Advanced Financial Accounting
Advanced Financial Accounting is an accounting course that builds upon the
principles and concepts of Financial Accounting to explore more complex
accounting topics. It covers advanced topics such as business combinations,
consolidated financial statements, foreign currency transactions, partnerships,
and other specialized accounting topics.
Overview of some of the main topics covered in Advanced Financial Accounting:
Business Combinations: This topic covers mergers and acquisitions, where one company buys another
company or merges with it. Accounting for business combinations can be complex, and involves
recognizing and valuing assets and liabilities, recording goodwill, and determining the fair value of the
acquired assets and liabilities.
Consolidated Financial Statements: This topic covers the preparation of consolidated financial
statements, which combine the financial statements of a parent company and its subsidiaries.
Consolidated financial statements are required by accounting standards when a company has control
over another entity.
Foreign Currency Transactions: This topic covers accounting for transactions that occur in foreign
currencies. It involves the use of exchange rates to translate foreign currency transactions into the
functional currency of the reporting entity.
Partnerships: This topic covers the accounting for partnerships, including the allocation of profits and
losses, the admission and withdrawal of partners, and the preparation of partnership financial
statements.
Other specialized accounting topics: Advanced Financial Accounting may also cover other specialized
accounting topics such as accounting for pensions, leases, and financial instruments.
Overall, Advanced Financial Accounting is a complex and challenging course that requires a strong
understanding of financial accounting principles and a deep knowledge of specialized accounting topics.
Business Combinations:
Business combinations occur when one company acquires another company or merges with it.
Advanced Financial Accounting covers accounting for business combinations and the steps involved in
recognizing and valuing assets and liabilities, recording goodwill, and determining the fair value of the
acquired assets and liabilities. The accounting treatment for business combinations varies depending on
the level of control the acquiring company has over the acquired company. When the acquiring
company has control over the acquired company, the accounting treatment is called a "merger
accounting" or "acquisition accounting," while when the acquiring company has less than control over
the acquired company, the accounting treatment is called "investment accounting."
Consolidated Financial Statements:
Consolidated financial statements combine the financial statements of a parent company and its
subsidiaries into a single set of financial statements. Advanced Financial Accounting covers the
preparation of consolidated financial statements and the accounting standards and procedures required
for their preparation. It involves identifying and eliminating intercompany transactions and balances,
recognizing non-controlling interests, and accounting for goodwill arising from the acquisition of
subsidiaries.
Foreign Currency Transactions:
Foreign currency transactions occur when a company engages in transactions denominated in a foreign
currency. Advanced Financial Accounting covers the accounting treatment for foreign currency
transactions, including the use of exchange rates to translate foreign currency transactions into the
functional currency of the reporting entity. It involves recognizing gains and losses from foreign currency
transactions, and accounting for forward contracts and options used to hedge against foreign currency
risk.
Partnerships:
Partnerships are formed when two or more individuals or entities come together to carry on a business.
Advanced Financial Accounting covers the accounting treatment for partnerships, including the
allocation of profits and losses, the admission and withdrawal of partners, and the preparation of
partnership financial statements. It involves accounting for partner capital accounts, partnership
income, and tax allocations.
Other specialized accounting topics:
Advanced Financial Accounting may also cover other specialized accounting topics such as accounting
for pensions, leases, and financial instruments. These topics require an understanding of the accounting
standards and procedures specific to each topic, and can be complex and challenging to master. For
example, accounting for pensions involves recognizing and measuring pension liabilities and assets,
accounting for contributions, and recognizing actuarial gains and losses. Similarly, accounting for leases
involves identifying lease arrangements, determining the lease term, and accounting for lease payments
and assets and liabilities on the balance sheet. Finally, accounting for financial instruments involves
recognizing and measuring financial assets and liabilities, accounting for interest and dividends, and
recognizing gains and losses from fair value changes.