Professional Documents
Culture Documents
School of Management
MN3245 Accounting for Corporate Accountability
Study Guide
Autumn Term, 2011/12 Academic Year
Course outline
Date Thursday
Lecture
Workshop Topic
29 Sep 11
06 Oct 11
13 Oct 11
20 Oct 11
27 Oct 11
03 Nov 11
10 Nov 11
17 Nov 11
24 Nov 11
03 Dec 11
Revenue recognition
Recap and revision lecture
Conceptual frameworks
transaction-based or value-based?
Accountability and users
Voluntary reporting theories and
practice
Economic and social consequences
of accounting regulation
Impact of recent accounting failures
Accounting for pension obligations
Accounting for employee share
options
Lease accounting
Revenue recognition
Course co-ordinator:
Professor Christopher Napier
Room FBE133, Tel: 01784 276121, E-mail: christopher.napier@rhul.ac.uk
Office hours (Autumn term 2009/10) Monday, 11:00-12:00, Thursday, 10:30-11:30)
If you want to meet the course co-ordinator at any other time, please send an e-mail to
arrange a mutually convenient time outside these office hours.
Aims of course
This course aims to:
Learning outcomes
Upon successful completion of this course, students should be able to:
1. Demonstrate an awareness and understanding of corporate duties of accountability to
external stakeholders.
2. Discuss and analyse the nature of subjective judgements involved in several complex
areas of financial, social and environmental accounting and reporting.
3. Employ UK and international Generally Accepted Accounting Practice in analysis of the
financial accounting treatment of a range of complex types of financial transactions.
4. Explain the broad nature of economic consequences which can potentially flow from
different accounting and reporting practices
Textbooks
The set text for this course is:
Alexander, D., Britton, A. and Jorissen, A. (2011) International Financial Reporting and
Analysis, Andover: Cengage Learning (5th edition). ISBN:978-1-4080-3228-2.
Elliott, B. and Elliott, J. (2012) Financial Accounting and Reporting, Harlow: FT Prentice
Hall (15th edition). ISBN: 978-0-273-76079-5
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The relevant chapters from these textbooks for each weeks topic are indicated in the
following weekly course outline. In addition, several journal articles are identified these
should all be downloadable from the course Moodle page.
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Assessment
The assessment for this course comprises an in-course assignment and an end-of-course
examination. The in-course assignment carries a weighting of 30% and the 2 hour closed
book examination carries a weighting of 70% towards the overall course mark. The word
limit for the assignment is 2,000 words, including direct quotations, but not including your list
of references/bibliography.
Assignment question
Leading accounting standard setters, such as the International Accounting Standards Board
and the Financial Accounting Standards Board in the USA, are increasingly moving towards
the use of fair value measurements in place of historical cost measurements. However, this
trend has been criticised on various grounds. Two of the main objections are that fair values
are inherently subjective and therefore unsuitable for financial reporting, and that the use of
fair values in financial statements is likely to encourage short-term behaviour by managers,
which could work against the interests of investors and other stakeholders.
Required: Discuss the two objections to the use of fair value measurement referred to
above, and critically examine how far they are valid.
A good answer will go a long way beyond mere description of the issues involved, including
analysis and criticism. Some reading suggestions will be provided through Moodle, and
good answers are likely to use other relevant sources.
The deadline for submission of your essay is Tuesday 8 November 2011 at 12:00 noon.
Your essay must be submitted in accordance with the standard School of Management
submission procedures. Please submit your essay as a Word file through the Turnitin
plagiarism software (http://www.submit.ac.uk) this will give you an automatic receipt, the
date and time of which will be considered definitive as the time of submission. Also submit a
printed version of your essay to the undergraduate office. Further details of the submission
process will be given before the submission date.
Any essays submitted after the deadline will be subject to the standard Royal Holloway late
submission penalties (10 percentage points deducted from the mark awarded for essays
submitted up to 24 hours after the deadline, a mark of zero for any essays submitted more
than 24 hours after the deadline). Extensions to the deadline will only be granted in very
exceptional circumstances. Failure or inaccessibility of computer equipment will not be
accepted as an adequate reason for granting an extension, so if you decide to leave printing
of your essay until the morning of 8 November then you have made the choice to take a risk
of having marks deducted if you experience problems accessing printers etc.
When writing an academic piece of work it is perfectly acceptable to quote or paraphrase
items you have read, provided you enclose direct quotes in quotation marks and state
the original source of the item. This requirement also applies if you copy, cut and paste, or
paraphrase material found on the internet. Failure to attribute quotations in this manner
will result in your assignment being penalised for plagiarism. All written academic work
must have a bibliography attached, listing all items referred to in researching and writing the
piece of work.
The aim is to return the assessed coursework by Monday 21 November 2011.
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LECTURE PROGRAMME
Lecture 1 Thursday 29 September 2011
Objectives of financial reporting; and conceptual frameworks
Objectives of lecture:
To recap and develop students knowledge and understanding of:
The concept of accountability
The role of corporate reporting
Conceptual frameworks for financial accounting
Key reading
Alexander, Britton & Jorissen, chapters 1 & 8
Supplementary reading
Deegan & Unerman, chapter 6.
Elliott & Elliott, chapter 9
Bence, D. & Fry, N. (2004), Which way forward, Accountancy, November 2004, p. 88
Marlow, D. (2009), Comment that matters, Accountancy, October 2009, pp. 68-69
Fraser, I. (2009), More than words, Accountancy, November 2009, pp. 38-39
McKernan, J. F. (2007), Objectivity in accounting, Accounting, Organizations and Society,
Vol. 32, No. 1-2, pp. 155-180.
Key reading
Deegan & Unerman, chapter 8
Supplementary reading
Alexander, Britton & Jorissen, chapter 10
Deegan, C. (2002), The legitimising effect of social and environmental disclosures - a
theoretical foundation. Accounting, Auditing & Accountability Journal, Vol. 15, No. 3, pp.
282-311.
O'Dwyer, B. (2005), Stakeholder democracy: Challenges and contributions from social
accounting. Business Ethics: A European Review, Vol. 14, No. 1, pp. 24-41.
Unerman, J. & Bennett, M. (2004), Increased stakeholder dialogue and the internet: towards
greater corporate accountability or reinforcing capitalist hegemony? Accounting,
Organizations and Society, Vol. 29, No. 7, pp. 685-707.
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Key reading
Deegan & Unerman, chapter 9
Supplementary reading
Alexander, Britton & Jorissen, chapter 10 (pages 193 to 210)
Elliott & Elliott, chapter 32.
Adams, C. A. (2004), The ethical, social and environmental reporting-performance portrayal
gap Accounting, Auditing & Accountability Journal, Vol. 17, No. 5, pp. 731-757.
Dillard, J. F., Brown, D., & Marshall, R. S. (2005), An environmentally enlightened
accounting Accounting Forum, Vol. 29, No. 1, pp. 77-101.
Gray, R. (2002), The social accounting project and Accounting, Organizations and Society:
privileging engagement, imaginings, new accountings and pragmatism over critique
Accounting, Organizations and Society, Vol. 27, No. 7, pp. 687-708.
Gray, R. (2010), Is accounting for sustainability actually accounting for sustainability. . .and
how would we know? An exploration of narratives of organisations and the planet,
Accounting, Organizations and Society Vol. 35, No. 1, pp. 47-62.
Key reading
Alexander, Britton & Jorissen, chapter 3
Supplementary reading
Deegan & Unerman, chapters 3 and 4.
Elliott & Elliott, chapters 9
Broadbent, J. & Laughlin, R., (2002), "Accounting choices: Technical and political trade-offs
and the UK's private finance initiative", Accounting, Auditing & Accountability Journal, Vol 15,
No 5, pp. 622-654.
Sleigh-Johnson, N. (2010) Where now for UK GAAP?, Accountancy, May 2010, pp. 64-65.
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Key reading
Alexander, Britton & Jorissen, chapters 25, 26 and 28 (pages 708-709 you will not be
expected to be able to prepare consolidated accounts, but it is useful to understand the
basic approaches to consolidation and relevant regulations)
Supplementary reading
Elliott & Elliott, chapter 22
Hines, R. D. (1988), Financial accounting: in communicating reality, we construct reality.
Accounting, Organizations & Society, Vol. 13, No. 3, pp. 251-261.
Unerman, J. & O'Dwyer, B. (2004), Enron, WorldCom, Andersen et al: a challenge to
modernity, Critical Perspectives on Accounting, Vol. 15, No. 6-7, pp. 971-993.
Sanderson, I. (2010), What REPO 105 really means, Accountancy, April 2010, pp. 28-29.
Key reading
Alexander, Britton & Jorissen, chapter 21 (pages 499 to 526)
Supplementary reading
Elliott & Elliott, chapter 15 (sections 15.1-15.17)
Napier, C. J. (2009), The logic of pension accounting, Accounting and Business Research,
Vol. 39, No. 3, pp. 231-249.
Peters, B. (2010), Far from final, Accountancy, June 2010, pp. 68-69.
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Key reading
Alexander, Britton & Jorissen, chapter 21 (pages 486 to 499)
Supplementary reading
Elliott & Elliott, chapter 15 (sections 13:18-13:22)
Crook, K. (2004) Learning to share, Accountancy, April 2004, pp 84-85
Franklin, W. & Giles, L. (2004) Life expectancy, Accountancy, September 2004, pp. 88-89
Franklin, W. (2004) End of a relaxed regime, Accountancy, November 2004, pp. 84-85
Osborne, J. (2005), Grappling with the practicalities, Accountancy, June 2005, pp. 68-69
Osborne, J. (2007), Good in principle, Accountancy, November 2007, pp. 74-75.
Ravenscroft, S. & Williams, P. F. (2009), Making imaginary worlds real: the case of
expensing employee stock options, Accounting, Organizations and Society, Vol. 34, No. 67, pp. 770-786.
Key reading
Alexander, Britton & Jorissen, chapter 15.
Supplementary reading
Elliott & Elliott, chapter 18
Collings, S. (2010), In a tangle, Accountancy, August 2010, pp. 70-71.
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Key reading
Alexander, Britton & Jorissen, chapter 18.
Supplementary reading
Elliott & Elliott, chapter 8.
ODonovan, B. (2010), Money, money, money, Accountancy, August 2010, pp. 68-69.
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WORKSHOP PROGRAMME
Workshop 1 Thursday 6 October 2011
Conceptual frameworks
It has been claimed that financial reporting has increasingly moved away from recording
transactions and reporting on stewardship, that is, how well a company and its management
use the resources invested by shareholders, and possibly by other stakeholders. This has
been replaced by reporting values, with an emphasis on providing information to help
investors make their investment decisions. Those who hold this view point to the focus on
the balance sheet (financial position) rather than the income statement (financial
performance) in conceptual framework documents. Do you agree with this? Does it matter?
2006
6.0%
5.0%
10.0%
8.0%
15m
17m
12m
18m
10m
14m
105m
120m
110m
112m
You should assume that all cash flows related to the pension scheme occur at the end of
each year. Ignore taxation.
Required:
(a)
(b)
Accounting standards such as IAS 19 have been blamed for the decline of defined
benefit pension schemes in the UK. How far is this allocation of blame fair?
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(b)
Show how the above share options would be treated in the balance sheet of Wolt plc
as at 31 December 2005 and 31 December 2006 in accordance with the provisions of
IFRS2.
(c)
Critically evaluate how the accounting treatment of share options required by IFRS 2
conforms to the International Accounting Standards Boards conceptual framework.
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Show how the above leases will be reflected in the financial statements of Latir plc for
the year ended 31 March 2005 (its second year of operation) in accordance with the
requirements of International Accounting Standard 17 (IAS 17), including relevant
notes to the accounts. Clearly explain why you have adopted the accounting treatment
you have chosen for each of the leases. (Note: you are NOT required to show the
comparative figures for the financial year ended 31 March 2004 which would normally
also appear in the 31 March 2005 accounts)
(b)
Without carrying out any further calculations, explain why and how the accounting
treatment of leases you have adopted in your answer to part (a) of this question would
change if the distinction between operating and finance leases were removed, so all
leases were accounted for on the same basis.
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Ali suggests that the easiest way of accounting is to treat half of the fare (1,000) as
revenue in 2011 and the remaining half as revenue in 2012.
(2)
Bassam notes that the second flight is described as free and therefore all of the
2,000 should be recognised in 2011.
(3)
Khaldoun points out that the incremental costs of carrying a business class
passenger from London to Sydney and back again (in-flight service, additional fuel,
ground handling, ticketing and administration) are 200, and this should be allowed
for. So Clementi should recognise 1,800 in 2011 and carry forward 200 for 2012.
(4)
Davoud argues that the transaction is not complete until the second flight has been
taken, and therefore Clementi should recognise no revenue until 2012. He would be
prepared for the incremental cost of the first flight to be carried forward rather than
expensed in 2011, and offset against the revenue when this is recognised in 2012.
(5)
Eliezer comments that about half of the passengers holding vouchers will not in fact
use them. He suggests that Clementi should recognise 1,500 per ticket in 2011 and
500 per ticket in 2012 to allow for this.
(6)
Fatimah reminds her colleagues that an alternative marketing approach that had not
been adopted was to sell return flights between London and Sydney taken between
1 September and 15 December 2011 for 1,700, with no voucher being offered. She
recommends that Clementi should recognise revenue of 1,700 in 2011 and the
remaining 300 in 2012.
Required:
(a)
(b)
Evaluate the six suggestions for recognising Clementi Airways revenue by reference
to IAS18 and consider whether IAS18 leads to a reasonable accounting treatment in
this case. Would the IASBs current (2010) proposals for revenue recognition lead to
any change in your answer?
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