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The all-new fast-reference problem solver
Accounting
T he Vest Pocket Controller is the handy pocket pr oblem solver that gives today’s busy executives and accountants the helpful
information they need in a quick-r eference format.
Whether in public practice or priv ate industr y, professionals will always have this reliable reference tool at their fingertips because it easily goes anywhere—to a client ’s office, on a business trip , or to an important lunch meeting.
Providing concise answ ers to the questions y ou ar e most likely to encounter during a typical business day , The V est Pocket Controller covers:
• The most heavily used GAAP accounting standar ds• The management areas a controller is likely to encounter• A variety of financial analysis topics with a par ticular focus on bottleneck analysis
• Metrics a controller is most likely to need, along with helpful examples
• The primary control systems you need to ensure your transactions are as error-free as possible
• How to analyze capital budgeting proposals so that only truly necessary assets are acquired
Packed with practical techniques and rules of thumb for analyzing, evaluating, and solving the day-to-day pr oblems ev ery contr oller faces, The Vest Pocket Controller helps y ou quickly pinpoint what to look for, what to watch out for , what to do, and ho w to do it. Its easy-to-use Q & A format offers hundr eds of explanations sup-ported by a multitude of examples, tables, char ts, and ratios.
Convenient and compr ehensive, The Vest P ocket Contr oller is a powerful companion for the ever-changing world of the controller.
STEVEN M. BRA GG, CPA, has been the chief financial officer or controller of four companies, as w ell as a consulting manager at E rnst & Young and auditor at D eloitte. H e is the author of over thir ty books primarily targeted to ward controllers and their needs. B ragg r eceived a master ’s degr ee in finance fr om Bentley College, an MBA from Babson College, and a bachelor ’s degree in economics from the University of Maine.
The FAST-REFERENCE PROBLEM SOLVER for EXECUTIVES and ACCOUNTANTS
Steven M. Bragg
Includes:■ Capital budgeting techniques■ Foreign exchange risk management■ Essential GAAP■ Working capital management techniques■ Stock registration alternatives■ Key performance metrics
THEVESTPOCKET
Controller
PMS 279 PMS 2623 GLOSSY
THE VEST POCKET Controller
Bragg
$29.95 USA/$35.95 CAN
E1BINDEX 03/10/2010 Page 418
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Additional Praise for The Vest Pocket Controller
``The Vest Pocket Controller presents the accounting com-munity with a fantastic resource that provides relevantand concise guidance. The question-and-answer formatallows the reader the opportunity to find the answer andreview the accounting treatment with some additionalinsight and commentary. The Vest Pocket Controller is anindispensable guide for all accountants.''
—Josh Nowack, CPA, MBA, Nowack StrategicBusiness Advisory & CPA
``The Vest Pocket Controller provides important informa-tion in an easy-to-use format. This book should be re-quired reading for anyone in an accounting or financerole as it is a resource that will be referenced time andagain. Since reading the book for the first time, I find my-self referring to its content on a regular basis. Not onlywill you find The Vest Pocket Controller in my vest pocket,but I will also be giving it to everyone in my accountingdepartment.
—Steven Randall, Managing Partner, Vonya Global LLC
``This book is a quick reference guide for a controller. Itprovides clear and concise answers with explanations tothe various questions a controller may have in his day-to-day operations, with plenty of examples. A valuable addi-tion to any controller’s library.''
—Priya K Srinvasan, Owner, Priya K Srinivasan CPA
``The Vest Pocket Controller is a comprehensive, incrediblywell-organized reference for controllers and accountingprofessionals alike complete with real-world scenariosand easy-to-follow journal entries. Once again, StevenBragg has put together a must-have accounting ‘cheatsheet’ for CPAs, accountants, and all level of financeprofessionals.''
—Adrienne Gonzalez, Founding Editor,JrDeputyAccountant.com
``Steve provides a clear and effective guide for readersfrom accountants to financial managers. This book coverskey topics concisely and clearly and earns a place as a keyreference book.''
—Paul Apodaca, Principal at Apodaca Consultingand Finance Manager, WONIK Quartz International
E1FFIRS 03/04/2010 Page 2
E1FFIRS 03/04/2010 Page 3
TheVestPocketController
E1FFIRS 03/04/2010 Page 4
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THEVESTPOCKETCONTROLLER
Steven M. Bragg
John Wiley & Sons, Inc.
E1FFIRS 03/04/2010 Page 6
Copyright# 2010 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted in any form or by any means, electronic,mechanical, photocopying, recording, scanning, or otherwise, except aspermitted under Section 107 or 108 of the 1976 United States CopyrightAct, without either the prior written permission of the Publisher, orauthorization through payment of the appropriate per-copy fee to theCopyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 111 River Street,Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and authorhave used their best efforts in preparing this book, they make norepresentations or warranties with respect to the accuracy or completenessof the contents of this book and specifically disclaim any impliedwarranties of merchantability or fitness for a particular purpose. Nowarranty may be created or extended by sales representatives or writtensales materials. The advice and strategies contained herein may not besuitable for your situation. You should consult with a professional whereappropriate. Neither the publisher nor author shall be liable for any loss ofprofit or any other commercial damages, including but not limited tospecial, incidental, consequential, or other damages.
For general information on our other products and services or for technicalsupport, please contact our Customer Care Department within the UnitedStates at (800) 762-2974, outside the United States at (317) 572-3993 or fax(317) 572-4002.
Wiley also publishes its books in a variety of electronic formats. Somecontent that appears in print may not be available in electronic books. Formore information about Wiley products, visit our web site atwww.wiley.com.
Library of Congress Cataloging-in-Publication DataBragg, Steven M.
The vest pocket controller/Steven M. Bragg.p. cm.
Includes index.ISBN 978-0-470-59373-8 (pbk.)
1. Managerial accounting. 2. Corporations–Accounting.3. Accounting. I. Title.HF5657.4.B723 2010658.15'11–dc22
2009051056
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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CONTENTS
Preface xxv
About the Author xxvii
PART I ACCOUNTING STANDARDS 1
One Revenue Recognition 3
When Can I Report Revenue atGross Instead of Net? � 3
How Does the InstallmentMethod Work? � 4
Can I Recognize Revenue WhenThere Is a Right of Return? � 5
When Can I Record Bill-and-HoldSales? � 5
How Does the Percentage-of-Completion Method Work? � 6
How Does the Completed-ContractMethod Work? � 6
What Types of PricingArrangements Are Usedin Contracts? � 7
How Do I Account for ContractLosses? � 10
How Do I Account for AdditionalClaims under a Contract? � 11
How Does the DepositMethod Work? � 11
How Do I Account forInstallation Fees? � 13
What Recognition MethodsCan I Use for ServiceBillings? � 15
How Do I Record Revenue forFranchise Sales? � 17
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Two Investment Accounting 19
Which Securities Are Designatedas Marketable EquitySecurities? � 19
What Is the Accounting forMarketable Equity Securities? � 19
What Is the Accounting for Transfersbetween Available-for-Sale andTrading Investments? � 22
What Is the Accounting forInvestments in Debt Securities? � 24
What Is the Accounting for DebtSecurities among Portfolios? � 25
How Are Deferred Tax EffectsRecognized for Changes inInvestment Valuation? � 26
What Is the Accounting for SignificantEquity Investments? � 26
What Is the Accounting for anInvestment Amortization? � 29
What Is the Accounting for anEquity Method InvestmentImpairment? � 29
When Is the Equity MethodNo Longer Used? � 30
What Are the Key Decisions forRecording Gains or Losseson Securities? � 30
Three Inventory Accounting 33
How Do I Account for Goodsin Transit? � 33
How Does Inventory OwnershipVary under Different DeliverySituations? � 33
How Do I Account for ConsignedInventory? � 34
What Overhead Do I Allocateto Inventory? � 35
How Do I Account for the Lowerof Cost or Market Rule? � 36
How Does the First-in, First-outValuation Method Work? � 38
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What Are the Advantagesand Disadvantages of FIFOValuation? � 40
How Does the Last-in, First-outValuation Method Work? � 41
What Are the Advantages andDisadvantages of LIFOValuation? � 43
How Does the Dollar-Value LIFOValuation Method Work? � 44
How Does the Link-ChainValuation Method Work? � 46
How Does the Weighted-AverageValuation Method Work? � 49
Four Fixed Asset Accounting 53
What Is Included in the CapitalizedCost of a Fixed Asset? � 53
What Is the Price of a PurchasedFixed Asset? � 53
What Is the Price of a FixedAsset Obtained through anExchange? � 54
What Is the Price of a Fixed AssetObtained with a Trade-in? � 55
What Is the Price of a Group ofFixed Assets? � 57
What Is the Accounting forImprovements to FixedAssets? � 58
How Is Interest Associated witha Fixed Asset Capitalized? � 59
What Is the Accounting for a FixedAsset Disposition? � 61
What Is the Accounting for an AssetRetirement Obligation? � 62
What Is the Accounting forDonated Assets? � 64
What Is the Accounting forConstruction in Progress? � 65
What Is the Accounting for Land? � 66What Is the Accounting for Leasehold
Improvements? � 66
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How Is an Asset’s Depreciation BasisCalculated? � 66
What Are the General DepreciationConcepts? � 67
How Is Straight-Line DepreciationCalculated? � 68
How Is Double-Declining BalanceDepreciation Calculated? � 68
How Is Sum-of-the-Years’ DigitsDepreciation Calculated? � 69
How Is Units-of-ProductionDepreciation Calculated? � 70
What Is the Accounting forAsset Impairment? � 71
What Is the Accounting forIntangible Assets? � 72
Five Debt Accounting 75
When Is Debt Categorized asShort-Term or Long-Term? � 75
How Are Bonds Sold at a Discountor Premiu1m Recorded? � 76
What Is the EffectiveInterest Method? � 77
How Is Debt Issued with No StatedInterest Rate Recorded? � 79
How Are Debt Issuance CostsRecorded? � 79
How Is a Debt Issuance withAttached Rights Recorded? � 80
How Is a Debt Issuance forProperty Recorded? � 81
How Is a Debt ExtinguishmentRecorded? � 82
How Is a Temporary or PermanentBond Default Recorded? � 83
How Is a Restructured BondObligation Recorded? � 83
How Is an Asset Transfer to EliminateDebt Recorded? � 83
How Is Convertible DebtRecorded? � 84
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How Is Debt Issued with StockWarrants Recorded? � 86
Six Stockholders' Equity 87
What Is Par Value? � 87How Is Stock Valued that Is Issued
for Property or Services? � 87What Are the Characteristics of
Preferred Stock? � 88What Is Convertible Preferred
Stock? � 88What Is a Stock Split? � 89What Is a Stock Subscription? � 90What Is Retained Earnings? � 91What Is a Stock Warrant? � 92What Are the Key Dates
Associated with Dividends? � 93What Is a Property Dividend? � 93What Is a Stock Dividend? � 94What Is a Liquidating
Dividend? � 95What Is Treasury Stock? � 96What Is the Constructive
Retirement Method? � 97What Is a Stock Option? � 97How Is a Stock Option Recorded
under the Intrinsic ValueMethod? � 97
How Is a Stock Option Recordedunder the Fair Value Method? � 99
How Do Option Expirations ImpactCompensation Expense? � 100
What Happens When an OptionExpires? � 101
What Happens if the CompanyBuys Options from the OptionHolder? � 101
How Is the Option Vesting PeriodRecognized? � 101
What Are Stock AppreciationRights? � 103
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How Do I Account for StockAppreciation Rights? � 103
How Does an Employee StockOwnership Plan Work? � 104
Seven Lease Accounting 107
What Is the Accounting foran Operating Lease by theLessee? � 107
What Is the Accounting for aCapital Lease by theLessee? � 108
How Does the Lessor Accountfor an Operating Lease? � 111
How Does the Lessor Accountfor a Sales-Type Lease? � 111
How Does the Lessor Account fora Direct Financing Lease? � 114
What Is the Accounting for aLease Termination? � 118
What Is the Accounting for a LeaseExtension by the Lessee? � 118
What Is the Accounting for a LeaseExtension by the Lessor? � 119
What Is the Accounting for aSublease? � 119
What Is the Accounting for a Sale-Leaseback Transaction? � 119
Eight Foreign Currency Accounting 121
What Is the Goal of ForeignCurrency Accounting? � 121
How Does the Current RateMethod Convert ForeignCurrency Transactions intoU.S. Dollars? � 121
How Does the RemeasurementMethod Convert ForeignCurrency Transactions intoU.S. Dollars? � 124
What Conversion Method Is Usedfor Occasional ForeignCurrency Transactions? � 126
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How Do I Decide Which ConversionMethod to Use? � 127
What Is the Accounting for ForeignCurrency TranslationAdjustments? � 127
What Exchange Rates Are Usedfor Conversion Calculations? � 128
How Is Foreign ExchangeHandled in IntercompanyTransactions? � 129
PART II ACCOUNTINGMANAGEMENT 131
Nine Closing the Books 133
What Types of Closes Are There? � 133What Problems Contribute to a
Delayed Close? � 133How Does Activity Acceleration
Improve the Close? � 134How Do Reporting Changes
Improve the Close? � 135How Can Journal Entry
Optimization Improve theClose? � 136
How Can I Improve theInventory Close? � 136
How Can I Improve thePayroll Close? � 137
How Can I Improve thePayables Close? � 137
What is Included in a ClosingChecklist? � 138
What Extra Closing StepsAre Needed by a PublicCompany? � 139
Ten Cash Management 141
What Types of Float Are Associatedwith a Check Payment? � 141
What Is Value Dating? � 143What Is a Lockbox? � 143What Is Remote Deposit
Capture? � 143
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Why Is Cash ConcentrationUseful? � 144
What Strategies Are Availablefor Cash Concentration? � 144
What Is Physical Sweeping? � 145When Do Sweeps Occur? � 146When Are Intercompany Loans
Linked to Cash Sweeps? � 147What Is Notional Pooling? � 147What Is a Bank Overlay
Structure? � 148What Short-Term Investment
Options Are Available? � 148What Investment Strategies
Are Used for Short-TermInvestments? � 150
Eleven Receivables Management 153
How Do I Create and Maintaina Credit Policy? � 153
How Do I Obtain FinancialInformation AboutCustomers? � 154
How Does a Credit-GrantingSystemWork? � 155
What Payment Terms ShouldI Offer to Customers? � 156
When Should I Review CustomerCredit Levels? � 157
How Can I Adjust the InvoiceContent and Layout toImprove Collections? � 157
How Can I Adjust Billing Deliveryto Improve Collections? � 158
Should I Offer Early PaymentDiscounts? � 159
How Do I Optimize CustomerContacts? � 159
How Do I Manage CollectionInformation? � 160
How Do I Handle PaymentDeductions? � 161
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How Do I Collect OverduePayments? � 162
When Should I Take Legal Action toCollect from a Customer? � 164
Twelve Inventory Management 165
How Do I Increase the Accuracyof Inventory Records? � 165
How Do I Reduce the Number ofStock-Keeping Units inInventory? � 168
How Do I Reduce InventoryPurchases? � 169
How Do I Compress InventoryStorage Space? � 170
How Do I Avoid Inventory Losses onShort Shelf Life Items? � 171
How Do I Improve PickingEfficiency? � 171
How Do I Store Inventory toReduce Picking Travel? � 173
How Do I Reduce InventoryScrap? � 173
How Do I Identify ObsoleteInventory? � 174
How Do I Sell ObsoleteInventory? � 176
Thirteen Debt Management 177
What Is Commercial Paper? � 177What Is Factoring? � 177What Is Accounts Receivable
Financing? � 178What Is Field Warehouse
Financing? � 178What Is Floor Planning? � 179What Is an Operating Lease? � 179What Is a Capital Lease? � 180What Is a Line of Credit? � 180What Is a Bond? � 180What Types of Bonds Can
Be Issued? � 181
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What Is a Bridge Loan? � 182What Is Receivables
Securitization? � 182What Is a Sale and Leaseback
Arrangement? � 183How Does One Interact with Credit
Rating Agencies? � 184How Do the Credit Rating
Agency Scores Compareto Each Other? � 185
Forteen Equity Registration 187
What Methods Are Used toRegister Stock for Sale? � 187
What Are the Contents of aForm S-1? � 187
When Is a Form S-3 Used? � 189When Is a Form S-8 Used? � 190What Is a Shelf Registration? � 191Why Must a Registration Statement
Be Declared Effective? � 192When Can the Regulation
A Exemption Be Used? � 192What Are the Advantages of Using
a Regulation A Exemption? � 193What Is the Process for Using the
Regulation A Exemption? � 193What Are the Restrictions on
Using the RegulationD Exemption? � 194
When Can Rule 144 be Usedto Register Stock? � 195
PART III FINANCIAL ANALYSIS 197
Fifteen Financial Analysis 199
How Do I Calculate theBreakeven Point? � 199
What Is the Impact of Fixed Costson the Breakeven Point? � 200
What Is the Impact of VariableCost Changes on the BreakevenPoint? � 201
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How Do Pricing Changes Alterthe Breakeven Point? � 202
How Can the Product Mix AlterProfitability? � 203
How Do I Calculate PriceVariances? � 204
How Do I Calculate EfficiencyVariances? � 206
How Do I Conduct a ProfitabilityAnalysis for Services? � 207
How Are Profits Affected by theNumber of Days in a Month? � 210
Which Research and DevelopmentProjects Should be Funded? � 211
How Do I Create a ThroughputAnalysis Model? � 213
How Do I Determine if MoreVolume at a Lower PriceCreates More Profit? � 216
Should I Outsource Production? � 218Should I Add Staff to the Bottleneck
Operation? � 220Should I Produce a New Product? � 222
Sixteen Pricing Analysis 227
What Is the Lowest Price that IShould Accept? � 227
How Do I Set Long-Range Prices? � 229How Should I Set Prices over the
Life of a Product? � 231How Should I Set Prices against
a Price Leader? � 232How Do I Handle a Price War? � 233How Do I Handle Dumping by
a Foreign Competitor? � 234When Is Transfer Pricing
Important? � 235How Do Transfer Prices Alter
Corporate Decision Making? � 235How Does the External Market
Price Work as a Transfer PricingMethod? � 236
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How Does Adjusted Market PricingWork as a Transfer PricingMethod? � 237
How Do Negotiated Transfer PricesWork as a Transfer PricingMethod? � 238
How Does the Contribution MarginWork as a Transfer PricingMethod? � 239
How Does the Cost-Plus MethodWork as a Transfer PricingMethod? � 240
How Do the Transfer PricingMethods Compare toEach Other? � 242
Seventeen Cost Reduction Analysis 243
What Reports Are Used for CostReduction Projects? � 243
What Is Spend Analysis? � 244How Is the Spend Database
Constructed? � 247How Does Supplier Consolidation
Work? � 248How Does Parts Consolidation
Work? � 250Can Spend Analysis Work for
MRO Items? � 250What Is Spend Compliance? � 251Which Reports Should Be Used
for Spend Analysis? � 252What Is the Analysis for a
Workforce Reduction? � 255What Is the Cost of a Workforce
Reduction? � 260What Are the Alternatives to a
Workforce Reduction? � 261How Does 5S Analysis Reduce
Costs? � 262How Are Check Sheets Used? � 263How Is Error Quantification
Used? � 265
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How Is Fixed Cost AnalysisUsed? � 265
How Are Ishikawa DiagramsUsed? � 266
How Is Value StreamMappingUsed? � 266
What Is Waste Analysis? � 268
Eighteen Metrics 271
How Do I Calculate AccountsPayable Turnover? � 271
How Do I Calculate AccountsReceivable Turnover? � 272
How Do I Calculate theAverage ReceivableCollection Period? � 273
How Do I Calculate the Cash-to-Working-Capital Ratio? � 275
How Do I Calculate the CoreGrowth Rate? � 276
How Do I Calculate the Cost ofCapital? � 277
How Do I Calculate the CurrentRatio? � 280
How Do I Calculate CustomerTurnover? � 281
How Do I Calculate the DebtCoverage Ratio? � 283
How Do I Calculate the Debt-to-Equity Ratio? � 284
How Do I Calculate the DividendPayout Ratio? � 285
How Do I Calculate EconomicValue Added? � 286
How Do I Calculate ExpenseCoverage Days? � 289
How Do I Calculate Fixed ChargeCoverage? � 290
How Do I Calculate InventoryAccuracy? � 292
How Do I Calculate InventoryTurnover? � 294
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How Do I Calculate the Marginof Safety? � 296
How Do I Calculate Net Worth? � 297How Do I Calculate the Price/
Earnings Ratio? � 299How Do I Calculate the
Quick Ratio? � 300How Do I Calculate Times
Interest Earned? � 301How Do I Calculate Working
Capital Productivity? � 303
PART IV CONTROL SYSTEMS 305
Nineteen Budgeting 307
Why Is Budgeting Important? � 307How Do the Various Budgets
Fit Together? � 307How Is the Revenue Budget
Constructed? � 310How Are the Production
and Inventory BudgetsConstructed? � 312
How Is the Purchasing BudgetConstructed? � 314
How Is the Direct Labor BudgetConstructed? � 314
How Is the Overhead BudgetConstructed? � 318
How Is the Cost of Goods SoldBudget Constructed? � 318
How Is the Sales DepartmentBudget Constructed? � 323
How Is the Marketing BudgetConstructed? � 323
How Is the General andAdministrative BudgetConstructed? � 326
How Is the Staffing BudgetConstructed? � 326
How Is the Facilities BudgetConstructed? � 326
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How Is the Research DepartmentBudget Constructed? � 332
How Is the Capital BudgetConstructed? � 332
How Are the Budgeted FinancialStatements Constructed? � 336
How Is the Financing BudgetConstructed? � 336
What Is a Flex Budget? � 340
Twenty Capital Budgeting 341
What Is Capital Budgeting? � 341What Are the Problems with Capital
Budgeting Analysis? � 341Why Focus on Bottleneck
Investments? � 342When Should I Invest in a
Bottleneck Operation? � 343What Capital Budgeting Application
Form Should I Use? � 344Should I Invest in Upstream
Workstations? � 345Should I Invest in Downstream
Workstations? � 346Should I Lease an Asset or
Buy It? � 347What Is Net Present Value? � 349What Cash Flows Are Included
in a Net Present ValueCalculation? � 350
What Is Investment Payback? � 351
Twenty-One Control Systems 355
What Are the Controls for aComputerized AccountsPayable System? � 355
What Are the Controls forProcurement Cards? � 357
What Are the Controls for OrderEntry, Credit, and Shipping? � 359
What Are the Controls for Drop-Shipped Orders? � 361
Contents xxi
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What Are the Controls for aPerpetual InventoryTracking System? � 362
What Are the Controls for Billing? � 364What Are the Controls for
Collections? � 367What Are the Controls for
Check Receipts? � 370What Are the Controls for
Investments? � 372What Are the Controls for
Payroll? � 374
PART V PUBLIC COMPANYACCOUNTING 379
Twenty-Two SEC Filings 381
What Is the Form 8-K? � 381What Information Is
Included in the Annual andQuarterly Reports? � 388
When Must Annual and QuarterlyReports be Filed? � 391
What Is the Form S-1? � 391What Is the Form S-3? � 393What Is the Form S-8? � 394What Forms Require a Payment
to the SEC? � 394How Do I Make a Fedwire
Payment? � 395
Twenty-Three Public Company Accounting Topics 397
When Is Interim ReportingRequired? � 397
What Is the Integral View ofInterim Reporting? � 397
What Is the Discrete View ofInterim Reporting? � 398
How Are Changes in AccountingPrinciple and EstimateAccounted for in InterimPeriods? � 398
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When Is Segment InformationRequired? � 398
How Are Reportable SegmentsDetermined? � 399
How Is Basic Earnings per ShareCalculated? � 401
How Is Diluted Earnings per ShareCalculated? � 403
What Methods Are Used forCalculating Diluted Earningsper Share? � 403
How Should Non-GAAPInformation Be Disclosed? � 404
Index 405
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PREFACE
This is a handy pocket problem solver for the controller.It covers the multitude of areas that a controller may ad-dress during the working day—accounting standards,management issues, financial analysis, controls, and evenhow to handle a variety of public company issues. It doesso with hundreds of concise explanations that are sup-ported by a multitude of examples, tables, charts, and ra-tios. The layout is designed for quick comprehension ofsuch questions as:
m Should I report revenue at gross or net?m What are the different types of marketable securities,
and how do I account for them?m How do I use the FIFO and LIFO inventory valua-
tion methods?m How do I account for bond discounts and premiums?m How do I record a treasury stock transaction?m When is a lease a capital lease?m How do I convert foreign currency transactions into
the home currency?m How do I achieve a fast close?m How do I set up cash sweeping or notional pooling?m How do I create a perpetual inventory system?m What exemptions are available for stock registrations?m How do I create a throughput analysis model?m How do I set long-range prices?m How do I create a spend analysis system?m Should I lease an asset or buy it?m What controls should I implement for the core
accounting systems?
Part I (Chapters 1–8) covers the most heavily usedGAAP accounting standards. These standards are segre-gated into the topics of revenue recognition, investments,inventory, fixed assets, debt, stockholders’ equity, leases,and foreign currency accounting. Numerous explanatoryexamples are intermingled with the text.
Part II (Chapters 9–14) addresses a number of manage-ment areas that a controller is likely to encounter. Theseinclude a discussion of the steps needed to close the
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books, the banking structures needed to marshal cash intothe proper investments, how to accelerate the collection ofreceivables, what can be done to minimize the investmentin inventory, what types of debt are available, and how toregister equity for sale.
Part III (Chapters 15–18) delves into a variety of finan-cial analysis topics, with a particular focus on bottleneckanalysis, how to set prices correctly, and how to reducecosts. Chapter 18 contains a number of the metrics that acontroller is most likely to need, along with helpfulexamples.
Part IV (Chapters 19–21) describes the primary controlsystems that a controller needs to ensure that transactionsare as error-free as possible. It also describes a comprehen-sive budgeting system and how to analyze capital budget-ing proposals so that only truly necessary assets areacquired.
Part V (Chapters 22–23) covers a number of the morecommon reports that must be filed periodically with theSEC as well as the accounting issues that are specific tothe public company: earnings per share, interim reporting,and segment reporting.
Throughout, The Vest Pocket Controller has been struc-tured to provide concise answers to the questions that acontroller is most likely to encounter during a typicalbusiness day. Keep it handy for easy reference and dailyuse.
xxvi Preface
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ABOUT THE AUTHOR
Steven Bragg, CPA, has been the chief financial officer orcontroller of four companies as well as a consulting man-ager at Ernst & Young and auditor at Deloitte & Touche.He received a master’s degree in finance from BentleyCollege, an MBA from Babson College, and a bachelor’sdegree in economics from the University of Maine. He hasbeen the two-time president of the Colorado MountainClub and is an avid alpine skier, mountain biker, and cer-tified master diver. Mr. Bragg resides in Centennial, Colo-rado. He has written the following books through JohnWiley & Sons except where indicated:
Accounting and Finance for Your Small BusinessAccounting Best PracticesAccounting Control Best PracticesAccounting Policies and Procedures ManualAdvanced Accounting Systems (Institute of Internal Auditors)Billing and Collections Best PracticesBusiness Ratios and FormulasThe Controller’s FunctionController’s Guide to CostingController’s Guide to Planning and Controlling OperationsController’s Guide: Roles and Responsibilities for the New
ControllerControllershipCost AccountingCost Reduction AnalysisEssentials of PayrollFast CloseFinancial AnalysisGAAP GuideGAAP Policies and Procedures ManualGAAS GuideInventory AccountingInventory Best PracticesInvestor RelationsJust-in-Time AccountingManagement Accounting Best PracticesManaging Explosive Corporate GrowthMergers and Acquisitions
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The New CFO Financial Leadership ManualOutsourcingPayroll AccountingPayroll Best PracticesRevenue RecognitionRun the Rockies (CMC Press)Running a Public CompanySales and Operations for Your Small BusinessThe Ultimate Accountants’ReferenceThe Vest Pocket ControllerThroughput AccountingTreasury Management
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