1 - University of Southern California
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SPRING 2011 SEMESTER
ACCOUNTING 582 (first half): FINANCIAL ACCOUNTING FOR M&A
CLASS NUMBER 14288R; TTh 9:30-10:50; JKP 202
Teacher: Professor Robert Trezevant
Office: Leventhal School of Accounting Building ACC 106
Telephone: 213-740-5013 (office number and voicemail number)
Email: trezeva@marshall.usc.edu
Office Hours: to be announced
IMPORTANT Be sure that you do not schedule interviews, office visits etc. on exam dates.
Ground Rule: You cannot make-up missed exams. The dates to not schedule interviews
etc. are as follows for the financial reporting half of the course): Feb. 3 and March
1. The tax half dates will be announced in class and on Blackboard in January.
Prerequisite: GSBA 510 (or equivalent)
Corequisite: none
IMPORTANT RULE: NO COMPUTERS ETC. CAN BE RUNNING DURING CLASS. STRICTLY ENFORCED RULE.
Course (first half of ACCT 582) Description and Objectives
This course is the first half of ACCT 582. We cover financial accounting for mergers and acquisitions. The second half of the course covers tax aspects of mergers and acquisitions and the second half of the course will have its own syllabus. The objectives of the first half of ACCT 582 include the following:
1. develop an understanding of financial accounting information, including the rules used to prepare and report this information. Achieving this objective requires understanding-by-doing for many of the nuts-and-bolts procedures of accounting. This learning outcome includes the development of critical thinking and problem solving skills, as well as an understanding of the strategic role of accounting in business organizations and society;
2. develop an appreciation of how this financial accounting information is used by “Wall Street” and its effect on management decisions;
3. develop an appreciation of the usefulness and limitations of financial accounting information and disclosures;
4. develop an understanding as to why accounting issues are so important in today’s business environment, including fair value accounting and the probable convergence of USGAAP and IFRS as they relate to M&A;
• develop the ability to apply ethical principles and professional standards in analyzing situations and making informed decisions.
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Grading for first half of ACCT 582
Scaled
% of Points Points
Midterm 35% 350
Final Examination 50% 500
Peer Evaluation 5% 50
Assignments that are turned in 10% 100
Total 100% 1000
Grading for ACCT 582 overall: The points you earn in the first half of ACCT 582 (financial accounting) will be combined with the points you earn in the second half of ACCT 582 (tax aspects). Your grade for ACCT 582 (entire course) will be based on your total points in the first and second halves of the course added together (each half of the course will be scaled to yield 1000 points), and the two halves of the course are weighted equally. Using these total points, grades will be assigned.
No late work will be accepted. Make-ups for exams will only be approved for documented medical emergencies; please arrange your interview schedule appropriately. Refer to “IMPORTANT Ground Rule” on page 1 of this syllabus to see the dates involved.
Required Course Materials
The text for the first half of ACCT 582 is the custom e-text available at the e-bookstore shop
To find our text at this website, type in: Accounting for Mergers and Acquisitions.
Be sure that the text that you buy is for Robert Trezevant’s course.
General Description of Teams
Team size can be four, five, or six members. I will allow you to choose your own teammates. If you do not have a preference for teammates, I will assign you to a team. Team deliverables will include homework assignments that will be collected (see pages 4-5 of this syllabus for due dates etc.). Regarding working on team assignments, I expect that team members will talk among themselves. I also expect that members of one team will not discuss the details of their team’s “answer” with members of another team.
General Description of Peer Evaluation
Near the end of the course, you will complete evaluations of the other members of your team.
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Grading Policy
This course adheres to the USC Leventhal School of Accounting and Marshall School of Business grading standards for graduate programs. In general, final course grades at the graduate level in a core course average approximately B+ (3.3), but may vary based on class performance. For elective courses, the class average is usually higher--approximating 3.5, which is between a B+ and an A-. You must receive a C or better to pass a required class, and you must have an overall B average (3.0 minimum) in order to graduate from USC.
Statement from Disability Office
Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to me or the TA as early in the semester as possible. DSP is located in STU 301 and is open 8:30 a.m. – 5:00 p.m., Monday through Friday. The phone number for DSP is (213) 740-0776.
Emergency Information
USC Emergencies 740-4321
USC Emergency Information Line 740-9233
USC Information Line 740-2311
KUSC Radio 91.5
Statement on Retention of Papers from the Curriculum Office
According to the Guidelines on Documents Retention, University policy requires that final exams and all other grade work which affected the course grade be kept for one year. Other papers or work that instructors hand back but that students fail to pick up can be held for one month. In this course, I do discard “Other papers or work that instructors hand back but that students fail to pick up” after one month.
Academic Integrity
This course follows the academic integrity guidelines as described in SCAMPUS, Section 11.10, Academic Integrity Violations, and Appendix A, Academic Dishonesty Sanction Guidelines.
Weekly Schedule 4
Topic Reading
First Week Jan. 11/13 Reasons for M&A pp. 1-29; pp. 285-289
Methods to Acquire pp. 35-41; pp. 111-120
Merge vs. Not Merge: Big Picture pp. 289-293
Historical Summary of M&A Rules in-class lecture
Explanation of FASB Codification in-class lecture
IFRS/USGAAP Convergence in-class lecture
Accounting For Investments:
Mark to market (0% to 20%) pp. 43-48
Equity Method (20% to 50%) pp. 49-54; pp. 249-256; pp. 261-265;
pp. 269-271
Assignment: for Jan. 13 : Problem E 17-16 on mark to market and equity method that is passed out;
Problems 6 (p. 276) and 12 (p. 277) (individual). Do not turn in.
Turn in Jan. 20: identify an article on a recent M&A and explain why it was done, 1 to 2 pages double-spaced (individual)
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Second Week Jan 18/20 Merger: Consolidation on Day Acquire: current rules
Rules & Detailed Examples pp. 293-300
Related Expenses pp. 300-301
Acquired Intangibles, Bargain pp. 305-308
Purchase, In Process R&D
Wall Street & one-time charges in-class discussion
Differences: current vs. prior rules pp. 64-65 (section on “Some Other
Differences”); pp. 309-313
Fair Value Accounting pp. 521-523
Assignment: for Jan. 20: Problems 25a (p. 329) and 16 (p. 325) (individual). Do not turn in.
Turn in Jan. 25: I will pass out a company’s financial statement disclosure of an acquisition. Based on this information, answer the questions that I will pass out related to (1) how the company would account for the acquisition under pre-2009 rules and under post-2008 rules and (2) why company management/”Wall Street” prefers the pre-2009 rules versus the post-2008 rules. (team)
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Third Week Jan. 25/27 No Merge (Sub not dissolved): Consolidation on Day Acquire: current rules
Rules & Detailed Examples pp. 301-305
Contingent Consideration pp. 361-362
Differences: current vs. prior rules in-class discussion
Why is M&A Activity Picking Up in-class discussion
Date to value equity consideration in-class discussion
Assignment: for Jan. 27: Prob. 15 (p. 325) and 25b (p. 329, no worksheet) (individual). Do not turn in.
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Weekly Schedule (con’t) 5
Topic Reading
Fourth Week Feb. 1/3 Goodwill Impairment & pp. 355-361; pp. 136-151
Amortizing Other Intangibles
Differences: current vs. prior rules in-class discussion
How do auditors audit impairments? in-class discussion
Restructuring charges in-class discussion
Assignment: for Feb. 1: Problem 16 (p. 373) (individual). Do not turn in.
Turn in Feb. 8: Responses to questions on the effects of changes in rules on Contingent Consideration and/or the effect of Goodwill Impairment on a company’s results (handed out in class) (team)
MIDTERM February 3
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Fifth Week Feb. 8/10 No Merge: Consolidation after Acquire
How to Account for Investment pp. 333-336
Consolidation Example pp. 336-342
Minority Interest: current rules pp. 391-396; pp. 405-406; pp. 62-64
Differences: current vs. prior rules pp. 418-422; pp. 60-62
Assignment: for Feb. 10: Problems 26 a,c (p. 379), Big buys Little (handout), and 23 (p. 433, we will
also cover what we would report pre-2009) (individual). Do not turn in.
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Sixth Week Feb. 15/17 Big Picture: What Wall Street Sees pp. 134-135; p.142
Break in Time-Series pp. 69-71
EPS
Why Wall Street Cares So Much pp. 496-502
Types of EPS Growth pp. 8-9
Earnings Management in-class discussion
Review: Calculating EPS in-class discussion
Effects from M&A in-class discussion
Ratios
Review: Calculating ROE, ROA in-class discussion
Effects from M&A in-class discussion
Accounting Shenanigans and M&A article handed out in class
Turn in Tuesday Feb. 22: response to Enron case questions (to be handed out in class) (team)
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Seventh Week Feb. 22/24 Variable Interest Entities (VIE) pp. 446-454; prepare Enron case on
pp. 559-584
Subprime Crisis: effects on FV/VIE in-class discussion
USGAAP & IFRS in-class discussion (including
proposed revenue recognition,
leasing rules)
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Final Exam Tuesday Mar. 1 in regular class room at regular class time (no class on Mar. 3)
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