Corporate Financial Reporting

ACCT-5053

Program BS in Commerce

Credit Hours 3

Duration 16 Weeks / 32 sessions

Prerequisites Corporate Finance

Course Introduction:

This course introduces the students to the corporate financial reporting environment. The
purpose of the course is to prepare the students to make financial reports complying with the
financial reporting standards. It will start from the introduction of the regulatory environment
leading to conceptual framework, principles and requirements for the preparation of the
financial statements.

Course Objectives:

This course aims at introducing the students with various issues in financial reporting. Also it
will develop their understanding about how to prepare financial reports. It will stimulate
theoretical applications of the concepts into financial issues regarding reporting.

Learning Outcomes:

By the end of this course, you should be able to:

 Describe the financial reporting requirements applied to Pakistani companies and
accounting standard setting processes and regulatory framework.
 Prepare financial statements in compliance with reporting requirements.
 Analyze the impact of the accounting choices that directors and managers make.
 Think critically about accounting developments.

Violation of Academic Honesty Policy:

If any two projects / assignments are identical or partially identical, a zero will be awarded.
The repetition of such kind may lead to an “F” grade in the course.

How to Keep Your Professor Happy:

Class attendance is mandatory. You may miss up to 6 class sessions. On the seventh absence,
you will be withdrawn from the course. As a courtesy to the instructor and other students, be
prepared to arrive at class and be in your seat on time. In addition, please note that each class
lasts for 90 minutes.

Also keep in mind some general rules as given below:

 Cell phones should be powered off.

 Eatables are not allowed in the class.
 The teacher will not tolerate any disruptive behavior in the class.
 The Dress Code has to be observed, no warnings will be given, and violators will be
asked politely to leave the class and consequently will be marked absent.
 Participation:
Students are required to attend all classes and read all the assigned material in advance of
class (although not necessarily with perfect comprehension). Advanced preparation and class
participation are crucial for periods in which we discuss cases. During discussion sessions,
the instructor generally keeps track of the insightful and useful comments students make.
(Any unproductive contribution is not rewarded)

TEXT BOOK

A course pack will be available at your campus book store.

 Corporate Financial Reporting
Calendar of Activities
Weeks Contents
Accounting and Reporting on a Cash Flow Basis
 What skills does an accountant require in respect of external and internal reports?
 Agency costs
1  Periodic financial statements prepared under the cash flow concept to disclose
realized operating cash flows
 Preparation of statement of financial position
 Treatment of non-current assets in the cash flow model
 Reports to external users
Accounting and Reporting on An accrual Accounting Basis
 Historical cost convention
 Accrual basis of accounting
 Mechanics of accrual accounting – adjusting cash receipts and payments
2  Subjective judgments required in accrual accounting
 Adjusting cash payments in accordance with the matching principle
 Mechanics of accrual accounting – the statement of financial position
 Reformatting the statement of financial position
 Accounting for the sacrifice of non-current assets
 Reconciliation of cash flow and accrual accounting data
Income and Asset Value Measurement : An Economist’s Approach
 Role and objectives of income measurement
3  Accountant’s view of income, capital and value
 Critical comment on the economist’s measure
 Income, capital and changing price levels
Accounting for Price-Level Changes
 Review of the problems of historical cost accounting (HCA)
4  Inflation accounting
 The four models illustrated for a company with cash purchases and sales and their
critiques
 Operating capital maintenance – a comprehensive example
Preparation of Statements of Comprehensive Income and Financial Position
 The prescribed formats – the statement of comprehensive income
 The prescribed formats – the statement of financial position
 Statement of changes in equity
5  The fundamental accounting principles underlying statements of comprehensive
income and statements of financial position
 What is the difference between accounting principles, accounting bases and
accounting policies?
 What does an investor need in addition to the financial statements to make
decision?
6 Annual Report: Additional Financial Statements
 The value added by segment reports
 Detailed review and evaluation of IRFS 8 - Operating Segments
 IFRS 5 –meaning of ‘held for sale’
  IFRS 5 – implications of classification as held for sale
 Meaning and significant of ‘discontinued operations’
 IAS 10 – Events after the reporting period
 Related party disclosures
Share Capital, Distributable Profits and Reduction of Capital
 Total owners’ equity, accounting entries on issue of shares
 Creditor protection: capital maintenance concept, why capital maintenance rules are
7 necessary, how to quantify the amounts available to meet creditor’s claims
 Issued share capital: minimum share capital
 Distributable profits, when may capital be reduced?
 Writing off part of capital, repayment of part of paid-in capital, purchasing of own
shares
Off Balance Sheet Finance, Financial Instruments
 Traditional statements - conceptual changes
 Off balance sheet finance - its impact
 Illustrations of the application of substance over form
8  Provisions - their impact on the statement of financial position
 Impact of converting to IFRS
 Financial instruments - the IASB’s problem child
 IAS 32 Financial Instruments: Disclosure and Presentation
 IAS 39 Financial Instruments: Recognition and Measurement
 Financial instruments developments
9 MID TERM
Employee Benefits
 Pension, Financial reporting implications
 Contribution pension and benefit schemes
 IAS 19 (revised) Employee Benefits
10  The liability for pension and other post-retirement costs
 The statement of comprehensive income
 Plan curtailments and settlements
 Multi-employer plans
 Short and long-service benefits
 Termination benefits
Taxation in Company Accounts
 Corporation tax systems – background, avoidance, and evasion
 IFRS and taxation
11  IAS 12 - accounting for current taxation
 Deferred tax
 A critique of deferred taxation
 Value added tax (VAT)
12 Property, Plant and Equipment (PPE)
 PPE - concepts and the relevant IASs and IFRSs
 What is PPE?
 How is the cost of PPE determined?
 What is depreciation?
 What are the constituents in the depreciation formula?
 How is the useful life of an asset determined?
  Residual value
 Calculation of depreciation
Leasing
 Background to leasing
 Why was the IAS 17 approach so controversial?
13  IAS 17 - classification of a lease
 Accounting requirements for operating and financial leases
 Accounting for the lease of land and buildings
 Leasing - a form of off balance sheet financing
 Accounting for leases by lessors
R&D; Goodwill; Intangible Assets, Brands, and Inventories
 Accounting treatment for research and development
 Why is research expenditure not capitalized?
 The judgments to be made when deciding whether to capitalize development costs
 Disclosure of R&D, Goodwill, accounting treatment of goodwill
14  Negative goodwill, Intangible assets, Brand accounting
 Accounting for acquired brands
 Intellectual property
 Inventory, its valuation
 Work-in-progress and Inventory control
 Creative accounting
 Audit of the year-end physical inventory count
Accounting for Groups at the Date of Acquisition and after the Acquisition
 Consolidated accounts and some reasons for their preparation
 The definition of control, preparing consolidated accounts
 Acquisition by cash and an exchange of shares
 Non-controlling interests, calculating of fair values
15  Differences between a subsidiary’s fair value and book value
 Pre- and post-acquisition profits/losses
 Inter-company balances
 Unrealized profit on inter-company sales
 Provision for unrealized profit affecting a non-controlling interest
 Uniform accounting policies and reporting dates
 How is the investment in subsidiaries reported
Preparation of Consolidated Statements of Comprehensive Income, Changes in
Equity and Cash Flows
 Preparation of a consolidated statement of comprehensive income
 The statement of changes in equity (SOCE)
16  Other consolidation adjustments
 Dividends or interest paid by the subsidiary out of pre-acquisition profits
 A subsidiary acquired part of the way through the year
 Published format statement of comprehensive income
 Consolidated statements of cash flows

FINAL EXAMINATION