CHANGES FOR THE SEVENTH EDITION

1. Reorganization of consolidation foundation material. The consolidation materials in the first section of the book have been extensively reorganized. The discussion of different theories of consolidation in Chapter 3 has been streamlined and a numerical example has been added to illustrate the effects of the different theories, including the FASB’s proposed standards on combinations and consolidations. Because most subsidiaries are wholly owned, consolidation procedures for wholly owned subsidiaries are discussed before adding the complexity of less-than-wholly owned subsidiaries. Thus, Chapter 4 deals with the consolidation of wholly owned subsidiaries both at the date of acquisition and beyond. Most of the important aspects of consolidation are discussed in Chapter 4 in the context of wholly owned subsidiaries. Chapter 5 then builds on this foundation to discuss consolidation of majority-owned subsidiaries.
2. Illustrations of proposed FASB standards on consolidation and combinations. The FASB currently is moving toward the completion of projects proposing major changes in accounting for business combinations and the presentation of consolidated financial statements. Although the proposed standards are not yet finalized, they will, if adopted, have a significant impact on future practice. The FASB’s proposals are included in the text in several ways. First, brief coverage of the proposed standards is integrated throughout the text when relevant topics are discussed. Second, a more detailed discussion of the proposed standards is provided in a separate section in Chapters 1, 3, and 5. Third, numerical examples are provided to illustrate the effects of implementing the proposed standards. For example, in Chapter 5, a full workpaper illustration of the preparation of consolidated financial statements under the proposed standards is presented. This illustration is extended on the text’s Website, and additional illustrations are presented as well (www.mhhe.com/baker7e ). End-of-chapter materials relating to the proposed standards have been included in the text.
3. Increased coverage of the Sarbanes-Oxley Act. The Sarbanes-Oxley Act (SOX) has had a profound impact on auditing and corporate governance. Chapter 14 provides an extensive overview and discussion of SOX, providing a background essential for accountants. Cases have been added for students to gain additional understanding of SOX.
4. Integration of the Revised Uniform Partnership Act. The model Revised Uniform Partnership Act (RUPA), or a significant adaptation, has now been adopted in about 40 states. Additional states are in the process of evaluating the impact of the RUPA on their states to determine which parts of the model RUPA they might adopt. Chapters 15 and 16 discuss and illustrate the essential provisions of RUPA.
5. Increased focus on governmental and not-for-profit financial statements and disclosures. Chapters 17 and 18 (on governmental entities) and Chapter 19 (on not-forprofit entities) have been updated to include recent GASB and FASB standards, and the discussion and end-of-chapter materials have been enhanced to provide students with more opportunities to understand how the accounting and reporting standards affect the financial statements and other elements of the entities’ annual reports.
6. More real-world examples throughout the text. Additional real-world examples have been added throughout the chapters to illustrate the topics and to show students that the topics covered are important for accountants to understand and be able to apply in the dynamic business environment. These examples make it “real” for students.
7. End-of-chapter materials have been significantly restructured.
• New cases: Real-world cases included in the end-of-chapter materials have been updated and a number of new ones added throughout the text. These cases provide students with a sense of relevancy, an opportunity to engage in online research, and a chance to practice formal writing.
• Kaplan CPA Review simulations: Also introduced are a number of simulations of advanced financial accounting issues that use the framework by Kaplan CPA Review. Students can work the simulations online to gain experience on the presentation and operation of simulations that appear on the computerized CPA exam.
• Supplemental problems: Some of the longer, more complex problems in some of the chapters have been moved to the textbook’s Website (www.mhhe.com/baker7e ) and are now presented as Supplemental Problems. Advanced financial accounting classes that wish to intensively explore the accounting and reporting requirements of a chapter’s topics can access the Website and download this problem material. By moving some of the longer problems to the Website, the authors created space to add more real-world research cases, which are becoming increasingly important for advanced financial accounting courses.