ACCT 210 Syllabus 2019 PDF

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Graduate School of Business STANFORD UNIVERSITY

ACCT 210: Financial Accounting Fall 2019

Financial Accounting Jung Ho Choi and Becky Lester

The objective of financial accounting is to measure economic activity for decision-making. Financial statements are a key product of this measurement process and an important component of firms’ financial reporting activities. In recent years, financial accounting has come to the forefront of the national consciousness with the revelation of accounting irregularities at some of the U.S. largest companies. However, the implications extended well beyond the effects of individual company failures: investors seemed to lose confidence in the integrity of the financial system as a whole. The capital markets, whose efficiency is based largely on the timely dissemination of relevant and reliable financial information, were at risk. Clearly, the importance of understanding accounting has never been so salient. The objective of this course is not to train you to become an accountant but rather to help you develop into an informed user of financial statement information. While financial statement users face a wide variety of decisions, they are often interested in understanding the implications of financial statement information for the future cash flows and earnings potential of a firm. We will focus on understanding the mapping between underlying economic events and financial statements, and on understanding how this mapping affects inferences about future profitability. Because annual reports are somewhat formidable, we will spend time familiarizing ourselves with how firms present the information for various accounts in the financial statements, including the footnotes. We also will discuss the role of the various institutions involved in the reporting process. By understanding the environment in which financial reporting takes place, you will be in a better position to evaluate critically the disclosures made by firms in published financial statements. Several features of the course are used to facilitate these learning objectives. The textbook provides a conceptual foundation for the course by introducing the accounting framework and by characterizing accounting principles and alternative methods. We also suggest several articles from the financial press to develop your understanding of the environment in which accounting standards are set, and the implications for different constituencies of alternative methods. You are encouraged to read the financial press articles, although we generally will not discuss them in class. Class time will be allocated to a combination of short lectures and discussions of the assigned materials. The assigned cases serve as a basis of class discussion and provide a challenging test of your understanding of the topic. They are based on corporate financial statements and illustrate the issues associated with various accounting methods and the manner in which the related information is disclosed. In addition, they demonstrate the “real life” magnitude of income and balance sheet differences under alternative accounting methods, as well as a variety of financial reporting practices.

Organizational Matters 1.

Required Text: Hanlon M., R. Magee, G. Pfeiffer, T. Dyckman, Financial Accounting, 6th Edition, Cambridge Business Publishers, 2020. The text is referred to as (T).

2.

Syllabus materials are organized according to the order in which they will be discussed in class. These materials include the homework assignments, additional self-study cases, and several handouts. Syllabus materials are denoted (S).

3.

Additional course materials, including solutions for the self-study problems, templates for some of the assigned cases, and additional class handouts are provided on the Canvas course website. The optional self-study problems are intended for your use as a tool for selfassessment and additional practice. We will not discuss the self-study problems during class. myBusinessCourse, a website from the textbook publisher, is also available through Canvas. There are a selection of lecture videos, guided examples from within textbook chapters, and self-study problems organized as “quizzes” to provide real-time feedback. Note that not all self-study problems are available through myBusinessCourse.

4.

Grades for ACCT 210 will be based on a midterm exam, a comprehensive final exam, class participation, and hand-in homework assignments. The following weights will be used in calculating your final grade: Midterm Exam Final Exam Classroom Performance Homework Assignments Total

30% 40% 15% 15% 100%

Exams: The midterm and the final exams will be closed book and closed notes. You may use a non-programmable calculator. Although the final exam is cumulative, it will focus mainly on materials covered after the midterm. Classroom performance: Classroom performance comprises participation in class discussions, preparation for class, and attendance during class. We view class discussion as an integral part of the learning experience of the course. Your class participation grade will be based on contribution to class discussion, not based on the amount of time you talk. We recognize that students with different backgrounds will contribute differently. Contributions can take many forms, including, but not limited to, insightful comments, thoughtful questions, and contribution of relevant articles for class discussion. Cold calls are fair game. Meaningful class participation requires adequate preparation of the assignments for each class. In the rare instance that an emergency precludes you from preparing adequately for a particular class, you should notify us before the class begins.

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Attendance is required for all sessions. However, there will be no negative evaluation consequences if you miss or if you are unprepared for no more than one class and let us know in advance. Tardiness, entering or leaving during class, and/or lack of attendance will have a negative effect on your classroom performance grade, and, in extreme cases, could lead to a failing grade for the course. Following the recommendation of the Student Association Academic Committee, the use of electronic equipment (e.g., laptops, tablets, cell phones, etc.) is not allowed during class. Homework Assignments: Your write-up of the homework assignments (including cases) should be short, concise, and typed. The assignments will be graded based mostly on effort displayed. You are allowed to discuss the homework assignments and prepare the write-ups in groups of no more than four students. However, each student needs to submit his/her copy of the write-up to obtain credit. By submitting the assignment, you confirm that you contributed to the homework assignment. Please submit your write-up through the Canvas website by clicking on the “Assignments” tab. The homework is due on the day on which it is assigned and must be submitted prior to the beginning of class. You can skip one homework assignment without any penalty. However, skipping two or more assignments will have a negative effect on your overall homework grade, and, in extreme cases, could lead to a failing grade for the course. Please also bring a print-out of the write-up to class for the class discussion. 5.

Help sessions will be offered throughout the quarter. Please consult the course website for exact times and location. Attendance at help sessions is strictly optional; these sessions are designed only to provide additional help to students who are having trouble with the material. That is, help sessions will provide an opportunity to ask questions about the problems and material covered in class. Neither additional material on a given topic nor new material to be discussed in future classes will be introduced in the help session. You are likely to find these sessions helpful if you have no accounting background or feel you would like to go over a given topic again. Feel free to come and go during help sessions; you are not obligated to stay for the entire session.

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Graduate School of Business STANFORD UNIVERSITY

Financial Accounting Fall 2019

Course Overview Session

Date

Topic

1

Monday

Sep 23

Introduction to Course and Financial Reporting

2

Thursday

Sep 26

Fundamentals of Financial Statements /Statement of Cash Flows

3

Monday

Sep 30

Statement of Cash Flows

4

Thursday

Oct 3

F/S as a Management Planning Tool / Rev.&Exp. Recognition

5

Monday

Oct 7

Revenue and Expense Recognition / Accounts Receivable

6

Thursday

Oct 10

Accounts Receivable / Inventories

7

Monday

Oct 14

Inventories

8

Thursday

Oct 17

Accounting for Not-for-Profit Organizations

9

Monday

Oct 21

Fixed Assets

10

Thursday

Oct 24

Midterm Review

Monday

Oct 28

Midterm Exam (3:15pm – 5:15pm)

Thursday

Oct 31

No class

11

Monday

Nov 4

Guest Speaker

12

Thursday

Nov 7

Intangible Assets

13

Monday

Nov 11

Intangible Assets / Income Taxes

14

Thursday

Nov 14

Income Taxes / Shareholders’ Equity

15

Monday

Nov 18

Shareholders’ Equity / Financial Securities

16

Thursday

Nov 21

Financial Securities / Fair Value Accounting

17

Monday

Dec 2

Financial Ratios

18

Thursday

Dec 5

Final Review

Tuesday

Dec 10

Final Exam (9:00am – 12:00pm)

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Financial Accounting Specific Assignments 1:

Monday, September 23 Introduction to Course and Financial Reporting Reading (T) Chapter 1 (pp. 2-20) (S) Handout, “The Four Financial Statements/Key Relations among Financial Statements” Assignment (S) Coca Cola Co. (assignment questions provided in the course reader and on Canvas) Self- Study (T) Chapter 1: Q1-3, Q1-4, Q1-6, Q1-14, M1-22, E1-29, P1-36(a)

2:

Thursday, September 26 2.a. Fundamentals of Financial Statements Reading (T) Chapter 2 (pp. 42-64); Chapter 3 (pp. 100-116) (S) Handouts, “Double-Entry Bookkeeping/Recording Transactions in T Accounts” and “Common Transactions” Assignment (S) BreatheScreen Inc. (assignment questions provided in the course reader and on Canvas) Self- Study (T) Chapter 2: Q2-3, Q2-8, M2-19, M2-25, P2-57, P2-67 (S) Watch video examples of balance sheet equation entries

2.b. Statement of Cash Flows Reading (T) Chapter 4 (pp. 156-177, skim 177-181) Self- Study (T) Chapter 4: Q4-3, Q4-8, M4-22, M4-25, E4-34, E4-44, P4-45, P4-48(a) and (b)

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3:

Monday, September 30 Case: Statement of Cash Flows Assignment (S) Financial Statement Analysis – Statements of Cash Flows Please answer the following two questions: a. Examine the contents of the three cash flow statements carefully and analyze the cash flow situation for each of the three companies. You may find the template that is included in this course reader and also posted on the course website useful in performing your analysis. b. Based on your analysis in part a. above, what is your overall assessment of the cash flow situation of the companies? Please rate each of the companies on a scale of 15, where 1 indicates that the corporation will declare bankruptcy next year, 3 represents a reasonable cash flow situation with few problems noted, and 5 represents an outstanding cash flow situation.

4:

Thursday, October 3 4.a. Financial Statements as a Management Planning Tool Assignment (S) The Farm Winery (template to answer questions and questions provided in course reader and on Canvas) NOTE: Don’t be intimidated by the sea of numbers. Most of the numbers you need to construct the balance sheets are directly given in the case. You don’t need to forecast future sales or develop a schedule for collections, etc. All of this has been (implicitly) done for you in the projected balance sheets, income numbers, etc. There are only a few numbers you actually need to derive. An Excel spreadsheet with a useful format for completing the assignment is included with the case and is also available on Canvas. 4.b. Revenue and Expense Recognition Reading (T) Chapter 6 (pp. 270-280, 296-298); Chapter 7 (pp. 326-329) (S) Handout, “Revenue Recognition/Expense Recognition” Self- Study (T)

Chapter 6: Q6-5, Q6-7, M6-14, M6-24, E6-27

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5:

Monday, October 7 5.a Case: Revenue and Expense Recognition Assignment (S) Microsoft Corporation (assignment questions provided in the course reader and on Canvas) Self-Study (S) Costco Companies, Inc.

5.b Accounts Receivable Reading (T) Chapter 6 (pp. 283-291) (S) Handout, “Basic Transactions for Receivables” Self- Study (T) Chapter 6: M6-20 (a) and (b), E6-36, P6-45(a) and (b – with BSE)

6:

Thursday, October 10 6.a Case: Accounts Receivable Assignment (S) Sears, Roebuck & Co. (assignment questions provided in the course reader and on Canvas) Self-Study (S) Honeywell International Inc. 6.b Inventories Reading (T) Chapter 7 (pp. 329-344, 351-353) (S) Handout, “Inventory Accounting” and “Cost Flow Assumptions” Self- Study (T) Chapter 7: Q7-4, M7-15, M7-20, E7-26, E7-29, P7-36

7:

Monday, October 14 Case: Inventories Assignment (S) Winnebago (assignment questions provided in the course reader and on Canvas) Self-Study (S) Chevron Corporation 7

8:

Thursday, October 17 Accounting for Not-for-Profit Organizations Reading (S) Accounting for Not-for-Profit Organizations (by Halsey and Hopkins) Assignment (S) Stanford University (assignment questions provided in the course reader and on Canvas) Note: Please check the course website for details regarding meeting time & room.

9:

Monday, October 21 Fixed Assets Reading (T) Chapter 8 (pp. 372-383) Assignment (S) Depreciation at Deutsche Lufthansa AG (assignment questions provided in the course reader and on Canvas) Self-Study (T) Chapter 8: Q8-4, M8-14, E8-22, E8-24, P8-36, P8-39 (S) ConocoPhillips

10:

Thursday, October 24 Midterm Review Monday, October 28 MIDTERM EXAM (3:15pm – 5:15pm) Thursday, October 31 – No class!

11:

Monday, November 4 Guest Speaker: Bethany McLean, Author of “Smartest Guys in the Room” Assignment (S) TBD Note: Please check the course website for details regarding meeting time & room

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12:

Thursday, November 7 Intangible Assets Reading (T) Chapter 8 (pp. 388-394) (S) Handout, “Accounting Goodwill” Self-Study (S) Oracle Corporation (T) Chapter 8: Q8-9, E8-31, C8-42

13:

Monday, November 11 13.a Case: Intangible Assets Assignment (S) BMC Software, Inc. (assignment questions provided in the course reader and on Canvas)

13.b Income Taxes Reading (T) Chapter 10 (pp. 486-498) Self-Study (T) Chapter 10: Q10-10, M10-23, E10-34, P10-42, P10-43

14:

Thursday, November 14 14.a Case: Income Taxes Assignment (S) Pfizer Inc. (assignment questions provided in the course reader and on Canvas) Self-Study (S) Philip Morris International

14.b Shareholders’ Equity Reading (T) Chapter 11 (pp. 528-555) (S) Handout, “Shareholders’ Equity” Self-Study (T) Chapter 11: Q11-7, Q11-10, M11-22, M11-25, E11-40, E11-45, P11-57

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15:

Monday, November 18 15.a Case: Shareholders’ Equity Assignment (S) Dell Computer (assignment questions provided in the course reader and on Canvas) Self-Study (S) ConocoPhillips 15.b Financial Securities and Fair Value Reading (T) Chapter 12, (pp. 580-595) Self-Study (T) Chapter 12: Q12-1, Q12-3, M12-12, M12-13, E12-29

16:

Thursday, November 21 Financial Securities and Fair Value Assignment (S) Alphabet Inc. (assignment questions provided in the course reader and on Canvas) Self-Study (S) Genentech, Inc.

17:

Monday, December 2 Financial Ratios Reading (T) Chapter 5 Self-Study (T) Chapter 5: E5-34, P5-38, P5-39 Note: Please bring laptop or tablet to class for online course evaluations.

18:

Thursday, December 5 Final Review

Tuesday, December 10 FINAL EXAM (9:00am – 12:00pm)

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