by Ken J. Leo

(eBook PDF) Financial Accounting 10th Edition by Jerry

(eBook PDF) Financial and Managerial Accounting 6th

(Original PDF) Company Accounting, 11th Australian

(eBook PDF) Financial Accounting: An Integrated

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CHAPTER 2 Financing company operations 37

CHAPTER 3 Company operations 91

CHAPTER 4 Fundamental concepts of corporate governance 155

CHAPTER 5 Fair value measurement 197

CHAPTER 6 Accounting for company income tax 237

CHAPTER 7 Financial instruments 297

CHAPTER 8 Foreign currency transactions and forward exchange contracts 349

CHAPTER 9 Property, plant and equipment 395

CHAPTER 10 Leases 453

CHAPTER 11 Intangible assets 515

CHAPTER 12 Business combinations 567

CHAPTER 13 Impairment of assets 633

CHAPTER 14 Disclosure: legal requirements and accounting policies 687

CHAPTER 15 Disclosure: presentation of financial statements 735

CHAPTER 16 Disclosure: statement of cash flows 799

CHAPTER 17 Translation of financial statements into a presentation currency 861

CHAPTER 18 Consolidation: controlled entities 905

CHAPTER 19 Consolidation: wholly owned subsidiaries 931

CHAPTER 20 Consolidation: intragroup transactions 991

CHAPTER 21 Consolidation: non-controlling interest 1047

CHAPTER 22 Consolidation: other issues 1109

CHAPTER 23 Associates and joint ventures 1177

CHAPTER 24 Joint arrangements 1237

CHAPTER 25 Insolvency and liquidation 1277

Financing company operations 37

Business combinations 567

Consolidation: wholly owned Consolidation: non-controlling

Ken Leo, Jeffrey Knapp, Susan McGowan and John Sweeting

Nature and regulation

Before you begin

1.1 The nature of a company

2 Company Accounting | Tenth Edition

1.2 Different types of companies

Chapter 1 | Nature and regulation of companies 3

4 Company Accounting | Tenth Edition

1.2.2 Public companies

1.2.3 Other titles for companies

Chapter 1 | Nature and regulation of companies 5

Cabot’s letter, more clearly than any writing of Alexander

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