Financial Accounting Course Sequence for MBA Students

• Accounting 380D

  Advanced Financial Reporting Topics for MBAs

  (Intermediate and Advanced Financial Accounting combined in one course designed for MBAs)

  This course covers a lot of material that is essential to understanding a set of financial statements. This material may seem somewhat familiar/similar to BA 384T; however, ACC 380D goes into these topics in much greater depth. After taking ACC 380D, students will be able to read and understand 80 percent of the material in a financial statement

  If you intend to concentrate in Finance in the MBA program, this course is very strongly recommended. In fact, most employers hiring MBAs with a Finance concentration require that they take this class, or its equivalent. A very significant portion of the CFA exam (Level I in particular) pertains to topics covered in this class.

  The course covers a number of topics typically covered in Intermediate and Advanced Accounting (i.e., ACC 380K.1 and ACC 380K.2). The course is specifically designed for MBA students. Students in the MPA program will not be allowed to enroll; they will take ACC 380K.1 and ACC 380K.2, which are described below.

  This course will be organized around how companies run their businesses. Particular attention is paid to the incentives of company management in terms of financial reporting. The course also will concentrate on how financial analysts use financial statement information. This class stops short of financial statement analysis, which is a separate course in the Department of Accounting (ACC 380K.7). Many students report that financial statement analysis is much easier and more enlightening if they have already had the content of ACC 380D before taking financial statement analysis.

  Articulation of balance sheet, income statement and cash flow statement Effects of accounting changes, restatements, discontinued operations, and extraordinary items Financial instruments (investments in debt instruments, equities, and derivatives; cash flow, fair value, and foreign currency hedges; outstanding debt, equity, hybrids) Deferred taxes (reconciliation of taxes paid with tax expense) Securitization Stock-based compensation Earnings per share (basic and diluted) Accounting implications of differences between mergers and acquisitions Consolidated financial reporting Accounting for foreign subsidiaries Importing, exporting, and financial instruments used to manage foreign exchange risk

• ACC 380K.7

  (Financial Statement Analysis)

  devotes about 30-40 percent of the semester to covering many of the topics from ACC 380D, but in less depth. The remainder of the course is devoted to using this information to evaluate a company’s financial position and performance and to forecast and conduct valuation analysis. For those going into finance-related positions, your employer will expect you to be familiar with the material in both ACC 380D and ACC 380K.7

  Course goal: To understand a company's history, current position, and future prospects by analyzing and interpreting the information in publicly-issued financial statements and their related footnotes. The analyses are performed in the context of the company's industry and strategic environment, and have a variety of potential uses, including business valuation, credit risk analysis, and management performance evaluation.

  Primary emphasis: The course typically focuses on business valuation as an application of the techniques and methods we discuss.

  Who would benefit from this class: This class is likely to be most useful for prospective financial analysts or for other professionals who might use accounting information to judge a company's prospects.

  Topics: Specific topics in the class include (a) analyzing the firm's industry and economic environment; (b) analyzing the firm's recent financial performance; (c) analyzing the firm's accounting methods and evaluating the quality of financial reporting; (d) forecasting the firm's future financial performance, and (e) independently estimating the value of the firm.

  Assignments: There are two major types of assignments in this class, and both reflect the real-world focus of the class. The first type consists of small assignments that use excerpts from firms' financial statements to illustrate specific accounting topics covered in the class. The second type consists of comprehensive analysis of existing companies, and is typically done in groups. Examples are cases on General Electric and Home Depot. Another example is a comprehensive financial statement analysis and valuation of selected companies.

  Relation to other courses: The only pre-requisite for this class is Introductory Financial Accounting, BA 384T. Advanced Financial Reporting Topics for MBAs (ACC 380D) will familiarize you with the topics in this class, and it is strongly recommended (but not necessary) to take that class before Financial Statement Analysis. In the past, students have successfully taken either of these classes alone or in either order. ACC 380D examines financial accounting from the perspective of decision makers within the company. Those decision makers are privy to the raw information that is summarized in financial statements and can shape their companies' financial reports. In contrast, Financial Statement Analysis examines financial reporting from the perspective of external users who are typically limited to the company's reports and other publicly available information on the company and its industry.

MBA students who wish to take more in-depth accounting courses can elect to take ACC 380K.1 and ACC 380K.2, which are separate courses in Intermediate and Advanced Accounting, respectively. These courses are offered primarily to students enrolled in the MPA program but can be taken by MBAs with permission of the MPA academic advisors

• Accounting 380K.1

  Financial Accounting Standards and Analysis I

  (Intermediate Financial Accounting)

  This course is a requirement for those enrolled in the MPA program and can be taken, with special permission by the MPA office, by those in the MBA program (although most MBAs will take ACC 380D, described above).

  This course covers many of the same topics dealt with in BA 384T, but we tackle them on a more in-depth basis. Specifically, we discuss how companies actually do their financial reporting as prescribed by the Financial Accounting Standards Board (FASB). To illustrate, consider the topic of leases. In BA 384T, you discuss the distinction between an operating and capital lease, as well as other related, relatively high-level issues. In ACC 380K.1 (intermediate), we tackle this issue in more depth by discussing how companies calculate the lease liability number that appears on their balance sheet; how companies deal with leases that have bargain-purchase provisions; how companies handle leases where the leased asset has a guaranteed residual value; strategies that companies use to avoid showing a lease liability on their balance sheets, etc.

  Topics covered in ACC 380K.1

  *Articulation of balance sheet, income statement and cash flow statement

  *Revenue recognition (long-term construction contracts, installment sales)

  *Effects of accounting changes, restatements, discontinued operations, and extraordinary items

  *Financial instruments (investments in debt instruments, equities, and derivatives; cash flow versus fair value hedges; securitizing receivables; outstanding debt, equity, hybrids)

  *Fixed assets (impairments, restructurings, and interest capitalization)

  *Deferred taxes (reconciliation of taxes paid with tax expense)

  *Leases (off-balance-sheet financing)

  *Pensions (effects of changes in interest rates and actuarial assumptions)

  *Stock-based compensation

  *Earnings per share (basic and diluted)

• Accounting 380K.2

  Financial Accounting Standards and Analysis II

  (Advanced Financial Accounting)

  This course is a requirement for those enrolled in the MPA program (in the financial accounting/auditing track) and can be taken by those in the MBA program (although most MBAs will take ACC 380D, described above).
  The overall theme of ACC 380K.2 (advanced) is to generalize the U.S. single-corporation focus of ACC 380K.1 (intermediate) to different and broader entities. Primary examples are partnerships, consolidated operations of affiliated companies, and international operations.
  Topics covered in ACC 380K.2

  *Partnership accounting and corresponding valuation issues

  *Accounting implications of differences between mergers and acquisitions

  *Consolidated financial reporting Special-purpose / variable-interest entities

  *Disclosures of segmented information

  *International accounting standards and global capital markets

  *Accounting for foreign subsidiaries

  *Importing, exporting, and financial instruments used to manage foreign exchange risk

Managerial Accounting Course Sequence for MBA Students

Management accounting is the information used to make business decisions including product costing, planning and budgeting, performance evaluation and feedback, product pricing, component sourcing, customer profitability, investment decisions, capacity utilization, and the like. Managerial accounting is integrally involved in the marketing, finance, operational, and human relations aspects of the business. Managerial accounting courses cut across these functional lines and examine information useful to making decisions in a variety of settings. The McCombs School offers two graduate course in managerial accounting: ACC 287.5 (Performance Measurement and Control) and ACC 387.4 (Strategic Control Systems). These courses are described below.

• ACC 287.5

  Performance Measurement and Control

  This is a half-semester FlexCore course generally taken in the second semester of the program.

  The purpose of this course is to introduce students to the types of managerial information used to effectively and efficiently run the business. The emphasis is on understanding the kind of information to ask for in various decision settings and how to use it (the managerial function) as opposed to the technical details of how to produce the data (the accounting function). Some technical expertise is developed to understand the strengths and limitations of the data. However, the course focuses on the use of that data as information in managerial decision making; that is, interpretation and evaluation of information in common business situations.

  The content of this course is organized into two components. First covered are the concepts and fundamentals of management accounting which pervade business decisions. This area includes cost behavior as studied in cost-volume-profit analysis and cost traceability as studied in product costing and overhead allocation. We study two models for accumulating information: the full cost model and the direct cost contribution margin model. The overriding theme of this course is understanding these two frameworks and their applicability in various decision settings.

  The second component covered is the planning and control function. Planning activities involve decisions between alternative courses of actions with a focus on future costs. In this context we consider standard costs and budgeting. Control addresses the successful implementation of plans and the use of feedback to ensure goals are reached.

  In this topic we consider variance analysis, responsibility accounting, and performance evaluation.

• ACC 387.4

  Strategic Control Systems

  This is a follow-up course for students who want to go beyond the material in ACC 287.5. Accordingly, students may elect to take this course in their second year.

  Relying solely on historical accounting information to run a business is like driving down the highway with the windshield covered. Through the "rear view mirror" of accounting information you can see clearly where you have been, but you have no way of navigating the twisting, turning road of the future.

  Business strategy guides companies into the future impacting the results that are ultimately reported in historical financial statements. This course shows how strategic control systems can give managers the timely quantitative and qualitative information they need to "drive into the future" with confidence and success. Managers use performance measurement and control systems to maintain or alter patterns in organizational activities. Desirable patterns may include efficiency and error-free processing, such as yield rates in manufacturing environments. In other instances, they may relate to patterns of ongoing creativity and innovation in products or internal processes, such as percentage of sales from new products or year-over-year improvement in processing speed. Rather than simply identifying good business measurements, this course emphasizes the identification and utilization of measurements that drive results consistent with corporate strategies.

  Major Themes

  Linking strategies to operations

  How can management leverage the potential for innovation while ensuring adequate control and protection from unpleasant surprises by employees?

  How do managers organize and allocate various resources to support implementation of strategies?

  How is focus maintained when a plethora of business opportunities exist?

  Aligning people with corporate objects

  How can managers communicate business strategy and goals effectively to all employees?

  How can senior managers move information from employees, who are in day-to-day contact with customers, back up the hierarchy to those responsible for formulating and supporting strategies?

  What is the role of compensation and recognition systems in motivating employees to achieve corporate objectives?

  Measuring results to control, learn and improve performance

  How can managers drive growth that enhances, rather than dilutes, profitability and cash flow?

  What are the best ways to measure and track performance toward strategically important goals?

  How are performance measures linked with external markets?

  How can managers ensure that their business is not exposed to unacceptable levels of risk?