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 DEDICATION TO
Our wives, Donna, Enid, and
Mary, for their love, support,
and encouragement

DIRECTOR Michael McDonald

ACQUISITIONS EDITOR Veronica Visentin
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10 9 8 7 6 5 4 3 2 1
Contents
CHAPTER 1 Financial Reporting and Accounting Standards
CHAPTER 2 Conceptual Framework for Financial Reporting
CHAPTER 3 The Accounting Information System
CHAPTER 4 Income Statement and Related Information
CHAPTER 5 Statement of Financial Position and Statement of Cash Flows
CHAPTER 6 Accounting and the Time Value of Money
CHAPTER 7 Cash and Receivables
CHAPTER 8 Valuation of Inventories: A Cost-Basis Approach
CHAPTER 9 Inventories: Additional Valuation Issues
CHAPTER 10 Acquisition and Disposition of Property, Plant, and Equipment
CHAPTER 11 Depreciation, Impairments, and Depletion
CHAPTER 12 Intangible Assets
CHAPTER 13 Current Liabilities, Provisions, and Contingencies
CHAPTER 14 Non-Current Liabilities
CHAPTER 15 Equity
CHAPTER 16 Dilutive Securities and Earnings per Share
CHAPTER 17 Investments
CHAPTER 18 Revenue Recognition
CHAPTER 19 Accounting for Income Taxes
CHAPTER 20 Accounting for Pensions and Postretirement Benefits
CHAPTER 21 Accounting for Leases
CHAPTER 22 Accounting Changes and Error Analysis
CHAPTER 23 Statement of Cash Flows
CHAPTER 24 Presentation and Disclosure in Financial Reporting
Appendix A Specimen Financial Statements: Marks and Spencer Group plc
Appendix B Specimen Financial Statements: adidas AG
Appendix C Specimen Financial Statements: Puma Group
Index
EULA
From the Authors

Globalization is occurring rapidly. As economic and other interactions increase among

countries, capital markets must provide high-quality financial information. A need therefore
exists for high-quality financial reporting standards that meet this objective. Fortunately,
International Financial Reporting Standards (IFRS) has broad international acceptance,
being used in some form by more than 115 countries around the world. One securities regulator
noted that IFRS is best positioned to serve as the single set of high-quality accounting
standards.

Change Is the Only Constant

Most countries want rapid action related to the acceptance of IFRS. A number of countries have
already switched from their own version of accounting standards to IFRS. Students and
instructors need educational materials related to IFRS in order to meet this new challenge. Our
objective in revising Intermediate Accounting, IFRS Edition, was therefore to continue to provide
the tools needed to understand what IFRS is and how it is applied in practice. The emphasis on
fair value, the proper accounting for financial instruments, and the new developments related to
leasing, revenue recognition, and financial statement presentation are examined in light of
current practice. In addition, given the rapid changes taking place, we provide and discuss the
new Conceptual Framework to understand how these issues will likely be resolved in the future.
“If this textbook helps you appreciate the challenges, worth, and limitations of financial
reporting, if it encourages you to evaluate critically and understand financial accounting
concepts and practice, and if it prepares you for advanced study, professional
examinations, and the successful and ethical pursuit of your career in accounting or
business in a global economy, then we will have attained our objectives.”

A Look at Global Accounting

While IFRS has achieved broad acceptance, not all countries have adopted it. For example,
U.S. companies still follow U.S. generally accepted accounting principles (U.S. GAAP) in
preparing their financial statements. In fact, the differences between IFRS and U.S. GAAP may
provide certain companies with a competitive advantage, so understanding these differences
may be important in analyzing company performance. In addition, the IASB and the FASB are
working together to converge their standards as appropriate. Accordingly, we have included a
Global Accounting Insights section at the end of selected chapters, to highlight the important
differences that remain between IFRS and U.S. GAAP, as well as the ongoing joint convergence
efforts to resolve them. As a result, students truly gain a global accounting education by
studying this textbook.

Intermediate Accounting Works

Intermediate Accounting, Sixteenth Edition (based on U.S. GAAP) is the market-leading

textbook in providing the tools needed to understand what U.S. GAAP is and how it is applied in
practice. With this IFRS Third Edition, we strive to continue to provide the material needed to
understand this subject area using IFRS. The book is comprehensive and up-to-date, and
provides the instructor with flexibility in the topics to cover. We also include proven pedagogical
tools, designed to help students learn more effectively and to answer the changing needs of this
course.
We are excited about Intermediate Accounting, IFRS Third Edition. We believe it meets an
important objective of providing useful information to educators and students interested in
learning about IFRS. Suggestions and comments from users of this textbook will be
appreciated. Please feel free to e-mail any one of us at AccountingAuthors@yahoo.com.
Donald E. Kieso
Somonauk, Illinois

Jerry J. Weygandt
Madison, Wisconsin

Terry D. Warfield
Madison, Wisconsin

Author Commitment

DON KIESO Donald E. Kieso, PhD, CPA, received his bachelor's degree from Aurora University
and his doctorate in accounting from the University of Illinois. He has served as chairman of the
Department of Accountancy and is currently the KPMG Emeritus Professor of Accountancy at
Northern Illinois University. He has public accounting experience with Price Waterhouse & Co.
(San Francisco and Chicago) and Arthur Andersen & Co. (Chicago) and research experience
with the Research Division of the American Institute of Certified Public Accountants (New York).
He has done post-doctorate work as a Visiting Scholar at the University of California at Berkeley
and is a recipient of NIU's Teaching Excellence Award and four Golden Apple Teaching Awards.
Professor Kieso is the author of other accounting and business books and is a member of the
American Accounting Association, the American Institute of Certified Public Accountants, and
the Illinois CPA Society. He has served as a member of the Board of Directors of the Illinois
CPA Society, then AACSB's Accounting Accreditation Committees, the State of Illinois
Comptroller's Commission, as Secretary-Treasurer of the Federation of Schools of
Accountancy, and as Secretary-Treasurer of the American Accounting Association. Professor
Kieso is currently serving on the Board of Trustees and Executive Committee of Aurora
University, as a member of the Board of Directors of Kishwaukee Community Hospital, and as
Treasurer and Director of Valley West Community Hospital. From 1989 to 1993, he served as a
charter member of the National Accounting Education Change Commission. He is the recipient
of the Outstanding Accounting Educator Award from the Illinois CPA Society, the FSA's Joseph
A. Silvoso Award of Merit, the NIU Foundation's Humanitarian Award for Service to Higher
Education, a Distinguished Service Award from the Illinois CPA Society, and in 2003 an
honorary doctorate from Aurora University.
JERRY WEYGANDT Jerry J. Weygandt, PhD, CPA, is Arthur Andersen Alumni Emeritus
Professor of Accounting at the University of Wisconsin—Madison. He holds a Ph.D. in
accounting from the University of Illinois. Articles by Professor Weygandt have appeared in The
Accounting Review, Journal of Accounting Research, Accounting Horizons, Journal of
Accountancy, and other academic and professional journals. These articles have examined
such financial reporting issues as accounting for price-level adjustments, pensions, convertible
securities, stock option contracts, and interim reports. Professor Weygandt is author of other
accounting and financial reporting books and is a member of the American Accounting
Association, the American Institute of Certified Public Accountants, and the Wisconsin Society
of Certified Public Accountants. He has served on numerous committees of the American
Accounting Association and as a member of the editorial board of the Accounting Review; he
also has served as President and Secretary-Treasurer of the American Accounting Association.
In addition, he has been actively involved with the American Institute of Certified Public
Accountants and has been a member of the Accounting Standards Executive Committee
(AcSEC) of that organization. He has served on the FASB task force that examined the
reporting issues related to accounting for income taxes and served as a trustee of the Financial
Accounting Foundation. Professor Weygandt has received the Chancellor's Award for
Excellence in Teaching and the Beta Gamma Sigma Dean's Teaching Award. He is on the
board of directors of M & I Bank of Southern Wisconsin. He is the recipient of the Wisconsin
Institute of CPA's Outstanding Educator's Award and the Lifetime Achievement Award. In 2001,
he received the American Accounting Association's Outstanding Educator Award.

TERRY WARFIELD Terry D. Warfield, PhD, is the PwC Professor in Accounting at the
University of Wisconsin—Madison. He received a B.S. and M.B.A. from Indiana University and
a Ph.D. in accounting from the University of Iowa. Professor Warfield's area of expertise is
financial reporting, and prior to his academic career, he worked for five years in the banking
industry. He served as the Academic Accounting Fellow in the Office of the Chief Accountant at
the U.S. Securities and Exchange Commission in Washington, D.C. from 1995–1996. Professor
Warfield's primary research interests concern financial accounting standards and disclosure
policies. He has published scholarly articles in The Accounting Review, Journal of Accounting
and Economics, Research in Accounting Regulation, and Accounting Horizons, and he has
served on the editorial boards of The Accounting Review, Accounting Horizons, and Issues in
Accounting Education. He has served as president of the Financial Accounting and Reporting
Section, the Financial Accounting Standards Committee of the American Accounting
Association (Chair 1995–1996), and on the AAA-FASB Research Conference Committee. He
also served on the Financial Accounting Standards Advisory Council of the Financial
Accounting Standards Board, and he currently serves as a trustee of the Financial Accounting
Foundation. Professor Warfield has received teaching awards at both the University of Iowa and
the University of Wisconsin, and he was named to the Teaching Academy at the University of
Wisconsin in 1995. Professor Warfield has developed and published several case studies based
on his research for use in accounting classes. These cases have been selected for the AICPA
Professor-Practitioner Case Development Program and have been published in Issues in
Accounting Education.

What's New?

This IFRS Third Edition expands our emphasis on student learning and improves upon a
teaching and learning package that instructors and students have rated the highest in customer
satisfaction. Based on extensive reviews, focus groups, and interactions with other intermediate
accounting instructors and students, we have developed a number of new pedagogical features
and content changes, designed both to help students learn more effectively and to answer the
changing needs of the course.

Wiley Engage

Wiley Engage for Intermediate Accounting: IFRS Third Edition is an innovative, dynamic online
environment—designed to help you administer your course in a personalized way. Utilizing
Wiley Engage in your course provides you with the following tools and resources to create and
manage effective activities and assessment strategies:
Complete online version of the textbook for seamless integration of all content. This content
can be fully customized, curated, or rearranged to better support your course, and local
content can be easily added, including your own assessment questions.
Review and Practice questions and solutions provide new practice opportunities and
 solutions that are integrated throughout.
Solution Walkthrough Videos provide step-by-step guidance for relevant homework
problems and solutions to review important concepts.
Additional relevant student study tools and learning resources ensure positive learning
outcomes.
Please contact your Wiley representative for details about these and other resources, or visit
our website at www.wiley.com.

Review and Practice and Solutions

New practice opportunities with solutions are integrated throughout the textbook and the Wiley
Engage course. Each textbook chapter now provides students with a Review and Practice
section that includes learning objective summaries, a key term listing, and a practice problem
with solution.

Streamlined Learning Objectives and Design

Each chapter now offers a more focused approach within each chapter and a design that
improves compatibility across all media.

Authoritative Literature References

Now placed near the end of each chapter, the Authoritative Literature References include a full
citation as well as a practice Research Case.

Major Content Revisions

In response to the changing environment, we have significantly revised several chapters.

Chapter 2 Conceptual Framework for Financial Reporting

Amendments to current IASB Conceptual Framework are expected later in 2017, so a

revised chapter will likely be available early in 2018 (new Evolving Issue discusses the
IASB's exposure draft on its Conceptual Framework).
Chapter 5 Balance Sheet and Statement of Cash Flows

Opening story reflects update on IASB financial statement project.

New discussion of IBM's financial flexibility within the ‘What Do the Numbers Mean?’ box on
the importance of cash flow information for investors.
Chapter 7 Cash and Receivables

Thoroughly updated discussion of recognition and valuation of accounts receivable, per

latest IASB standards, including deleting percentage-of-sales approach.
Chapter 8 Valuation of Inventories: A Cost-Basis Approach

Updated discussion on ownership of goods and costs to include in inventory, per recent
IASB standard on revenue.
Chapter 13 Current Liabilities and Contingencies

New examples and updated discussion of warranties and consideration payable, per latest
IASB standard on revenue.
 Chapter 17 Investments

Discussion updated throughout to reflect IFRS 9 ruling for accounting for investments,
including the Fair Value Hedge section in Appendix 17A.
Chapter 18 Revenue Recognition

Right of Return section completely rewritten as Sales Returns and Allowances, with more
explanations and examples, per new IASB standard.
Chapter 21 Accounting for Leases

Entire chapter substantially revised per latest standard.

See the following for a complete list of content revisions by chapter.

Content Changes by Chapter

Chapter 1 Financial Accounting and Accounting Standards

• Updated discussion on convergence efforts between IFRS and U.S. GAAP.

• New “What Do the Numbers Mean?” (WDNM) box on how each country's culture and customs
impact convergence efforts.
Chapter 2 Conceptual Framework for Financial Reporting

• Amendments to current IASB Conceptual Framework are expected later in 2017, so a revised
chapter will likely be available early in 2018 (new Evolving Issue discusses the IASB's exposure
draft on its Conceptual Framework).
• New WDNM box on how the use of unconventional financial terms in statements can mislead
investors.
Chapter 3 The Accounting Information System

• Updated discussion to reflect IFRS on revenue recognition.

• New section on the chart of accounts, as well as increased explanation and graphics of the
recording process.
Chapter 5 Balance Sheet and Statement of Cash Flows

• Revised opening story to reflect the update on IASB financial statement project.
• New discussion of IBM's financial flexibility within WDNM box on the importance of cash flow
information for investors.
Chapter 6 Accounting and the Time Value of Money

• Changed interest rates on many of the in-chapter examples to reflect more realistic data.
• Deleted outdated WDNM boxes
Chapter 7 Cash and Receivables

• Updated WDNM box on where companies park their cash

• Thoroughly updated discussion of recognition and valuation of accounts receivable, per latest IASB
standards, including deleting percentage-of-sales approach.
• Deleted Appendix , Impairments of Receivables.
Chapter 8 Valuation of Inventories: A Cost-Basis Approach

• Updated discussion on ownership of goods and costs to include in inventory, per recent IASB
standard.
 • Inventory errors discussion moved to the end of chapter, for improved flow of discussion.
• New WDNM box on operating on lean inventory levels.
Chapter 10 Acquisition and Disposition of Property, Plant, and Equipment

• Updated opening story on importance and capital expenditures (capex) of property, plant, and
equipment to many companies.
Chapter 11 Depreciation, Impairments, and Depletion

• Updated opening story on technical and environmental issues affecting recognition of impaired
assets.
Chapter 12 Intangible Assets

• New WDNM boxes on how companies protect their intangible assets and the many patent battles
between companies.
• Moved up the “Presentation of Intangible Assets” section within chapter for improved flow of topics.
Chapter 13 Current Liabilities and Contingencies

• New examples and updated discussion of warranties and consideration payable, per latest IASB
standard on revenue.
• New WDNM box, on how an increasing liability such as unearned revenues can sometimes provide
a positive signal about a company's sales and profitability.
Chapter 14 Non-Current Liabilities

• Deleted outdated WDNM box on correlations between bond and equity markets.
Chapter 15 Equity

• Moved up discussion of preference shares for improved flow of discussion.

• Updated WDNM box for the recent trends on dividend payouts
Chapter 16 Dilutive Securities and Earnings per Share

• Updated opening story, on increased use of restricted shares versus share options.
• Revised WDNM box on convertible bonds, to include most recent information and trends.
• Updated discussion and added illustration on share-based compensation plans.
Chapter 17 Investments

• Discussion updated throughout to reflect the updated IFRS 9 for accounting for investments,
including the Fair Value Hedge section in Appendix 17A.
• New WDNM boxes on (1) how mutual funds assign a current value to private technology
companies, (2) concerns over accounting rules that delay recognition of losses, and (3) the
expanding global derivatives market.
Chapter 18 Revenue Recognition

• New section on extended example of the basic five-step revenue recognition model, to give
students a better understanding/overview before more advanced issues are discussed.
• Right of Return section completely rewritten as Sales Returns and Allowances, with more
explanations and examples, per new IASB standard.
• End of chapter material includes many new Brief Exercises, Exercises, and Problems, to reflect
new IASB standard and terminology.
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Chapter 19 Accounting for Income Taxes

• New section and illustrations on financial statement effects of future taxable amounts and deferred
taxes.
• Completely revised the Financial Statement Presentation section, including new material on note
disclosure.
Chapter 20 Accounting for Pensions and Postretirement Benefits

• Updated the WDNM boxes on defined contribution plans and overall financial health of pension
plans for most recent information.
Chapter 21 Accounting for Leases

• Entire chapter substantially revised per latest standard.

Chapter 22 Accounting Changes and Error Analysis

• New WDNM box on whether changes for accounting estimates are motivated by attempt to provide
more useful information or to make financial results look better.
• Motivations for Change of Accounting Method section now a WDNM box.
Chapter 23 Statement of Cash Flows

• Updated Evolving Issue box, for most recent research on decision-usefulness of direct versus
indirect methods for preparing the statement of cash flows.
• Expanded footnote on reporting of significant non-cash transactions as they can significantly affect
analysts' assessments of capital expenditures and free cash flow.
Chapter 24 Full Disclosure in Financial Reporting

• Updated opening story on most recent IASB actions regarding financial disclosure.
• New Evolving Issue box on pros and cons of short-term interim reporting.
 Key Learning Features
This edition continues to provide numerous key learning aids to help you master the textbook
material and prepare you for a successful career.
Chapter Preview
The Chapter Preview summarizes the major issues discussed in the chapter, and provides
students with a visual outline of the key topics.

Underlying Concepts
The Underlying Concepts highlight and explain major conceptual topics throughout chapter.

What Do the Numbers Mean?

The “What Do the Numbers Mean?” boxes further students' understanding of key concepts with
practical, real-world examples.
Evolving issue

The Evolving Issue feature introduces and discusses a current topic in the accounting industry in
which the profession may be encountering controversy or nearing resolution. The feature shows
how the key standardsetting organizations make decisions to adjust to the changing global
business environment.

Review and Practice

NEW Review and Practice section includes Key Terms Review, Learning Objectives Review, and
a Practice Problem with Solution. In addition, multiple-choice questions with solutions, review
exercises with solutions, and a full glossary of all key terms are available online.
Using Your Judgment

The Using Your Judgment section provides students with real-world homework problems covering
topics such as financial reporting and financial statement analysis.

Bridge to the Profession

NEW to this edition, this section now includes Authoritative Literature References and a Research
Case, all designed to refer students to the relevant IASB literature for key concepts in the textbook
and provide assessment of their understanding.

Global Accounting Insights

Global Accounting Insights offer students a detailed discussion and assessment material of U.S.
accounting standards (U.S. GAAP) at the end of each chapter.
Contents
1. Cover
2. Title Page
3. Dedication
4. Copyright page
5. Brief Contents
6. From the Authors
7. Author Commitment
8. What's New?
9. Content Changes by Chapter
10. Key Learning Features
11. Contents
12. Acknowledgments
13. Chapter 1 Financial Reporting and Accounting Standards
1. Global Markets
2. Objective of Financial Reporting
3. Standard-Setting Organizations
4. Financial Reporting Challenges
5. Global Accounting Insights
6. Notes
14. Chapter 2 Conceptual Framework for Financial Reporting
1. Conceptual Framework
2. Fundamental Concepts
3. Assumptions
4. Measurement, Recognition, and Disclosure Concepts
5. Global Accounting Insights
6. Notes
15. Chapter 3 The Accounting Information System
1. Accounting Information System
2. Record and Summarize Basic Transactions
3. Identify and Prepare Adjusting Entries
4. Preparing Financial Statements
5. Financial Statements for a Merchandising Company
6. Appendix 3A Cash‐Basis Accounting versus Accrual‐Basis Accounting
7. Conversion from Cash Basis to Accrual Basis
8. Theoretical Weaknesses of the Cash Basis
9. Appendix 3B Using Reversing Entries
10. Illustration of Reversing Entries—Accruals
11. Illustration of Reversing Entries—Deferrals
12. Summary of Reversing Entries
13. Appendix 3C Using A Worksheet: The Accounting Cycle Revisited
14. Worksheet Columns
15. Preparing Financial Statements from a Worksheet
16. Global Accounting Insights
17. Notes
16. Chapter 4 Income Statement and Related Information
1. Income Statement
2. Content and Format of the Income Statement
3. Reporting Various Income Items
 4. Accounting Changes and Errors
5. Related Equity Statements
6. Global Accounting Insights
7. Notes
17. Chapter 5 Statement of Financial Position and Statement of Cash Flows
1. Statement of Financial Position
2. Preparation of the Statement of Financial Position
3. Statement of Cash Flows
4. Additional Information
5. Appendix 5A Ratio Analysis—A Reference
6. Using Ratios to Analyze Performance
7. Notes
18. Chapter 6 Accounting and the Time Value of Money
1. Basic Time Value Concepts
2. Single-Sum Problems
3. Annuities (Future Value)
4. Annuities (Present Value)
5. Other Time Value of Money Issues
6. Notes
19. Chapter 7 Cash and Receivables
1. Cash
2. Receivables
3. Valuation of Accounts Receivable
4. Notes Receivable
5. Other Issues Related to Receivables
6. Appendix 7A Cash Controls
7. Using Bank Accounts
8. The Imprest Petty Cash System
9. Physical Protection of Cash Balances
10. Reconciliation of Bank Balances
11. Global Accounting Insights
12. Notes
20. Chapter 8 Valuation of Inventories: A Cost-Basis Approach
1. Inventory Issues
2. Goods and Costs Included in Inventory
3. Which Cost Flow Assumption to Adopt?
4. Effect of Inventory Errors
5. Appendix 8A LIFO Cost Flow Assumption
6. Last-In, First-Out (LIFO)
7. Inventory Valuation Methods—Summary Analysis
8. Notes
21. Chapter 9 Inventories: Additional Valuation Issues
1. Lower-of-Cost-or-Net Realizable Value (LCNRV)
2. Valuation Bases
3. The Gross Profit Method of Estimating Inventory
4. Retail Inventory Method
5. Presentation and Analysis
6. Global Accounting Insights
7. Notes
22. Chapter 10 Acquisition and Disposition of Property, Plant, and Equipment
 1. Property, Plant, and Equipment
2. Interest Costs During Construction
3. Valuation of Property, Plant, and Equipment
4. Costs Subsequent to Acquisition
5. Disposition of Property, Plant, and Equipment
6. Notes
23. Chapter 11 Depreciation, Impairments, and Depletion
1. Depreciation—A Method of Cost Allocation
2. Other Depreciation Issues
3. Impairments
4. Depletion
5. Revaluations
6. Presentation and Analysis
7. Appendix 11A Revaluation of Property, Plant, and Equipment
8. Revaluation of Land
9. Revaluation of Depreciable Assets
10. Global Accounting Insights
11. Notes
24. Chapter 12 Intangible Assets
1. Intangible Asset Issues
2. Types of Intangible Assets
3. Impairment and Presentation of Intangible Assets
4. Research and Development Costs
5. Global Accounting Insights
6. Notes
25. Chapter 13 Current Liabilities, Provisions, and Contingencies
1. Current Liabilities
2. Provisions
3. Contingencies
4. Presentation and Analysis
5. Notes
26. Chapter 14 Non-Current Liabilities
1. Bonds Payable
2. Long-Term Notes Payable
3. Extinguishment of Non-Current Liabilities
4. Presentation and Analysis
5. Global Accounting Insights
6. Notes
27. Chapter 15 Equity
1. Corporate Capital
2. Reacquisition of Shares
3. Dividend Policy
4. Presentation and Analysis of Equity
5. Appendix 15A Dividend Preferences and Book Value per Share
6. Dividend Preferences
7. Book Value per Share
8. Global Accounting Insights
9. Notes
28. Chapter 16 Dilutive Securities and Earnings per Share
1. Dilutive Securities
 2. Share Warrants
3. Share Compensation Plans
4. Basic Earnings per Share
5. Diluted Earnings per Share
6. Appendix 16A Accounting for Share-Appreciation Rights
7. SARS—Share-Based Equity Awards
8. SARS—Share-Based Liability Awards
9. Share-Appreciation Rights Example
10. Appendix 16B Comprehensive Earnings per Share Example
11. Diluted Earnings Per Share
12. Global Accounting Insights
13. Notes
29. Chapter 17 Investments
1. Debt Investments
2. Equity Investments
3. Other Reporting Issues
4. Appendix 17A Accounting for Derivative Instruments
5. Defining Derivatives
6. Who Uses Derivatives, and Why?
7. Basic Principles in Accounting for Derivatives
8. Derivatives Used for Hedging
9. Other Reporting Issues
10. Comprehensive Hedge Accounting Example
11. Controversy and Concluding Remarks
12. Appendix 17B Fair Value Disclosures
13. Disclosure of Fair Value Information: Financial Instruments
14. Disclosure of Fair Values: Impaired Assets or Liabilities
15. Conclusion
16. Global Accounting Insights
17. Notes
30. Chapter 18 Revenue Recognition
1. Fundamentals of Revenue Recognition
2. The Five-Step Process Revisited
3. Accounting for Revenue Recognition Issues
4. Presentation and Disclosure
5. Appendix 18A Long-Term Construction Contracts
6. Revenue Recognition Over Time
7. Appendix 18B Revenue Recognition for Franchises
8. Franchise Accounting
9. Recognition of Franchise Rights Revenue over Time
10. Notes
31. Chapter 19 Accounting for Income Taxes
1. Fundamentals of Accounting for Income Taxes
2. Additional Issues
3. Accounting for Net Operating Losses
4. Financial Statement Presentation
5. Appendix 19A Comprehensive Example of Interperiod Tax Allocation
6. First Year—2018
7. Second Year—2019
8. Global Accounting Insights
 9. Notes
32. Chapter 20 Accounting for Pensions and Postretirement Benefits
1. Fundamentals of Pension Plan Accounting
2. Using a Pension Worksheet
3. Past Service Cost
4. Remeasurements
5. Reporting Pension Plans in Financial Statements
6. Global Accounting Insights
7. Notes
33. Chapter 21 Accounting for Leases
1. The Leasing Environment
2. Lessee Accounting
3. Lessor Accounting
4. Special Lease Accounting Problems
5. Appendix 21A Sale-Leasebacks
6. Accounting Issues in Sale-Leaseback Transactions
7. Sale-Leaseback Example
8. Appendix 21B Comprehensive Example
9. Lease Terms: Scenario 1
10. Lease Terms: Scenario 2
11. Global Accounting Insights
12. Notes
34. Chapter 22 Accounting Changes and Error Analysis
1. Accounting Changes
2. Changes in Accounting Estimates
3. Accounting Errors
4. Error Analysis
5. Global Accounting Insights
6. Notes
35. Chapter 23 Statement of Cash Flows
1. The Statement of Cash Flows
2. Preparing the Statement of Cash Flows
3. Special Problems in Statement Preparation
4. Use of a Worksheet
5. Global Accounting Insights
6. Notes
36. Chapter 24 Presentation and Disclosure in Financial Reporting
1. Full Disclosure Principle
2. Disclosure Issues
3. Auditor's and Management's Reports
4. Current Reporting Issues
5. Appendix 24A Basic Financial Statement Analysis
6. Perspective on Financial Statement Analysis
7. Ratio Analysis
8. Comparative Analysis
9. Percentage (Common-Size) Analysis
10. Appendix 24B First-Time Adoption of IFRS
11. General Guidelines
12. Implementation Steps
13. Summary
 14. Global Accounting Insights
15. Notes
37. Appendix A Specimen Financial Statements: Marks and Spencer Group plc
38. Appendix B Specimen Financial Statements: adidas AG
39. Appendix C Specimen Financial Statements: Puma Group
40. Name Index
41. Subject Index
42. EULA
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Acknowledgments
Third Edition Reviewers

Azlina Ahmad, Universiti Kebangsaan Malaysia

Wilfredo Baltazar, De La Salle University
Dennis Chan, Bunda Mulia University
Peng-Chia Chiu, The Chinese University of Hong Kong
Teresa Chu, University of Macau
Kaleed Jaarat, Middle East University
Edmund Keung, National University of Singapore
Kevin Li Chi Keung, The Open University of Hong Kong
Sudheer Kimar, Hurix.com
Paul Kimmel, University of Wisconsin—Milwaukee
Kurniawati, Bunda Mulia University
Raji Lakshmi, Pauls Engineering College, India
Jessica Lee, Hong Kong University of Science and Technology
Vincent Leung, Macao Polytechnic Institute
Tom Linsmeier, University of Wisconsin—Madison
Hsin-Tsai Liu, National Taiwan University
Daphne Main, Loyola University—New Orleans
Kingsley Olibe, Kansas State University
Can Ozturk, Cankaya University
Hannah Pantaran, Silliman University, Philippines
Fernando Penalva, IESE Business School
Nuchjaree Pichetkun, Rajamangala University of Technology, Thanyaburi
Nuraini Sari, Binus University
Dr. Charlie Sohn, University of Macau
Nai Hui Su (Suzanne), National Chung Hsing University
Sukarnen Suwanto, Indonesia
Professor Ting-Wong, National Chengchi University
Rita Yip, Lingnan University
Amy Zang, The Hong Kong University of Science and Technology
Stephen Zeff, Rice University
Ancillary Authors, Contributors, Proofers, and Accuracy Checkers
Ellen Bartley, St. Joseph's College
LuAnn Bean, Florida Institute of Technology
John C. Borke, University of Wisconsin—Platteville
Melodi Bunting, Edgewood College
Jack Cathey, University of North Carolina—Charlotte
Andrew Debbink, FASB
Jim Emig, Villanova University
Larry Falcetto, Emporia State University
Coby Harmon, University of California, Santa Barbara
Kimberly Hurt, Central Community College—Hastings
Mark Kohlbeck, Florida Atlantic University
Steven Lifl and, High Point University
Jill Misuraca, University of Tampa
Barbara Muller, Arizona State University
Yvonne Phang, Borough of Manhattan Community College
Laura Prosser, Black Hills State University
Lynn Stallworth, Appalachian State University
Alice Sineath, Benedictine University
Dick D. Wasson, Southwestern College
Lori Grady Zaher, Bucks County Community College
Practicing Accountants and Business Executives
From the fields of corporate and public accounting, we owe thanks to the following practitioners
for their technical advice and for consenting to interviews.
Tracy Golden, Deloitte LLP
John Gribble, PricewaterhouseCoopers (retired)
Darien Griffin, S.C. Johnson & Son
Michael Lehman, Sun Microsystems, Inc. (retired)
Michele Lippert, Evoke.com
Sue McGrath, Vision Capital Management
David Miniken, Sweeney Conrad
Robert Sack, University of Virginia
Clare Schulte, Deloitte LLP
Willie Sutton, Mutual Community Savings Bank, Durham, NC
Mary Tokar, IASB
Lynn Turner, former SEC Chief Accountant
Finally, we appreciate the exemplary support and professional commitment given us by the
development, marketing, production, and editorial staffs of John Wiley & Sons, including the
following: Michael McDonald, Emily Marcoux, Terry Ann Tatro, Margaret Thompson, Chris
DeJohn, Karolina Zarychta, Courtney Jordan, Anna Durkin, Jane Lee Kaddu, Jenny Welter, and
Maureen Eide. Thanks, too, to Jackie Henry and the staff at Aptara®, Inc. for their work on the
textbook.
Suggestions and comments from users of this book will be appreciated. Please feel free to e-mail
any one of us at AccountingAuthors@yahoo.com.
Donald E. Kieso
Somonauk, Illinois
Jerry J. Weygandt
Madison, Wisconsin
Terry D. Warfield
Madison, Wisconsin
CHAPTER 1

Financial Reporting and Accounting Standards

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1 Describe the global financial markets and their relation to financial reporting.
2 Explain the objective of financial reporting.
3 Identify the major policy-setting bodies and their role in the standard-setting
process.
4 Discuss the challenges facing financial reporting.

PREVIEW OF CHAPTER 1

As the following opening story indicates, countries are moving quickly to adopt
International Financial Reporting Standards (IFRS). It is estimated that over 300
of the 500 largest global companies are using IFRS. However, the accounting
profession faces many challenges in establishing these standards, such as
developing a sound conceptual framework, use of fair value measurements,
proper consolidation of financial results, off-balance-sheet financing, and proper
accounting for leases and pensions. This chapter discusses the international
financial reporting environment and the many factors affecting it, as follows.
This chapter also includes numerous conceptual discussions that are
integral to the topics presented here.

Revolution in International Financial Reporting

The age of free trade and the interdependence of national economies is now with us.
Many of the largest companies in the world often do more of their business in foreign
lands than in their home country. Companies now access not only their home capital
markets for financing but others as well. As this globalization takes place, companies
are recognizing the need to have one set of financial reporting standards. For
globalization to be efficient, what is reported for a transaction in Beijing should be
reported the same way in Paris, New York, or London.
A revolution is therefore occurring in financial reporting. In the past, many countries
used their own set of standards or followed standards set by larger countries, such as
those in Europe or in the United States. However, that situation is changing rapidly. A
single set of rules, called International Financial Reporting Standards (IFRS), is now
being used by over 149 jurisdictions (similar to countries). Here is what some are
saying about IFRS.
• “The global financial crisis that began in 2007 and continues today provides a very
clear illustration of the globally connected nature of financial markets and the
pressing need for a single set of high quality global accounting standards. That is
why the G20 … has supported the work of the IASB and called for a rapid move
towards global accounting.” [Michael Prada, chairman of the IFRS Foundation.]
• “Large multi-national companies stand to realize great benefits from a move to a
single set of standards. Companies will have more streamlined IT, easier training,
and there will be better communication with outside parties. In fact, the move to
IFRS is not so much about the accounting but about the economics of a shrinking
world.” [Sir David Tweedie, former chairman of the IASB.]
• “The added costs from having to use this complex hodgepodge (different country
reporting standards) of financial information can run in the tens of millions of
dollars annually. In the international arena, they can act as a barrier to forming and
allocating capital efficiently. Thus, there are growing demands for the development
of a single set of high quality international accounting standards.” [Robert Herz,
former chairman of the FASB.]
• “The current and growing breadth of IFRS adoption across the world suggests that
IFRS has become the most practical approach to achieving the objective of having
a single set of high-quality, generally accepted standards for financial reporting.
Those who share this belief are influenced by the fact that the IASB's structure and
due-process procedures are open, accessible, responsive, and marked by
extensive consultation.” [KPMG Defining Issues.]
• “Developments such as the shocks of the Asian financial crisis, the Enron and
WorldCom scandals, and Europe's creation of a unified financial market helped
build consensus for global accounting standards. Every relevant international
organization has expressed its support for our work to develop a global language
for financial reporting.” [Hans Hoogervorst, chairman of the IASB, June 2013.]
What these statements suggest is that the international standard-setting process is
rapidly changing. And with these changes, it is hoped that a more effective system of
reporting will develop, which will benefit all.
 Review and Practice

Go to the REVIEW AND PRACTICE section at the end of the chapter for a
targeted summary review and practice problem with solution. Multiple-choice
questions with annotated solutions as well as additional exercises and practice
problem with solutions are also available online.

Global Markets

LEARNING OBJECTIVE 1

Describe the global financial markets and their relation to financial reporting.

World markets are becoming increasingly intertwined. International consumers drive

Japanese cars, wear Italian shoes and Scottish woolens, drink Brazilian coffee and
Indian tea, eat Swiss chocolate bars, sit on Danish furniture, watch U.S. movies, and
use Arabian oil. The tremendous variety and volume of both exported and imported
goods indicates the extensive involvement in international trade—for many
companies, the world is their market.
To provide some indication of the extent of globalization of economic activity,
Illustration 1.1 provides a listing of the top 20 global companies in terms of sales.
Random documents with unrelated
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The Project Gutenberg eBook of Divvy up
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
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under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
United States, you will have to check the laws of the country where
you are located before using this eBook.

Title: Divvy up

Author: Stephen Marlowe

Illustrator: Mel Varga

Release date: December 29, 2023 [eBook #72537]

Language: English

Original publication: New York, NY: Ziff-Davis Publishing Company,

1960

Credits: Greg Weeks, Mary Meehan and the Online Distributed

Proofreading Team at http://www.pgdp.net

*** START OF THE PROJECT GUTENBERG EBOOK DIVVY UP ***

 DIVVY UP

By MILT LESSER

ILLUSTRATED by VARGA

Here's a fine, hard story of the inverted

ethical system of the post-war world, where
inhumanity is the norm and cruelty pays dividends.

[Transcriber's Note: This etext was produced from

Amazing Stories February 1960.
Extensive research did not uncover any evidence that
the U.S. copyright on this publication was renewed.]
Hardesty fondled the sight picture with his right eye, squinting shut
his left eye, caressing the trigger of his rifle with the index finger of his
right hand and waiting for the squad leader to issue his commands.
"Ready," called the squad leader.
At times like this, Hardesty observed, time seemed suspended. He
wondered if it worked that way for the condemned man, too. The sun
was just coming up over the rim of the bomb crater, splashing the
rubble there with rose and gold. A hungry dog howled somewhere
north of the crater.
"Aim...."
A dozen rifles were pointed at various parts of the condemned man's
anatomy. Hardesty always selected the stomach, although there
invariably was a softie in each firing squad to spoil the fun. The
hungry dog began to yelp. Someone had probably left ground glass
for it.
Before the squad leader could shout the command to fire, a rifle shot
cracked flatly, with a complete lack of resonance, across the bomb
crater. The condemned man jerked upward, then strained forward in
death against the fetters which bound him to the firing post.
"Damn it!" swore the squad leader. "Who the hell did that?"
Jumping the gun had started some years ago strictly as a sport. Now
it was business, though, and profitable if you could get away with it
and trust your confederate.
"Who did that?" screamed the squad leader.
No one spoke. The dozen members of the firing squad stood rigidly at
the aim position, their weapons pointing like accusing fingers at the
dead man slumping forward against the firing post. Two crows
flapped by like black paper overhead, cawing raucously.
"All right," snapped the squad leader. "Uh-ten-shun!"
Rifle stocks were slapped in brisk unison as the weapons were
brought down from the aim position through port to order arms. A
trickle of sweat rolled across the bridge of Hardesty's nose. A bus
rumbled by two blocks east, on what was left of Lexington Avenue.
Hardesty wondered if the driver's union sanctioned passenger
trapping. He had once traveled ten extra blocks on a bus which had
slowed down without stopping at the designated spots. He had
watched braver passengers than himself leap from the vehicle,
risking broken bones. Well, they probably had time-clocks to punch;
Hardesty was in business for himself.
"In-spec-shun—harms!" the squad leader screamed. Twelve rifles
snapped up to port, twelve bolts were slammed back. The squad
leader walked down the line, examining rifle chambers. Three rifles to
Hardesty's left, he stopped. "Here she is," he said.
From the corner of his eye, Hardesty saw the girl, calm as murder,
hurl her heavy rifle at the squad leader. The stock slammed across
his face and knocked him down before he could parry it with his arms.
The girl turned and fled up over the rim of the bomb crater.
"Catch her!" bellowed the squad leader, who stood up, wiped the
blood from his lips and sprinted toward the crater rim. Ten members
of the squad followed him on the double. The penalty for jumping the
gun was severe; the reward for catching the culprit, considerable.
Hardesty did not follow the squad leader.
He waited until the last of the squad had scrambled up the steep
slope of the crater wall, waited until the drumming sound of feet on
the buckled pavement faded, then approached the dead man still
suspended from the firing post. The man's face looked peaceful, as if
he were only sleeping. He wore a mackinaw, a pair of patched
trousers and heavy rubble-boots. Hardesty could not see where the
bullet had gone in.
Approaching the corpse, Hardesty wondered if the girl who had fired
prematurely would make good her escape. Lord knew there were
places to hide in the bombed-out city. Hardesty began to hope they
would capture her, though. It would simplify things. He did not know
her name, but fifteen minutes before the execution he had tossed a
coin with her. Hardesty had won. She would kill the condemned man
prematurely, Hardesty would remain behind to go through his pockets
for booty. Later on, they would meet at the stump of the Lever
Brothers Building and divvy up. Provided she wasn't caught. Provided
Hardesty remembered.
Sucker, he thought.
He reached the dead man and started through the big flap pockets of
his mackinaw. A cold wind swirled into the crater, lifting a cloud of
choking dust. The first red glow of the sun had faded, leaving a pale
and watery orb to fight the gathering clouds in the eastern sky. It
looked like snow was on the way. Hardesty found a tattered wallet in
the left rear pocket of the man's trousers.
"Hold it," a woman's voice called softly.
Startled, Hardesty looked around. He saw no one. He might hurl
himself behind the corpse and the firing post, his rifle ready—but the
woman could have been crouched behind the embankment there.
"What do you want?" Hardesty demanded in an arrogant voice. You
were a goner if you showed fear. That's what they wanted, fear.
"I'm armed. I have you covered. I can see you but you can't see me.
Drop your rifle."
Bluff? Hardesty wondered.
"I'll count three."
And fire on two, you shrew, Hardesty thought. He wondered again
about the other girl, the one who was fleeing across the city now. A
confederate of hers? It was possible. Double-dealing invited triple
dealing. Hardesty thumbed the safety catch forward on his rifle and
dropped the weapon at his feet. He still held the dead man's wallet in
his left hand.
The woman appeared over the rear embankment of the crater. She
wore a cap with earlaps, a tattered leather lumber-jacket, a heavy
black skirt, rubble-boots and no gloves. She carried a sawed-off
shotgun in the cradle of her bent left arm. She was pretty, but did not
look mean enough to be really beautiful. Her eyes were piercing.
"What have you got in your hand?" she said.
"His wallet."
"Give it to me." The young woman came forward, kicked Hardesty's
rifle out of reach with her left foot and held out her right hand.
Just then an air-raid siren began to wail. Hardesty looked up at the
pale cold sky. He saw no jets. He heard none. The spotters didn't give
you much warning these days. They knew of the raid in advance, of
course. They had received word from the spotters up and down the
coast. While they would be executed if they failed to report the raid
entirely, there was no stipulation on the time limit and no way of
proving it if there had been. As a consequence, the spotters were rich
men. You hardly had time to lock up or hide your valuables with only
seconds to reach shelter.
"Think it's for real?" the woman asked Hardesty.
He shrugged. He still heard no jets. False alarms kept you on your
toes and made you wait until the last possible moment when the real
thing came. False alarms? The spotters called them air-raid drills.
"I doubt it," Hardesty said truthfully. The bomb crater would make a
fairly good shelter, anyway. The worst of the shock waves would pass
over it. Hardesty hoped shelter-seeking pedestrians wouldn't find the
bomb crater. He might be able to deal with the woman alone, but he'd
lose whatever booty was left in the dead man's pockets if a few dozen
scavengers came down into the hole.
"Give me the wallet."
Hardesty handed it over. "Who are you?" he said. "A friend of that
blonde girl who—"
"Did you take anything else? I'm the widow."
A head was silhouetted briefly against the pale sky above the rim of
the crater. The widow fired a warning shot from one barrel of her
shotgun, then quickly reloaded it. The head vanished.
"You have no right to your husband's belongings," Hardesty said.
"You ought to know that."
"You have a right?"
"Sure. Why don't I?"
"Because I saw what happened. You were in cahoots with that blonde
girl, weren't you?" The widow went through her dead husband's
pockets as she talked, stuffing what she found into the pockets of her
mackinaw. Hardesty stared hungrily at the silver gleam of coins, the
dull green of paper money.
"Lady," Hardesty said derisively, "you're a sucker. Your husband was
holding out on you."
"What else did you find?"
"I didn't say I found anything."
"But you implied it."
"Go scratch," said Hardesty in a taunting voice. He wanted the
woman to search him. He thought he could take her if she got busy
with his pockets.
"I could kill you and search you afterwards."
"You could, if I didn't hide it where you'd never find it."
"Hide what?" the woman licked her lips eagerly. She looked real
pretty now. Hardesty had always preferred the mean, hard look to the
unctuous one which stamped so many faces these days. The woman
took a step toward Hardesty, who tensed himself. It was the little
things like this which made life worth living. The cat and mouse
game. Personal politics, it was called. It used to be called ethics. The
woman put her hand in the pocket of Hardesty's coat, anxiously
searching.
At that moment, the first wave of jets came over.
The sky shook itself, disgorging bombs. A bright flash blossomed
beyond the western rim of the crater, and another. Seconds later,
Hardesty heard the explosions. The woman had forgotten Hardesty
and crouched in terror at the feet of her dead husband, who still stood
there leaning forward from the firing post. Had the woman denounced
him for some personal reason? wondered Hardesty. It happened all
the time. Personal politics.

The second wave of jets came over, their roar all but drowning out the
stacatto pop-pop-pop of the AA guns. The country had used up its
entire supply of ground-to-bomber missiles. The enemy had depleted
its store of fusion and fission bombs. Everyone settled for ack-ack
and TNT.
The bombs rained down, exploding like firecrackers on a scale model
of the ruined city. It always looked that way to Hardesty. Unreal. He
supposed it was like that, unreal, to everyone until the one bomb
which was too close and suddenly too real compressed the air before
its warhead and shrieked earthward, growing and growing and not
cutting off the shriek before the sound of the explosion like kids do
when they play war and make vocal bomb sounds but terminating the
shriek instantly with the explosion and killing you almost before you
heard the sound with concussion or flying masonry or fire.
Like that bomb, right now, right there, which picked up a two-story
building, uprooting it at the foundation and lifting it slowly into the air
in defiance of gravity, then turning it over gently, teaching it tricks
before it perished, flipping it carelessly, indifferently, showering a slow
downpour of furniture to the ground through the now floorless bottom
story and then turning the whole building once more, like a child's
block caught in a gale, and suddenly sundering it, breaking the
building into large pieces which floated lazily downward, exploding
with a paradoxical lack of violence into smaller pieces, and the
smaller ones into still smaller, until the whole thing came down, dust
and shards now, like a multi-colored snowstorm, beyond the rim of
the bomb crater.
Afterwards came the concussion, mitigated by the depth of the crater
but still strong, flipping Hardesty across the crater floor. He let his
muscles go slack, instinctively knowing there would be less likelihood
of a broken bone that way. He tasted blood in his mouth and felt his
head burrow into rubble and ashes. He stood up groggily as the all-
clear sounded. You had to be cautious. Sometimes the spotters
tricked you. Then you went out into the open and the bombs came
down again almost as if the spotters and the enemy bombardiers
were in secret entente with one another and would later meet in some
undreamed of neutral place and share the booty collected from
corpses and parts of corpses. It was a dog eat dog world.
The concussion had ripped loose the firing post, which had fallen with
the dead man still dangling, like a drunk leaning backwards against a
lamp-post, across the woman. She lay there under its weight, her
legs drumming, her arms twitching.
"Help me," she called to Hardesty in a feeble voice. "Please help me."
She was very ugly that way, with a look of supplication on her dirt-
smeared face. Hardesty walked over to her and placed his foot on her
shoulder so she wouldn't twitch so, then went through her pockets
quickly. He found two five million dollar bills and a handful of small
denomination coins, one and two hundred thousand dollars each,
mostly. Shrugging his disappointment, Hardesty realized it would be
only enough to keep him going a week, and that long only if he spent
it frugally. Those were the breaks.
"What else did you find?" the woman croaked through bloody lips.
She would probably live, Hardesty figured. She was only pinned
there; she didn't seem badly hurt. Naturally, he changed his residence
in the bombed-out city every day, but if the blonde girl were caught
and described him to save her own neck and if this woman confirmed
the description to receive her share of the ten million dollars in
denouncer's bounty, Hardesty might possibly be found. The penalty
for jumping the gun or aiding gun-jumping was death. Other citizens
didn't have their just opportunity to scavenge.
"What else?" the woman asked again.
Hardesty went over and found the sawed-off shotgun. "Nothing," he
said, and split the woman's skull open with the stock of the shotgun.
"Hey, man! Hey, over this way!"
A digging crew was working with picks and shovels on a ruined
building on 44th Street. It had been an office building of some dozen
storys, but the whole façade had collapsed. The offices thus revealed
looked like tiny cubicles with cardboard ceilings, floors and walls. The
whole ruined structure looked like a giant compartmented eggbox
lying on its side, the small square compartments cluttered with
impossibly small office furniture carved to perfect scale.
"Hey, man! We got an extra shovel."
Community effort. You had to dig out the ruins. In the early days of
the war you looked for living people, but now personal politics had
changed that. The diggers had clubs and knives ready in case any
survivors were found to contest their booty. They were hacking away
at the heaps of broken concrete with consummate effort, stopping
every now and then for hot drinks which the Red Cross brought
around. They had some union, those Red Cross workers. They were
guaranteed ten percent of the booty in any building they serviced
during digging. Often only the digging foreman got coffee, but it didn't
matter.
The scene reminded Hardesty of a clever children's toy he had seen
once. It was a hollow globe of plastic, with water inside. When you
turned it upside down, tiny jet bombers dropped tinier bombs on a
skyscraper which resembled the Lever Brothers Building. The
building flew apart, spitting miniature corpses and furniture out of
windows. Minute diggers started to dig at the base of the structure
and a Red Cross vehicle spilled out tiny, spider-like Red Cross
workers with armbands. When you turned the globe right-side-up
again, everything assumed its place like before the air-raid. It was
very ingenious.
Hardesty thought it would be a good idea to get out of his
neighborhood. There was no telling what had happened to the
blonde. If he were caught in her position, he certainly would have
squealed. Anyway, Hardesty had heard that the pickings were good
down by the old Navy Yard in Brooklyn, provided you could steal a
boat and make your way across the East River under the ruined
bridges. Some people claimed the waters of the river were still
radioactive, but Hardesty suspected the radiation had long since
flowed out to sea. It was probably a rumor promulgated and
maintained by the roving bands of Brooklyn scavengers. Hardesty
had always preferred being a small businessman. He just couldn't
see scavenging for a salary, despite the comparative security it
offered.
"Well, what do you say, man?"
"No, really, I have to be getting along."
"All right, then. It's an order." Someone thrust a shovel at Hardesty.
He glanced at the man's sleeve and saw the starred armband of a
block captain. Damn these civil servants! You hated their guts but had
to obey them. Oh, they were psychopathic enough. Hardesty
admitted that to himself. You couldn't get any kind of a decent job with
the city unless the Civil Service Board passed on your psychopathy.
But they were too smug in an orderly, regimented way. They could
quote ordinances to you until you wanted to wring their necks but
they were right and if you did, you were as good as dead.
Hardesty took the shovel in his numb cold hands and began to dig
mechanically where the pick-ax crew had already done its work. After
an hour, he had uncovered nothing worthwhile. A teen-aged Red
Cross girl brought him a cup of evil-smelling synthetic coffee, but he
drank it to warm his stiff muscles.
All at once, he heard a tapping sound coming from a big bronze pipe
which had probably carried water or refuse from one of the offices
upstairs.
"Someone's alive in there," a youngster next to Hardesty said. He ran
over with a pick-ax and began to hack furiously at the rubble.
The block captain rushed to the spot and said, "Are you crazy or
something? There's no air in there. Give them a couple of hours and
they'll be dead. Are you forgetting your ordinances, boy?"
"But we can save them!" the youngster said in some confusion.
"We got too many mouths to feed as it is. Anyhow, you want them
contesting the booty? If they survive, they're liable to claim it all."
"I—I'm sorry." The youngster stopped hacking away with his pick-ax.
He seemed genuinely contrite, but you never knew about that type.
He might come back tonight and dig in private. By then, fortunately, it
would be too late. But the city hospitals were full of just such people
who couldn't adjust to the rigors of war. Hardesty had heard about a
proposed bill which would have them all killed painlessly. That was no
way to die, without pain, but it served them right. Of course, thought
Hardesty bitterly, the city would claim all their booty—which was
another matter entirely.

Five minutes later, Hardesty found a dismembered arm. It was

already frozen with the cold and seemed more like wax than flesh.
The arm was too muscular to have belonged to a woman. The man
had worn a ring and a gold-plated wristwatch which, between them,
might bring eighty or ninety million dollars on the black market.
Hardesty got the watch loose and was working the ring off the frozen
fingers when the block captain spotted him.
"I saw that," he said. He had a big beefy face with eyes so close
together they seemed to be forever staring at the tip of his nose. "You
think you're in business for yourself?"
"I'm sorry," Hardesty said lamely. "Habit. I'm a scavenger by
occupation. Here. Here's the ring."
The beefy-faced man scrutinized the ring and pocketed it. "The
wristwatch," he said,
"There must be some mistake."
"I saw you put it in your pocket."
"No, you must have been imagining things." What would it bring on
the black market? Fifty million dollars in a quick sale? Decent living
for a month. Hardesty was damned if the block captain would get it.
"Fork it over, wise guy."
The other diggers had stopped their work to watch Hardesty's
growing—and now perilous—discomfort. "Let's just get on with the
work," Hardesty suggested. He had placed the sawed-off shotgun
down near the curb when he started digging. He saw it there now,
with one of the Red Cross teen-agers staring at it covetously. He
wondered if he could reach it in time and blast the beefy block
captain's face in. He decided the shovel would be quicker and every
bit as effective.
"For the last time ..." began the block captain.
Swinging the shovel like a baseball bat, Hardesty bounced it off his
jaw. He didn't wait to see the results. He bolted for the curb, scooped
up his sawed-off shotgun, and ran.

It was snowing now, big dry flakes which fell from a windless sky,
slow patient flakes which would fall for many hours if the leaden sky
was any indication, choking the broken arteries of the perishing city.
Let it, thought Hardesty. I don't have to go to Brooklyn, after all. I
know where I can dispose of this wristwatch.
He was jogging along in no great hurry. He had darted down
Vanderbilt Avenue by the ruins of Grand Central Station, then cut
back and forth through the streets in the low forties. They had chased
him for a while but had given him up by now, he supposed. Hell, it
was only one wristwatch. He slowed to a walk along Park Avenue
and watched the city die.
The city had been moribund ever since Hardesty could remember. It
seemed the natural state of things, just as the public politicians had
finally given in to the inevitable and now decried that war was the
natural state of human society. With war, cities died. With dead cities,
war became a more personal thing. That was where personal politics
came in. War became an individual thing as well as a social
enterprise. That was the way you lived.
An old woman came trudging along in the snow, her boot-shod feet
making footprints clear down through the thin white covering to the
broken gray sidewalk beneath it. She was selling poor-grade booty,
trinkets and a few items of faded old clothing. "Anything I've got," she
hawked, holding a yellow straw basket up for Hardesty's inspection,
"anything in the basket for only a hundred thousand dollars."
When Hardesty shook his head, she tagged along, gripping his
sleeve in clawlike fingers and tugging at it. "Go away, grandma," he
said. The old lady went on ranting about her wares in a high,
incongruously childish voice. Maybe a few of the diggers were still
looking for him, Hardesty thought. The crone's piercing voice would
attract people for blocks.
The hag cleared her throat and spat yellow phlegm in the clean white
snow. "See this dress? See, it's second hand, but you could hardly
tell. For you, a special price because you have a cruel face. For you
—"
"Damn it!" said Hardesty, and fished in his pocket for a few coins.
There was no one else on the street, no one else on the lonely
landscape of battered buildings and stumps of buildings. A few feet to
Hardesty's left, a fire hydrant had ruptured; a torrent of water gushed
from it, freezing at the edges of the large puddle which had formed,
as if the ice had started there and would approach the hydrant and
strangle it. Hardesty was surprised that the city still pumped so much
pressure through its water mains.
"Here," Hardesty said, handing the old woman a few coins and taking
her basket. It was unexpectedly heavy. The old woman thanked him
profusely in her childish voice. Hardesty had no use for the contents
of the basket, but wouldn't return it to the hag. Later he could dispose
of it. Returning it to her would be charity, and you just did not indulge
in charity.
The old woman walked off through the snow, cackling happily.
"There he is!" someone cried.
Hardesty heard the footfalls pounding behind him. The diggers. He
began to run, hurling the basket away from him. He turned around to
look and saw four or five shapes sprinting after him. Hardesty raised
the shotgun without bothering to aim and fired both barrels. The hag
clutched her throat and pitched forward in the snow. One of the men
fell with her. Hardesty tossed the now useless shotgun aside and
heard something clatter against the wall next to him. Sparks flew. It
was a knife. The man's aim had been good, almost too good.
Hardesty circled the block twice, then hid in a doorway. It was a
doorway to absolutely nowhere. On one side was the street, on the
other was a rubble-filled bomb crater. This had once been a building,
but only the doorway stood. Even the door had been blown to bits.
A sign over the door said WAL—RIA. Hardesty thought a hotel had
stood here, long ago. He crouched in the doorway and waited,
catching his breath. It was so cold, his teeth began to chatter
uncontrollably. His lungs, though, were on fire, and his nostrils. He
couldn't stay there too long. He would freeze to death. Perhaps they
had taken a wrong turn over on Madison Avenue.
Hardesty walked boldly out into the street. No one stopped him.
Ten minutes later, after hiding in a pile of rubble when he saw
someone coming down the street, Hardesty found himself passing
the stump of the Lever Brothers Building. The girl, he thought
suddenly. He had forgotten about the blonde. He shouldn't be passing
here. She might be waiting for him.
"Psst! Hey, it's me. I didn't know to expect you or what."
It was the blonde's voice. Hardesty had in mind to run again, but
there would be too many people after him, too many people who, out
of spite or patriotism, would identify him and denounce him. He would
share the executed man's booty with the blonde girl. But not the
wristwatch. She had nothing to do with the wristwatch. Maybe, he
thought, she even knew of a good warm place to sleep.
"I had a little delay," Hardesty said. He didn't see the blonde
anywhere. She was inside the building.
"Well, come on in."
People came from all over Manhattan to see the Lever Brothers
stump. Miraculously, some of the green-tinted glass was still whole.
No one could explain this except to say it was a freak of concussion,
and it had happened, hadn't it? The few panes which remained were
almost the only unbroken panes of glass in New York City.
It was green in there, and dim. Looking out through the glass, the
snow resembled tons of chopped spinach coming down. The blonde's
hair was green. Her skin was green, and her eyes. She had a hard
cold look on her face now.
"Well?" she said.
Hardesty began to empty his pockets for the divvy up.
Someone said, "Stop right there! Hold it."
The man was big and had probably used many times with success
the gun he carried in his fist. It was the man who had spoken. He
covered Hardesty with the gun while the blonde hastily went through
the booty they had found.
"You're being held under city ordinance 217," the big man told
Hardesty. Ordinance 217 was concerned with gun-jumping or aiding a
gun-jumper. The penalty was death.

Not long afterwards, Hardesty was bound to a firing post near the
embankment of a crater close to the Lever Brothers stump, but far
enough away so none of the glass would be shattered. The firing
squad lined up. The blonde girl was third from the right. Hardesty
hoped someone would aim for his stomach and the others would
miss. If he had to die, he wanted to die painfully.
"Ready!" barked the squad leader. Hardesty wasn't sure, but thought
he was the same man who had led that other squad.
"Aim...."
Time was suspended again. Even more for the condemned.
And then, before the squad leader could shout "fire!" Hardesty heard
a gunshot. He didn't feel the bullet go in, but as he slumped forward
away from the firing post he felt a warm wetness, and no other
sensation, in his chest. With a final effort of will he looked up and saw
the blonde girl's face. There was a faint smile tugging at the corners
of her lips. All at once Hardesty knew. She had probably taken