P a g e 1 COURSE SYLLABUS International Financial Reporting & Analysis September 9 26, 2013 INSTRUCTOR Dr. Michael Favere-Marchesi Faculty of Business Administration, Simon Fraser University (Vancouver, Canada) Ph.D. (Accounting), University of Southern California Master of Accountancy, Brigham Young University Bachelor of Science (Accounting), Brigham Young University Certified Public Accountant (California) DESCRIPTION This course is designed to help you become a global user of financial reports. Several cases which deal with a specific financial accounting topic will be discussed within the context of corporations financial statements. Each case will
P a g e 2 contain financial statement information and a set of specific questions pertaining to one financial accounting issue. The financial statement information will be used to infer and interpret the economic events underlying the numbers. Some cases will be accompanied by a related article taken from the business press. In those cases, information from the article will be incorporated in the questions in the case. Some cases will involve two companies within an industry and the case questions will focus on intercompany comparisons of financial information. OBJECTIVE Many cases will be based on international companies from Canada, U.S.A., U.K., France, Germany, Japan, Mexico, and Taiwan. The globalization of business requires your competence with financial statements prepared in accordance with IFRS, U.S. GAAP or other basis of reporting. The international cases will help you understand some of the recent harmonization efforts between the IASB and the U.S. FASB. Some international cases require you to recast the financials to U.S. GAAP. Thus, you will become a knowledgeable user of financial information. Each case will focus on one or two sets of financial statements. A brief description of the companies in the case is designed to remind you that accounting information is used in specific business contexts. Reported financial accounting numbers are the result of a series of complex, professional estimates and judgments. Many of these are influenced by industry practice. Correctly reading and interpreting financial information is predicated on your awareness of a company s business and industry. The case questions are organized under up to three separate topics: 1. Concepts. The typical case will begin with a set of conceptual questions. These general questions will focus each case on its topic area. These concept questions will call for factual responses that you are likely to easily provide. 2. Process. Before you become a sophisticated consumer of accounting information, you need an understanding of the accounting process and the basics of financial statement presentation. The second set of questions in each case will
P a g e 3 focus on the process. The accounting process is the means by which you will build a firm understanding of how financial accounting works the way it does. 3. Analysis. These questions will have you synthesize, analyze, interpret information and formulate and defend your opinion on accounting policies, standards, and corporate behavior. Analysis questions will sharpen your higherorder thinking skills. Some of the cases will relate to the framework of financial reporting. In these cases, you will acquire skills in basic financial statement preparation and understand how financial statements help in the investment decision process. In achieving the latter, the cases will emphasize how financial statements classify items and how such classifications are important in the prediction of the nature, uncertainty, and timing of future cash flows. Thus those cases will introduce the notion of earnings persistence and how it affects firm valuation. The other cases will explore the accounting issues for the major financial statement line items. Particular emphasis will be placed on the latitude and judgment management has in arriving at the reported numbers and the economic consequences of their choices. This will introduce the notion of the quality of earnings. Those cases are designed to help you acquire the skills necessary to identify quality of earnings issues and learn how to deal with them (for example, by restating the financials under different assumptions of accounting methods). The second part of the course will introduce several cases to illustrate the different types of analysis performed on the financial statements, namely cash flow, return on invested capital, profitability, prospective, credit, equity and comprehensive. TEXT Cases and some learning materials related to the analysis of financial statements will be provided to students.
P a g e 4 INSTRUCTIONAL METHODOLOGY The course will consist of discussions of the assigned cases. You must come to class prepared, having read the cases and answered the questions, and participate in the discussions. Large of amount of materials are covered quickly; it is important for you to remain current. EVALUATION & GRADING Your grade will be determined by the following: Participation 20% Case presentation 30% Final exam 50% PARTICIPATION You will be able to earn participation marks by contributing to class discussions (e.g., critiques, analysis, thoughtful questions, and comments). Emphasis is on the quality of the contribution. Merely restating known facts does not constitute positive contribution to the class discussion. You are expected to read the assigned materials before coming to class. CASE PRESENTATION Some of the cases will be presented to the class by students in groups of two. Cases to be presented will be randomly assigned on the first day of class. Presenters are reminded that class participants will have attempted their own solutions. Presentations should "add value" and "go beyond the required" rather than concentrate on calculations and getting the "right" answer. Consider: Why the information is required (who uses it, and what for?) Any assumptions required or choices you made in formatting your solution Possible alternatives to your solution
P a g e 5 If part of a question is very straight-forward, don t waste time explaining - just present your solution and ask the class if they had any difficulties If you found a part/(s) of the question difficult, so will your classmates, and this is where you should focus most of your presentation GOOD PRESENTATIONS ENCOURAGE CLASS DISCUSSION. Don t just lecture to the class, ask participants questions, and get THEM to explain the key ideas. You may want to bring prepared overhead or PowerPoint slides. This is important for calculations and formatted answers - writing out calculations while you present is very time consuming. BUT AVOID SLIDES FULL OF SENTENCES. Do NOT read your presentation. USE KEY WORDS / IDEAS ONLY ON SLIDES - then add the detail through your discussion. USE A LARGE FONT SIZE ON OVERHEADS! NOTE: All students must prepare the first three cases (Sep 10) individually. Some students may be called on to show their solutions. COURSE OUTLINE Date Topics MO, Sep 9 Analyzing Operating Activities Analyzing Investing Activities EW 165 TU, Sep 10 Analyzing Financing Activities General Mills - Understanding Financial Statements
P a g e 6 WE, Sep 11 L9, 1-2, room 009 Rocky Mountain Chocolate Factory- Preparing Financial Statements Weis Markets- Statement of Cash Flows Apple Inc.- Revenue Recognition TH, Sep 12 08:30 11:45 L9,1-2, room 210 Google Inc.-Earnings Announcements and Information Environment Molson Coors Brewing Company -Profitability and Earnings Persistence Mitsubishi Electric Corporation-Time Value of Money MO, Sep 16 Weis Markets- Measurement Concepts & Valuation Pearson plc-accounts Receivable Callaway Golf Company-Manufacturing Inventory TU, Sep 17 L9,1-2, room 009 Caterpillar and CNH Global- Inventory Palfinger AG-Property, Plant, and Equipment Borland Software Corporation- Goodwill and Other Intangible Assets WE, Sep 18 L9, 1-2, room 009 Abbott Laboratories-Equity Method Investments Volvo Group -Research & Development Costs WorldCom Inc.-Capitalized Costs and Earnings Quality TH, Sep 19 08:30 11:45 L9,1-2, room 210 State Street Corporation-Marketable Securities BP plc-contingencies Johnson & Johnson Retirement Obligations
P a g e 7 MO, Sep 23 EW 165 International Speedway- Deferred Taxes Rite Aid Corporation-Long-term Debt Build-A-Bear Workshop -Leases TU, Sep 24 L9, 1-2, room 009 Xilinx- Stock-based Compensation Merck & Co. and GlaxoSmithKline- Shareholders Equity Khol s Corporation and Dillard Inc.-Financial Statement Analysis WE, Sep 25 L9, 1-2, room 009 Nordstrom Inc.-Analyzing Financial Performance (ROA Additive Dupont Model) Nordstrom Inc.-Analyzing Financial Performance (Traditional Multiplicative Dupont Model) TH, Sep 26 08:30 11:45 Review O 251/252 MO, Sep 30 15:30 17:30 O 251/252 FINAL EXAM (please register for the exam with the student office from Sept 09 to (no later than) Sept 13) UPDATE ROOM ALLOCATION AS OF SEPT 04, 2013.
P a g e 8 REGISTRATION The case studies will be made available in advance. It is mandatory for participants to register for the course by joining the e-learning group on ILIAS. Students should also provide information about their prior experience with accounting and finance topics. In addition, interested students have to send an e- mail to Marcus Brocard, marcus.brocard@bwl.uni-mannheim.de, no later than Sept. 04 stating that they will participate in this course. Limited number of participants.