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The University of Texas at Dallas

Global Leadership Executive MBA Program

Financial Accounting: AIM 6201


Summer 2005: July 11 – August 28, 2005

Instructors

Ashiq Ali, Ph. D. Phone: (972) 883.6360 Fax: (972) 883.6811

Carolyn Reichert, Ph.D. Phone: (972) 883.2726 (W) Fax: (972) 883.6164
Course Manager (972) 867.7088 (H)

Course Objectives
This course provides an introduction to the concepts and issues of financial accounting
with an emphasis on the interpretation of financial statements. The first part of the
course presents how to prepare financial statements (income statement, balance sheet,
and statement of cash flows) starting from business transactions. It also presents a
systematic approach to utilizing the information contained in financial statements.
Without a solid understanding of this material, the remainder of the course will prove to
be very difficult. Accordingly, I urge you to keep up with the course from the start.

The remainder of the course focuses on how corporate financial statements report
particular economic events. We will discuss the generally accepted accounting
principles for these events, their limitations, their alternatives, and the notion of earnings
quality. By the end of the course you should feel comfortable with a company's annual
report. You should be able to come to a reasoned conclusion about a company's
financial health and be able to make comparisons across firms and periods of time. You
should be able to pick up a set of financial statements, understand where the numbers
came from, and be able to take the statements apart and put them back together again
so that they suit your decision making needs.

Learning Outcomes

• Understand a company’s annual report


• Make reasoned conclusions about a company's financial health.

Resources

Workbook: Essentials of Accounting and Post Test Booklet, 8th ed.


R. Anthony and L. Breitner, Prentice Hall, 2003

Text: Introduction to Financial Accounting, 9th ed.


C. Horngren, G. Sundem, J. Elliott and D. Philbrick, Prentice Hall, 2005
Cases: Cases in Financial Reporting, Revised Edition, 4th ed.
D. Hirst, Prentice Hall, 2004

Other: Solutions to selected text problems, class readings, solutions manual for
the text, sample true/false exam questions, sample reports for the financial
statement analysis project, and team member evaluation form for the
project are posted on Blackboard.

The Wall Street Journal (optional, but highly recommended)

The Cases in Financial Reporting text provides you with exposure to a wide range of
financial disclosures. A good part of our class time will be spent on the cases in this
text. Class Readings (posted on Bb) consist of articles from business publications such
as The Wall Street Journal, Fortune, and Forbes. The purpose of these readings is to
place the concepts we discuss into perspective and to examine the impact of
accounting standards on decision making. I strongly encourage you to do additional
reading of this nature. It will not only improve your understanding of the role of financial
accounting but will also broaden your knowledge of business.

Evaluation and Grading Rubric

• Individual Homework Submissions 25%


• Team Financial Statement Analysis Project 15%
• Examinations 60%
Midterm 20%
Final 40%

Individual Homework Assignments 25%

I've adopted an active learning approach. For each class session, you are expected to
read the background material and do the required homework assignment. For most
students, this will be the first time you've covered the area and so you may not be able
to do the assignments correctly. However, I would like you to give it a good try and
make note of your difficulties. I expect that my discussion of the assignment in the next
session should address most of your difficulties. I find that this approach is very
effective in understanding and retaining new concepts. I will grade your homework
based largely on effort and not accuracy.

Homework assignments are due by the date and time indicated in the Schedule of
Assignments below. NO EXTENSIONS WILL BE GIVEN FOR ANY REASON. Late
work will not be accepted. Keep a copy of your work for reference during class
discussions. Your work will be graded as follows:
• 1.0 –There is evidence that you made a serious attempt on all parts of the
assignment.
• 0.5 – The work is incomplete.
• 0 – No work is turned in.
Homework assignments are to be turned in individually. Although I would encourage
that you work on these assignments in groups, you should write-up your submissions
individually. That is, you should not have one group member type the solution and share
the document, electronic or otherwise, with the other members. Doing so is not only an
act of academic dishonesty, but significantly reduces the learning experience. If such
cases come to my attention, all parties involved will receive grades of zero for that
assignment. Repeat offenses will be dealt with more harshly.

Note: Release of Audios and Homework Deadlines

This class uses an active learning approach. After a homework assignment is


completed, it is discussed in the next class session. As a result, there will be audios
and slides released immediately after each homework deadline. Homework deadlines
cannot be changed and no extensions can be given.

Individually Written Examinations 60%


Midterm (20%) and Final (40%)

There are two exams for this course. Anyone missing an exam will automatically receive
a grade of zero for that test. Exceptions for documented medical or family reasons may
be permitted. Where possible, either the course manager or I should be contacted prior
to the time of the exam. At my discretion, either a make-up exam will be scheduled or a
reallocation of the weight to remaining examinations will be made. Exams will be based
on the assigned material in the textbook, casebook and Class Readings.

The timed examinations will be downloaded from Blackboard. You will have
prespecified time to complete each one and post your solutions to the Digital Drop Box.
Examinations are to be done individually. Evaluation is based on the correctness and
quality of the response. It is important to pace yourself on the exams. Content is far
more important than appearance, so don’t waste time on formatting, fonts and other
similar items.

Assignment:

Format for Written Assignments


Written assignments should be Word documents or Excel files (no html formats).
• Each assignment can have a maximum of one document and one workbook.
• Problems and questions should be answered in order.
• Assignments should comply with any page limits.
• Charts and exhibits should be numbered and appropriately referenced in the
body of the document.
• Word documents:
o Double-spaced, 12 pt. Arial or Times New Roman font
o Citations properly formatted in MLA style
• Clearly identified by author or team
o For an individual assignment, the student name needs to be on the first
page of the document AND as part of the document name.i.e.
SmithMidterm.doc when it is submitted.
o For a team assignment, the team number and names of team participants
on the first page AND the team number as part of the document name i.e.
Team2JCPFinal.doc when it is posted
o There is no need for a separate cover pages

Submission
Assignments should be posted on Blackboard (Bb) within the course area by the due
date. Assignments are submitted to the Digital Drop Box under Tools tab. Be sure to
use the SEND command to submit to the Drop Box. Do not use ADD command to post.

Late Assignments
THERE ARE NO EXTENSIONS FOR HOMEWORKS. Assignments are of varying
lengths. Plan well ahead so that you are not surprised by the time needed to complete
the assignment.

Retreats: Attendance at the retreat is a course requirement. Missing the retreat is


grade affecting: you will lose 5 points (half a letter grade) from your final grade.

Evaluations:

Peer Evaluation
Students need to complete a peer evaluation for the Team Financial Statement Analysis
Project. The peer evaluation is an electronic document whose link is located on
Blackboard (Bb) in the course area under the Information button.

Course Evaluation
The completion of a course evaluation is a course requirement. Students need to
complete a course evaluation form which is an electronic document whose link is
located on Blackboard (Bb) in the course area under the Information button. Students
who do not submit a course evaluation by the due date will receive an incomplete grade
for the course.

UTD Policy on Cheating:

Students in this class will be held to the standards established by Regents’ Rules and
Regulations (Part One, Chapter VI, Section 3, Subsection 3.2, Subdivision 3.22) which
states: Candidates are expected to be above reproach in scholastic activities.
Candidates who engage in scholastic dishonesty are subject to disciplinary penalties,
including the possibility of failure in the course and dismissal from the University.
“Scholastic dishonesty includes, but is not limited to cheating, plagiarism, collusion, the
submission for credit of any work or materials that are attributable in whole or in part to
another person, taking an examination for another person, any act designed to give
unfair advantage to a student or the attempt to commit such acts.” Professors randomly
use “Turnitin.com” to screen papers against other published works on the web to insure
against plagiarism.
Schedule of Assignments

Pre-retreat
Assignment: Complete Chapters 1 to 5 of “Essentials of Accounting”
(Turn it in during the retreat for evaluation)

Retreat: Financial Accounting Basics


May 13
________________________________________________________________

Week 1: Financial Accounting Basics


Dates: July 11 – July 17

Lecture: Financial Accounting Basics I


Financial Accounting Basics II
Comprehensive Review Problem
Readings: Chapters 1, 2, 3 and 4

Practice: Ch. 1: 36, 43; Ch. 2: 46, 47; Ch 3: 38; Ch 4: 39


Comprehensive Review Problem (Bb) (discussed in the lecture)

Read the following material before doing the assignment:


Horngren p. 251-256.
The Crackdown is Here (Bb)
In Corporate America It Is Cleanup Time (Bb)
You Have Come a Long Way Shareholder

Assignment: Individual Homework: Miniscribe (Bb)


(Answer the questions accompanying the articles)
Due date: Homework posted to the Digital Drop Box by July 17 midnight CST
_______________________________________________________________________

Week 2: Statement of Cash Flows; Financial Statement Analysis I;


Investor’s Reliance on Financial Statements.
Dates: July 18 – July 24

Lecture: Statement of Cash Flows


Financial Statement Analysis I
Investor’s Reliance on Financial St. & Miniscribe (available after
July 18)
Readings: Chapters 5 & 12

Practice: Ch. 5: 57, 58; Ch. 12: 47, 48, 50-54


Problem 5-59 (Horngren) (discussed in the lecture)
Articles: Burning Up (Bb)
Once Hot Now Toast (Bb)
Return on Equity Example (Bb)
Managing Working Capital (Horngren, p. 157)

Read the following material before doing the assignment:


Horngren p. 26-32; 75-76; 565-570;
Numbers Game (Bb)

Assignment: Individual Homework: Maple Leaf Garden; Reebok and LA Gear


• Maple Leaf Garden (Hirst) parts a to h
(Note: Net book value = Total Assets – Total Liabilities)
• Reebok and LA Gear - Financial Statement Analybsis (Bb)
(Stock price charts of Reebok & L.A. Gear are on Bb)
Due date: Homework posted to the Digital Drop Box by July 24 noon CST

Teleconference: Teleconference topic: Reebok and LA Gear


Teleconference Date: Sunday, July 24, 7 to 8:30pm, CST.
_______________________________________________________________

Week 3: Valuation; Financial Statement Analysis II; Accounts Receivable


Dates: July 25 – July 31

Lecture: Valuation & Maple Leaf Garden (available after July 25)
Reebok and LA Gear (available after July 25)
Accounts Receivable
Readings: Chap. 6

Practice: Ch. 6: 55, 59, 66

Articles: Fearing Outcry Big Oil Companies Will Trim Profits (Bb)
Inside the WorldCom Numbers Factory (Bb)

Assignment: Individual Homework: Fredrick’s of Hollywood - Property Plant and


Equipment (parts c,d,e,f,g)
Due date: Homework posted to the Digital Drop Box by July 31 midnight CST

Exam Date: Mid-term Exam, Saturday, July 30: 9:00 AM – 11:00 AM CST.
(based on material from Weeks 1 to 3)
________________________________________________________________
Week 4: Inventory; Property, Plant & Equipment

Dates: August 1 – August 7

Lecture: Inventory
Property, Plant & Equipment & Frederick’s PPE
(available after August 1)
Readings: Chap. 7 and 8 (pages 335-357)

Practice: Ch. 7: 56, 67, 70; Ch. 8: 31, 39, 61, 70, 71

Articles: Inventory Chicanery Tempts More Firms, Fools More Auditors (Bb)
Paying FIFO Taxes: Your Favorite Charity (Bb)
Earnings Helper (Bb)

Assignment: Individual Homework: Alcatel, Whole Food, Keysor Roth, Chrysler,


Merck
• Alcatel - Accounts Receivable (Hirst)
(parts a to e; for part e assume that all sales are on credit)
• Whole Food Market - Inventory (Hirst)
(parts a to f; for part d assume that all purchases are on credit;
for parts e and f, assume that the tax rate is 35%)
• Keysor Roth Corp. Senior Debenture (Bb)
(Answer the questions accompanying the above article)
• Chrysler Corp. (Problem 7-71 of Horngren, p.326)
• Merck and Company (parts a, b) (Hirst)*
Due date: Homework posted to Digital Drop Box by August 7 midnight CST
_______________________________________________________________

Week 5: Accounts Receivable, Inventory and Intangible Assets


Dates: August 8 – August 14

Lecture: Alcatel (available after August 8)


Whole Food Market (available after August 8)
Chrysler and Keysor Roth (available after August 8)
Intangible Assets & Merck (available after August 8)
Readings: Pages 390-395 and Chap. 8 (pages 357-362)

Practice: Ch. 8: 54
Articles: Real Assets, Unreal Reporting (Bb)

Assignment: Individual Homework: AMR Corp. - Leases (parts d,e,f,g) (Hirst)


Due date: Homework posted to Digital Drop Box by August 14 midnight CST

Assignment: Team Assignment: Financial Statement Analysis Project Part I


Due date: Assignment posted to Digital Drop Box by August 14 midnight CST

_______________________________________________________________

Week 6: Bonds; Leases


Dates: August 15 – August 21

Lecture: Bonds
Leases (available after August 15)
Readings: Chap. 9 (pages 390-409 and 418-425)

Practice: Ch. 9: 52, 57


Problem 9-53 (Horngren) (discussed in the lecture)
Articles: Chrysler Bonds (Bb)
How Leases Play a Shadowy Role in Accounting (Bb)
Accounting Analysis (Bb)

Assignment: Individual Homework: Dow Chemical Company - Treasury Stock


(parts a,b,c,d) (Hirst)
Due date: Homework posted to Digital Drop Box by August 21 midnight CST
________________________________________________________________

Week 7: Stockholders’ Equity; Intercorporate Investments; Global


Accounting Standards

Dates: August 22 – August 28

Lecture: Stockholders’ Equity & Dow Chemical (available after August 22)
Intercorporate Investments
Global Accounting Standards

Readings: Chap. 10 (pages 441-465); Chap. 11 (pages 489-498 and 500-520)

Practice: Ch. 10: 30, 32, 44


Problem 10-61 (Horngren)
Problem 11-31, 11-43 (parts 1&2), 11-45 (Horngren)
(discussed in the lecture)
Articles: U.S. GAAP versus Swedish GAAP (Bb)
FASB’s Impact on Cost of Capital (Bb)
Share and Share Unalike (Bb)
Murky Waters: A Primer on Enron Partnership (Bb)

Exam Date: Final Exam, Saturday, August 27: 9:00 AM – 12:00 PM CST.
(Comprehensive)

Assignment: Team Assignment: Financial Statement Analysis Project Part II


Due Date: Posted to Digital Drop Box by August 31 midnight CST

Peer Evaluation: Due by August 31

Course Evaluation: Due by August 31

________________________________________________________________
ASSIGNMENT SCHEDULE
(NO EXTENSIONS ON HOMEWORK; SOME AUDIO/SLIDES RELEASED WEEKLY)
Week Topic Readings/Practice Due
Retreat: May 13 Financial Accounting Individual Homework:
Basics Workbook; Ch 1-5
Workbook: Chapters 1-5 Due 5/13
Week 1: Financial Accounting Chap. 1, 2, 3 & 4
7/11 to 7/17 Basics Problems: Ch. 1: 36, 43;
Ch. 2: 46, 47; Ch 3: 38;
Ch 4: 39 Individual Homework:
Comprehensive Review Miniscribe
Readings: Horngren, Due 7/17 at midnight
Crackdown, Cleanup Time,
You have come a long way
Week 2: Statement of Cash Chap. 5 & 12
7/18 to 7/24 Flows, Financial Problems: Ch. 5: 57, 58, 59; Individual Homework:
Statement Analysis I, Ch. 12: 47, 48, 50-54 Maple Leaf Garden
Investor Reliance on Articles: Burning Up; Once Reebok & LA Gear
Financial Statements Hot; Return on Equity; Due 7/24 by NOON
Managing Working Capital
Readings: Horngren, Teleconference: 7/24 pm
Numbers Game
Week 3: Valuation, Financial Individual: MIDTERM
7/25 to 7/31 Statement Analysis II, Chap. 6 7/30 at 9 AM CST
Accounts Receivable Problems: Ch. 6: 55, 59, 66 Individual Homework:
Articles: Fearing Outcry; Frederick’s PPE
Inside Worldcom Due 7/31 at midnight
Week 4: Inventory; Property, Chap. 7 & 8 (Pg. 335-357) Individual Homework:
8/1 to 8/7 Plant and Equipment Problems: Ch. 7: 56, 67, 70; Alcatel, Whole Food,
Ch. 8: 31, 39, 61, 70, 71 Keysor, Chrysler,
Articles: Inventory Chicanery; Merck
Paying FIFO, Earnings Helper Due 8/7 at midnight
Week 5: Accounts Receivable, Individual Homework:
8/8 to 8/14 Inventory and Pg. 390-395; Chap. 8 (pg. AMR Corp
Intangible Assets 357-362) Due 8/14 at midnight
Problems: Ch. 8: 54 Team Project Part 1:
Articles: Real Assets Due 8/14 at midnight
Week 6: Bonds and Leases Chap. 9 (pg. 390-409; 418-
8/15 to 8/21 425) Individual Homework:
Problems: Ch. 9: 52, 53, 57 Dow Chemical
Articles: Chrysler Bonds; How Due 8/21 at midnight
Leases; Accounting Analysis
Week 7: Stockholders’ Equity, Chap. 10 (pg. 441-456); 11 Individual: FINAL
8/22 to 8/28 Intercorporate (489-498, 500-520) 8/27 at 9 AM CST
Investments and Problems: Ch. 10: 30, 32, 44, Team Project Part II
Global Accounting 61; Ch. 11: 31, 43, 45 Due: 8/31 midnight CST
Standards Articles: US GAAP; FASB
Impact; Share; Murky Waters