Financial Reporting and Statement Analysis
Peking University
HSBC Business School
Financial Reporting and Statement Analysis
SYLLABUS
Instructor Contact Information
Dr. Naqiong Tong, Ph.D., CPA
Class Time: Monday/Thursday (13:30-3:20 pm) Class room: C-105
E-mail:nqtong@phbs.pku.edu.cn
Office Hours: Monday and Thursday, by appointment
Course Objectives:
The perspective and main focus of this course are not for the accountants who prepare financial reports, but rather for the users of the information contained in them: mostly investors and financial analysts who serve them, creditors and, to some extent, management. This course discusses U.S generally accepted accounting principles [GAAP] underlying the financial statements, their implementation in practice and various valuation models used by analysts for firms valuations. Note is also made of the limitations of financial reports, their evolution in response to changing business conditions, current accounting controversies and the constraints that limit the freedom and influence the course of action of rule makers and regulators.
Topics Covered in the course:
Industry Analysis (Value chain analysis, Porter’s Five Forces, Economic Attributes Framework, BCG’s Growth-Share Matrix); Company Strategy Analysis (concentration/integration and Geographical and industry diversification); Elements of Financial Statements (Balance Sheet ,Income Statement, Statement of Cash Flows, Statement of Shareholders’ Equity); Value Measurement (Acquisition Cost, Adjusted Acquisition Cost, PV of Cash Flow using historical/current interest rates, Replacement Cost, Net Realizable Value cost; Income Recognition (Realized/ unrealized gains/losses, other comprehensive income); Accounting for Taxes (Permanent differences VS Temporary differences, Deferred Tax Assets (DTA) or Deferred Tax Liabilities (DTL)); Cash Flow Statement Preparation and Analysis (Operating/Investing/Financing Activities ,accrual accounting, relation between cash and income); Ratio Analysis(profitability and risk ratios); Income Types (income from continuing activities, income from discontinuing activities, income from extraordinary items, income from , changes in accounting principles, other comprehensive income, impairment losses and restricting charges ); Revenue Recognition (accounting for Long Term Contracts and accounting for installments); Inventory Valuation; tangible and intangible assets accounting, Lease Accounting (capital lease and operating lease), Fair Value Accounting; Accounting for Derivative Instruments(fair value hedge and cash flow hedge),, Accounting for Pensions and Other Post-retirement Benefits Accounting; Consolidated Financial statements, Accounting for Investments in Securities, Foreign Currency Translation; Stock-based Compensation and Forecasting Financial Statements
How to Succeed in This Class:
There is a considerable amount of material covered in this course. To do well in this course it is essential that you: (1) attend class regularly, (2) complete assignments, and (3) contribute to team project (4) work hard preparing exams. To understand accounting theories and applications, it is critical that you struggle with the details of assigned problems. It is essential that you stay current with all readings and assignments.
Course Materials:
Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, Sixth Edition by Stickney/Brown/Wahlen (SBW) ISBN-10: 0324302959 ISBN-13: 9780324302950
Course Website:
Other Reading List:
1. The Secret Language of Financial Reports, The Back Stories That Can Enhance Your Investment Decisions, Mark Haskins.
2. Financial Shenanigan, How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition, Howard Schilit, 2000
3. Financial Shenanigan, How to Detect Accounting Gimmicks & Fraud in Financial Reports, third edition, Howard Schilit and Jeremy Perler, 2010
4. The Wall Street MBA: Your Personal Crash Course in Corporate Finance, by Reuben Advani
6. Away from Accounting Frauds, How to avoid Fraudulent Financial Reports, Zhaohui Zhen
7. 48 Financial Frauds of Chinese Listing firms, by Zhaohui Zhen
Grades: Grades will be based on the following weights:
Attendance and Participation 5%
Homework 30%
Team Project 15%
Exam I 25%
Exam II 25%
Total 100%
Requirement Descriptions and Directions:
1. Attendance and Participation (5%)
Because of the complexity of the material and pace of the class, it is imperative that you attend every class. Laptop and cell phone use are not allowed in the classroom. A name card should be displayed during the class to facilitate the class discussion. If you have to miss a class, please notify me in advance through email, call or your classmates. If a class has to be canceled due to an emergency, I will attempt to notify you by e-mail or phone. If you miss a class it is your responsibility to keep yourself apprised of what occurred during your absence.
2. Homework (30% )
The homework assignments will emphasize the comprehension of these principles and concepts, problem solving, and applications to business situations. Each homework is due prior to the beginning of the next class meeting time and grades are given by each homework. Since we have ten homework assignments, each assignment’s maximum grades are 3 points. Details are listed in the course schedule.
3. Team Project (15%)
One class project will be assigned to each team. The purpose of the class project is to provide students real world situations to apply the course concepts in understanding and analyzing financial statement and learn skills related to team work. Each team should be composed of 6 students and the grading of the project is based on the project and the team work corporations (each individual’s participation and performance of the project based on the team chapter) (10 points for the project context and 5 points for presentation).
Project Requirement (due date: final exam date):
Find Pepsi Co and Coca Cola’s financial statements and footnotes listed in the textbook (2004) and give detail discussion of the accounting methods used in the firm (focus on the format of the footnotes and information contained in the footnotes.) Each group should focus on two notes and use information disclosed in the management discussion and analysis, explain the accounting methods used in each notes, compare the differences in two firms related to each note and explain reasons underlying the differences. The project should have both written version (maximum 10 pages) and power point slide version.
Team Work Requirement:
Each student should form the team voluntarily, it is the students’ responsibility to find team members and work together through the semester.
4. Examinations (25%, 25%)
Two exams will be tested in this course. The exams are partial open book (use slides only). Exam 1 covers chapter 1-5. Exam 2 covers Chapters 6-10. The formats of the exams are multiple choice questions.
Class Schedule and Assignments:
Date | Topic | Assignment |
2/13/2012 | 1. Overview of Financial Reporting, Financial Statement Analysis, and Valuation | |
2/16/2012 | 1. Overview of Financial Reporting, Financial Statement Analysis, and Valuation 2. Asset and Liability Valuation and Income Measurement | 1.11 |
2/20/2012 | 2. Asset and Liability Valuation and Income Measurement | 2.4 2.5 2.6 |
2/23/2012 | 3. Income Flows versus Cash Flows: Key Relationships in the Dynamics of a Business | |
2/27/2012 | 3. Income Flows versus Cash Flows: Key Relationships in the Dynamics of a Business | 3.6 3.7. 3.8 |
4. Profitability Analysis | ||
3/1/2012 | 4. Profitability Analysis | 4. 6 4.7. 4.8. 4.9 4.14.a.d. 4.15 a |
5. Risk Analysis | ||
3/5/2012 | 5. Risk Analysis | 5.16 |
First exam review | ||
3/8/2012 | Midterm #1 in class –Ch 01-05 | |
6. Quality of Accounting Information | ||
3/12/2012 | 6. Quality of Accounting Information | 6.10 a, b,d, 6.11 |
7. Revenue Recognition and Related Expenses | ||
3/15/2012 | 7. Revenue Recognition and Related Expenses | 7.13 7.14 a,b,c,d 7.15a,b,c, |
3/19/2012 | 8. Liability Recognition and Related Expenses | |
3/22/2012 | 8. Liability Recognition and Related Expenses | 8.9 8.13 a,b,c,d |
3/26/2012 | 9. Intercorporate Entities | |
3/29/2012 | 9. Intercorporate EntitiesSecond exam review | 9.10 9.14 9.18 9.26 a,b,c,d,e, |
4/2/2012 | Midterm #2 Chapters 6-9 | |
4/5/2012 | 10. Forecasting Financial Statements | |
4/9/2012 | 10. Forecasting Financial Statements | 10.11 |
4/12/2012 | Group Presentation | |
4/15/2012 | Group Presentation |