IBEAR: Statistics for Managers



USC Marshall Executive MBA Program-Los AngelesFinancial Reporting Syllabus and ScheduleProfessor:Mark DeFond email: defond@marshall.usc.eduOffice: (213) 740-5016Home: (818) 790-2435COURSE AND OBJECTIVES:The aim of this course is to provide the student with a solid grounding in the fundamental underlying financial reporting practices. The course will concentrate on general underlying concepts with a significant emphasis on applications. The Dyckman text is used to introduce the concepts and the mechanics associated with the accounting topics covered in the course. With this as a starting point we then consider the effects and implications of the topics in real-world settings. This is accomplished primarily through the analysis of Cases that focus on the annual reports of actual publicly held corporations.The course is, by its nature, demanding. The assigned text readings and cases require a high level of preparation and most students need to devote a reasonable amount of time in order to gain a full understanding of the materials presented and discussed. Homework Assignments and Cases should be attempted prior to each class meeting, although they are not collected. You are encouraged to work in groups to prepare for the Assignments. The best way to learn accounting is to work through accounting problems. Solutions to the Homework problems in the text will be provide to you.COURSE MATERIALS:Required Text Book:Dyckman, Magee, and Pfeiffer, Financial Accounting, Fourth Edition, Cambridge Business Publishers 2014.Cases:The assigned Cases are prepared by the instructor and are included in the packet of materials provided to you by the EMBA program office.Course GradesThe final grade in the Financial Reporting course will be based on the following:Three quizzes (25% each)75%Case Solution25%Schedule for Theme 1 #DateTopicReadings, Homework, CasesDeliverables18/24/15Primary Financial Statements and The Balance SheetReading: Magee, Dyckman, Pfeiffer Chapters 1 & 2Cases: The Big Picture; Chicken Feet BurgersHomework Problems: M1-24; P1-36; M2-18; E2-42None28/28/15Measuring Performance: The Income StatementReading: Magee, Dyckman, Pfeiffer Chapter 3Case: Chicken Feet Mania Homework Problems: Q3-10: Q3-12; Q3-14; Q3-16; P3-42 (part a only) None38/28/15Joint Case with Finance and MarketingTBANoneSchedule for Theme 2#DateTopicReadings, Homework, CasesDeliverables19/5Quiz #1 at beginning of class +Reporting Cash Flow InformationReading: Dyckman, Magee, Pfeiffer Chapter 4 Homework Problems: M4-22; P4-46Quiz(20 min.)29/6Short-Term Operating AssetsReading: Dyckman, Magee and Pfeiffer, Chapter 6 (p. 277-284) and Chapter 7 (p. 317-336)Homework: M6-18, 19; M7-17, M7-1939/19Quiz #2 at beginning of class +Long-Term Operating Assets & InvestmentsReading: Dyckman, Magee and Pfeiffer, Chapter 8 (365-380); Chapter 12 (p. 572-580)Homework: M8-11; M8-13; Q12-8; M12-17Quiz(20 min.)49/20Accounting for Financial ObligationsReading: Dyckman, Magee and Pfeiffer, Chapter 9 (p. 405-411; 419-426)Homework: M9-31, M9-32, E9-47Case: Mondo-Bondage510/3Quiz #3 at beginning of class +Ratio AnalysisReading: Dyckman, Magee and Pfeiffer, Chapter 5Homework Problems: M5-17; M5-21; E5-27Case: Analyze This! Quiz(20 min.)+Case due at beginning of class6 10/4Ratio Analysis, continued+Wrap upTheme I, Session 1Class Session:Mark DeFond Topic: Introduction to the Primary Financial Statements and the Balance SheetPurpose: The overarching objective of our first two sessions is to provide students with a basic grounding in the fundamentals of financial reporting and the process that generates financial reports. Our first session begins with a big picture overview of the primary financial statements. We use a real company’s annual report to make the big picture more concrete. We then go through a case that is designed to “look under the hood” of the accounting model by demonstrating how a balance sheet is constructed. In the process, we discuss some of the concepts and principles that underlie the accounting model. Students are not required to learn the formal system of “debits and credits” in this course (although all of the details are presented in the text and I am happy to answer any questions you may have about debits and credits). Instead, we will employ a more user-friendly approach that uses a “financial statement effects template.” This is an alternative to using debits and credits, and is introduced it the assigned text.Learning ObjectivesUnderstand the “geography” of the prmary financial statementsIntroduction to the basic components of the balance sheet and income statementDeeper understanding of the conceptual underpinnings of the balance sheetLearn the mechanics of how balance sheets are ic OutlineThe primary financial statementsThe balance sheetAssets = Liabilities + Owners’ EquityThe income statementNet income = Revenues - ExpensesThe balance sheetHow are assets and liabilities defined?When are assets and liabilities “recognized” in the balance sheetHow to account for basic balance sheet transactionsAssignment: Reading: Dyckman, Magee, Pfeiffer Chapter 1 and Chapter 2 Case: The Big Picture; Chicken Feet BurgersSuggested Homework Problems: M1-24; P1-36; M2-18; E2-42Theme I, Session 2Class Session: Mark DeFondTopic: Measuring Performance: the Income StatementPurpose: This session extends the previous session by introducing the Income Statement, including the fundamental concepts that govern revenue and expense recognition and measurement. This session builds on the basic principles and concepts that were laid down in the first session and, importantly, formally introduces the notion of “accrual-basis” accounting, a very old but very ingenious method of measuring the flow of wealth over time. We also discuss some of the differences and similarities between financial reporting in the U.S. and financial reporting in other countries around the world.Learning ObjectivesUnderstand the conceptual underpinnings of the income statementUnderstand how the income statement “articulates” with the balance sheetLearn the mechanics of how income statements are ic OutlineThe income statementHow are revenues and expenses defined?How do they relate to balance sheet accounts?When are revenues and expenses “recognized” in the income statementWhat is the revenue recognition principle?What is the matching concept?How to account for basic income statement transactionsAssignment: Reading: Dyckman, Magee, Pfeiffer, Chapter 3Case: Chicken Feet Mania Homework Problems: Q3-10: Q3-12; Q3-14; Q3-16; P3-42 (part a only)Theme 2, Session 1 Class Session: Mark DeFondTopic: Reporting Cash Flow Information Purpose: The Cash Flow Statement is a critical tool in evaluating management’s investing and financing strategies and in understanding issues of financial health. In this session we first compare and contrast earnings and cash flows as measures of performance, then spend time attempting to understand the mechanics of the cash flow statement. We conclude with Cases where cash flows can be used as a diagnostic tool to gain deeper insights into the firm and how it is managed. We also compare how U.S.-GAAP reporting compares with International Financial Reporting Standards in terms of reporting Cash Flow information.Learning ObjectivesUnderstand the difference between cash flows and accrual-based net incomeUnderstand how cash flows are related to accounting earningsUnderstand the different roles of cash flows and earnings in period performance evaluationTopic OutlineWhat are the sources and uses of cash flows?Operating cash flowsInvesting cash flowsFinancing cash flowsWhat is a cash flow statement and how is it organized?What can be inferred from cash flow statements?What do cash flow statements look like forGrowing companies?Mature companies?Declining companies?Assignment:Reading: Dyckman Pfeiffer Chapter 4 Suggested Homework Problems: M4-22; P4-46Theme 2, Session 2 Class Session: Mark DeFondTopic: Short Term Operating AssetsPurpose: Operating assets are the assets that companies employ to generate profits for its owners. And it is difficult to over-emphasize the importance of accounting for short term operating assets. Accounts Receivable and Inventory are two short term operating accounts. Measurement and recognition of these accounts are critical in capturing firm performance. Accounts receivable and inventory accounting are also classic examples of how balance sheet accounting has important implications for the income statement. Valuation of receivables and inventories are particularly subject to management’s discretion and the issues related to these accounts are generalizable to a variety of accounts and settings.Learning ObjectivesUnderstand the basic concepts that underlie the accounting for current operating assetsLearn how accounts like inventory and receivables have balance sheet and income statement implications Apply your accounting knowledge by looking at some real world cases of inventory ic OutlineThe fundamental nature of operating assetsExpenses waiting to happenFundamental trade off between “stock” versus “flow” The case of “bloated balance sheets”The self-correcting nature of misstatementsMeasurement and recognition issues related toAccounts receivable InventoriesAssignment:Reading: Dyckman, Magee and Pfeiffer, Chapter 6 (p. 277-284) and Chapter 7 (p. 317-336)Suggested Homework Problems: M6-18; M7-17, M7-19Theme 2, Session 3 Class Session: Mark DeFondTopic: Long-Term Operating Assets & InvestmentsPurpose: While timely financial reporting requires matching expenses to the revenues they create, long-lived assets present some thorny problems in accurately capturing expenses. In particular, the proper accounting for fixed assets requires a deep understanding of the concepts of “capitalization” versus “expensing.” As we will see in class, some real world companies have had a particularly difficult time correctly measuring their fixed assets. We will also cover the basics of accounting for “business combinations,” which are the long-term majority investments in other companies.Learning ObjectivesUnderstanding the nature of long versus short term assetsThe concepts of “capitalization” versus “expensing”when and how to apply eachWhat are the consequences of inaccurate measurement of fixed assetsUnderstand how companies account for long term majority investments in other companiesTopic OutlineThe fundamental nature of long lived assetsRecognizing long-term operating assets in the balance sheetMeasuring the period benefits of capitalized assetsThe basics of majority ownership in other companiesMinority versus majority ownershipAccounting for goodwillAssignment:Reading: Dyckman, Magee and Pfeiffer, Chapter 8 (365-380); Chapter 12 (p. 572-580)Homework: M8-11; M8-13; Q12-8; M12-17Theme 2, Session 4 Class Session: Mark DeFondTopic: Accounting for Financial ObligationsPurpose: This session introduces the class to the fundamentals of accounting for liabilities. We begin by looking at the problems inherent in accounting for liabilities in general, and then move on to some issues related to accounting for a major source of financing for a large number of public companies: bonds. We will also discuss some of the accounting issues related to some controversial topics, such as accounting for leases and taxes.Learning ObjectivesUnderstand the basic concepts that underlie the nature of debt and other obligations.Learn how companies recognize and record their obligations.Apply your accounting knowledge by looking in detail at the accounting for ic OutlineAccounting for obligations in generalOff balance sheet financingContingent liabilitiesLong term obligationsFixed contract obligationsBondsLeasesAssignments:Reading: Dyckman, Magee and Pfeiffer, Chapter 9 (p. 405-411; 419-426)Suggested Homework Problems: M9-31, M9-32, E9-47Case: Mondo-BondageTheme 2, Session 5 and 6 Class Session: Mark DeFondTopic: Ratio AnalysisPurpose: The financial statements tell a story, and a careful analysis of the accounting ratios can reveal the plot. This session demonstrates how information in the financial reports can be used to evaluate management performance, credit risk, and valuation issues. The majority of the session will be spent getting our hands dirty by unlocking some interesting mysteries contained in the Wal-Mart annual report. Learning ObjectivesUnderstand the basic drivers of firm value.Learn how financial statement analysis evaluates operating, financing and investing activities.Apply your accounting knowledge looking at the financial ratios of a real ic OutlineWhat can we learn from financial statement analysis?Primary ratio ratio categories for measuring performanceOperating ratiosInvesting ratiosFinancing ratiosReturn on equitySummary performance measuresAssignment:Reading: Dyckman, Magee and Pfeiffer, Chapter 5Suggested Homework Problems: M5-17; M5-21; E5-27Case: Analyze This! Turn in your solutions to the Case at the beginning of class ................
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