+1 (951) 902-6107 info@platinumressays.com

Discussion Thread: Literature Review Types and Primary Steps

 

 

Discussion Thread: Literature Review Types and Primary Steps

Narrative And Systematic Literature Reviews

Differentiate between the narrative and systematic literature reviews including advantages/disadvantages of each.

Phases of a Literature Review

Briefly explain the Scan, Scope, Search, Structure, Synthesize, and Write phases of a literature review.  Remember brevity, be concise – see rubric.

PowerPoint 1 Starting

Chapter 1 from

How to do your literature review

How to do your literature review

11 Chapters

11 PowerPoints

Chapter and PowerPoint overview

1 Starting
2 Scanning, skimming, saving and storing
3 Sources, quality and criticality
4 Scoping
5 Searching and screening
6 Structuring a narrative review
7 Systematising
8 Strategising: comparing systematic, realist and narrative reviews
9 Synthesising: storyline and theory
10 Synthesising and analysing
11 Scribing, concluding and stopping

This is PowerPoint 1 for Chapter 1 …

We will look at

What a literature review is for

The process of doing a review

Types of literature review

What counts as literature

The shape of a review

The nature of an Introduction to a literature review

Setting a question

Whether to use AI

All of this is discussed in much more detail in Chapter 1 of How to do your literature review

What is a literature review for?

To identify themes and lines of agreement among authors

To identify disagreements, controversies or dilemmas in the literature

To bring together – to integrate – different sources of information on a topic

To synthesize these different sources of information

To pinpoint gaps in the literature

To discover and discuss the main methods of research being used in the area

To critically reflect on the nature and quality of the literature on the topic.

To draw conclusions from the literature and comment on the validity of those conclusions.

The process of a literature review …

You get a ‘feel’ of the area by reading around. You set a prima facie question. (Chapters 1-3)

 Finding core references, drawing a mindmap, revising your prima facie question. (Chapter 4)

 Deciding how you will structure your review – thematic, funnelled, chronological, etc.

(Chapters 6-8)

 Gathering more information using databases and AI tools.

Organising your references and selecting the best. (Chapter 5)

 

 Weaving your findings into a narrative. Engaging with theory. (Chapters 9-11)

Scan Scope Search Structure Synthesise

A literature review may be …

A project in itself – a freestanding literature review

Or

Part of a broader research project

There are two types of literature review

The narrative review

The systematic review

Each has different purposes. Neither is superior to the other. We’ll look at each in detail in subsequent PowerPoints.

What counts as literature?

books

authored books

chapters in edited books

journal articles

peer review journals

professional journals

conference and symposium proceedings

dissertations and theses

newspaper and periodical articles

websites

blogs and vlogs

social media

research reports

university repositories of their staffs’ published and unpublished material

patent databases

court records

 

10

What’s the shape of a review?

Conclusion Overall discussion Methods used in field Issue 3 Issue 2 Issue 1 Your methodology Introduction 5 10 10 20 20 20 10 5 Conclusion Overall discussion Methods used in field Issue 3 Issue 2 Issue 1 Your methodology Introduction Conclusion Overall discussion Methods used in field Issue 3 Issue 2 Issue 1 Your methodology Introduction

Chapter or section headings

Percent of wordage

Begin with an Introduction

The Introduction to your literature review has to …

introduce the reader to your thinking about the topic and its associated literature.

translate your thinking, your interests and your purposes into initial research questions for your literature review.

tell the reader briefly about any changes in direction that have happened as the review has progressed.

outline the potential ways in which you could go about doing the review.

First set a question, or a thesis statement

Your prima facie question may be revised

Revised question(s)

Prima facie question(s)

Initial reading around

What makes a good question for a literature review?

Clear It has to be unambiguous and easily understood

Specific It has to be sufficiently specific for it to be clear what constitutes an answer

Answerable We can see what literature needs to be collected to answer it

Should you use AI

There are AI tools such as Elicit.com that are good at helping you to search

They are less good at weaving together sources into a narrative

They can’t triangulate

They can’t understand how sources fit (or don’t fit) together

They can’t offer lines of reasoning that help to answer a research question

Summary

Literature reviews tell you what is known about a topic and help you to contextualize your own work.

Literature reviews either contribute to a broader project in which you do your own fieldwork, or they can be freestanding projects, without additional fieldwork.

There are narrative and systematic reviews. In a narrative review the onus is on you to select appropriate literature and assess it, whereas with the systematic review you use a specialised procedure to search for and select appropriate literature.

There are several steps involved in doing a literature review: scanning, scoping, searching, structuring, and synthesising. They’re about gradually focusing down on the subject that you are interested in, searching and synthesising the literature, and ultimately concluding with a write-up that has cohesion.

The Introduction to your review is important. It maps out the area for your work, and it helps you shape your questions.

For a literature review that informs a broader project, it will normally occupy 20-30 percent of the wordage for the project write-up. For a freestanding review, it’s 100 percent.

The research question or thesis statement will be at the heart of your review. Right at the beginning of your work, you will set a start-up question, a prima facie question, which may be changed as you scope the area.

Activity

Topic
Background
Dimensions of the issue  
Question or thesis statement

Look at Table 1.1 in How to do your literature review. It sketches out background features to an issue and some dimensions to pursue in an introductory chapter.

Think of a topic in your own area of interest. Now:

sketch out a background to the issue

outline various dimensions to the issue

offer a question or statement based on these …

image1.jpeg

image2.png

image3.svg

image4.png

image5.svg

image6.jpeg

image7.jpeg

image8.png

image9.svg

image10.png

image11.svg

image12.jpeg

image13.jpeg

image14.jpeg

image19.png

image20.svg

image21.jpeg

image22.jpeg

image23.jpeg

,

PowerPoint 2 Scanning, skimming, saving and storing

Chapter 2 from

How to do your literature review

This is PowerPoint 2 for Chapter 2 …

We will look at

Speed reading

Gutting books and articles

Keeping notes

Using a reference manager

All of this is discussed in much more detail in Chapter 2 of How to Do Your Literature Review

Speed reading

Don’t try to read word by word.

Rather than reading left to right as normal, scan down the centre of the page.

Allow yourself a maximum time to scan one page – say, 20 seconds.

Give more time to diagrams and tables, which contain more information than words.

Cover the lines and paragraphs that you have already read. Or if reading on a screen, keep scrolling so that you can’t go back.

Don’t try to understand the full sense of a piece. Just get an impression of what it’s about. Use titles and section headings to help you in this.

Don’t be a perfectionist. If it doesn’t make sense, move on.

Gutting an article

Read the abstract, if there is one. If not (if it’s a chapter, for example), use some other summary, often contained in the Introduction section.

Look at the keywords. Do they address the theme of your own research questions?

Scan and survey the whole piece quickly, remembering that key nuggets of information occur at the beginning and end of an article or chapter, and at the beginning and end of paragraphs.

Ask yourself questions, related especially to what you intend to find out.

Gutting a book

Very quickly, flip through the book to get a general impression of its relevance for you. Don’t be tempted to try to read parts in detail.

Look at the table of contents – the headings and subheadings. Pay particular attention to the Introduction chapter. In many books, this contains a useful summary of the whole book.

Sometimes a book will contain a Conclusion chapter. Read this more carefully.

If you have an e version of a book, it’s easy to highlight parts or mark phrases for notes.

Try using an app to keep notes

Microsoft OneNote 

Apple Notes 

Google Keep 

Notion 

Obsidian 

Evernote

Joplin 

Formatting notes

At the top, put the reference to the article or book

On the next line, write down keywords

Now, jot down notes about background information, themes, methods, findings, or any material of interest to you and your research questions

Go through these notes highlighting themes or adding different coloured text to indicate higher-order classification

Use background colours to differentiate categories

Make clear any words that come directly from the author

In the last lines, add any of your own commentary, including reference to other material that you think may be relevant

Use the organisational system of the particular tool you are using (e.g. Notebook Section Page in OneNote, or Labels and Titles in Google Keep), to divide up and hierarchise your references

Use a reference manager

A reference manager helps you to build up a personal library of references to sources as you collect them.

Popular ones are RefWorks, EndNote and Zotero

RefWorks is almost entirely web based which means there isn’t much software to install but you’ll always need a web connection. EndNote and Zotero, by contrast, are mainly desktop based and work offline.

RefWorks and EndNote need institutional subscriptions for free use, but Zotero is free for a basic account.

EndNote, RefWorks and Zotero all work with Mac and Windows, but only Zotero works also with Linux.

All are compatible with Word. EndNote is not compatible with Google Docs, while RefWorks and Zotero are.

Summary

There’s a lot to read, and it’s important to be able to read quickly, given the amount of material that has to be digested in a literature review.

In your initial scans of the literature, learn to skim, speed read and gut articles and books.

To do this we have to learn to skip over material and just get a general feel of what it’s saying.

Taking notes is important for subsequent retrieval of your findings and ideas.

You can take notes in a number of ways, including by using readily available online tools.

Be systematic in the way you collect notes, and use online tools such as Google Keep to help you store and organise them.

Reference managers such as Zotero take much of the drudgery out of saving and storing references and help enormously in the compilation of your reference list.

Reference managers also help in the organization of your work by enabling you to compile a library with sections and subsections

Activity

Using your favourite search engine, access the home pages for EndNote and Zotero

Make notes on the offer made by each

Find out which reference manager your university supports (eg EndNote, RefWorks, Zotero)

Access the reference manager in 3 and take notes on its main features

If you can’t access the university-supported reference manager, access Zotero (which is free) and take notes on its main features

image1.jpeg

image2.jpeg

image3.jpeg

image4.jpeg

image5.png

image6.svg

.MsftOfcThm_Accent1_Fill_v2 { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke_v2 { stroke:#4472C4; }

image7.jpeg

image8.jpeg

image9.jpeg

,

PowerPoint 3 Sources, quality and criticality

Chapter 3 from

How to do your literature review

This is PowerPoint 3 for Chapter 3 …

We will look at

Quality of sources

Being critical

Triangulation

All of this is discussed in much more detail in Chapter 3 of How to Do Your Literature Review

Literature comprises sources

Books

authored books

chapters in edited books

journal articles

peer review journals

professional journals

conference and symposium proceedings

dissertations and theses

newspaper and periodical articles

websites

blogs and vlogs

social media

research reports

Sometimes called ‘grey literature’

Judging the quality of sources

Two main ways of judging quality are by asking …

Is the source a primary source or a secondary source?

Is it peer reviewed?

Primary or secondary sources

Primary sources are ‘straight from the horse’s mouth’, such as a research report written by the person or people who did the research.

A secondary source – such as a textbook – has reported on somebody else’s research.

Primary sources are usually thought to be more trustworthy than secondary sources, though secondary sources may give a good overview.

Peer review

A peer review journal is one where experts in the field have examined the piece of work to see if it is worthy of publication in the journal.

Peer review is generally thought to be the best guarantee of a source’s worth. However, it is not infallible.

Being critical

Ask yourself:

What is the status of the output? Peer reviewed? Primary or secondary?

Are there any vested interests at play (revealed by funders)?

Might different methods for collecting data or analysing findings have yielded different results?

What sources of information are the writers or researchers themselves drawing upon – is there evidence of balance?

Has the writer been on a thought merry-go-round, looking only at ‘high-quality’ papers that cite each other and ignoring research of different types or dissenting voices or unorthodox views?

Is citation count a good index of quality?

Citation count is about how often a paper has been cited, which you can find out on Google Scholar and databases.

It’s a useful pointer, but is more an index of impact rather than quality.

Why might citation count give the wrong idea?

Very recently published high quality papers will not have many citations – because they’re new, and the field has not had a chance to assimilate them yet.

High quality papers may be hard for a field to understand.

Low quality papers may achieve high citation counts because they summarise a standard position but offer little that is new.

Papers may achieve high citation counts simply because they are on controversial subjects.

Other ways of judging quality

Was the research funded? If so, by whom?

What methods were used? Were they appropriate?

Has the source been cited by others?

Critical awareness

Critical awareness is not just about spotting bias.

It is about an awareness that knowledge is frail, not fixed, and that you should approach everything you read and hear with a questioning mind.

You should always ask yourself whether something could have been done differently, or whether different conclusions could have been drawn.

Search far and wide – triangulate

Triangulation means using a combination of several data collection methods and/or analytical techniques to gain a rounded perspective on a research problem or question.

Triangulation is especially important in literature review, since you are relying on one source of data (ie literature).

It’s therefore important that you seek literature of different kinds and which uses different methods.

Right method for the question

There are many kinds of research …

case study

action research

ethnography

experiment

longitudinal study

cross-sectional study

survey

comparative study

… and more. Do you think that the methods used in the research article you are looking at were appropriate for the question being asked?

Don’t get bewildered by over-analysis

There is the danger in making analyses of quality that we can overthink things.

 

Don’t get bewildered in the critical analysis headlights. While criticality is vitally important, over-analysis can prevent you from putting fingers to keyboard at all.

Summary

There are many sources on which a literature review can draw, from articles to books to conference proceedings to websites … and many others – almost anything that is recorded in any form.

The quality of sources varies enormously: some are well grounded and trustworthy; others may be unreliable.

Primary sources, where researchers have drawn directly from their own work are usually more reliable than secondary sources (such as textbooks), where authors have drawn from the work of others.

Peer review – the process of researchers’ work being reviewed by other researchers – is taken to be the most dependable form of quality assurance.

Conflicts of interest, such as that potentially introduced by research funding, should make us guarded about the findings of a research study.

Citation count is an indicator of a source’s impact, not necessarily its quality.

It’s important to approach the literature with a critical disposition, taking all of the above into account and approaching everything you read in a questioning frame of mind.

Try to be wide-ranging in your literature appraisal, valuing triangulation, i.e. looking at an issue from different points of view and using different methods.

Activity

Using Google Scholar (scholar.google.com) or Elicit.com, identify an article in your area of interest. Now, assess the article for your purpose in conducting a literature review. Assess it on these criteria and write notes on each one:

 

Relevance: How closely does the source address your topic? Does it address a particular aspect of your review, and how could this be incorporated into a review about a broader topic?

Impact: How many times has the article been cited? Remember that citation count is not necessarily a good indicator of quality, and recently published material will not have accumulated many citations

Methodology: Is the research methodology clearly explained and appropriate for the study? Give reasons for why you think the method that has been used is (or isn’t) appropriate for the topic being addressed.

Bias: Are there any potential biases or conflicts of interest in the source? Look for any disclosures about funding.

Evidence: What kind of evidence is being offered to support the article’s conclusions and/or claims?

Clarity: Is the article well-written, organized, and easy to understand?

image1.jpeg

image2.jpeg

image3.jpeg

image4.jpeg

image5.png

image6.svg

.MsftOfcThm_Accent1_Fill_v2 { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke_v2 { stroke:#4472C4; }

image7.jpeg

image8.jpeg

image9.jpeg

image10.jpeg

image11.png

image12.svg

.MsftOfcThm_Accent1_Fill_v2 { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke_v2 { stroke:#4472C4; }

image13.jpeg

image14.jpeg

image15.jpeg

,

PowerPoint 4 Scoping

Chapter 4 from

How to do your literature review

This is PowerPoint 4 for Chapter 4 …

We will look at

Scoping

Finding core sources

Mindmapping

Storyboarding

Revising your prima facie question

Keeping an audit

All of this is discussed in much more detail in Chapter 4 of How to Do Your Literature Review

Scoping helps you to refine and focus your search

Scoping happens near the beginning of your search for literature

It lets you get a ‘lay of the land’ with a few (10 or so – the actual number isn’t critical) core readings

You can then think about refining your original question

You might do this by mindmapping, and perhaps drawing a storyboard.

Scoping

Scoping

Ask a prima facie question

Find core sources

Draw a mindmap

Refine your question

Expand your search

Find 10 core sources

Use tutor recommendations or ‘finds’ from an initial database or search engine search

Look amongst this material for themes, disagreements, dilemmas.

Use those 10 core sources to locate other relevant material. You might now decide to exclude some of your first 10, having found more relevant or interesting material.

Think about and begin to organise the material that you have identified, drawing a preliminary mindmap

Getting to a mindmap

The mindmap can be as detailed or as simple as you like.

Its purpose is to map out the terrain as it is forming itself around the core references.

What’s in a mindmap? …

Although there is no set format, it will usually contain:

the question or issue at the heart of the research, and around this will be

nodes that spring from the question. These may (or may not) be connected with

arrows or connecting lines.

Beyond this, a mindmap may contain

buds sprouting from the nodes, with new, connected ideas to pursue. You may, if you wish, add

key references as reminders or pointers for snowballing

and, if it helps, colour-code connected parts.

Mindmaps …

Question

Node

Node

Node

Node

Node

Bud

Bud

Bud

Bud

Bud

How does a storyboard differ from a mindmap?

The storyboard moves beyond ideas to chart a narrative – a story.

Could you build your storyboard around a chronological framework, drawing a timeline of the historical development of the topic?

Could the structure reflect the themes or concepts in the topic?

Could it be methodological (e.g., grouping sources based on research methods used)?

Or, could it combine elements of all the above?

Remember

Mindmaps and storyboards are your servants – they are not end-products.

They are to help you think and focus.

So, there’s no point fussing over details, presentation, or whether you’ve done them right.

Revising your prima facie question

Having too broad an initial question means too broad a search for literature, with less time for in-depth, focused analysis.

After mindmapping and storyboarding, you may want to revise your first, your prima facie, question.

You may want to refine your question and focus it on something particularly relevant to your own situation.

Keep an audit

Keep a record of any changes you make to your initial ideas in the process of scoping.

This record is called an audit.

Auditing the changes you made in scoping brings to light for the reader the details of how you have gone about scoping.

Keep an audit

Your eventual write-up will include a chapter containing your discussion of your processes of scoping and searching.

In this chapter, you should outline how you audited and what the audit shows.

Summary

After thinking about the topic for your literature review, you’ll need to scope the area. This means beginning with a few key references and ideas, and thinking about where these ideas may take you.

As you begin to scope – reading background literature and talking to your tutor – try to see connections, trends and patterns. Try to understand the territory of the subject as you first see it.

On the basis of your early reading and discussions, identify a few core references.

Using those core references, brainstorm about your start-up question or issue with a mindmap that identifies key areas that you might pursue.

Your mindmap may mature into a storyboard, in which you can ‘populate’ different sections with references to key sources.

If necessary, revise your prima facie, start-up question. Record changes that you have made.

Activity

Take a topic from your own area of interest and brainstorm a question around it.

Put the question in the centre of the mindmap and spend some time thinking about nodes which might surround it.

Once you have established some issues for the nodes, find a key reference to attach to each of the nodes.

Question

Node

Node

Node

Node

Node

Bud

Bud

Bud

Bud

Bud

image1.jpeg

image2.jpeg

image3.jpeg

image14.png

image15.svg

.MsftOfcThm_Accent1_Fill_v2 { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke_v2 { stroke:#4472C4; }

image16.jpeg

media1.mp4

image17.png

image18.jpeg

image19.jpeg

image20.jpeg

image21.jpeg

image22.jpeg

image23.jpeg

image24.jpeg

,

BUSI 701

Discussion Assignment Instructions

Provide a 600 to 800-word summary (formatted according to APA guidelines) of the new research in this area from a minimum of five new peer reviewed journal articles and identify questions that need exploring in future research.  

 

Your discussion should be organized in a three-paragraph format:

Introductory Paragraph: gives an overview and definition of the topic you chose. At the end of the paragraph it gives an idea of how your forum is organized.

Current Trends Paragraph: In this paragraph, you will discuss the themes that you found in the research from the 5 articles related to your topic. This paragraph should be a synthesis of the research and not just a listing of annotated summaries.

Future Research Paragraph: In this paragraph, you will discuss areas of future research by referencing the 5 articles that you identified. The future research areas should be based on the findings of the authors of those articles rather than general ideas you may have.

* A reference section should then be included at the end of your discussion.

You will review your classmates’ initial postings and choose one classmate to complete the following for your reply:

Write a 250 to 300-word response to your classmate. Your reply must make a recommendation to your classmate of a peer reviewed journal article that provides additional information on their topic. In your response, you should give a summary of the article in your own words and discuss why it is relevant to their forum topic. It must be different than articles they reference in their forum. Include an APA formatted citation at the bottom of the reply.

Discussion Thread: Liabilities and Economic Sacrifices

Read: Revsine: Chapter 12 

Read: Chapter 12 – Financial Instruments and Liabilities

Watch: Module 5 Presentation

 

Discussion Thread: Liabilities and Economic Sacrifices

Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of past transactions or events.

Do you agree or disagree with this statement? Why would a company consider a liability to be a sacrifice for the future growth? Explain your reasoning.

The best business advice comes from God and his Word. There are many instances in the Bible that show God’s response to building a business. God’s Word shows that He believes in hard work and growing the business in an ethical manner. Luke 8:14-15 states “The seed which fell among the thorns, these are the ones who have heard, and as they go on their way they are choked with worries and riches and pleasures of this life and bring no fruit to maturity. But the seed in the good soil, these are the ones who have heard the word in an honest and good heart, and hold it fast, and bear fruit with perseverance.” Review this scripture in Luke and provide an additional scripture that explores how to grow the business without sacrificing ethics or one’s morality.

 

DISCUSSION ASSIGNMENT INSTRUCTIONS
The student will complete Discussions in this course.
thread of at least 400 words
scholarly citation in APA format and at least one Bible verse. The integration of the Bible verse
and the discussion content should be evident. Each reply must incorporate at least 1 scholarly
citation in APA format. Any sources cited must have been published within the last five years.
Acceptable sources include the textbook, and scholarly sources from the Library’s databases.

    Business & Finance Case Study: IFRS Adoption in the U.S. Assignment

     

     Case Study: IFRS Adoption in the U.S. Assignment 

    Receivables

    Revsine/Collins/Johnson/Mittelstaedt/Soffer: Chapter 9

    © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.

    © McGraw Hill

    1

    Learning Objectives 1 After studying this chapter, you will understand:

    How to account for accounts receivable using net realizable value.

    How to analyze accounts receivable under net realizable value accounting.

    How to evaluate whether or not reported receivables arose from real sales and how to spot danger signals.

    How to impute and record interest when notes receivable have either no explicit interest or an unrealistically low interest rate.

    How to account for accounts and notes receivable using the fair value option.

    How companies use receivables to accelerate cash inflows and how the accounting treatment affects financial statement ratios.

    Why receivables are securitized and how the accounting treatment affects financial statement ratios.

    9-‹#›

    © McGraw Hill

    Learning Objectives 2 After studying this chapter, you will understand:

    Why receivables are restructured when a customer experiences financial difficulty and how to account for the troubled-debt restructuring.

    The key differences between current G A A P and I F R S requirements for receivable accounting.

    9-‹#›

    © McGraw Hill

    Assessing the Net Realizable Value of Accounts Receivable

    Accounts receivable are generally reflected in the balance sheet at net realizable value.

    Two things must be estimated to determine the net realizable value of receivables:

    Credit losses—the amount that will not be collected because customers are unable to pay.

    Returns and allowances—the amount that will not be collected because customers return the merchandise for credit or are allowed a reduction in the amount owed.

    9-‹#›

    © McGraw Hill

    4

    Accounting for Credit Losses 1

    Most companies establish credit policies by weighing the expected cost of credit sales against the benefit of increased sales.

    Expected cost:

    Customer collection and billing costs plus potential bad debts.

    This tradeoff illustrates that bad debts are often unavoidable.

    Accrual accounting requires that some estimate of uncollectible accounts be offset against current period sales.

    9-‹#›

    © McGraw Hill

    Treatment of Bad Debt Losses

    Traditionally, firms referred to losses from uncollectible accounts as bad debt expense and treated them as operating expenses.

    However, the final F A S B revenue recognition standard, effective for fiscal years beginning after December 15, 2017, requires that bad debt losses be treated as expenses and include them with other impairment losses.

    The impairment losses must be disclosed separately if material.

    9-‹#›

    © McGraw Hill

    Recording and Reporting the Allowance for Credit Losses

    Bristol Corporation estimates that bad debt losses arising from first quarter sales are expected to be $30,000.

    D R Credit loss expense $30,000
    C R Allowance for credit losses $30,000

    A contra-asset account subtracted from gross accounts receivable.

    If Bristol’s gross accounts receivable and allowance for credit losses before recording this entry were $1,500,000 and $15,000, respectively, then after the entry the balance sheet would show:

    Accounts receivable (gross) $1,500,000
    Less: Allowance for credit losses (45,000)
    Accounts receivable (net) $1,455,000

    9-‹#›

    © McGraw Hill

    Approaches to Estimating Uncollectible Accounts: Sales Revenue Approach

    Bristol Corporation prepares quarterly financial statements and must estimate the bad debt provision at the end of each quarter. Analyzing past customer payment patterns, Bristol determined that bad debt losses average about 1% of sales. First quarter sales total $3,000,000.

    Sales Revenue Approach

    Estimate the current period bad debt provision as a percentage of current period sales. For Bristol Corporation, the estimate is:

    9-‹#›

    © McGraw Hill

    Approaches to Estimating Uncollectible Accounts: Gross Receivables Approach

    Gross Receivables Approach

    Estimate the required allowance account balance as a percentage of gross receivables and then adjust the allowance upward or downward to this figure. For Bristol Corporation, the required allowance account balance is:

    Access the text alternative for slide images.

    9-‹#›

    © McGraw Hill

    Writing Off Credit Losses

    When a specific account receivable is known to be definitely uncollectible, the amount must be removed from the books.

    Assume that Bristol later determines that a $750 receivable from Ralph Company cannot be collected.

    D R Allowance for credit losses $750
    C R Accounts receivable – Ralph Company $750

    Notice that the entry has no effect on income.

    The specific account receivable (Ralph Company) is eliminated from the books and the allowance contra-account is reduced, but no credit loss expense is recorded.

    This is consistent with the accrual accounting philosophy of recording estimated uncollectibles when the sales is made rather than at a later date when the nonpayment is identified.

    9-‹#›

    © McGraw Hill

    Assessing the Adequacy of the Allowance for Credit Losses Account Balance 1

    No matter which method is used to estimate bad debts, management must periodically assess the reasonableness of the allowance for uncollectibles balance.

    The F A S B approach uses a current expected credit loss (C E C L) model.

    F A S B A S C Topic 326 does not require a specific method, but provides an aging of accounts receivable example.

    9-‹#›

    © McGraw Hill

    Assessing the Adequacy of the Allowance for Credit Losses Account Balance 2

    Exhibit 9.1 Bristol Corporation: Allowance for Credit Losses Based on Aging of Receivables

    On December 31, 20X1, Bristol Corporation’s gross accounts receivable are $1,600,000, and the balance of the Allowance for uncollectibles is $39,000. Bristol’s normal sales terms require payment within 30 days after the sale is made and the goods are received by the buyer. Bristol determines that the receivables have the following age distribution:

    Current 31 to 90 days old 91 to 180 days old Over 180 days old Total
    Amount $1,450,000 $125,000 $15,000 $10,000 $1,600,000

    Once the receivables have been grouped by age category, a separate estimate of credit losses by category is developed. Based on past experience, Bristol determines the following estimate of expected credit losses by category:

    Current 31 to 90 days old 91 to 180 days old Over 180 days old
    Historical % of credit losses 2.3% 5.5% 18.4% 36.8%

    9-‹#›

    © McGraw Hill

    Assessing the Adequacy of the Allowance for Credit Losses Account Balance 3

    Exhibit 9.1

    Numerous government forecasts predict that economic growth will slow in 20X2. In addition, unemployment rates have increased. Consequently, Bristol estimates that the 20X2 credit loss rates will be approximately 8% higher. Consequently, it uses the following loss percentages to estimate its allowance at December 31, 20X1.

    Current 31 to 90 days old 91 to 180 days old Over 180 days old
    Forecasted % of credit losses 2.5% 6.0% 20.0% 40.0%

    The required balance in the Allowance for credit losses account would then be as follows:

    Current 31 to 90 days old 91 to 180 days old Over 180 days old Total
    Amount $1,450,000 $125,000 $15,000 $10,000 $1,600,000
    Estimated % of credit losses 2.5% 6% 20% 40%
    = Allowance for credit losses $ 36,250 $ 7,500 $ 3,000 $ 4,000 $ 50,750

    9-‹#›

    © McGraw Hill

    Assessing the Adequacy of the Allowance for Credit Losses Account Balance 4

    Exhibit 9.1

    Because the balance of the Allowance for credit losses is only $39,000 on December 31, 20X1, the account must be increased by $11,750. This is the difference between the $50,750 required balance (as computed) and the existing $39,000 balance. To bring the balance up to the $50,750 figure indicated by the aging, Bristol makes the following adjusting entry:

    D R Credit loss expense $11,750
    C R Allowance for credit losses $11,750

    9-‹#›

    © McGraw Hill

    Analysis of Uncollectible Accounts Receivable 1

    Exhibit 9.2 Mattel, Inc.: Analysis of Accounts Receivable Credit Losses

    ($ in millions) Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2016
    A. Select Reported Amounts
    Revenues $ 4,510.9 $ 4,882.0 $ 5,456.7
    Pre-tax income (419.3) (505.0) 409.7
    Ending gross accounts receivables 992.1 1,154.0 1,136.6
    B. Change in Allowance for doubtful accounts
    Balance at beginning of year $ 25.4 $ 21.4 $ 24.4
    Provision for doubtful accounts 40.9 17.6 9.2
    Write-offs (44.3) (13.6) (12.2)
    Balance at end of year $ 22.0 $ 25.4 $ 21.4
    C. Analysis
    Provision for doubtful accounts as a % of sales 0.91% 0.36% 0.17%
    Provision for doubtful accounts as a % of ending gross receivables 4.12% 1.53% 0.81%
    Provision for doubtful accounts as a % of ending allowance 185.91% 69.29% 42.99%
    Allowance as a % of ending gross receivables 2.22% 2.20% 1.88%

    Source: Mattel, Inc. Form 10-Ks.

    9-‹#›

    © McGraw Hill

    Analysis of Uncollectible Accounts Receivable 2

    Sales declined over the three-year period.

    The provision for doubtful accounts increased substantially over the three year period.

    The percentage of, gross receivables, and ending allowance increased substantially over the period as Mattel’s collection experience worsened.

    Firms must continually adjust their allowance account as collection experience changes.

    9-‹#›

    © McGraw Hill

    Estimating Sales Returns and Allowances

    When goods are returned or a price allowance granted, the customer’s account receivable must be reduced and an income statement charge made.

    Assume that Bristol agrees to reduce by $8,000 the price of goods that arrived damaged at Bath Company:

    Companies must estimate the expected amount of future returns and allowances arising from receivables currently on the books at the end of each reporting period. If significant, an adjusting entry must be recorded.

    D R Sales returns and allowances $$$
    C R Allowance for sales returns and allowances $$$

    9-‹#›

    © McGraw Hill

    Analytical Insight: Do Existing Receivables Represent Real Sales?

    Generally, the growth rates in sales and in accounts receivable should be roughly equal.

    Receivables might grow faster than sales for the following reasons:

    Deliberate change in (that is, loosening of) sales terms to attract new customers.

    Deteriorating credit worthiness among existing customers.

    Firm has changed its financial reporting procedures, which determine when sales are recognized (that is, accelerated revenue recognition.)

    Large increases in accounts receivable relative to sales frequently represent a danger signal.

    Access the text alternative for slide images.

    9-‹#›

    © McGraw Hill

    Notes Receivable 1

    When a note bears an interest rate that approximates prevailing borrowing and lending rates, the accounting is straightforward.

    Michele Corporation sells a machine to Texas Products Company for $5 million. Michele accepts a three-year, $5 million interest-bearing note signed with 10% interest per annum to be paid in quarterly installments each year.

    D R Note receivable—Texas Products Company $5,000,000
    C R Sales revenue $5,000,000

    Interest income accrues each quarter.

    D R Accrued interest receivable $125,000
    C R Interest income $125,000

    To accrue three months’ interest = [$5,000,000 × 0.10]/4.

    9-‹#›

    © McGraw Hill

    Notes Receivable 2

    Upon receipt of the cash payment, the accrued interest receivable is reduced.

    D R Cash $125,000
    C R Accrued interest receivable $125,000

    To record receipt of the interest payment.

    9-‹#›

    © McGraw Hill

    Accounting for Credit Losses 2

    Firms use the Current Expected Credit Loss (C E C L) model to assess the collectability of notes receivable and an appropriate allowance.

    Methods may include a discounted cash flow method, a loss-rate method, or a probability-of-default method.

    Significant credit quality information must be disclosed by type of receivable including:

    Credit quality indicator.

    Amortized cost for prior five years and in total.

    How expected loss estimates are determined.

    Changes in risk factors, policies, or methodologies.

    Amount of significant sale of receivables.

    Roll-forward of the allowance for credit losses.

    Aging analysis of amortized cost by receivable type for past due receivables.

    9-‹#›

    © McGraw Hill

    Imputing Interest on Notes Receivable: Interest Rate not Stated 1

    A complication arises for a note that does not state an interest rate.

    Monson Corporation sells equipment it manufactured to Davenport Products in exchange for a $5 million non-interest-bearing note due in three years. The note bears no explicit interest. It says only that the entire $5 million is to be paid at the end of three years. Monson’s published cash selling price for the equipment is $3,756,600.

    The difference between the $5 million note and the $3,756,600 cash price is the imputed interest.

    The implied interest rate equates the present value of the $5 million payment to the cash price of $3,756,600.

    9-‹#›

    © McGraw Hill

    Imputing Interest on Notes Receivable: Interest Rate not Stated 2

    Although the $5 million note itself does not contain any mention of interest, Monson will earn a return of 10% per year for financing Davenport’s long-term credit purchase.

    Exhibit 9.3 Monson Corporation Effective Interest Table

    (a) Interest Income—10% of Column (d) Balance for Prior Year (b) Cash Interest Received (c) Increase in Present Value of Note: (a) Minus (b) (d) End-of-Year Present Value of Note
    1/1/20X1 — — — $ 3,756,600
    12/31/20X1 $ 375,660 $ 0 $ 375,660 4,132,260
    12/31/20X2 413,226 0 413,226 4,545,486
    12/31/20X3 454,514* 0 454,514 5,000,000
    Total $1,243,400

    * Rounded.

    Interest accumulates at 10% on the unpaid balance.

    9-‹#›

    © McGraw Hill

    Imputing Interest on Notes Receivable: Interest Rate not Stated 3

    Monson Corporation records the sale and note receivable as:

    D R Note receivable—Davenport $3,756,600
    C R Sales revenue $3,756,600

    Over the next three years, the note receivable is increased and interest income recognized.

    At the end of Year 1, the entry is:

    D R Note receivable—Davenport $375,660
    C R Interest income $375,660

    At the end of Year 3, Monson receives a $5 million payment, which consists of the cash sales price ($3,756,600) plus interest ($1,243,400 = $375,660 + $413,226 + $454,514).

    9-‹#›

    © McGraw Hill

    Imputing Interest on Notes Receivable: Interest Rate not Stated 4

    D R Cash $5,000,000
    C R Note receivable—Davenport.. $5,000,000

    This process of allocating the proceeds of the note between sales revenue and interest income is called imputed interest.

    9-‹#›

    © McGraw Hill

    Imputing Interest: Stated Rate Is Less than Prevailing Rate 1

    Another complication arises when the stated interest rate is lower than prevailing rates for loans of similar risk.

    Quinones Corp. sells a machine to Linda Manufacturing in exchange for a $4 million, three-year, 2.5% (Stated rate) note. At the time, the interest rate normally charged to companies with Linda’s credit rating is 10% (Prevailing rate).

    The implied (cash) selling price of the machine is $3,253,966, as computed on the following slide’s exhibit.

    9-‹#›

    © McGraw Hill

    Imputing Interest: Stated Rate Is Less than Prevailing Rate 2

    Exhibit 9.4 Quinones Corporation: Computation of Implied Sales Price for a Note with a Below-Market Interest Rate

    Calculation of Present Value at 10% Effective Interest Rate

    Present value of $4,000,000 principal repayment on 12/31/20X3 at 10%:

    $4,000,000 × 0.75132 = $3,005,280

    Present value of three interest payments of $1,000,000 (that is, $4,000,000 × 0.025), each at 10%:

    12/31/20X1 $ 100,000 × 0.90909 = 90,909
    12/31/20X2 $ 100,000 × 0.82645 = 82,645
    12/31/20X3 $ 100,000 × 0.75132 = 75,132
    Implied sales price of machine $3,253,966

    Note: All present value factors are from the book’s Appendix A, Table 1, 10% column.

    9-‹#›

    © McGraw Hill

    Imputing Interest: Stated Rate is Less than Prevailing Rate 3

    Exhibit 9.5 Quinones Corporation: Computation of Interest on Note Receivable

    *Rounded (a) Interest Income 10% of Column (d) Balance for Prior Year (b) Cash Interest Received (c) Increase in Present Value of Note (a) Minus (b) (d) End-of-Year Present Value of Note
    Inception – – – $3,253,966
    Year 1 $ 325,397 $100,000 $225,397 3,479,363
    Year 2 347,936 100,000 247,936 3,727,299
    Year 3 372,701* 100,000 272,701 4,000,000
    Total $1,046,034

    Notice that the present value of the note, and thus its carrying value increases each year.

    Entry for Year 1 (similar entries are made in Years 2 and 3):

    D R Note receivable—Linda Mfg. $225,397
    D R Cash 100,000
    C R Interest income $325,397

    Entry when the note is paid at maturity:

    D R Cash $4,000,000
    C R Note receivable—Linda Mfg. $4,000,000

    9-‹#›

    © McGraw Hill

    The Fair Value Option

    Although most firms record accounts and notes receivable at net realizable value, they have the option to record them at fair value.

    Bristol Corporation reports a net realizable value of $1,455,000 (gross receivables of $1,500,000 – allowance for uncollectibles of $45,000).

    There is an active market for these types of receivables; the price is 95% of face value, or $1,425,000.

    To adjust the receivable’s carrying value to fair value, the difference between the fair value and the face amount of the receivable is recorded as an unrealized loss as follows:

    D R Unrealized loss on receivables $75,000
    C R Fair value adjustment—Accounts receivable $75,000

    An asset valuation account that is adjusted upward or downward as the fair value changes.

    9-‹#›

    © McGraw Hill

    The Fair Value Option: Calculating Interest Income for Quinones 1

    Quinones will continue to compute interest income using the original 10% rate. However, the balance sheet will reflect the fair value based on the 9% rate (shown in column e below).

    Exhibit 9.6 Quinones Corporation: Note Receivable Recorded at Fair Value

    (a) Interest income (b) Cash interest received (c) Increase in present value of note (d) Present value at 10% (e) End of year fair value of note at 9% (f) Fair value adjustment –Note receivable: (e) Minus (d) (g) Unrealized gain (loss) on note receivable: (f) Minus prior (f)
    Inception $3,253,966
    20X1 $ 325,397 $100,000 $225,397 3,479,363 $3,542,631* $63,268† $ 63,268
    20X2 347,936 100,000 247,936 3,727,299 3,761,468 34,169 (29,099)
    20X3 372,701 100,000 272,701 4,000,000 4,000,000 – (34,169)
    Total $1,046,034 $ –

    The fair value option changes the pattern of income recognition but not the total amount recognized.

    9-‹#›

    © McGraw Hill

    The Fair Value Option: Calculating Interest Income for Quinones 2

    * Present value at market rate of 9%:

    $4,000,000 × 0.84168 (pv 2, 9%) = $3,366,720
    100,000 × 1.75911 (pvoa 2, 9%) = 175,911
    = $3,542,631

    † Fair value of $3,542,631 minus $3,479,363 carrying value using 10%.

    9-‹#›

    © McGraw Hill

    The Fair Value Option: Calculating Interest Income for Quinones 3

    At the end of Year 2, the fair value (column e) represents the present value of the interest payment and principal to be received in one year.

    At the end of Year 3, the fair value equals the principal amount because no interest payments are remaining.

    To reflect the Year 2 and Year 3 changes in the fair value, Quinones debits Unrealized gain (loss) on note receivable (column g) and credits Fair value adjustment—note receivable (column f).

    The Year 2 and Year 3 losses offset the initial gain recognized in Year 1.

    9-‹#›

    © McGraw Hill

    Accelerating Cash Collections: Sale of Receivables and Collateralized Borrowings

    Companies might want to accelerate cash collection for the following reasons:

    Competitive conditions require credit sales but the company is unwilling to bear the cost of processing and collecting receivables.

    There may be an imbalance between the credit terms of the company’s suppliers and the time required to collect customer receivables.

    The company may have an immediate need for cash but be short of it.

    There are two ways to accelerate cash collections:

    Sale of receivables (factoring)

    Collateralized borrowings

    9-‹#›

    © McGraw Hill

    Ambiguities Abound: Is It a Sale or a Borrowing?

    Sometimes, it is not obvious whether the receivables have been sold or are instead being used as collateral for a loan. The ambiguity arises when certain obligations, duties, or rights regarding the transferred receivables are retained by the firm undertaking the transfer (the transferor).

    Sale of Receivables:

    Receivables removed from balance sheet.

    Gain or loss recognized in earnings.

    Collateralized Borrowing:

    Receivables stay on balance sheet.

    Loan shown as balance sheet liability.

    No gain or loss recognized in earnings.

    The F A S B has provided guidelines in the Accounting Standards Codification:

    Assets are isolated and beyond reach of transferor’s creditors.

    Transferee has right to pledge or exchange the assets.

    Transferor has no obligation to repurchase or redeem assets in future.

    9-‹#›

    © McGraw Hill

    A Closer Look at Securitizations

    Customers with “low” to “moderately high” risk take out 7% home mortgages with bank.

    Bank forms a bundled portfolio of the 7% home mortgages; risk in the aggregate is “moderate.”

    Investors are willing to buy the portfolio at a price that yields a 6% return.

    A bank may reduce risk further by paying a guarantor to bear some of the default risk.

    Because the selling price of the bundled portfolio is higher than the carrying value of the mortgages, the bank records a gain on the sale of receivables.

    Both the investors and the bank benefit from the transaction.

    Access the text alternative for slide images.

    9-‹#›

    © McGraw Hill

    Securitization Entities

    Figure 9.3 Structure of a Securitization

    The transferor (for example, the bank) forms a securitization entity (S E) that is legally distinct from the transferor.

    The transferor sells the receivables to the S E; receivables are beyond the reach of the transferor and its creditors.

    The S E creates and issues debt securities.

    The S E sells the securities to investors.

    The S E remits the cash that it receives from the investors to the transferor.

    Access the text alternative for slide images.

    9-‹#›

    © McGraw Hill

    Financial Statement Effects of Securitizations 1

    On December 31, 20X1, Doyle securitized $1,000,000 of mortgages using a securitization entity (S E). The cash received from the S E was exactly $1,000,000, so it recognized no gain or loss on the transaction. If the transaction meets the criteria for sale accounting, it will make the following entry:

    D R Cash $1,000,000
    C R Mortgages receivable $1,000,000

    The effects of this entry on Doyle’s balance sheet are as follows:

    Balances Prior to Securitization Change in Balances If Transaction Is Treated as a Sale Balances after Securitization
    Assets
    Mortgages receivable $ 2,200,000 $ (1,000,000) $ 1,200,000
    All other assets 800,000 1,000,000 1,800,000
    Total assets $ 3,000,000 $ 3,000,000
    Liabilities and equity
    Liabilities $ 2,700,000 $ 2,700,000
    Equity 300,000 300,000
    Total liabilities and equity $ 3,000,000 $ 3,000,000

    9-‹#›

    © McGraw Hill

    Financial Statement Effects of Securitizations 2

    If the transaction does not meet the criteria for sale accounting, Doyle would treat the transaction as a collateralized borrowing and make the following entry:

    D R Cash $1,000,000
    C R Loan Payable $1,000,000

    The effects of this entry on Doyle’s balance sheet are as follows:

    Balances Prior to Securitization Change in Balances If Transaction Is Treated as a Sale Balances after Securitization
    Assets
    Mortgages receivable $ 2,200,000 $ 1,200,000
    All other assets 800,000 $1,000,000 1,800,000
    Total assets $ 3,000,000 $ 4,000,000
    Liabilities and equity
    Liabilities $ 2,700,000 $1,000,000 $ 3,700,000
    Equity 300,000 300,000
    Total liabilities and equity $ 3,000,000 $ 4,000,000

    Doyle’s net income for the year ended December 31, 20X1, is $40,000.

    9-‹#›

    © McGraw Hill

    Financial Statement Effects of Securitizations 3

    Assuming that the net income of Doyle National Bank is $40,000 for the year, its return-on-assets ratio and debt-to-equity ratio would be computed as follows:

    The left column reflects the ratio under sales treatment.

    The right column shows the ratio balances that would have been reflected if the transaction had been treated as a borrowing with the mortgages serving as collateral.

    Treating the transaction as a sale improves the return-on-assets ratio from 1% to 1.3%—a 30% increase.

    Similarly, the sale treatment improves (reduces) the debt-to-equity ratio from 12.33 to 9—a 27% reduction.

    If a gain had been recognized on the securitization, both ratios would have been improved even further.

    9-‹#›

    © McGraw Hill

    Troubled Debt Restructuring

    When a customer is financially unable to make required interest and principal payments, rather than force the customer into bankruptcy, lenders frequently agree to restructure the loan receivable.

    The restructured loan can differ from the original loan in several ways:

    Scheduled interest and principal payments may be reduced or eliminated.

    The repayment schedule may be extended over a longer time period.

    The debtor and lender can settle the loan for cash, other assets, or equity interests.

    Restructured loans benefit both the customer and the lender.

    9-‹#›

    © McGraw Hill

    Definition of Troubled Debt Restructuring

    A restructuring of debt constitutes a troubled debt restructuring … if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.

    In other words, for the restructuring to be troubled, the borrower must be unable to pay off the original debt and the lender must grant a concession to the borrower.

    9-‹#›

    © McGraw Hill

    Criteria for Troubled Debt Restructuring

    F A S B A S C 310-40-15-13 states that a creditor (lender) has granted a concession when it no longer expects to collect everything owed, including interest.

    The creditor would consider collateral in determining the amount expected to be collected.

    When assessing whether the debtor (borrower) is experiencing financial difficulties, the creditor should consider all of the following indicators:

    The debtor is currently in default on any of its debt or default is probable.

    The debtor is in the process of declaring bankruptcy.

    The debtor is unlikely to remain a going concern.

    The debtor has securities that are being delisted from an exchange.

    The creditor forecasts that the debtor’s cash flows are insufficient to pay interest and principal on its debt.

    Without the current modification, the debtor cannot obtain funds at nontroubled rates.

    9-‹#›

    © McGraw Hill

    Accomplishing a Troubled Debt Restructuring

    Troubled debt restructurings can be accomplished in two different ways:

    Settlement, which cancels the original loan by a transfer of cash, other assets, or equity interests (borrower’s stock) to the lender.

    Continuation with modification of debt term by canceling the original loan and signing a new loan agreement.

    Some troubled debt restructurings contain elements of both settlement and modification.

    The accounting issues related to troubled debt restructuring encompass both the measurement of the new (modified) loan and the recognition of any gain or loss.

    Example

    Harper Companies purchased $75,000 of corn milling equipment from Farmers State Cooperative on January 1, 20X1. Harper paid $25,000 cash and signed a five-year, 10% installment note for the remaining $50,000 of the purchase price. The note calls for annual payments of $10,000 plus interest on December 31 of each year. Harper made the first two installment payments on time but was unable to make the third annual payment on December 31, 20X3. After much negotiation, Farmers State agreed to restructure the note receivable. At that time, Harper owed $30,000 in unpaid principal plus $3,000 in accrued interest. The restructuring was agreed to on January 1, 20X4, and both companies have recorded interest up to that date.

    9-‹#›

    © McGraw Hill

    Settlement: Entries Recorded by the Borrower 1

    Suppose Farmers State agrees to cancel the loan if Harper pays $5,000 cash and turns over the company car. The car has a current fair value of $18,000 and is carried on Harper’s books at $16,000.

    Harper Companies (Borrower)

    D R Automobile $ 2,000
    C R Gain on disposal of asset $ 2,000

    To increase the net carrying amount of the automobile ($16,000) to its fair value ($18,000).

    D R Note payable $30,000
    D R Interest payable 3,000
    D R Accumulated depreciation 5,000
    C R Cash $5,000
    C R Automobile 23,000
    C R Gain on debt restructuring 10,000

    To record the settlement.

    Access the text alternative for slide images.

    9-‹#›

    © McGraw Hill

    Settlement: Entries Recorded by the Borrower 2

    Does Harper benefit from the restructuring?

    Yes ~ The combined economic value of the cash ($5,000) and automobile ($18,000) is $23,000—or $10,000 less than the $33,000 Harper owes Farmers State.

    9-‹#›

    © McGraw Hill

    Settlement: Entries Recorded by the Lender

    Recall that Farmers State agrees to cancel the loan if Harper pays $5,000 cash and turns over the company car.

    Farmers State Cooperative (Lender)

    D R Cash $ 5,000
    D R Automobile 18,000
    D R Loss on receivable restructuring 10,000
    C R Note receivable $30,000
    C R Interest receivable 3,000

    To record the settlement.

    Included in income from continuing operations (not extraordinary)

    Does Farmers State benefit from the restructuring?

    Most likely ~ Lenders often receive more through restructuring than they would from foreclosure or bankruptcy.

    9-‹#›

    © McGraw Hill

    Continuation with Modification of Debt Terms

    Instead of reaching a negotiated settlement of the note receivable, Harper and Farmers State could have resolved the troubled debt by modifying the terms of the original loan.

    The possibilities are endless.

    For accounting purposes, what matters is whether the undiscounted sum of future cash flows under the restructured note is:

    More than the note’s carrying value (including accrued interest) at the restructuring date.

    Less than the note’s carrying value (including accrued interest) at the restructuring date.

    9-‹#›

    © McGraw Hill

    Summary of Accounting Procedures for Troubled Debt Restructurings

    Exhibit 9.10 Summary of Accounting Procedures for Troubled Debt Restructurings

    Restructured Loan Cash Flows Are

    Settlement Gain or Loss Lower Than Current Carrying Value of Loan* Higher Than Current Carrying Value of Loan*
    Borrower
    New loan payable N A† Total of restructured cash flows Current book value
    Gain on debt restructuring Yes Yes None
    Gain (loss) on transfer of assets Yes N A N A
    Future interest expense N A None, all payments applied to principal Based on rate that equates current carrying value and restructured cash flows
    Lender
    New loan receivable N A Present value of new cash flows at original effective interest rate Present value of new cash flows at original effective interest rate
    Loss on debt restructuring Yes Yes Yes
    Future interest income N A Based on original loan rate Based on original loan rate

    * Includes unpaid accrued interest.

    † N A means “not applicable.”

    9-‹#›

    © McGraw Hill

    Global Vantage Point: Credit Losses 1

    The general accounting for accounts and notes receivable under I F R S is similar to the accounting under U.S. G A A P.

    The accounting is called amortized cost, which refers to the gross amount of the receivable.

    An allowance is still established for credit losses and returns.

    Both I F R S and U.S. G A A P use a current expected credit loss model (C E C L) but the approaches are different.

    9-‹#›

    © McGraw Hill

    Global Vantage Point: Credit Losses 2

    The I A S B modified I F R S 9 effective for fiscal years beginning after January 1, 2018.

    The I A S B approach computes loss expected values by multiplying probabilities by potential cash shortfalls and summing the products.

    The approach recognizes expected credit losses, but measures the losses according to how credit quality for a financial instrument has changed.

    For receivables with only small declines in credit risk, the loss is based on expected cash shortfalls associated with a possible default within the 12 months after the balance sheet date.

    For receivables that have had significant declines in credit quality, the loss is based on expected losses over the life of the loan.

    9-‹#›

    © McGraw Hill

    Global Vantage Point: Credit Losses 3

    The F A S B provided its credit loss guidance in A S U 2016-13.

    Public companies do not have to comply with guidance until they issue financial statements for fiscal years beginning after December 15, 2019.

    The F A S B approach uses a current expected credit loss (C E C L) model. It is similar to the approach used under I F R S 9; however, the F A S B:

    Has one model that computes expected losses over the life of the receivable for all financial assets measured at amortized cost.

    Guidance differs for investments carried at amortized cost and those classified as available-for-sale securities.

    Allows firms to use judgment in determining relevant information and estimation methods.

    9-‹#›

    © McGraw Hill

    Global Vantage Point: Fair Value Option, Sale of Receivables, and Debt Restructurings 1

    Fair Value Option:

    G A A P

    Allows the fair value option for a broader set of transactions.

    I F R S

    Firms may elect the fair value option only in cases where it:

    Eliminates an accounting mismatch or,

    Because a group of assets are managed and evaluated using fair values.

    Requires firms to disclose the fair value of short-term trade receivables and loans in addition to long-term notes receivables.

    9-‹#›

    © McGraw Hill

    Global Vantage Point: Fair Value Option, Sale of Receivables, and Debt Restructurings 2

    Guidance regarding sales of receivables is similar to the post-2009 U.S. accounting guidance. Under prior guidance, Q S P Es were off-balance-sheet. Under both I F R S and U.S. guidance, most of these entities will not stay on the balance sheet.

    I F R S for debt restructurings from the lender’s perspective are similar to U.S. G A A P. I F R S does not have explicit guidance from the borrowers perspective. The F A S B provides explicit guidance related to credit losses for troubled debt restructurings, but I F R S 9 does not address this specifically.

    9-‹#›

    © McGraw Hill

    Summary 1

    G A A P requires that accounts receivable be shown at their net realizable value.

    Companies use one of two methods to estimate credit losses: (1) the sales revenue approach or (2) the gross accounts receivables approach. In either case, firms must periodically assess the reasonableness of the uncollectibles balance using a method consistent with the Current Expected Credit Loss (C E C L) model, which utilizes both historical collection experience and expectations about the future.

    Analysts should scrutinize the allowance for uncollectibles balance over time. Significant increases in the allowance could indicate collection problems, while significant decreases in the allowance could be a sign of earnings management.

    Receivables growth can exceed sales growth for several reasons, including a change in customer mix or credit terms. But a disparity in the growth rate of receivables and sales could also indicate that aggressive revenue recognition practices are being used.

    9-‹#›

    © McGraw Hill

    Summary 2

    In certain long-term credit sales transactions, interest must be imputed by determining the note receivable’s present value.

    Firms may elect the fair value option for accounts and notes receivable. Changes in fair value are recognized in net income.

    Firms sometimes transfer or dispose of receivables before their due date to accelerate cash collection. Sales of receivables—also called factoring—can be with or without recourse.

    Receivables are also used as collateral for a loan.

    In analyzing receivables transactions, it is sometimes not obvious whether the transaction to accelerate cash collection represents a sale or a borrowing; however, authoritative accounting literature provides guidelines in Topic 860 Transfers and Servicing of the F A S B Accounting Standards Codification for distinguishing between sales (when the transferor surrenders control over the receivables) and borrowings (when control is not surrendered). Sales of receivables change ratios such as receivables turnover as well as potentially masking the underlying real growth in receivables.

    9-‹#›

    © McGraw Hill

    Summary 3

    Subprime loans and securitizations were at the heart of the 2008 economic crisis. Accounting and regulatory reforms are under way to address some of the problems identified during the crisis.

    Banks and other holders of receivables frequently restructure the terms of the receivable when a customer is unable to make required payments because of financial difficulties.

    These troubled debt restructurings can take one of two forms: (1) settlement or (2) continuation with modification of debt terms.

    When terms are modified, the precise accounting treatment depends on whether the sum of future cash flows under the restructured note is more or less than the note’s carrying value at the restructuring date. The interest rate used in troubled debt restructurings may not reflect the real economic loss suffered by the lender.

    Both the F A S B and I A S B have finalized most of their rules on financial instrument reporting. There are significant differences in the requirements related to estimating credit losses.

    9-‹#›

    © McGraw Hill

    Accessibility Content: Text Alternatives for Images

    9-‹#›

    © McGraw Hill

    Approaches to Estimating Uncollectible Accounts: Gross Receivables Approach – Text Alternative 1

    Return to parent-slide containing images.

    The 0.03 is circled with the callout reading Management believes that 3% of existing gross receivables will ultimately be uncollectible. And the credited $30,000 has a callout that reads Notice this second step.

    Return to parent-slide containing images.

    9-‹#›

    © McGraw Hill

    Approaches to Estimating Uncollectible Accounts: Gross Receivables Approach – Text Alternative 2

    Return to parent-slide containing images.

    "Backing into” the $30,000 with the use of a T-account is shown as follows. All three entries are on the right side of the T account. First is a current balance of $15,000, followed by a required adjustment of 30,000, which computes to a new balance of $45,000.

    Return to parent-slide containing images.

    9-‹#›

    © McGraw Hill

    Analytical Insight: Do Existing Receivables Represent Real Sales? – Text Alternative

    Return to parent-slide containing images.

    Assume that before introducing more lenient credit terms, Hmong Company had annual sales of $12 million and customers, on average, paid within 30 days. Outstanding accounts receivable, therefore, represent one month's sales, or $1 million. Under the new credit program, customer receivables would represent four months' sales, or $4 million; this represents a 300% increase in receivables even if total sales remain unchanged.

    The line graph shows two lines: Sales, steadily increasing, and then Receivables, also steadily increasing as Sales but then increasing more rapidly at midway point indicating faster growth

    Return to parent-slide containing images.

    9-‹#›

    © McGraw Hill

    Accelerating Cash Collections: Sale of Receivables and Collateralized Borrowings – Text Alternative

    Return to parent-slide containing images.

    Sales of receivables (factoring) is comprised of three parties: Company, Credit customer of company, and Bank or other financial institution. 1. Company makes sale to customer on credit.

    Interaction: Company to Credit customer

    2. Company sells customer receivable to factor for cash.

    Interaction: Company to Bank

    3. Customer payment sent to factor.

    Interaction Credit customer to Bank

    4. If sold “with recourse,” company buys back uncollectible accounts.

    Interaction: Bank to Company

    The process of collateralized borrowings is comprised of three parties: Company, Credit customer of company, and Bank or other financial institution.

    1. Company makes sale to customer on credit.

    Interaction: Company to Credit customer

    2. Company borrows cash from lender using receivables as security. Interaction: Bank to Company

    3. Customer payment sent to company. Interaction Credit customer to Company

    4. Company’s loan payment sent to lender. Interaction: Company to Bank

    Return to parent-slide containing images.

    9-‹#›

    © McGraw Hill

    A Closer Look at Securitizations – Text Alternative

    Return to parent-slide containing images.

    Bank has an arrow leading to Investors which reads Receivables transferred in exchange for cash. Customers has an arrow pointing up to Bank that reads Home mortgage receivables.

    Return to parent-slide containing images.

    9-‹#›

    © McGraw Hill

    Securitization Entities – Text Alternative

    Return to parent-slide containing images.

    The diagram contains five entities:

    Securitization entity (S E) is formed to facilitate the securitization.

    Transferor (the firm undertaking the securitization).

    Investors.

    Guarantor.

    Credit-rating agency.

    The steps in a securitization proceed as follows:

    Mortgage receivables are transferred to the S E (Interaction: from transferor to S E).

    SE obtains default guarantees from a third party (Interactions: SE pays fees to Guarantor; Guarantor provides guarantee to S E).

    SE obtains a rating for new securities (Interactions: S E pays fees to Credit-rating agency; Credit-rating agency provides rating to S E).

    Mortgage receivables are collateral for newly created debt securities sold to investors (Interaction: S E sells to investors).

    Cash from sale of debt securities is received by the SE (Interaction: from Investor to S E).

    Proceeds from the sale of debt securities is remitted to the transferor (Interaction: from SE to transferor).

    Return to parent-slide containing images.

    9-‹#›

    © McGraw Hill

    image1.jpeg

    image2.wmf

    oleObject1.bin

    image3.jpeg

    image4.wmf

    oleObject2.bin

    image5.png

    image6.jpeg

    image7.jpeg

    image8.jpeg

    image9.jpeg

    image10.jpeg

    image11.jpeg

    image12.jpeg

    image13.jpeg

    image14.jpeg

    image15.wmf

    image16.wmf

    image17.wmf

    image18.wmf

    image19.wmf

    image20.wmf

    image21.wmf

    image22.wmf

    oleObject7.bin

    oleObject8.bin

    oleObject9.bin

    oleObject10.bin

    oleObject3.bin

    oleObject4.bin

    oleObject5.bin

    oleObject6.bin

    image23.jpeg

    ,

    Long-Lived Assets

    Revsine/Collins/Johnson/Mittelstaedt/Soffer: Chapter 11

    © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.

    © McGraw Hill

    1

    Learning Objectives 1 After studying this chapter, you will understand:

    Why depreciated historical cost is used to measure long-lived assets.

    What specific costs can be capitalized and how joint costs are allocated.

    How generally accepted accounting principles (G A A P) measurement rules can complicate both trend analysis and cross-company analysis.

    Why balance sheet carrying amounts for internally developed intangibles differ from their real values.

    How to address long-lived asset impairments.

    How to account for asset retirement obligations and assets held for sale.

    How different depreciation methods are computed.

    11-‹#›

    © McGraw Hill

    Learning Objectives 2 After studying this chapter, you will understand:

    How analysts can adjust for different depreciation assumptions.

    How to account for exchanges of long-lived assets.

    The key differences between G A A P and I F R S requirements for long-lived asset accounting.

    11-‹#›

    © McGraw Hill

    Long-Lived Assets 1

    Operating assets expected to yield their economic benefits (or service potential) over a period longer than one year are called long-lived assets.

    11-‹#›

    © McGraw Hill

    Long-Lived Assets 2

    EXHIBIT 11.1 Exxon Mobil: Partial Consolidated Statement of Financial Position—December 31, 2017

    ($ in millions)   Percentage
    Assets    
    Cash and cash equivalents $ 3,177
    Notes and accounts receivable, less estimated doubtful accounts 25,597
    Inventories
    Crude oil, products and merchandise 12,871
    Materials and supplies 4,121
    Other current assets 1,368
    Total current assets 47,134 13.5%
    Investments, advances and long-term receivables 39,160 11.2
    Property, plant, and equipment, at cost, less accumulated depreciation and depletion 252,630 72.5
    Other assets, including intangibles, net 9,767 2.8
    Total assets $348,691 100.0%

    Long-lived assets comprise 72.5% of ExxonMobil’s total assets.

    Source: Exxon Mobil Corporation 2017 financial statements and supplemental information.

    11-‹#›

    © McGraw Hill

    Measurement of the Carrying Amount of Long-Lived Assets

    There are two ways that long-lived assets could be measured on balance sheets:

    Expected Benefit Approach

    $$ Discounted present value. Net realizable value.

    Estimated value in an output market where the asset is sold

    Economic Sacrifice Approach

    $$ Historical cost. Replacement cost.

    Estimated value in an input market where the asset is purchased

    11-‹#›

    © McGraw Hill

    The Approach Used by G A A P 1

    Assume a truck originally costing $100,000, is two years old, has a remaining life of 8 years, is being depreciated on a straight-line basis, and is expected to have no salvage value.

    The hypothetical range of long-lived asset carrying amounts as measured under each approach—expected benefit versus economic sacrifice—is shown in 11.3.

    U.S. G A A P uses historical cost—an economic sacrifice approach—to measure long-lived assets in most circumstances.

    11-‹#›

    © McGraw Hill

    The Approach Used by G A A P 2

    EXHIBIT 11.3 Hypothetical Long-Lived Asset Carrying Amounts (10-year life, 8 years remaining)

    Expected Benefit Approach Examples

    Discounted present value:

    Expected net operating cash inflows = $16,275 per year (assumed) for eight remaining

    years, discounted at a 10% (assumed) rate

    Net realizable value:

    Current resale price from an over-the-road equipment listing (Purple Book) for the specific vehicle model

    $85,000 (assumed)

    11-‹#›

    © McGraw Hill

    The Approach Used by G A A P 3

    Economic Sacrifice Approach Examples

    Replacement cost:

    Replacement cost of a two-year-old vehicle in equivalent condition

    Historical cost less accumulated depreciation:

    * Discount factor for an ordinary annuity for eight years at 10%. See “Present Value of an Ordinary Annuity of $1” table in end-of-book appendix.

    11-‹#›

    © McGraw Hill

    Long-Lived Asset Measurement Rules

    The initial balance sheet carrying amount of a long-lived asset is governed by two rules:

    All costs necessary to acquire the asset and make it ready for use are included in the asset account; that is, they are capitalized costs. (Expenditures excluded from asset categories are “expensed” to income.)

    Capitalized

    $$ Price paid for land
    $$ Cost of clearing land

    Expensed

    $$ Monthly equipment rental
    $$ Cost to repair damaged equipment

    Joint costs incurred in acquiring more than one asset are apportioned among the acquired assets on a relative fair value basis or some other rational basis.

    11-‹#›

    © McGraw Hill

    Long-Lived Asset Measurement Rules Illustrated 1

    Background information:

    Canyon Corporation acquired a tract of land on 6/1/X1, by paying $6,000,000 and by assuming an existing mortgage of $1,000,000 on the land.

    Canyon demolished an empty structure on the property at a cost of $650,000.

    Bricks and other materials from the demolished building were sold for $10,000.

    Regrading and clearing the land cost $35,000.

    Architectural fees were $800,000, and the payments to contractors for building a new factory on the site totaled $12,000,000.

    Canyon negotiated a bank loan for the construction. Interest payments over the construction period totaled $715,000.

    Legal fees incurred in the transaction totaled $57,000:

    $17,000 was attributable to both examination of title and legal issues linked to the assumption of the existing mortgage.

    The remaining $40,000 of legal fees related to contracts with the architect and the construction companies.

    The construction project was completed on 12/31/X1.

    11-‹#›

    © McGraw Hill

    Long-Lived Asset Measurement Rules Illustrated 2

    11-‹#›

    © McGraw Hill

    Computing Avoidable Interest

    G A A P requires capitalizing what are called avoidable interest payments on self-constructed assets; this interest is defined as that “could have been avoided . . . if expenditures for the assets had not been made.”

    Avoidable interest = Cumulative weighted average expenditures on the constructed asset x I interest rate

    Canyon’s calculation of avoidable interest:

    Date and Amount     Portion of Year   Cumulative Weighted Average Expenditures
    June 1 $10,000,000 × 58.630%* — $5,863,000
    August 22 3,558,788 × 36.164%† — 1,287,000
    $7,150,000

    Construction expenditures

    Avoidable interest = $7,150,000 × 10% = 715,000

    DR Construction in progress $715,000
    CR Interest expense $715,000

    11-‹#›

    © McGraw Hill

    Limits on the Amount of Interest Capitalized

    G A A P limits the amount of interest that can be capitalized to the lower of (1) interest actually incurred or (2) avoidable interest.

    Case 1:

    Case 2:

    Actual interest is less in this case

    Therefore only $600,000 would be capitalized

    Capitalization is restricted to interest arising from actual borrowings from outsiders.

    11-‹#›

    © McGraw Hill

    Tax Versus Financial Reporting Incentives

    How costs are allocated between land and building affects the amount of income that will be reported in future periods.

    Allocation 1:

    Higher depreciation

    Lower net income

    Lower taxes

    Allocation 2:

    Lower depreciation

    Higher net income

    Higher taxes

    For tax purposes, the incentives for allocating costs between land and building asset categories are completely different because the objective of most firms is to minimize tax payments, not to “correctly” allocate costs.

    The higher the costs allocated to land for tax purposes, the higher the future taxable income becomes because land cannot be depreciated.

    However, U.S. income tax rules generally parallel financial reporting rules and require cost allocations between land and buildings that are similar to U.S. G A A P rules. The same is true for interest capitalization.

    11-‹#›

    © McGraw Hill

    Capitalization Criteria—An Extension

    G A A P capitalizes expenditures that increase an assets usefulness—that is, increases the carrying amount of a long-lived asset—when the expenditure causes any of the following conditions:

    The useful life of the asset is extended.

    The capacity of the asset is increased.

    The efficiency of the asset is increased.

    There is any other type of increase in the economic benefits (or future service potential) of the asset that results as a consequence of the expenditure.

    When the expenditure does not meet any of these conditions, it must be treated as a period expense and be charged to income.

    Routine equipment maintenance is one example.

    11-‹#›

    © McGraw Hill

    Capitalization criteria: Costs incurred after initial use 1

    EXHIBIT 11.6 Winger Enterprises: Determination of Capitalized Costs

    On January 1, 20X1, Winger Enterprises purchased a machine that will be used in operations. Its cash purchase price was $80,000. The freight cost to transport the machine to Winger's factory was $1,200. During the month of January 20X1, Winger's employees spent considerable time calibrating the machine and making adjustments and test runs to get it ready for use. Costs incurred in doing this were:

    Allocated portion of production manager's salary for coordinating machine adjustments $2,200
    Hourly wages of production workers engaged in test runs of the machine 3,600
    Cost of raw materials that were used in test runs (the output was not salable) 1,500

    Given these facts, on January 1, 20X1, the capitalized amount of the machine would be the total of the shaded costs ($80,000 + $1,200 + $2,200 + $3,600 + $1,500 = $88,500).

    11-‹#›

    © McGraw Hill

    Capitalization criteria: Costs incurred after initial use 2

    Suppose that in January 20X4, Winger spends an additional $8,000.

    $6,000 for the installation of a new component that allowed the machine to consume less raw material and operate more efficiently

    Capitalized in 20X4 and added to the carrying amount of the machine

    $2,000 for ordinary repairs and maintenance

    Treated as a period expense

    11-‹#›

    © McGraw Hill

    Deferred Costs

    Incremental costs related to the successful negotiation of a contract (such as sales commissions) should be capitalized.

    The asset is then systematically amortized over the life of the contract, including expected renewals.

    To be capitalized, the costs must meet all of the following criteria:

    Relate to a specific contract.

    Generate or enhance resources that will be used to satisfy performance obligations in the future.

    Expected to be recovered.

    Expenses that would have been incurred without the contract signing are expensed immediately.

    11-‹#›

    © McGraw Hill

    Intangible Assets

    Intangible assets are long-lived assets that do not have physical substance.

    The category includes the following types of assets.

    Patents.

    Copyrights.

    Trademarks.

    Brand names.

    Customer lists.

    Licenses.

    Technology.

    Franchises.

    Employment contracts.

    The accounting for acquired intangible assets is straight-forward:

    The acquired intangible asset is first recorded at the arm’s length transaction price.

    Most acquired intangible assets are amortized (depreciated) on a straight-line basis over their expected useful economic lives and reviewed for impairment.

    Some intangible assets, known as indefinite-lived intangible assets, have indefinite lives and are not amortized. Instead, they are evaluated annually for impairment.

    11-‹#›

    © McGraw Hill

    Research and Development (R&D)

    Difficult financial reporting issues exist when the intangible asset is developed internally instead of being purchased from another company.

    These difficulties arise because it is uncertain whether current expenditures will ultimately lead to valuable patents or trademarks.

    The recoverability of research and development (R&D) expenditures is highly uncertain at the start of a project.

    Consequently, the G A A P requires that virtually all R&D expenditures be charged to expense immediately.

    11-‹#›

    © McGraw Hill

    Computer Software Products

    Prior to establishing the technological feasibility of a computer software product, companies are required to expense all R&D costs incurred to develop it.

    After technological feasibility is established, additional costs incurred to ready the product for general release to customers are supposed to be capitalized.

    The capitalization of additional costs ceases when the final product is available for sale.

    11-‹#›

    © McGraw Hill

    Asset Impairment: Tangible and Amortizable Intangible Assets

    Figure 11.1

    11-‹#›

    © McGraw Hill

    Asset Impairment Illustration 1

    Solomon Corporation manufactures a variety of computer products. The growing popularity of tablets is expected to reduce the demand for Solomon’s notebook computers. The notebook computers are produced on an assembly line consisting of five special purpose assets with a carrying amount (cost of $5,300,000 less accumulated depreciation of $3,300,000) of $2,000,000.

    Solomon’s management believes that this change in the business climate threatens the recoverability of these assets’ carrying amount; accordingly, their answer to the question in Stage A is yes.

    Consequently, to apply Stage B, they prepare the following estimate of future undiscounted cash flows over the expected 3-year remaining life of the notebook computer assembly line:

    11-‹#›

    © McGraw Hill

    Asset Impairment Illustration 2

    Impairment possible?

    Yes

    Undiscounted net

    cash flows expected

    $1,500,000

    Are cash flows lower

    than carrying amount?

    Yes ($1,500,000 > $2,000,000)

    Impairment loss

    $2,000,000 – $750,000 = $1,250,000

    Net operating cash flows
    20X1 $ 800,000
    20X2 400,000
    20X3 200,000
    Expected salvage value 100,000
    Total undiscounted cash flows $1,500,000

    11-‹#›

    © McGraw Hill

    Asset Impairment Illustration 3

    To record the loss, Solomon would make the following entry:

    DR Impairment loss $1,250,000
    CR Equipment $1,250,000

    The impairment loss decreases both assets and net income.

    Though it does not affect current cash from operations, the loss has negative implications for future revenue and cash flow.

    11-‹#›

    © McGraw Hill

    Indefinite-Lived Intangible Assets

    Indefinite-lived intangible assets must be evaluated for impairment at least annually.

    A two-step evaluation process is allowed by G A A P:

    Firm first assesses qualitative factors to determine whether it is necessary to perform a quantitative impairment test.

    If based on this qualitative evaluation, management believes that it is more likely than not that an indefinite-lived intangible asset has been impaired, then it must go to the second step.

    Perform a quantitative assessment by calculating the fair value of the intangible asset.

    If the book value of the asset exceeds the fair value, then the asset is considered impaired.

    The firm then reduces the book value of the asset to its estimated fair value and records a loss.

    The book value of the asset cannot be increased later if the fair value recovers.

    11-‹#›

    © McGraw Hill

    Management Judgments and Impairments

    Impairment write-downs present managers another set of potential earnings management opportunities.

    Auditors and other financial statement analysts should be alert to the potential use of write-offs opportunistically by managers.

    11-‹#›

    © McGraw Hill

    Obligations Arising From Retiring Long-Lived Assets 1

    EXAMPLE

    Kalai Oil Corporation constructs an oil drilling rig off the Texas coast, which is placed into service on January 1, 20X1. The rig cost $300 million to build. Texas law requires that the rig be removed at the end of its estimated useful life of five years. Kalai estimates that the cost of dismantling the rig will be $12 million and its credit-adjusted risk-free rate is 8%. The liability’s discounted present value is $8,167,000. Assume that Kalai has already capitalized the $300 million cost of the rig in the account Drilling rig.

    Kalai records the asset retirement obligation (A R O) when the asset is placed into service:

    DR Drilling rig (asset retirement cost) $8,167,000
    CR A R O liability $8,167,000

    This results in additional depreciation expense:

    DR Depreciation expense $1,633,400*
    CR Accumulated depreciation—drilling rig $1,633,400

    *$8,167,000/5 yrs. = $1,633,400.

    11-‹#›

    © McGraw Hill

    Obligations Arising from Retiring Long-Lived Assets 2

    The liability is initially recorded at its present value but increases over time as retirement nears.

      (a) Present Value of the Liability at Start of Year (b) Accretion Expense [8% × Column (a) Amount] (c) Present Value of the Liability at Year-End [Column (a) + Column (b)]
    20X1 $8,167,000 $653,360 $8,820,360
    20X2 8,820,360 705,629 9,525,989
    20X3 9,525,989 762,079 10,288,068
    20X4 10,288,068 823,045 11,111,113
    20X5 11,111,113 888,887* 12,000,000

    11-‹#›

    © McGraw Hill

    Obligations Arising From Retiring Long-Lived Assets 3

    The entry to record the increase in the liability in 20X1:

    DR Accretion expense $653,360
    CR ARO liability $653,360

    Assume that an outside contractor dismantles the rig early in January 20X5 at a cost of $11,750,000.

    DR ARO liability $12,000,000
    CR Cash $11,750,000
    CR Gain on settlement of ARO liability 250,000

    11-‹#›

    © McGraw Hill

    Assets Held for Sale

    When firms actively try to sell assets they own, the asset groups should be classified on the balance sheet as “held for sale.”

    When assets are held for sale, they are reported at the lower of book value or fair market value minus costs to sell.

    So, these assets would be shown on the balance sheet at $2,304,000.

    Access the text alternative for slide images.

    11-‹#›

    © McGraw Hill

    Depreciation

    The costs of productive assets must be apportioned to the periods in which they provide benefits.

    In financial reporting, the cost to be allocated to periods is the asset’s original historical cost minus its expected salvage value.

    Computing depreciation requires the reporting entity to estimate three things:

    The expected useful life (in years or units) of the asset.

    The depreciation pattern that will reflect the asset’s declining service potential.

    The expected salvage value that will exist at the time the asset is retired.

    Access the text alternative for slide images.

    11-‹#›

    © McGraw Hill

    Depreciation: Straight-Line Depreciation Method

    The straight-line (S L) depreciation method simply allocates cost minus salvage value evenly over the asset’s expected useful life.

    EXHIBIT 11.10 Depreciation Example

    Facts

    Cost of the asset $ 10,500
    Expected salvage value $ 500
    Expected useful life 5 years
    Expected units 20,000

    Straight-Line Depreciation (S L)

    11-‹#›

    © McGraw Hill

    Depreciation: Units of Production Method 1

    The units-of-production (U P) depreciation method allocates cost minus salvage over the expected units to be produced instead of the expected useful life.

    EXHIBIT 11.10 Depreciation Example

    Facts

    Cost of the asset $ 10,500
    Expected salvage value $ 500
    Expected useful life 5 years
    Expected units 20,000

    Units-of-Production (U P)

    11-‹#›

    © McGraw Hill

    Depreciation: Units of Production Method 2

    EXHIBIT 11.10 Depreciation Example

    Year Unit Rate ($10,500 − $500)/20,000 Units Produced (Assumed) Depreciation
    1 $0.50 4,200 $ 2,100
    2 0.50 3,400 1,700
    3 0.50 6,000 3,000
    4 0.50 3,300 1,650
    5 0.50 3,100 1,550
    Total 20,000 $10,000

    11-‹#›

    © McGraw Hill

    Depreciation: Double-Declining Balance Method 1

    The depreciation rate for the double-declining balance (D D B) method is double the straight-line rate. Applying a constant D D B depreciation percentage to a declining balance will produce a book value at the end of the asset’s economic life that is above or below the salvage value.

    Apply twice the S L rate to the book value of the assets without subtracting the salvage value.

    Once the D D B depreciation amount falls below what it would be with S L, a firm might use the straight-line method for the remaining years.

    Double-Declining Balance Depreciation (D D B)

    11-‹#›

    © McGraw Hill

    Depreciation: Double-Declining Balance Method 2

    Year Beginning-of-Year Book Value Depreciation (40% of Beginning-of-Year Book Value) Year-End Book Value
    1 $10,500.00 $4,200.00 $6,300.00
    2 6,300.00 2,520.00 3,780.00
    3 3,780.00 1,093.33* 2,686.67
    4 2,686.67 1,093.33 1,593.34
    5 1,593.34 1,093.34 500.00

    * Year 3: Switch to straight-line method (as explained in the text).

    11-‹#›

    © McGraw Hill

    Depreciation: Sum=of-the-Years’ Digits Method 1

    The sum-of-the-years’ digits (S Y D) method is another accelerated depreciation method. It depreciates an asset to precisely its salvage value.

    Sum-of-the-Years’ Digits Depreciation (S Y D)

    † The formula for determining the sum-of-the-years' digits is n(n + 1 )/2 where n equals the estimated life of the asset. In our example: 5(5 + 1)/2= 15. This, of course, is the answer we get by tediously summing the years‘ digits—that is, 5 + 4 + 3 + 2 + 1 = 15.

    11-‹#›

    © McGraw Hill

    Depreciation: Sum=of-the-Years’ Digits Method 2

    Year Depreciation Basis ($10,500 − $500) Applicable Fraction Depreciation
    1 $10,000 5/15 $ 3,333.33
    2 10,000 4/15 2,666.67
    3 10,000 3/15 2,000.00
    4 10,000 2/15 1,333.33
    5 10,000 1/15 666.67
    Total 15/15 $10,000.00

    11-‹#›

    © McGraw Hill

    Depreciation: Alternative Depreciation Methods

    Figure 11.2 Alternative depreciation methods

    Annual depreciation charges

    Total depreciation expenses is the same under all methods

    Net book value

    Ending book values are the same under all methods

    11-‹#›

    © McGraw Hill

    Disposition of Long-Lived Assets

    When individual long-lived assets are disposed of before their useful lives are completed, any difference between the net book value of the asset and the disposition proceeds is treated as a gain or loss.

    Assume the asset in Exhibit 11.10 is being depreciated using the D D B method and is sold at the end of Year 2 for $5,000 when its book value is $3,780.

    The entry to record the disposition removes the asset and its accumulated deprecation from the books:

    DR Cash $5,000
    DR Accumulated depreciation 6,720
    CR Long-lived asset $10,500
    CR Gain on sale of asset 1,220

    Gain (loss) = $5,000 − ($10,500 − $6,720) = $1,220

    11-‹#›

    © McGraw Hill

    Financial Analysis and Depreciation Differences

    Most U.S. firms use straight-line depreciation for financial reporting purposes.

    Nevertheless, making valid comparisons across firms is often hindered by other depreciation assumptions, especially differences in useful lives.

    To improve comparisons of profitability of firms, an analyst could standardize the average useful life used to compute depreciation expense.

    This adjustment process relies on several assumptions.

    The useful life differences are artificial and do not reflect real differences in expected asset longevity.

    The salvage value proportions are roughly equivalent for all firms in the industry

    The dollar breakdown within the asset categories are similar across the firms being compared.

    11-‹#›

    © McGraw Hill

    Exchanges of Nonmonetary Assets 1

    Sometimes firms exchange one nonmonetary asset like inventory or equipment for another nonmonetary asset.

    Unless certain exceptions apply, the recorded cost of the acquired asset is the fair market value of the asset given up.

    Rohan Department Store exchanges a delivery truck with a fair value of $70,000 for 10 checkout scanners from Electronic Giant Warehouse, Inc. The truck's book value is $60,000—original cost of $80,000 minus accumulated depreciation of $20,000. In addition to the truck, Rohan pays Electronic Giant $15,000.

    DR Store equipment $85,000
    DR Accumulated depreciation—delivery truck 20,000
    CR Delivery truck $80,000
    CR Cash 15,000
    CR Gain on exchange 10,000

    F M V of truck plus cash

    11-‹#›

    © McGraw Hill

    Exchanges of Nonmonetary Assets 2

    Asset exchange rules were subject to manipulation. To prevent a repeat of these abuses, the F A S B issued rules that now require companies to record certain exchanges of nonmonetary assets at the existing book value of the relinquished asset if any of the following conditions apply:

    The fair value of neither the asset(s) received nor the asset(s) relinquished is determinable within reasonable limits.

    The transaction lacks commercial substance.

    The exchange transaction is made to facilitate sales to customers. Specifically, the transaction is an exchange of inventory or property held for sale in the ordinary course of business for other inventory or property to be sold in the same line of business.

    11-‹#›

    © McGraw Hill

    Exchanges Recorded at Book Value: Fair Value Not Determinable

    What if the fair value of neither the asset(s) received nor the asset(s) relinquished cannot be determined?

    The new asset received is recorded at the sum of the at the sum of the book value of the old asset that was given up plus the cash given.

    Denver Construction Corporation (a fictional company) agrees to swap with Cody Company (another fictional company) one type of crane in exchange for a slightly different model whose features are better suited for a highway bridge project it is currently engaged in. The old crane Denver is exchanging has a book value of $600,000 at the time of the transaction. Its original cost was $700,000, and accumulated depreciation is $100,000. Denver also pays Cody $40,000 to complete the transaction. It is not possible to measure the fair value of either crane within reasonable limits.

    DR Construction crane (new) $640,000
    DR Accumulated depreciation—construction crane (old) 100,000
    CR Construction crane (old) $700,000
    CR Cash 40,000

    B V of old crane plus cash

    11-‹#›

    © McGraw Hill

    The Commercial Substance Criterion

    Booking exchange transactions at fair value introduces the possibility of gains (or losses) on the transaction.

    G A A P requires that the transaction must possess commercial substance. An exchange transaction has commercial substance when the firm’s future cash flows are expected to change significantly as a result of the exchange.

    A significant cash flow change exists if either:

    The configuration (risk, timing, and amount) of the future cash flows of the asset(s) received differs significantly from the configuration of the future cash flows of the asset(s) transferred.

    The entity-specific value of the asset(s) received differs from the entity-specific value of the asset(s) transferred, and the difference is significant in relation to the fair values of the assets exchanged.

    If both conditions are not met, the transaction must be recorded using the book value of the asset(s) relinquished.

    This precludes any gain recognition.

    11-‹#›

    © McGraw Hill

    Exchange Transaction to Facilitate Sales to Customers

    Sometimes firms exchange assets with other firms—even competitors—to balance inventories:

    Lee Electronics faces a shortage of plasma television sets but has an excess of liquid crystal display (L C D) sets. It agrees to swap L C Ds with a fair value of $50,000 and a book value of $40,000 for plasma sets with a fair value of $52,000 from Bonnie Enterprises.

    Because the exchange does not culminate an earnings process, the plasma sets are recorded as:

    DR Inventory—plasma sets $40,000
    CR Inventory—LCDs $40,000

    Book value of asset surrendered with no gain or loss recorded

    The $12,000 gain on the swap (= $52,000 fair value − $40,000 book value) will be recognized only when the plasma sets are ultimately sold to customers.

    11-‹#›

    © McGraw Hill

    Exchange Transaction to Facilitate Sales to Customers: Cash Received—A Special Case 1

    Let’s assume instead that Lee Electronics also receives cash representing 10% of the proceeds.

    Lee Electronics faces a shortage of plasma television sets but has an excess of liquid crystal display (L C D) sets. It agrees to swap L C Ds with a fair value of $50,000 and a book value of $40,000 for plasma sets with a fair value of $52,000 from Bonnie Enterprises

    DR Cash $ 5,778
    DR Inventory—plasma sets 36,000
    CR Inventory—L C Ds $40,000
    CR Recognized gain on exchange 1,778

    10% of ($52,000 + $5,778 − $40,000)

    11-‹#›

    © McGraw Hill

    Exchange Transaction to Facilitate Sales to Customers: Cash Received—A Special Case 2

    Fair value of plasma sets $52,000
    Less: Portion of gain deferred:
    Total gain $17,778
    Gain recognized (1,778)
    Gain deferred   (16,000)
    Inventory—plasma sets $36,000

    11-‹#›

    © McGraw Hill

    Global Vantage Point: Comparison of I R F S and G A A P Long-Lived Asset Accounting 1

    Although there are many similarities between U.S. G A A P and I F R S, numerous important differences exist. I F R S allows more choice in valuation models and has different specific guidance for issues such as depreciation and impairments.

    Tangible Long-Lived Assets:

    I A S 16 allows two different models for tangible long-lived assets:

    Cost Method (same as U.S. G A A P)

    Revaluation Method – Asset is carried at a revalued amount reflecting fair market value at the revaluation date.

    Subsequent depreciation is based on fair value, not original cost.

    The amount of the write-up is credited to an owners’ equity account called Revaluation Surplus (equivalent to Accumulated other comprehensive income).

    11-‹#›

    © McGraw Hill

    Global Vantage Point: Comparison of I R F S and G A A P Long-Lived Asset Accounting 2

    Intangible Long-Lived Assets:

    The accounting under I A S 38 is similar to U.S. G A A P.

    Generally, acquired assets are carried at amortized cost.

    A revaluation method is allowed, but an active market must be available for the intangible.

    There is a difference regarding internally developed intangibles.

    Research is expensed.

    Some development expenditures may be capitalized.

    11-‹#›

    © McGraw Hill

    Global Vantage Point: Comparison of I R F S and G A A P Long-Lived Asset Accounting 3

    Impairments:

    I A S 36, “Impairment of Assets,” provides the guidelines for impairments of long-lived tangible and intangible assets other than investment property measured at fair value.

    For tangible assets and amortizable intangible assets:

    Events that require an impairment review are similar to the U.S. G A A P events mentioned in Stage A. However, Stage C differs in that an impairment loss occurs if the carrying value exceeds the recoverable amount, defined as the higher of the asset’s fair value (less costs to sell) and its value in use, which is the discounted net cash flows identified in Stage B.

    I F R S rules also permit reversals of previously recognized impairment losses when there has been a change in the estimates that were previously used to measure the loss. The reversal increases net income.

    I F R S accounting for indefinite-lived intangible assets is similar to G A A P.

    11-‹#›

    © McGraw Hill

    Summary 1

    U.S. G A A P for long-lived assets is far from perfect. The need for unbiased, accurate, cost-effective, and verifiable numbers causes these assets to be measured in terms of the economic sacrifice incurred to obtain them—their historical cost—rather than in terms of their current expected benefit—or economic worth—to the firm.

    Changes in the amount of capitalized interest from one period to the next can distort earnings trends. A thorough understanding of how the G A A P measurement rules are applied allows statement readers to avoid pitfalls in trend analysis when investment in new assets is sporadic.

    Incremental costs, such as sales commissions, associated with acquiring a contract may be deferred and amortized over the life of the contract.

    11-‹#›

    © McGraw Hill

    Summary 2

    Because it is uncertain whether future benefits result from research and brand development costs, these costs are generally expensed in the period incurred. Consequently, balance sheet carrying amounts for intangible assets often differ from their real value to the firm. Analysts must scrutinize disclosures of R&D expenses to undo the overly conservative accounting.

    When comparing return on assets (R O A) ratios across firms, one must remember that historical cost leads to an upward drift in reported R O A as assets age. So, analysts must determine whether the average age of the long-lived assets for firms being analyzed is stable or rising. Inflation also injects an upward bias into reported R O A.

    Asset impairment write-downs depend on subjective forecasts and could be used to manage earnings.

    11-‹#›

    © McGraw Hill

    Summary 3

    An understanding of differences in depreciation choices across firms permits better interfirm comparisons. When making interfirm comparisons, analysts should use note disclosures to overcome differences in the long-lived asset useful lives chosen by each firm and, when possible, in their depreciation patterns.

    International practices for long-lived assets are sometimes very different from those in the United States. Statement users who make cross-country comparisons must exercise caution. I F R S allows much greater use of fair value than does U.S. G A A P.

    Some of the key differences between I F R S and U.S. G A A P relate to the revaluation of tangible assets, investment property, capitalization of intangible development costs, and impairment losses.

    11-‹#›

    © McGraw Hill

    Accessibility Content: Text Alternatives for Images

    11-‹#›

    © McGraw Hill

    Long-Lived Asset Measurement Rules Illustrated 2 – Text Alternative 1

    Return to parent-slide containing images.

    Land section includes:

    Cash payment of $6,000,000

    Mortgage assumed of 1,000,000

    Demolition of existing structure, $650,000

    Less: Salvage value of material, (10,000)

    These last two lines subtotal to 640,000

    Regrading and clearing land, 35,000

    Legal fees allocated, 17,000

    Capitalized land costs, $7,692,000

    Building section includes:

    Architectural fees of $800,000

    Building costs, 12,000,000

    Interest capitalized, 715,000

    Legal fees allocated, 40,000

    Capitalized building costs, $13,555,000

    Advance to rest of text alternative.

    11-‹#›

    © McGraw Hill

    Long-Lived Asset Measurement Rules Illustrated 2 – Text Alternative 2

    Return to parent-slide containing images.

    Callouts identify key amounts. The $6,000,000 cash and 1,000,000 mortgage are the purchase price. Preparation costs include the 640,000 demolition minus salvage and the 35,000 regrading line item. The 17,000 legal fees are joint cost. The architectural fees of 800,000, building costs of 12,000,000, and interest at 715,000 are all construction costs. The 40,000 legal fees under building are also joint cost. An additional notation is by this figure that reads Special GAAP rules apply.

    Return to parent-slide containing images.

    11-‹#›

    © McGraw Hill

    Computer Software Products – Text Alternative

    Return to parent-slide containing images.

    Left side lists Before Development expenditures, to be expensed as incurred. And at the right is listed After Development expenditures, to be capitalized and amortized. Midway point represents technological feasibility established.

    Return to parent-slide containing images.

    11-‹#›

    © McGraw Hill

    Asset Impairment: Tangible and Amortizable Intangible Assets – Text Alternative

    Return to parent-slide containing images.

    The flowchart contains five levels. Stage A: Have events or changes in circumstances raised the possibility that certain long-lived assets may be impaired?

    If Yes, go to Stage B.

    If No, No impairment write-down is necessary.

    Stage B: Estimate the future undiscounted net cash flows expected from the use and the disposal of the asset. Stage C: Are these future undiscounted net cash flows lower than the carrying amount of the asset?

    If Yes, go to Stage D.

    If No, No impairment write-down is necessary.

    Stage D: The impaired asset must be written down. Stage E: The impairment loss is the difference between the fair value of the asset and the carrying amount of the asset.

    Return to parent-slide containing images.

    11-‹#›

    © McGraw Hill

    Assets Held for Sale – Text Alternative

    Return to parent-slide containing images.

    On the left is Book value at $2,500,000. In the middle is Fair value: $2,350,000. And at the right is Expected cost to sell: $46,000.

    The last two boxes are connected showing the equation of $2,350,000 minus $46,000 equals $2,304,000.

    Return to parent-slide containing images.

    11-‹#›

    © McGraw Hill

    Depreciation – Text Alternative

    Return to parent-slide containing images.

    Depreciation is made up of Buildings and Equipment. Amortization includes Intangibles. Depletion would apply to Mineral deposits and Wasting assets.

    Return to parent-slide containing images.

    11-‹#›

    © McGraw Hill

    Depreciation: Alternative Depreciation Methods – Text Alternative

    Return to parent-slide containing images.

    In the first graph, year (1 through 5) is marked on the horizontal axis, and depreciation expenses in dollars are indicated on the vertical axis. The graph has four lines: straight line; sum-of-the-years’ digits; units-of-production; and double-declining balance.

    Straight line depreciation is a horizontal line that remains at $2,000 for all five years.

    Sum-of-the-years’ digits is a downward-sloping line that begins at $3,333 in year 1 and ends at $667 in year 5.

    Units-of-production begins at $2,100 in year 1, with varying values for the remaining four years: $1,700, $3,000, $1,650, and $1,550.

    Double-declining balance begins at $4,200 in year 1, $2,520 in year 2, and remains at $1,093 for years 3, 4, and 5.

    In the Net Book Value graph, end of year (1 through 5) is displayed on the x-axis and Book value in dollars (0 through 9000) is displayed on the y-axis. The Straight line method starts at about 8700 and declines in a straight line to roughly 700 in year 5. The sum of the years' digits starts at just above 7000 in year 1, declines to about 4700 in year 2, and 2700 in year 3. The drop then becomes more gradual to just above 1000 in year 4 and then finishes with the other methods in year 5. The units of production line starts near the straight line method at approximately 8600. It virtually mirrors the straight line method at about 6700 in year 2. It drops more dramatically in year 3 to about 3700, then slopes less steeply to approximately 2000 in year 4, before ending with the others at about 700. The double-declining balance method starts lower than all the others at approximately 6400 and declines sharply to about 3800 in year 2. The line then declines much less steeply to just under 3000 in year 3, around 1700 in year 4 and then ending with the other methods.

    Return to parent-slide containing images.

    11-‹#›

    © McGraw Hill

    image1.jpeg

    image2.wmf

    oleObject1.bin

    image3.wmf

    image4.wmf

    oleObject2.bin

    oleObject3.bin

    image5.png

    image6.png

    image7.png

    image8.png

    image9.png

    image10.png

    image11.png

    image12.png

    image13.png

    image14.png

    image15.wmf

    oleObject4.bin

    image16.wmf

    oleObject5.bin

    image17.wmf

    oleObject6.bin

    image18.wmf

    oleObject7.bin

    image19.wmf

    oleObject8.bin

    image20.png

    image21.png

    image22.wmf

    oleObject9.bin

    image23.wmf

    oleObject10.bin

    image24.wmf

    oleObject11.bin

    ,

    BUSI 532

    Case Study Overview

    Overview

    During this course, you will complete seven Case Study Assignments. The purpose of the case study is to allow you to read through real-world examples from various companies and learn more about the financial issues that they face. You will use the case study scenarios to apply the concepts that you have learned from the weekly content. Case studies are an engaging assignment that allow you to not only apply the concepts from the course, but also to use critical thinking skills when completing the analysis.

    Instructions

    · Length of assignment – Each case study analysis should be a minimum of 500 to 1000 words in length. The assignments should be submitted in a Word document with spreadsheets embedded in the Word document, as needed.

    · A cover page is also required. A properly formatted reference page and corresponding in-text citations are also required.

    · You should use APA formatting

    · A minimum of two scholarly citations are required

    · Acceptable sources include scholarly articles published within the last five years and your textbook.

    Note: Your assignment will be checked for originality via the Turnitin plagiarism tool.

    ,

    BUSI 532

    Case Study: IFRS Adoption in the U.S. Assignment Instructions

    Overview

    During this course, you will complete seven case study assignments. The purpose of the case study is to allow you to read through real-world examples from various companies and learn more about the financial issues that they face. You will use the case study scenarios to apply the concepts that you have learned from the weekly content. Case studies are an engaging assignment that allow you to not only apply the concepts from the course, but also to use critical thinking skills when completing the analysis.

    Instructions

    · Read Case 11.5. Royal Dutch Shell PLC: Identifying differences and similarities between IFRS and GAAP on pages 11-58 through 11-59.

    · Respond to the question prompt.

    · Prepare your analysis of the company based on your response to question prompt provided.

    · Length of assignment – Each case study analysis should be a minimum of two pages in length. The assignments should be submitted in a Word document with spreadsheets embedded in the Word document, as needed.

    · A cover page is also required, but not part of the two pages of content. A properly formatted reference page and corresponding in-text citations are also required.

    · You should use APA formatting

    · A minimum of two scholarly citations are required

    · Acceptable sources include scholarly articles published within the last five years and your textbook.

    · Refer to Case Study Overview document for further instructions.

    Note: Your assignment will be checked for originality via the Turnitin plagiarism tool.

    HIM

     

    Happy Physician Practice has purchased a new system that assists providers in creating patient notes and billing encounters from some basic input information. The physicians are excited because the system allows them to create a good note and then use it to paste into other encounters and edit. The billing manager is excited, and the entire office is happy about this discovery.

    As the HIM professional what is the most appropriate response?

    Please read chapter 4 and search the internet, AHIMA website resources to support your discussion.

    • The initial response must be relevant, detailed, and specific, at least 250 words.

      Forensic

       Answer 2 of the questions below

      1. You are the analyst and discover that cross contamination has just  occurred. (Cross Contamination between samples – when DNA from one  sample is found on another sample. Occurs when instruments aren’t  cleaned properly, examinations areas aren’t cleaned properly, or on  older instruments because they didn’t self clean properly.) You know you  have to report it.  You also know you can hide the results and no one  will know. You have had some other discipline issues 4 years ago.  Also,  the Lab has been in the local paper for similar problems in the past  year.  This will mean another investigation, possible closure of the  Lab, and maybe losing your job.  The DNA does not match anyone, so the  case will go no where and never be prosecuted.  What’s the harm of  keeping quiet.
      2. Discuss the ethics of dealing with a vendor who offers to buy you  lunch.  The Vendor offers to supply food for a training conference.  Is  there a difference?
      3. You notice a co-worker is skipping some steps in testing, but writes in their report that they did it.  What should you do?
      4. A friend of yours was a crime victim. You receive the evidence to test.  Should you do it?  Why of why not?

        Person Centered Care 3

          

        project plan outlining the intervention steps, a conceptual model for change, and a systematic evaluation plan that details the intervention steps, time frame for completion, the individual responsible for each step, and current metrics and expected benchmark metrics.

          discussion

           

          It is anticipated that the initial discussion post should be in the range of 250-300 words. Response posts to peers have no minimum word requirement but must demonstrate topic knowledge and scholarly engagement with peers. Substantive content is imperative for all posts. All discussion prompt elements for the topic must be addressed. Please proofread your response carefully for grammar and spelling. Do not upload any attachments unless specified in the instructions. All posts should be supported by a minimum of one scholarly resource, ideally within the last 5 years. Journals and websites must be cited appropriately. Citations and references must adhere to APA format.

          Instructions:

          • Describe the chemical and electrical processes used in neurotransmission.
          • Why are depolarizations referred to as excitatory postsynaptic potentials and hyperpolarization as inhibitory postsynaptic potentials?
          • What are the differences between absolute and relative refractory periods?

          Responses need to address all components of the question, demonstrate critical thinking and analysis and include peer-reviewed journal evidence to support the student’s position.

          Please be sure to validate your opinions and ideas with in-text citations and corresponding references in APA format.

            week 1 discussion

              

            Why Is My Story So Important?

             Miller, N., Miller, S., & Allar, I. (2024). Life after college: Presenting yourself to the workforce.  

             

            Prepare

            Prior to beginning work on this discussion forum, review

            • Chapter 1 of the Life After College: Presenting Yourself to the Workforce textbook

            Miller, N., Miller, S., & Allar, I. (2024). Life after college: Presenting yourself to the workforce.  

             Work When and Where you WantLinks to an external site.

            For this discussion, you may provide a written response or craft a video response using the record/upload media feature discussion forum.

            Take some time to consider your personal and professional journey. Write down key experiences, challenges, achievements, and lessons learned. Consider how these elements have shaped who you are today.

            In less than 250 words or in a video response (2 minutes or less):

            • Explain why you think it is important to share your personal story with potential employers.
            • Describe how sharing your story can help you stand out in a competitive job market.
            • Share what elements of your story you believe are most compelling and why.
            • Summarize how you can use your story to demonstrate your skills, values, and fit for a particular role or organization.

            EDU499 Crafting and Communicating Your Value Through Your Story

            TRANSCRIPT FOR INTERACTIVE LEARNING MODULE

            Screen 1: Objective

            This interactive is designed to help you explain your unique story and understand how it

            accentuates your value proposition in the workforce.

            You’ll learn how to highlight your distinctive qualities, experiences and story into conversations

            with potential employers.

            Screen 2: Conversation on ePortfolio

            John and Charlene discuss how to outline and present one’s story through ePortfolio.

            [The screen displays 2 slides with two characters John and Charlene]

            Select the arrow buttons to explore more. Once finished, select the next button.

            Slide 1:

            John: Hi, Charlene. Let me tell you how to stand out in the education field. You must start by

            outlining your story and presenting it through your ePortfolio.

            Charlene: That sounds great, John! I'm excited to learn how to showcase my skills and

            experiences in a way that highlights my strengths.

            Slide 2:

            John: This week, we'll discuss identifying, capturing, and communicating your accomplishments

            so you can demonstrate value to potential employers.

            Charlene: I like the sound of that! I need all the help I can get sharing my story so it makes

            sense in an interview.

            Screen 3: How to Articulate Your Story

            Follow these steps to highlight your qualities and experiences.

            [The screen displays 6 tabs- select each tab for more information]

            Select each tab to learn more.

            Step 1: Understand the Importance of Your Story

            Objective: Recognize that a clear and compelling personal story is essential to set yourself apart

            in the job market. Here are some steps to achieve this:

            • Consult a professional mentor to determine how they used their personal story in their career.

            • Reflect on how your personal story enhances your value proposition to potential employers.

            Step 2: Identify Key Elements of Your Story

            Objective: Identify the distinctive qualities, experiences, and strengths that comprise your story.

            Here are some steps to do this:

            • List key events, challenges, achievements, and lessons that shaped your professional identity.

            • Share your list with a peer or small group for feedback on what is most compelling and relevant to your career goals.

            Step 3: Craft Your Value Proposition Statement

            Objective: Summarize your unique story into a concise statement that highlights your value to

            employers. Here are some steps:

            • Use your list to draft a value proposition statement that connects your personal experiences to employers' needs.

            • Review examples of value propositions to draft your own.

            • Share your draft value proposition with peers and mentors for constructive feedback.

            Step 4: Integrate Your Story Into Professional Conversations

            Objective: Learn how to weave your story into conversations with potential employers. Follow

            these steps to prepare:

            • Practice mock interviews where you introduce your personal story and value proposition.

            • Create scripts with keywords to help you transition from discussing your experiences to highlighting your value proposition.

            Step 5: Reflect and Refine

            Objective: Improve your personal narrative and value proposition based on feedback and

            reflection. Here are some tips:

            • Journal what you learned from practicing your narrative, how you felt, and how you will refine your story.

            • Revise and record a short video or audio clip where you practice incorporating your story into a professional conversation

            Step 6: Apply Your Learning in Real-World Situations

            Objective: Use your personal story to show your value proposition in real-life professional

            contexts. Follow these steps:

            • Attend a networking event, job fair, or interview to introduce your value proposition in a real-life situation.

            • Reflect on your experience. Then, repeat Step 5.

            Screen 4: Summary

            By following this tool, you'll articulate your unique story, highlight the qualities and experiences that set you apart, and integrate your narrative into conversations with potential employers.

            Platinum Essays