UNIVERSITY OF SOUTHERN CALIFORNIA MARSHALL SCHOOL OF BUSINESS LEVENTHAL SCHOOL OF ACCOUNTING SPRING 2013 ACC 581 Financial Statement

Analysis Lec 033-14280R T 6.00-10.00pm OFFICE HOURS: T 4.30-5.30pm USC Emergency Info Line: (213)-740-9233 USC Emergencies: (213)-740-4321 Course Description and Objectives The basic thrust of this course is analyzing and using information from corporate financial reports for the purpose of financial analysis and valuation. Specific topics include: analyzing and adjusting financial numbers for the purpose of financial analysis; evaluating earnings quality; profitability analysis; cash flow analysis; credit analysis; and equity valuation. The learning objectives of this course are: develop an understanding of financial accounting information from a decision makers perspective, including an appreciation of the usefulness and limitations of this information; develop skills in analyzing financial statements; develop skills in using financial accounting information for financial analysis, including credit analysis and equity valuation. This course does not have a broad strategic (big picture) focus. Rather it emphasizes detailed and nitty-gritty analysis of financial statements. You will learn specific techniques and methods rather than broad conceptual issues. This is a get your hands dirty ACCOUNTING course. For students who are not comfortable with accounting, be aware that this course can turn out to be difficult and time consuming. You have been forewarned!! Prerequisites GSBA 510. Grading Policy Homework Class Participation Final Exam 30% 20% 50% 100% K. R. Subramanyam OFFICE: HOH 821 PHONE: (213) 740-5017 email: krs@marshall.usc.edu USC Info Line (213)-740-2311 KUSC Radio (Emergency Info): 91.5 FM

Grades will be assigned based on a curve. A total of 8 homework assignments will be posted on Blackboard with their due dates. Each assignment carries 5 points. I shall include the best 6 scores toward your homework grade. Homework points are assigned not only on correctness but also on the basis of efforthowever, I retain all discretion as to what I define as effort. So please show all details of your work. Homework needs to be attempted in groups of TWO students. Please form groups within yourselves in time for the first homework submission.

The final exam is on April 2 6.00pm at the regular class venue. It is open book and is to be individually attempted. More information about the nature of the exam will be subsequently provided. There will be no make-up exams (the policy regarding incomplete grade is attached). Exams will not be returned to students. Those who wish to review their answers can fix an appointment with me. Class participation grade will be based both on attendance and participation in class. I will take attendance every single class. I expect students to participate actively in class, especially during case discussions. Participation points will depend on the quality of participation. Students must come adequately prepared for class. In particular, students should prepare the readings and cases listed in Readings and AssignmentsRequired in the adjoining class schedule prior to class. Students can turn in evidence of their preparation at the start of class for class participation points. Students are expected to adhere to, and will be bound by, the University and School policies governing academic integrity.

Course Materials Required Materials Text: Financial Statement Analysis by K.R. Subramanyam and J. J. Wild, 10th Edition (McGraw Hill Irwin). One required course reader is available at the University Bookstore.

Academic integrity All work turned in for a grade must be solely the work of the individual turning it in. Collaboration with others will be considered a violation of the honor code. If you are in doubt, please contact me. Retention of Graded Work All graded materials not returned to the student will be retained for one year following the students receipt of their grade. Returned paperwork, unclaimed by a student, will be discarded after the date of the final examination. Statement for Students with Disabilities 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 accommodation can be obtained from DSP. Please be sure the letter is delivered to me 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.

Class Schedule and Assignments

Date Topic Readings and Assignments

Section I: Introduction
1/15 Course Introduction Introduction to FSA Principal Financial Statements and their Uses Tools and Techniques of FSA Nature and Purpose of Financial Reporting - Accrual AccountingIs Cash King? Required Required Required SW1: 2-14, 40-47 SW: 15-39 SW: 66-91

Section II: Accounting Analysis

1/22 Introduction to Accounting Analysis The Concept of Income Non-Recurring Items 1/29 Non-Recurring Items - Case: Toys R Us Inventory 2/5 Capitalize or Expense? - Case: America Online Required Required Required Required Required SW: 106-113, 91-97, 330-336 SW: 336-350 RR: Toys R Us (Case) SW: 228-237 SW: 237-250 (browse), 355-359 RR: America Online (Case)

SW refers to the text: K.R. Subramanyam and Wild, J., Financial Statement Analysis 10 th edition. Numbers are page numbers. RR refers to required reader.

Date Investment Securities 2/12 Fair Value Accounting 2/19

Topic Required Required Required Required Required Required -

Readings and Assignments SW: 264-272, 311-313 SW: 97-106, 298-302 SW: 224-228, 176-183 RR: Accounting for Asset-Backed Securitization RR: New Century Financial (Case) SW: 359-365, 377-379 SW: 366-373 SW: 142-152 RR: Leasing in the Airline Industry (Case)

Receivables & Securitization - Case: New Century Financial

Employee Stock Options 2/26 Income Taxes Leases Case: Leasing in the Airline Industry

Section III: Financial Analysis

3/5 Profitability Analysis - Case: Sears and Walmart Cash Flow Analysis - Case: Amazon.com 3/12 Credit Analysis - Case: Amazon.com 3/26 Wrap-Up Required Required Required SW: 445-468 RR: Sears and Walmart (Case) SW: 400-420 (Browse) RR: Amazon.com (Case) only Cash Flow Statement SW:526-569 (Browse) RR: Amazon.com (Case)