Post Graduate Programme in Management

2014-15 TERM: I

TITLE OF THE COURSE: FINANCIAL ACCOUNTING AND REPORTING
CREDITS: 4
Name of the Faculty member
Prof. V K Gupta Prof. Akila K. Prof. Jayanthi Iyer Dr. Amit Shrivastava Prof. N. Sivasankaran

Faculty Block
A-104 VF VF VF VF

Email:
vkgupta@iimidr.ac.in vf-akilak@iimidr.ac.in vf-jayanthii@iimidr.ac.in dramit.iima@gmail.com ns@iimranchi.ac.in

Telephone Number
2439516

COURSE DESCRIPTION

Accounting is the language of business. It attempts to measure and report corporate
performance. Users of financial statements demand the performance measure in a variety of
decisions they make. Managers use accounting in making decisions; while investors use it for
valuing stocks. The bankers and lender rely on accounting information to decide to whether to
lend money to business. The accounting information is also crucial in evaluating the performance
of employees at various levels in an organization.

COURSE OBJECTIVES

This course is designed with the following objectives:
(i) Help the participants to become intelligent users of accounting information
(a) Understand the rules and managements discretion
(b) Understand what explains the rules and the type of management discretion
(c) Understand how events affect firm value
(ii) Make the participants comfortable looking through an annual report
(iii) Develop the ability in participants to use financial statements to assess a companys
performance
(iv) Participants to get a sense of the limitations of financial statement data.


PEDAGOGY/TEACHING METHOD:

Cases, minicases and annual report discussion.



EVALUATION WEIGHTAGE
Quizzes 25%
Case Analysis / Home Assignments 20%
Mid-term Examination 25%
End-term Examination 30%
Total 100%


SCHEDULE OF SESSIONS

Module I Preparation of Financial Statements

Module Objective

To explain the basic principles underlying the preparation of financial statements and to go
through the entire accounting process quickly to establish an overview.

Sessions and Objective
Session 1: Balance Sheet
Objective: To explain how to prepare the balance sheet and the importance of each
underlying principle.
Reading: AHM: Chapter 2: Basic Accounting Concepts: The Balance Sheet
Case: Smoky Valley Caf

Session 2: Income Statement
Objective: To explain how to prepare the income statement of a firm and the
underlying principles in accrual accounting.
Reading: AHM: Chapter 3: Basic Accounting Concepts: The Income Statement
Case: Mansa Building [IIMA / F&A-0089R]

Sessions 3 & 4: Income Statement- Merchandising firms
Objective: To introduce the system of double-entry bookkeeping and to explain its
elements viz. preparation of journal, the ledger and the trial balance.
Reading: AHM: Chapter 4: Accounting Records and Systems
Case: AHM: Case 4 4: Waltham Oil and Lube Centre, Inc.

Session 5: Income Statement Manufacturing firms
Objective: To explain how the costs are accrued in the manufacturing context and
estimating the cost of goods manufactured and cost of goods sold apart
from preparation of classified financial statements.
Reading: AHM: Chapter 6: Cost of Sales and Inventories, pgs. 148-152
Case: Birla3M [IIMA / F&A-0462]

Sessions 6 & 7: Cash Flow Statement
Objective: To explain how to prepare the cash flow statement including cash flows
from operating, investing and financing activities and also to calculate the
cash from operations by indirect method
Reading: AHM: Chapter 11: Statement of Cash Flows
Case: Chemalite, Inc. [B] [9-195-130]


Module II Accounting Policies and Managerial Choices
Module Objective

To discuss important accounting policies and standards which are required for measuring the
revenues, expenses, assets and liabilities.

Sessions and Objective

Session 8: Revenue Recognition
Objective: To explain the revenue recognition methods used when the critical event
and measurability conditions for revenue recognition are not satisfied at
the point of sale.
Reading: AHM: Chapter 5: Revenue and Monetary Assets
Case: AHM: Case 5 2: Grennell Farm

Session 9: Issues in Revenue Recognition
Objective: To understand the accounting standard on revenue recognition and when
to recognize revenue in different types of sales transactions.
Reading: Revenue Recognition and Reporting [9-101-050]
Case: Boston Automation [9-103-041]

Session 10: Accounting for Inventory
Objective: To explain different classification of inventory and how to measure the
value of inventory under different methods as well as explaining accounting
standard regarding Inventory.
Reading: (1) AHM: Chapter 6: Cost of Sales and Inventories
(2) The Question of LIFO or FIFO: Which is Preferable? [9-104-087]
Case: Merrimack Tractors and Mowers, Inc.: LIFO or FIFO? [3217]

Session 11: Accounting for Depreciation
Objective: To understand how to measure the depreciation expenses for long-lived
assets under different methods as well as explaining the relevant
accounting standard.
Reading: (1) AHM: Chapter 7: Long-lived Nonmonetary Assets and Their Amortization
(2) Accounting for Property, Plant, and Equipment and Other Assets [9-193-
046]
Case: Depreciation at Delta and Singapore Airlines [9-198-001]

Session 12: Accounting for Long Lived Assets
Objective: To evaluate the three models of accounting for long-lived assets (cost,
revaluation and fair value models) and to conclude on a major financial
reporting decision.
Reading: (1) AHM: Chapter 7: Long-lived Nonmonetary Assets and Their Amortization
(2) Asset Reporting [9-101-014]
Case: Land Securities Group [A] [9-105-014]

Session 13: Accounting for Equity
Objective: To understand the accounting and financial reporting for owners equity.
Reading: AHM: Chapter 9: Sources of Capital: Owners Equity
Case: Kemp Foods Corporation [9-110-101]


Session 14: Accountingfor Liabilities
Objective: To understand when to recognize the contingent liability and to measure
and record it in financial statements.
Reading: AHM: Chapter 8: Sources of Capital: Debt
Case: Accounting for the Intel Pentium Chip Flaw [9-101-072]

Session 15: Accounting for Leases
Objective: To understand when to capitalize a lease and how to report in the financial
statements.
Reading: (1) Lease Accounting and Analysis [9-100-003]
(2) Lease Reporting and Analysis
Case: A Note on Comdiscos Lease Accounting [9-196-122]

Session 16: Accounting for Income Taxes
Objective: To understand the situations in which deferred tax arise as asset or liability
and how to report in the financial statements.
Reading: Income Tax Reporting and Analysis
Case: Taxing situations: Two cases on income taxes and Financial Reporting [9-
191-071]

Module III Financial Statement Analysis

Module Objective
To examine the information contained in corporate annual report, assess the performance from
different viewpoints and to understand the limitations of the accounting data.

Sessions and Objective

Sessions 17& 18: Understanding of Annual Report
Objective: To explain how to understand the corporate financial statements in
prescribed format as well as significant account policies apart from
directors report, auditors report and the management discussion.
Reading: AHM: Chapter 14: Understanding Financial Statements
Discussion: Annual Report of Hindustan Unilever Limited


Session 19: Financial Statement Analysis
Objective: To explain how analyze the corporate financial statements from the
viewpoint of various stakeholders about the performance of the company
and its financial condition.
Reading: AHM: Chapter 13: Financial Statement Analysis
Case: Analyzing the Financial Statements of Hindustan Unilever Limited

Session 20: Review
Objective: To review the topics covered in different sessions of the course and Q&A
session on any accounting issue related to meeting the objectives of the
course.

Additional Reading & Text Book:
Accounting Text and Cases (AHM)- 13th Edition" Author- Robert N Anthony, David F Hawkins and
Kenneth A Merchant- Publisher- Tata McGraw
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