Financial Accounting (ACC7301) SYLLABUS Division: |
BASIC INFORMATION:
PROFESSOR(s)
OFFICE
CAMPUS PHONE ALTERNATIVE PHONE
OFFICE HOURS
COURSE OBJECTIVES:
The purpose of this course is to introduce you to financial reporting and to the importance of being an informed user of financial information. Whether you are starting your own business, working in the not-for-profit sector, managing your personal finances, or working for a large corporation, you will need to be able to incorporate financial information into your decision making process. This course will focus on the preparation and analysis of financial statements and their uses in business decisions. Financial reports are one measure of how successful the organization has been in implementing its strategies. Financial reports will be analyzed across companies and industries, providing linkages to entrepreneurial and strategic decision making. In addition, we will look at the growth in corporate social responsibility reporting and how companies are incorporating this information into their reports and websites.
By the end of this course you will be able to
· Read a financial report and analyze the financial statements and footnotes
· Understand the “core earning” of a company
· Distinguish between cash flows and net income and understand the importance of each in measuring the financial health of a company
· Understand the importance of cash flows and earnings for an entrepreneurial venture
· Calculate and interpret financial ratios for a company
· Analyze and understand how a company is incorporating other information, including corporate social responsibility reports (CSR), as a means of identifying and establishing the long-term sustainability of the company
The course will be taught using a combination of assigned problems and actual financial statements to highlight key concepts and measures that companies use in reporting their financial results. The problems listed in the assignments are due that day. It is assumed that the student can read the material and attempt the problems prior to the class. The class time will be used to clarify any remaining issues and to take the material to the next level – the analysis and interpretation of the problem solutions. If you have not spent time working on this material prior to the class, the class discussion will be lost on you. Financial Accounting is the language of business and like any new language, it requires practice to become proficient in it. Students are expected to spend a minimum of two hours of out-of-class preparation for each hour of class time and come to class ready to discuss the materials at hand. There is also a tutor assigned to this stream and he will be offering a review class weekly for those who are having difficulty with the topic. If the past is any indication, approximately 80% of the class generally has no prior academic work in financial accounting so the course is taught as an introductory class. The professors also assume you have completed all pre-work required for the class.
COURSE MATERIALS:
Easton, Wild, Halsey, and McAnally. Financial Accounting for MBAs
Readings in Stream Folders
Cases in case packet
Financial Calculator (If you already have one, no need to buy a new one. If you do not have one, we recommend the Texas Instruments BA2 Plus or the H-P 12C)
GRADING and COURSE DELIVERABLES:
Assignment | Individual/Group | Percent | Due Date |
9/16/2011 | |||
Final | 10/18/2011 | ||
Mod Presentation | 10/20/2011 | ||
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Total Available Points | 100% |
PLEASE NOTE: While class participation has not been assigned any points, it will be used in the final analysis for any students who are on the border of a grade increase or decrease. For example, if your overall score put you just below the cutoff for an “A-“, outstanding class participation would result in your grade being raised to the “A-.”
CLASS POLICIES
1. Class will begin on time and end on time. Any late arrivals will be viewed negatively in your overall class participation. Also, students are expected to remain in the classroom for the entire class unless there is an emergency. (Going out for a cup of coffee is NOT an emergency!)
2. If you must miss a class, please notify the instructor prior to the class. You are responsible for any materials missed that day.
3. All exams will be taken from classroom discussions and assigned work.
4. Laptops are ONLY to be used for classroom work. Emailing, texting, etc. is not permissible during class time.
5. Students may only use a nonprogrammable calculator for exams. We have listed calculators above that are acceptable for classroom use.
6. Any student who faces a conflict between the requirements of a course and the observance of his or her religious faith should let us know at the beginning of the semester. In such an event, the faculty will provide reasonable accommodations that do not unduly disadvantage the students.
7. All materials are in Blackboard in the stream folders. Once the class is over, the same folder will contain the solutions for the module that was discussed that day.
SESSION DETAILS:
SESSION 1: Overview of Financial Reporting
LEARNING OBJECTIVES
· Review the history of financial reporting, transaction analysis, and preparation of the income statement and balance sheet.
· Discuss the Financial Reporting environment, both US and International perspective, including regulatory requirements.
· Provide examples of the subjectivity of financial reporting results.
Note: Throughout FINACC, we will be using the Balance Sheet Equation (BSE), not journal entries or T Accounts. This course is designed for users of financial information, not preparers.
The balance sheet equation is: CASH + OTHER ASSETS = LIABILITIES + OWNERS’ EQUITY + REVENUE - EXPENSES
SESSION WORK
READINGS
· Easton, Wild, Halsey, McAnally Book (EWHM) – MOD 1
· Financial Reporting Basics Reading (FINACC 1 Stream folder)
· Coke/Pepsi Financials (FINACC 1 Stream Folder)
ASSIGNMENT: N/A
MATERIALS CAN BE FOUND:
SESSION 2: Building Financial Statements
LEARNING OBJECTIVES
· Use of Balance Sheet Equation to report on financial transactions and preparation of income statement and balance sheet
SESSION WORK
CASE:
· Sunbeam Financials Case (FINACC 2 Stream folder)
READINGS
· EWHM Book – MOD 2, Appendix 2A, and Mod 3
· FASB Proposed changes in Financial Statements
ASSIGNMENT
· Analyze the Sunbeam transactions and use the Sunbeam template.xls to record the transactions: (both found in FINACC 2 Stream folder)
· (Optional): EWHM: Module 2, Exercise/Problems 2-29, 2-45, and MA2-49
Note: optional problems are not required for class. These are suggested for students who need additional practice with concepts discussed in the Module, primarily use of the Balance Sheet Equation (BSE). Solutions will be posted in the FIN stream folder after material are covered in class
MATERIALS CAN BE FOUND:
SESSION 3: Income Measurements and Cash Flows
LEARNING OBJECTIVES
· Preparation and analysis of cash flow statements using the direct and indirect method
· Analysis of income vs. cash flows as metrics for financial results
· Understand how the three financial statements (balance sheet, income statement, and statement of cash flows) articulate with each other.
SESSION WORK
CASE: N/A
READINGS
· EWHM Book –Appendix B
· Cash Flow Statement Reading (found in FINACC 3 Stream folder)
ASSIGNMENT
· EWHM: Appendix B, problems B-29, B-36
Note: Appendix B is a supplement to Module 3 and can be found at the end of the textbook. It is a more detailed discussion of the preparation of the cash flow statement. Problems with a letter “B” in front of the problem number denote problems from this Appendix.
MATERIALS CAN BE FOUND:
SESSION 4: Statement of Cash Flows & Ratio Analysis
LEARNING OBJECTIVES
· Preparation and analysis of cash flow statements (continued)
· Understand the use of ratios in analyzing financial statements and results of operations
· Understand how strategy affects the financial footprint of a company
· Review ratio analysis and assess a company’s profitability and risk. In this class and throughout Mod 1, emphasis will be on analyzing accounting choices and their effects on financial statements and ratio analysis. Quality of earnings will be discussed in realtion to each accounting topic.
SESSION WORK
CASE: N/A
READINGS
· Analysis of corporate cash flow statements – Coke/Pepsi (found in FINACC 1 Stream folder)
· Financial Statement Analysis Reading (found in FINACC 4 Stream folder)
· Ratio Summary Sheet Template (found in FINACC 4 Stream folder)
ASSIGNMENT
· EWHM: Appendix B, Problems B-37, B-38, and B-47
· Typaldos Cash Flow Statement (found in FINACC 4 Stream folder)
MATERIALS CAN BE FOUND:
SESSION 5: Ratio Analysis (con’t)
LEARNING OBJECTIVES
Continuation of Financial Statement Analysis
SESSION WORK
CASE: N/A
READINGS: EMC Financial Statements (found in FINACC 5 Stream folder)
ASSIGNMENT:
Prepare the cash operating cycle and Dupont Analysis for EMC
SESSION 6: Mid Term
LEARNING OBJECTIVES
SESSION WORK
CASE: N/A
READINGS : N/A
ASSIGNMENT: Mid-term will be on transaction analysis, cash flows, and ratios. You do NOT need to memorize ratios. The ratio sheet will be provided with the exam. You may also use a nonprogrammable calculator.
SESSION 7: Revenue Recognition and Accounts Receivable
LEARNING OBJECTIVES
· Understand the importance of the definition of revenue recognition and its impact on financial results – industry perspective
· Accounts Receivable – beginning discussion of use of estimates in preparation of financial statements
· Understand the concepts of matching and valuation in relation to accounts receivable.
· Understand reserve accounting and effect on earnings over multiple reporting periods
· Calculate bad debt expense and understand the impact on quality of earnings of this calculation.
SESSION WORK
CASE:
· Whales of Summer (found in FINACC 7 Stream folder)
READINGS
· EWHM Book –Module 5 (skip pages 8-10 and 17-23); Module 6 pp. 1-12
ASSIGNMENT
· EWHM: Module 6 – E6-25
· Whales of Summer (found in FINACC 7 Stream folder)
MATERIALS CAN BE FOUND:
SESSION 8: Quality of Earnings
LEARNING OBJECTIVES
· Introduction of quality of earnings. Understanding management of earnings vs. fraud.
· Smoothing/volatility desired by analysts
· Evaluate the judgements and gray areas involved in financial reporting
· Apply tools of ethical evaluation to decisions made at the leadership levels of organizations
SESSION WORK
CASE:
· Albert Dunlap Case A (found in FINACC 8 Stream folder)
· Albert Dunlap Case B (found in FINACC 8 Stream folder)
READINGS : N/A
ASSIGNMENT (Questions)
1. Examine the financial statements in Case A. Based on the questionable accounting practices mentioned in the case, how would these accounting practices affect net income in 1996 and in future years?
2. Do you think Al Dunlap’s “creative accounting” approach to revenue recognition with Sunbeam was proper?
3. If you do a cursory cost-benefit analysis of Dunlap and Kershi’s behavior, does crime pay?
4. How would the ethical frameworks developed in the Pre-Work module play out in this case?
MATERIALS CAN BE FOUND:
SESSION 9: Inventories
LEARNING OBJECTIVES
· Understand the different methods of costing inventories
· Understand definitions and importance of margins
· Understand the impact of alternative inventory methods on financial statements and ratio analysis.
· Calculate cost of goods sold and ending inventory using first-in, first-out (FIFO) and last-in, last-out (LIFO), cost flow assumptions
· Assess the effect on the balance sheet and income statement, as well as ratio analysis, of using FIFO versus LIFO cost flow assumptions
· Convert balance sheet and income statement amounts under a LIFO cost flow assumption to be a FIFO cost flow assumption.
SESSION WORK
CASE: N/A
READINGS
· EWHM Book –Module 6 pp. 13-25
· Analysis of Company Footnotes
· Inventory Overview (found in FINACC 9 Stream folder)
ASSIGNMENT
· EWHM: Module 6 – E27, E28, P41
MATERIALS CAN BE FOUND:
SESSION 10: Long-Term Assets
LEARNING OBJECTIVES
· Understand the effect of reporting choices in accounting for long-term assets – purchase, use, and disposition of assets
· Understand use of estimates – Impairment charges, depreciation charges, age of assets.
· Effect of accounting choices on deferred taxes
· Impact of acquisition accounting on financial results, including Goodwill and intangible assets
· Understand and apply the concepts that distinguish expenditures that are capitalized as assets, and subsequently amortized, from expenditures that are expensed in the current period.
· Explain depreciation as a process of cost allocation, not one of valuation.
SESSION WORK
CASE: N/A
READINGS
· EWHM Book: Module 6: pp. 26-36; Module 5: pp. 7-23
· Analysis of Company Footnotes
· Long Term Assets (found in FINACC 10 Stream folder)
ASSIGNMENT
· EWHM: Module 6 – E31, E35, P43
· Long-term Asset Problems
· Cracker Barrel LT Assets problems
MATERIALS CAN BE FOUND:
SESSION 11: Long-Term Liabilities
LEARNING OBJECTIVES
· TVM – use of present value in valuing long-term liabilities
· Liability disclosures and market value
· Apply present value concepts in accounting for long-term liabilities, especially bonds
· Explain how the accounting treatment for long-term debt affects financial statements.
· Understand the nature of year-end accruals for expenses, e.g. warranties, gift cards, etc. and effect on earnings.
SESSION WORK
CASE: N/A
READINGS
· EWHM Book: Module 8, including Appendix 8-A. The appendix is a review of present value concepts and how they apply to bond pricing
· Bonds (found in FINACC 11 Stream folder)
ASSIGNMENT
· EWHM: Module 8: E31, E36, P38
MATERIALS CAN BE FOUND:
SESSION 12: Off-Balance-Sheet Financing
LEARNING OBJECTIVES
· Understand the impact of off-balance-sheet financing and its effect on financial analysis including financial statements and ratio analysis.
· Understand the impact of lease accounting on financial statements; current thought on changes in reporting on leases
· Analyze leases using GAAP
· Use lease disclosure in financial statement analysis to determine the impact on the debt structure of the company.
SESSION WORK
CASE: N/A
READINGS
· EWHM Book: Module 10 pp. 1-11
· Analysis of Lease footnotes
· Accounting for Leases Overview (found in FINACC 12 Stream folder)
ASSIGNMENT
· EWHM: Module 10: exercises 10-20
· Adjusting for Operating Leases: Staples (Found in FINACC 12 Stream Folder)
· Using the financial statements and the footnotes for their leases, calculate the following ratios for the financial statements as given and re-do the ratios assuming all the leases were capitalized. The ratios to be calculated are:
o Fixed asset Turnover
o Long-Term Debt/ (Long-Term Debt + Stockholders’ Equity)
o How does this analysis change your view of the company’s financial risk and fixed asset productivity?
MATERIALS CAN BE FOUND:
SESSION 13: Stockholder’s Equity
LEARNING OBJECTIVES
· Understand the nature of stockholder’s equity accounts – Common and Preferred Stock, Retained Earnings, Treasury Stock, Comprehensive Earnings, Options and Warrants.
· Analyze and interpret the statement of stockholders’ equity. Understand nature of equity financing.
SESSION WORK
CASE: N/A
READINGS
· EWHM Book: Module 9 pp. 1-23
· Analysis of Statement of Stockholder’s Equity – Coke/Pepsi, EMC
ASSIGNMENT
· EWHM: Module 9: E39, E44, E45, and E47
· Review the statement of stockholders’ equity for Coke/Pepsi and EMC.
MATERIALS CAN BE FOUND:
SESSION 14: Financial Statement Analysis
LEARNING OBJECTIVES
· Use of ratio analysis and statement analysis to understand funding needs for entrepreneurial and corporate environments.
SESSION WORK
CASE:
· Strunk Lumber (in FINACC 14 Stream Folder)
READINGS N/A
ASSIGNMENT: Prepare the questions at the end of the Strunk Lumber Case
MATERIALS CAN BE FOUND:
SERVICES FOR STUDENTS WITH DISABILITIES:
Any student who qualifies for accommodations based on the impact of a disability should contact your program advisor privately and in a timely fashion to discuss his or her specific needs. In addition, students must also contact the Manager of Disability Services at 781-239-4508 or in Hollister Hall to coordinate reasonable academic accommodations. http://www3.babson.edu/offices/academicservices/disability/
ACADEMIC HONESTY AND INTEGRITY POLICY:
Commitment to Academic Integrity –Every member of the Babson graduate community is expected to uphold the principles embodied in the academic honesty and integrity policy. All members of the College community –students, faculty, and staff share responsibility to bring forward known acts of apparent academic dishonesty. Any member of the academic community who witnesses or otherwise becomes aware of an act of academic dishonesty should report it to the appropriate faculty member or to the Associate Director of Graduate Student Affairs in Graduate Programs and Student Affairs. Detailed information can be found in the graduate student handbook. You may download a copy by clicking on the link below.
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