Financial Accounting and Reporting

Financial accounting and reporting

(Last update: December 22, 2017)

Professor

Course leader: Hervé Stolowy Assistant: Brigitte Madéo

E-mail: Email:

Building W2, Rm # 57 Building W2, Rm # 41

Ext 9442 Ext 7308

Course instructor: Pepa Kraft

E-mail:

Building W2, Rm # 48

Ext 9424

OVERVIEW

The course is an introduction to Financial Accounting & Reporting designed for business students with the assumption that the knowledge of a unique accounting system (the US, the UK or the French one) is not sufficient. The main purpose of this course is to deal with the measurement of value created (and value creation from the point of view of outside decision-makers) and the use of financial accounting information.

The approach is based on the following ideas:

-  We adopt a user perspective, rather than a producer one, because most MBA students will become users of financial statements, internal (managers, executives) or external (investors, analysts…), rather than preparers of financial statements. Thus the same financial information a company uses to assess its performance internally is used by investors and analysts to determine how to assess a company in the marketplace.

-  When faced with a complex problem, we begin examining the problem by a general overview of the possible solutions and what impact they will have on a company’s financial decisions. This requires an “a-national” or non-national approach--it is more useful to take time explaining the various possible solutions than studying the way a particular country handles the issue. In the first part of the course, all the developments are not based on a specific country but on a generic country. In the second part of the course, we mainly refer to International Financial Reporting Standards (IFRS), though occasionally we will mention the US approach to the problem. Since over 100 countries have adopted IFRS, students should be able to understand financial statements produced in many countries.

-  The comparative part of the course is based on a topic-based (issue) approach, rather than a country approach.

Learning Outcomes

When you successfully complete this course, you should be able to:

-  Understand the process of accumulating, identifying, measuring and recording economic information

-  Appreciate the use of accounting information for external decision making

-  Understand the underlying similarities and differences of generally accepted accounting principles in the world

-  Understand the importance of financial statement analysis for fund managers, financial analysts, strategy advisors and the stakeholders of the company

-  Master the different “tools” used to perform a financial statement analysis.

Key Topics

The course has been structured to take into account these objectives and to allow for a gradual progression from the simpler to the more complex topics.

The fundamental concepts are fairly simple and do not require any advanced knowledge of quantitative sciences - but, please be careful, since the application of these principles to a particular situation will often require considerable thought and reflection.

Classroom sessions have been grouped together into the following homogeneous blocks so that you can more readily evaluate your own progress and identify particular problems on which you may require help and advice:

- Introduction: Accounting - the language of business

- Part one: The accounting model

- Part two: International and comparative financial accounting: a topic-based approach

- Part three: Financial statement analysis.

Course Materials

Required textbook

Financial Accounting and Reporting: A Global Perspective (co-authored by Prof. Hervé Stolowy with Prof. Yuan Ding), Cengage Learning, Andover, UK, 5th edition 2017. This book is specifically tailored for the approach used in this course.

Online resources

Several resources will be made available online from the course’s website, run by the instructors, accessible from the following address: http://www.hec.fr/finacc

-  Login: To be communicated later.

-  Password: To be communicated later.

Required cases

You will be provided with a printed course pack for this course. This course pack includes the syllabus, assignments and slides (in a four-per-page format). Review problems with solutions and slides (in a one-per-page format) are only available online.

Teaching Methods

Cases and exercises (See the list of group works at the end of this document).

PREREQUISITEs

No prior knowledge of accounting is required to follow and to understand the content of this course.

Grading

Counseling

The essential role of your teacher is to make sure that you attain the necessary level of competence in the subject. In that respect you can expect (wherever necessary) to receive advice from her based on a continuous ongoing evaluation process - undertaken partly by her and partly by yourself.

If you yourself recognize that you have difficulties and problems before the course teacher has identified them then you should not hesitate to contact her.

Your course instructor is available to discuss particular difficulties with you either at the end of each class room session or in her office. In this latter case, you can contact her by e-mail:

Principles

In the context of a continuous evaluation process the grading received at the end of the course is based on two criteria:

(a) The ability to present orally the basic accounting techniques and financial concepts (a manager has to argue his view point);

(b) The capacity to demonstrate a written mastery of the basic accounting techniques and financial concepts (a manager has to show his understanding of documents).

Operationally, this means that the grading of each individual will take into account the quality of classroom participation and the standard of written analysis.

Elements in grading (tentative – will depend on the section and the time constraints)

Your final grading will contain different items weighted as follows:

Grading scale

Grading is based on ECTS (European Credit Transfer System):

Grading will be implemented in conjunction with the following rule (source: 2012 HEC MBA Rules & Policies Handbook):

“Professors are expected to implement the following grade distribution:

A: 40% of the class

B: 50% of the class

C+D+F: 10% of the class”

Availability of exams

The exams will be kept by the course instructors and can be seen by the students by appointment.

Biography

Pepa KRAFT 01 39 67 94 24 /

Pepa Kraft received her PhD in Accounting from the University of Chicago Booth School of Business, her M.Sc. in Banking and Finance from HEC University of Lausanne, and her B.Sc. with Honours in Accounting and Finance from the London School of Economics. Her research focuses on the role of accounting in credit markets, credit rating agencies, off-balance sheet financing and disclosure issues in financial reporting. Pepa has published in several academic journals including The Accounting Review, Journal of Accounting & Economics and Review of Accounting Studies.

She has taught courses on financial reporting and financial statement analysis at Chicago Booth, Stern and Wharton. Before joining academia, she has held posts at Deutsche Bank and JPMorgan in Corporate Equity Derivatives and Mergers & Acquisitions Advisory. She is a Chartered Financial Analyst and a member of the American Accounting Association and European Accounting Association.

SCHEDULE

Appendix 1: List of case studies

1.  Assignment 2.7 Stora Enso (Introduction to financial statement analysis)

2.  Assignment 7.9 Kia (Financial analysis of tangible assets)

3.  Assignment 14.3 Procter & Gamble (1) (Income statement analysis)

4.  Assignment 14.4 Iliad-Free (1) (Income statement analysis)

5.  Assignment 15.6 Iliad-Free (2) (Balance sheet analysis)

6.  Assignment 17.5 Procter & Gamble (2) (Statement of cash flows analysis)

7.  Additional Assignment 17.1 Iliad-Free (3) (Statement of cash flows analysis)

8.  Accounting fraud: Satyam accounting scandal

Appendix 2: List of possible typewritten group assignments

1.  A 4.4 Lalo

2.  A 5.4 Nokia & others

3.  A 7.6 Tippett

4.  A 8.7 Granados

5.  A 13.3 Mutter & Tochter

6.  A 14.2 Smetana (1)

7.  A 15.2 Smetana (2)

8.  A 16.2 and A 17.2 Smetana (3) and (4)

Estimated Workload

Generally, the estimated time required to prepare a regular class meeting is 60 minutes. However, the time required to prepare the assignments varies across the different assignments (from one to three hours for some case studies).

It should be reminded that the participants can choose the assignments and cases to hand in during the course (see above).

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