SMU Classification: Restricted

ACCT 408 Valuation

Course Outline 2018/2019 Term 1

A. Instructor and Contact Information

CHENG Nam Sang, Associate Professor of Accounting (Practice)

Room 5042 (Level 5) Tel: (65) 6828-1910

School of Accountancy Fax: (65) 6828-0600
Singapore Management University Email: nscheng@smu.edu.sg

Consultation time: By appointment (preferred due to instructor’s compact timetable) or

drop-by to the office (trying your luck)

Teaching Assistant: More details will be provided at a later stage.

B. Course Prerequisites

Students enrolling in this course must have successfully completed FNCE101 Finance (passing
grade)/FNCE103 Finance for Law (min. A- grade) and ACCT201 Corporate Reporting and
Financial Analysis/ACCT224 Financial Reporting and Analysis.

Note that knowledge of intermediate financial accounting (ACCT334) might be preferable for
this course. Stronger accounting skills will of course make some of the material easier to
understand.

C. Course Description

This course covers valuation and analysis of financial statements, and will include the valuation
of businesses and entities, and various components. The focus will be primarily on valuation
from the perspective of corporate managers and for business entities rather than from the view
of assigning value to individual assets and/or portfolio analysis. An examination of certain
critical steps in the valuation process will all be covered. This includes examination of: key
accounting policies, accounting adjustments, financial statement analysis, forecasting and
discount rate estimation. Special topics for application will include: (a) analysis of different
valuation models, (b) valuation for securities analysis and (c) use of financial information in
credit and default prediction.

The objective of this course is to equip students with tools and techniques to be able to (a)
identify accounting issues in, (b) understand and evaluate financial statements as well as (c)
value companies. First, students need to be able to understand the information provided in
financial reports and the various complexity of accounting treatments under International
Financial Reporting Standards (IFRS). Second, the course will emphasize the role of
accounting in both the financial analysis and valuation processes. Third, the application of
valuation of business entities is important in many areas. All of these tools and techniques will
be useful for students intending on pursuing a professional careers in any of the areas of:

ACCT408 Valuation (Prof Cheng Nam Sang) Course Outline

 SMU Classification: Restricted 

financial analysis, investments, asset management, credit and loan assessment, management
consulting, corporate advisory services as well as mergers and acquisitions.

D. Learning Goals, Course Objectives and Skills Development

This course contributes to the development of the following learning goals and objectives of
the School’s Bachelor of Accountancy program:

Learning Goal 1 (Accounting Competencies):

 Learning Objective 1.1 – Our students can recognize, develop, measure,
record, validate and communicate financial and other related information.
 Learning Objective 1.2 – Our students can analyze, synthesize and evaluate
financial and other related information for decision making in a management
context.

At the end of this course, students are expected to be able to:

1. Understand how information is presented in the financial statements and the necessary
assumptions and issues of how this financial information is compiled.
2. Be able to use various financial analysis techniques for analyzing the efficiency and
effectiveness of business organizations.
3. Understand the usefulness and limitations of, as well as apply alternative valuation
models and techniques to value business entities.
4. Perform a valuation of a business including the following: identifying drivers of the
business’s performance, making appropriate analytical adjustments, forecasting the
business’s financial statements, estimating the appropriate cost of capital, and sanity
checks on valuation outcomes.
5. Conduct and evaluate security analysis and use financial information for credit analysis
as practical applications of valuation.

Beyond just technical competencies, this course also seeks to develop students:

 Analytical and communication skills;

 Ability to work in teams;
 Ability to engage in active learning within a dynamic and uncertain environment; and
 Awareness of ethical and social responsibility considerations in business decision
making.

E. Learning Approach
The pedagogical approach to this course consists of:

 Instructor-facilitated Learning – principally through in-class lessons and in-class

problem activities.
 Individual Learning – through pre-class preparation, readings, and review of in-class
problems as well as textbook discussion and problem questions.
 Collaborative Learning – through participation in class discussions and teamwork in
the in-class problems and group assignments.

ACCT408 Valuation (Prof Cheng Nam Sang) Course Outline

 SMU Classification: Restricted 

F. Textbook and Other Resources

Required Text:

Business Valuation
Eric Teo Khee Hwee, Low Buen Sin and Jason Doan Thuan Hai,
1st edition, 2018
Cengage Learning

G. Assessment

To pass the course, a student is required to obtain a total mark of 50% or better. The assessment
components are listed below: Progress Assessments (20%), Class Participation and Activities
(10%), Group Project (20%) and Final Examination (50%).

1. Progress Assessments (20%)

There will be one mid-term test during the term. The test will be conducted in-class in Week 9
(subject to change).

2. Class Participation and Activities (10%)

Class learning activities are designed to give you opportunities to participate in and contribute
to your own learning and that of the entire class. This is typically done through in-class
participation, project presentation, homework assignment, and may include other assigned
work, tasks, or questions (e.g. pre-class preparations and post-class reviews) during the term
that will help you prepare for the class and review course materials in a timely manner.

Voluntary class participation is expected, however, I will cold call on individuals in class from
time to time.

3. Group Project (20%)

The group project aims to provide students with an understanding of business valuation
practices. Students should be able to critically analyze and evaluate various aspects, with
emphasis on (but not limited to), of the topics discussed in the course, and value the business
using appropriate valuation models discussed in the course. More details on the project will be
disclosed during the term.

4. Final Examination (50%)

Further information will be provided as the term progresses. The final examination is a closed-
book, of three (3) hours duration and covers the entire course.

Important Notice on Date and Time of Final Exam

At SMU, the dates and times of all final exams are announced well in advance of each term’s
course bidding. Students should note the official date and time of the final exam for this
course as published by the Office of Registrar. Requests by students to take the final exam on
other than the officially scheduled date and time will not be approved except under extremely
extenuating circumstances entirely beyond the student’s control. Students who believe they
may be unable to take the final exam on the scheduled date and time should not enroll for this
course this term.

ACCT408 Valuation (Prof Cheng Nam Sang) Course Outline

 SMU Classification: Restricted 

H. Academic Integrity

All acts of academic dishonesty (including, but not limited to, plagiarism, cheating,
fabrication, facilitation of acts of academic dishonesty by others, unauthorized possession of
exam questions, or tampering with the academic work of other students) are serious offences.
All work (whether oral or written) submitted for purposes of assessment must be the student’s
own work. Penalties for violation of the policy range from zero marks for the component
assessment to expulsion, depending on the nature of the offense. When in doubt, students
should consult the instructors of the course. Details on the SMU Code of Academic Integrity
may be accessed at http://www.smuscd.org/resources.html.

I. Accessibility

SMU strives to make learning experiences accessible for all. If you anticipate or experience
physical or academic barriers due to disability, please let me know immediately. You are also
welcome to contact the university's disability services team if you have questions or concerns
about academic provisions: included@smu.edu.sg.

Please be aware that the accessible tables in our seminar room should remain available for
students who require them.

J. Emergency Preparedness for Teaching and Learning (EPTL)

As part of emergency preparedness, Instructors may conduct lessons online via the WebEx
platform during the term, to prepare students for online learning. During an actual
emergency, students will be notified to access the WebEx platform for their online lessons.
The class schedule will mirror the current face-to-face class timetable unless otherwise stated.

K. Lesson Plan

The course will be conducted in class sessions that will last for 3 hours each with a short
break in between. You are expected to come to these sessions prepared and be ready to
respond to questions as required. This means doing the required readings and/or homework
for each session.

A brief outline of course schedule is provided below:

 Week 1: Business Value & Its Drivers
 Week 2: Investment Appraisal techniques
 Week 3: Business Valuation techniques (I) - Market-based and asset-based
 Week 4: Business Valuation techniques (II) - Income-based approach
 Week 5: Business Valuation techniques (III) – Business Valuation through capital
budgeting techniques
 Week 6: Business Valuation techniques (IV) Business Valuation through Capital
Structure
 Week 7: Business Valuation techniques (V) – FME, EVA, MVA
 Week 8: Term Break
 Week 9.1: Mid-term Test (2 hours)
 Week 9.2: Impact of financing on Investment Decisions

ACCT408 Valuation (Prof Cheng Nam Sang) Course Outline

 SMU Classification: Restricted 

 Week 10: International Investments and Financing Decisions

 Week 11: Valuation and risk management in Mergers and Acquisitions
 Week 12: Valuation Issues in Mergers and Acquisitions – Intangible Assets and Goodwill
 Week 13: Valuation of high-growth start-ups
 Week 14: Pre-exam Study Week
 Week 15: Examination

The detailed course work plan will be announced in class. Note that this schedule is subject to
change. Alternative times or activities will be arranged should they become necessary.

Vetted by: Seow Poh Sun 19 June 2018

ACCT408 Valuation (Prof Cheng Nam Sang) Course Outline