Post Graduate Programme in Management

AY 2021-22 TERM: I

TITLE OF THE COURSE: FINANCIAL ACCOUNTING AND CONTROL (FAC)

CREDITS: 4

Name of the Faculty Faculty Block/ Email Telephone

Room No. Number
Prof. Mehul Raithatha K 102 mehulr@iimidr.ac.in 0731-2439-588
Prof. Saumya Ranjan Dash J-214 sranjan@iimidr.ac.in 0731-2439-667
Prof. Surya Bhushan Kumar B-207 suryak@iimidr.ac.in 0731-2439-760

Prof. K S Ranjani VF ksranjani@nitie.ac.in

CONSULTATION TIME FOR STUDENTS: On prior appointments only

COURSE DESCRIPTION

Accounting is the language of business. It attempts to measure and report corporate performance.
Users of financial statements demand the performance measure in a variety of decisions they make.
Managers use accounting in making decisions; while investors use it for valuing stocks. The bankers
and lender rely on accounting information to decide to whether to lend money to business. The
accounting information is also crucial in evaluating the performance of employees at various levels
in an organization.

COURSE OBJECTIVES

This course is designed with the following objectives:

(i) Help the participants to become intelligent users of accounting information

(a) Understand the rules and management’s discretion
(b) Understand what explains the rules and the type of management discretion
(c) Understand how events affect firm value
(ii) Make the participants’ comfortable looking through an annual report
(iii) Develop the ability in participants’ to use financial statements to assess a company’s
performance
(iv) Participants’ to get a sense of the limitations of financial statement data.
Expected Learning Outcomes and Associated Measures

At the end of the course student is expected to accomplish the following learning outcomes (CLO).
Alignment of CLO with the Programme Level Goals (PLG) & Objectives and Assessment of the
learning outcomes of the course is presented below.

Program Learning Goals Learning Objectives Assessment Tool(s)

Develop Critical 1.2 Identify the decision problem along Embedded Question
Thinking with sources. in End-term exam.
1.3 Identifies and presents appropriate
evidence supporting the analysis of
alternatives

Develop Competence 3.2 Provides useful accounting Embedded Question

in Quantitative information for business decisions in End-term exam
Analysis

ACADEMIC DISHONESTY:
IIM Indore believes in Academic honesty. Academic dishonesty or misconduct is cheating that
relates to an academic activity. It is a violation of trust between the Institute and its stakeholders.
Plagiarism, fabrication, deception, cheating, and sabotage are examples of unacceptable academic
conduct. Please consult the Programme manual for the section on academic dishonesty.

PEDAGOGY/TEACHING METHOD:
Cases, mini-cases and annual report discussion.

Text Book:
Anthony, Robert N, Hawkins, David F & Merchant, Kenneth A, Accounting: Text and Cases,
13th edition, McGraw-Hill Education, 2017.

EVALUATION

Individual Component Group Component Weightage

Quiz 25
Class Participation/Assignment 20

Mid Term 25
End Term 30
Total 100%
SCHEDULE OF SESSIONS

Module I: Preparation of Financial Statements

Module Objective

To explain the basic principles underlying the preparation of financial statements and to go through
the entire accounting process quickly to establish an overview.

Sessions and Objective

Session 1: Overview of Financial Accounting and Control
Objective: Generating an overview of Financial Accounting and Control
Reading: AHM: Chapter 1: The nature and purpose of accounting
Hawkins D (1995), Financial Reporting Fundamentals Inc. HBS No. 9-195-
160). Boston, MA: Harvard Business School Publishing

Session 2: Balance Sheet

Objective: To explain how to prepare the balance sheet and the importance of each
underlying principle.
Reading: AHM: Chapter 2: Basic Accounting Concepts: The Balance Sheet
Case: Smoky Valley Café

Session 3: Income Statement

Objective: To explain how to prepare the income statement of a firm and the
underlying principles in accrual accounting.
Reading: AHM: Chapter 3: Basic Accounting Concepts: The Income Statement
Case: Seshan S (2001) Mansa Building IIMA No. F&A-0089R. Indian Institute of
Management Case Repository.

Sessions 4 & 5: Income Statement – Services firms

Objective: To introduce the system of double-entry bookkeeping and to explain its
elements viz. preparation of journal, the ledger and the trial balance.
Reading: AHM: Chapter 4: Accounting Records and Systems
Case: Waltham Oil and Lube Center, Inc., Case no. 4–4, AHM text book.

Session 6: Income Statement – Service firms

Objective: To explain how the costs are accrued in the service firms and preparation
of classified financial statements.

Reading: Healy P (2001) Reporting Income for Dot-coms HBS No. 9-101-013.
Boston, MA: Harvard Business School Publishing.
Case: Seshan S (2003) Symphony Theatre IIMA No. F&A0126R, Indian Institute
of Management Case Repository
Module II Accounting Policies and Managerial Choices

Module Objective

To discuss important accounting policies and standards which are required for measuring the
revenues, expenses, assets and liabilities.

Sessions and Objective

Session 7: Revenue Recognition
Objective: To explain the revenue recognition methods used when the “critical
event” and “measurability” conditions for revenue recognition are not
satisfied at the point of sale.
Reading: AHM: Chapter 5: Revenue and Monetary Assets, pp. 105 - 115
Case: AHM: Case 5 – 2: Grennell Farm

Session 8: Accounts Receivables – Measurement issues

Objective: To explain the issues in measurement of accounts receivable, allowance
for bad debts and the accounting for actual bad debt expense and bad
debt recoveries.
Reading: AHM: Chapter 5: Revenue and Monetary Assets
Case: AHM: Case 5 – 1: Stern Corporation (A)

Session 9: Accounting for Inventory

Objective: To explain different classification of inventory and how to measure the
value of inventory under different methods as well as explaining
accounting standard regarding Inventory.
Reading: (1) AHM: Chapter 6: Cost of Sales and Inventories
Case: Bruns W J, Bruns S M & Marmeling S (2008). Merrimack Tractors and
Mowers, Inc.: LIFO or FIFO? HBS No.3217.Boston, MA: Harvard Business
School Publishing

Session 10: Accounting for Depreciation

Objective: To understand how to measure the depreciation expenses for long-lived
assets under different methods as well as explaining the relevant
accounting standard.
Reading: (1) AHM: Chapter 7: Long-lived Nonmonetary Assets and Their
Amortization
(2) Bruns W J (2004). Accounting for Property, Plant, and Equipment and
Other Assets [9-193-046]
Case: Bruns W J (2004). Depreciation at Delta and Singapore Airlines (A)HBS No.
9-198-001.Boston, MA: Harvard Business School Publishing

Session 11: Accounting for Long Lived Assets

Objective: To evaluate the three models of accounting for long-lived assets (cost,
revaluation and fair value models) and to conclude on a major financial
reporting decision.
Reading: (1) AHM: Chapter 7: Long-lived Nonmonetary Assets and Their
Amortization
 (2) Healy P & Choudhary P (2001). Asset Reporting HBS No.9-101-
014.Boston, MA: Harvard Business School Publishing.

Case: Riedl E (2008). Land Securities Group [A] Inc. HBS No.9-105-014.Boston,
MA: Harvard Business School Publishing.

Session 12: Accounting for Equity

Objective: To understand the accounting and financial reporting for owners’ equity.
Reading: AHM: Chapter 9: Sources of Capital: Owners’ Equity
Case: Hawkins D, & Madera F (2005) Kemp Foods Corporation Inc. HBS No.9-
110-101. Boston, MA: Harvard Business School Publishing

Session 13: Accounting for Leases & other liabilities

Objective: To understand when to capitalize a lease and how to report in the
financial statements apart from accounting for other liabilities.
Reading: (1) AHM Chapter 8: Sources of Capital & Debt
(2)Hawkins D (2001). Lease Accounting and Analysis. Inc. HBS No.9-100-
003.Boston, MA: Harvard Business School Publishing.
Case: Palepu K (1996). A Note on Comdisco’s Lease Accounting Inc. HBS No.9-
196-122.Boston, MA: Harvard Business School Publishing.

Session 14: Accounting for Income Taxes

Objective: To understand the situations in which deferred tax arise as asset or liability
and how to report in the financial statements.
Reading: (1) AHM: Chapter 10: Other items that affect Net Income and Owners’
Equity. pp.292-300
Case: Harmeling S S (1993). Taxing situations: Two cases on income taxes and
Financial Reporting. Inc. HBS No.9-191-071.Boston, MA: Harvard Business
School Publishing.

Module III Understanding and Analysis of Financial Statements

Module Objective

To examine the information contained in corporate annual & quarterly reports, assess the
performance from different stakeholders viewpoints and to understand the limitations of the
accounting data.

Sessions and Objective

Sessions 15 & 16: Cash Flow Statement
Objective: To explain how to prepare the cash flow statement including cash flows
from operating, investing and financing activities and also to calculate the
cash from operations by indirect method
Reading: (1) AHM: Chapter 11: Statement of Cash Flows
(2) AHM: Chapter 6: Cost of Sales and Inventories, pp. 148 - 152
 (3) Simons, R. L. and Davila, A. (1996), Preparing and using the statement
of cash flows, HBS:196108, Boston, MA: Harvard Business School Publishing
Case: (1) Davila A Wilson (2008), Chemalite, Inc. HBS No. 9-117-078. Boston, MA:
Harvard Business School Publishing
(2)Davila A (1995), Chemalite, Inc. [B] HBS No. 9-195-130. Boston, MA:
Harvard Business School Publishing

Sessions 17: Understanding of Annual Report

Objective: To explain how to understand the corporate financial statements in
prescribed format as well as significant account policies apart from
directors’ report, auditors’ report and the management discussion.
Reading: AHM: Chapter 14: Understanding Financial Statements
Discussion: Latest Annual Report of Hindustan Unilever Limited

Session 18 & 19: Financial Statement Analysis - I

Objective: To explain how analyze the corporate financial statements from the
viewpoint of various stakeholders about the performance of the company
and its financial condition.
Reading: AHM: Chapter 13: Financial Statement Analysis
Case: Analyzing the Financial Statements of Hindustan Unilever Limited

Session 20: Financial Statement Analysis - II

Objective: To explain how analyze the corporate financial statements from the
viewpoint of various stakeholders about the performance of the company
and its financial condition and compare among companies.
Reading: AHM: Chapter 13: Financial Statement Analysis
Case: Gregory S. Miller and Christopher Noe (2000), Sears, Roebuck & Co. vs.
Wal-Mart Stores, Inc., HBS No. 9-101-011. Boston, MA: Harvard Business
School Publishing.

Please indicate the changes made in the course outline based on the measurement of assurance
of learning (closing the loop)/student feedback: NIL

Please give the details of the book if students need to buy the book

Author Title Publisher Edition Remarks, if any

Robert N Anthony, Accounting: Text and McGraw-Hill 13th edition, referred to as
David F Hawkins, and Cases Education 2017 AHM in the course
Kenneth A Merchant outline

Additional Readings

NIL

******