Course Title: Understanding Financial Accounting: Making More Authoritative Decisions

Module: 1 Business Fundamentals Class: EMBA-2023

Instructor: Asad A. Alam Email: aalam@lums.edu.pk

Room # 409 Telephone: Ext: 8096

Office Hours: Secretary/TA Kashif Saeed

Kashif.saeed@lums.edu.pk
Ext: 8023

COURSE DESCRIPTION
Accounting is the universal language of business. Sound accounting principles are important for
shaping capital markets. Financial Accounting is the process that culminates in the preparation of
financial reports on the enterprise for use by both internal and external parties. Users of these financial
reports include investors, creditors, managers, unions, and government agencies. This course
introduces the concepts and issues of financial accounting with an emphasis on the interpretation of
financial statements and how financial statement data can be used to assess and manage value creation
activities. It takes a broad view of financial accounting and reporting encompassing virtually any
external information or incentive system. This course will help students to understand what
accounting can do for managers, the decision-maker, and how accounting policy choice affects
decisions. Students will be exposed to the methodology and practice of accounting need to critically
examine the broader implications of financial accounting for the fair and efficient working of our
economy. The objective is to give the students an understanding of current financial accounting and
reporting environment, taking into account the diverse interests of both external users and
management. A key aspect of the course is a group presentation on the analysis of the annual reports
of a sample of firms in a selected industry.

PEDAGOGICAL PHILOSOPHY
Some of you will experience a bit of a shock when you find out how this course is run. When you
were undergraduates, your professors probably covered the material in class then sent you home to try
some problems on your own. That’s not the way this class works. I’ve adopted a much more active
learning approach. For each class session, you are expected to read the material and be prepared to
discuss the required case. For many students, this will be the first time you’ve covered the topic. As
such, you’re likely to struggle. It’s through this struggle that learning takes place. The world is
changing far too quickly for us to teach you everything there is to know about accounting or business.
You have to pick up self-education skills.

Each session is built on the previous session taught, Accordingly, I urge you to keep up with the
course from the start.

COURSE LEARNING OBJECTIVES

This course will introduce you to the key concepts of Accounting. You will learn to prepare financial
statements and will also be equipped to analyze them. After taking this course, you will be able to:
1. Feel comfortable with a company’s annual report.
2. Come to a reasoned conclusion about a company’s financial health and be able to make
comparisons across firms and periods.
3. 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.
4. Assess whether and how company managers have created value for the shareholders.
EMBA PROGRAM LEARNING GOALS & OBJECTIVES
Goal 1 – Effective Communication

Objective Written: Students will be able to communicate in writing; effectively, clearly and
persuasively, in ways appropriate for a variety of objectives and audience.
Objective Oral: Students will be able to verbally communicate clearly and persuasively, in ways
appropriate for a variety of objectives and audience.

Goal 2 – Critical Thinking & Decision Making

Objective: Students will be able to identify key problems, collect and use information critically, and
generate viable alternatives and solutions.

Goal 3 – Global Perspective & Flexibility

Objective: Students will demonstrate understanding of global and multi-cultural perspectives within
the local context and be able to work effectively in multi-cultural settings.

Goal 4 – Leadership and Teamwork

Objective: Students will be able to assume leadership roles, perform leadership tasks responsibly, and
work effectively in teams.

Goal 5 – Ethical Understanding and Reasoning

Objective: Students will demonstrate that they are able to identify and address ethical issues in an
organizational context

Goal 6 – Functional (subject area knowledge), integrative and strategic abilities

Objective: Students will demonstrate understanding of the functional and strategic aspects of business
and management, be able to integrate across functional areas, and develop feasible strategies and
action plans.

Indicate below how the course learning objectives specifically relate to any program learning
goals and objectives.

Program Learning Goals and Course Learning Course Assessment

Objectives Objectives Item

Goal 1 – Effective Communication Students will have an Classroom discussions,

opportunity to Quizzes, Assignments,
demonstrate their oral and Exams
communication skills by
interacting in classroom
discussion. Written
communication is
demonstrated in
performing financial
statement analysis in the
final exam.

Goal 2 - Critical Thinking and Decision Analytical thinking and Classroom discussions,
Making problem-solving skills are Quizzes, Assignments,
embedded in the content and Exams
of this course and are
COURSE DESCRIPTION
essential for completing
this course successfully
Goal 3 – Global Perspective and Cases used in the course Classroom discussions,
Flexibility includes both local and Quizzes, Assignments,
international companies to and Exams
give a global perspective

Goal 4 – Leadership and Teamwork Teamwork is important in Classroom discussions,

workplace and it is Quizzes, Assignments,
important in this course. and Exams
Students will get an
opportunity to
demonstrate leadership
and teamwork through
discussion groups

Goal 5 – Ethical Understanding and Ethical and Social Classroom discussions,

Reasoning understanding is Quizzes, Assignments,
embedded in the content and Exams
of this course through the
use of International
Financial Reporting
Standards (IFRSs).

Goal 6 – Functional (subject area The course covers the Classroom discussions,
knowledge), integrative and strategic financial and ethical Quizzes, and
abilities effects of choosing one Assignments
Generally Accepted
Accounting Principle
(GAAP) over another
GAAP. The course
content is based on the
standards of the
professional accountancy
bodies (e.g. ICAP,
ICAEW, and ACCA).

COURSE ASSESSMENT/GRADES
Grades will be based on the following percentage allocation:
1) Class Participation 30%
2) In-Class exercises/Quizzes 25%
3) Midterm Exam 20%
4) Final Exam 25%
CLASS-MANAGEMENT POLICY
In general, I expect students to arrive on time and prepared to discuss the day’s topic and cases. I
expect professional conduct in the classroom at all times. Unless we are using the Internet for
pedagogical reasons, I expect students NOT to be connected. That is, no email, no surfing, no
checking your stocks during class. This is a matter of professional courtesy – you certainly would not
open the Business Recorder or a novel and proceed to read during class or during a meeting at your
workplace. The Internet is no different. The quality of your class participation, and hence the quality
of the class as a whole, suffers when your attention is elsewhere.
COURSE DESCRIPTION
Cell/Smart-phones, pagers, Blackberries and other communication devices should be turned off
during class time. Anyone caught using these devices will get a negative CP for that particular
class session.

You will not be allowed to use cell phone calculator for quizzes and exams and I strongly
suggest you to invest in a basic calculator for this course.

Please also refer to EMBA handbook for attendance, timelines and norms of professional conduct.

COURSE REQUIREMENTS
1. This is an introductory level financial accounting course therefore there are no pre-requisites
2. Completion of Harvard online course would add significant skills, exposure and experience

RECOMMENDATION FOR FURTHER EDUCATION

A Readings package with all the cases and readings is provided. 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 also will broaden your knowledge
of business.

RECOMMENDED TEXTBOOKS/SUPPLEMENTARY READINGS ( if Applicable)

Books:
Financial Accounting: IFRS, 1st edition
by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
June 2010, ©2011

Intermediate Accounting: IFRS Edition

by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
December 2010, ©2011

For each class session, you should familiarize yourself with the topics covered in the assigned reading.
For each class, you are responsible for reading one or more cases taken from the Harvard Business
School. You may come across articles relevant to the accounting topics we are studying as you read
the Business Recorder and other periodicals. I encourage you to bring them to our attention.

It is critical that you become acquainted with the basics of each case before class. Your ability to
participate in class discussion will be enhanced by being prepared. You will also be rewarded for
quality participation (30% of your class grade is dependent on your participation).

REQUIREMENTS (FOR PCO OFFICE)

Midterm Exam: Yes Format of the exam will be MCQs,

short written answers and problems.
Exam will be Closed book/closed
notes. You may bring a calculator to
the exam.

Final Exam: Yes Format of the exam will be MCQs,

short written answers and problems.
Exam will be Closed book/closed
notes. You may bring a calculator to
the exam.
COURSE DESCRIPTION
Double Session: No

Joint Session (combined of two No

sections):

Simulation: No

Video Recording: No

IT Lab sessions No

Additional session or review session No

Course Cap (applicable for elective No This is a core course therefore

courses) everyone in the EMBA program must
take this course

Any other requirement (e.g. No

laptop/computer etc.):

OTHER REQUIREMENTS
There are two examinations for this course, midterm examination and a final. Anyone missing an
exam will automatically receive a grade of zero for that exam. Exceptions for documented medical or
family reasons may be permitted. Where possible, either the department office or the professor should
be contacted prior to the time of the exam. At EMBA programme director’s discretion, either a make-
up exam will be scheduled or a reallocation of the weight of remaining examinations will be made.
Session No. Module and Topic: TITLE OF CASE READING MATERIAL LEARNING OBJECTIVES ASSIGNMENT QUESTIONS

Session 1 Module 1: Chemalite • Understanding Financial This case introduces preparation Please solve questions at the end of
Introduction to Statements: Making More of financial statements from the case and the questions sent for
Financial Statements Authoritative Decisions. unstructured data, including the assigned chapter
• Chapter 3(I) preparing a sample income
The four major statement, balance sheet, and cash
financial statements. flow statement.
Relationships among
the F/S. Major uses of
financial statements

Session 2 Module 2: Monetary Bausch & Lomb, Inc. • Revenue Recognition Bausch & Lomb (B&L) instituted Please solve questions at the end of
Assets, Revenue and (A) • Chapter 4(I) an aggressive sales program in the case and the questions sent for
Expense Recognition: the final weeks of its 1993 fiscal the assigned chapter
Revenue and monetary
year that pushed a large amount
assets
of inventories onto distributors.
The company recognized
revenues on these products when
they were shipped. The case
provides students with an
understanding of the accounting
principle of revenue recognition.

Session 3 Income Statement Reporting income for • Chapter 4(I) Question 1 to 10 as homework
dot.coms

Session 4 Module 3: SKA • Chapter 5(I) Management is debating a Please solve questions at the end of
Capitalization Vs. proposal to capitalize R&D. the case and the questions sent for
expense While Swedish GAAP permits the assigned chapter
capitalization, the general practice
is to expense R&D as incurred.
The case develop student
understanding of factors that
influence corporate financial
 reporting decisions, specifically
whether to capitalize R&D or to
expense it as incurred.

Session 5 Module 5: Inventories Summit Distributors • Chapter 8(I) The case provides a comparison Please solve questions at the end of
and long-term assets (A) of alternative assumptions about the case and the questions sent for
Cost of sales and inventory cost flows, effects on the assigned chapter
inventories
taxes paid, and effects of an
accounting change from LIFO to
FIFO.

Session 6 Long lived assets • Chapter 10(I) This session provides an Please solve questions sent for the
• Measurement of tangible overview of accounting for assigned chapter
long-term assets property, plant and equipment
under both US GAAP and IFRS.
It addresses recognition on
property, plant and equipment, as
well as impairment.

Session 7 Long lived assets and Depreciation at Delta • Chapter 11(I) Depreciation policies at Delta Air
their amortization and Singapore Lines and Singapore Airlines are
Airlines compared and contrasted against
a summary of operating data from
each airline. Questions focus
attention on differing depreciation
policies. This case introduces
depreciation policies and choices
using the different policies at two
major airlines as examples.
Session 8 Module 6: Current Accounting for • Chapter 13(I) Airline frequent flier programs Please solve questions at the end of
and Long-term frequent fliers offer members the opportunity to the case and the questions sent for
Liabilities earn free flights by accumulating the assigned chapter
Current Liabilities Lecture, short cases mileage. Accounting and
and exercises reporting the obligations of
airlines and the cost of frequent
flier programs raises difficult
measurement issues. The U.S.
Securities and Exchange
Commission began to require
airlines to disclose the number of
free flights program members
took. The case allows estimates of
the cost and obligations of the
United Air Lines program.

Session 9 Midterm Midterm Midterm Midterm Midterm

Session10 Long-term liabilities Real Estate and Chapter 14(I) To understand the nature of a Please solve questions at the end of
and Leases Capital Structure bond contract and to isolate the the case and the questions sent for
Decisions—Lease vs. cash flows when the bond is the assigned chapter
Buy Analysis
issued, during each investment
period, and the point when the
bond is finally retired. To
understand the multiple impacts
of changing interest rates on
bonds. To understand key
principles in calculating the value
of any financial security.

Session 11 Income taxes and Taxing Situations: Chapter 19(I) Two situations are described to Please solve questions at the end of
Deferred Taxes Two cases on income provide illustrations of situations the case and the questions sent for
taxes and financial where income taxes paid differ
 reporting from the income tax expense that the assigned chapter
might be included in financial
reports. In addition to illustrating
that financial reported income
may differ from taxable income,
the case contains data, to allow
students to discover the reasons
for and nature of a deferred tax
account

Session 12 Module 7: Lecture, short cases • Chapter 15(I) Please solve questions at the end of
Shareholders’ Equity and exercises the case and the questions sent for
the assigned chapter
Shareholders’ equity

Session 13 Module 8: Cash Flows • Statement of Cash Flows: Students are asked to use actual Please solve questions at the end of
Statement of cash Preparation, Analysis & and pro forma financial the case and the questions sent for
flows Linkages statements to prepare a statement the assigned chapter
of cash flows under both the
direct and indirect method.

Session 14 Statement of cash Cash Flow Analysis • Ins and Outs of Cash Flow Students are asked to use actual Please solve questions at the end of
Flows • Chapter 13(P) and pro forma financial the case and the questions sent for
statements to prepare a statement the assigned chapter
of cash flows under both the
direct and indirect method.

Session 15 Module 9: Financial • Essentials of Financial The note provides students with Please solve questions at the end of
Statement Analysis Statement Analysis (1) an understanding of the the case and the questions sent for
Financial statement essence of long-term financial the assigned chapter
analysis
health; (2) familiarity with the
calculation and meaning of
various financial ratios; and (3)
an understanding of the influence
of a company's operating and
 competitive characteristics on its
investment in various type assets,
on the profitability of these
investments, and on the financial
structure of its balance sheet.

Session 16 Financial statement Bed Bath & Beyond • Essentials of Financial To provide an example of Please solve questions at the end of
analysis Statement Analysis business analysis and valuation of the case and the questions sent for
a specialty retailer and its the assigned chapter
competitors in the housewares
industry. Provides an opportunity
for students to conduct a
complete financial statement
analysis at Bed Bath and Beyond
using four steps: business strategy
analysis, accounting analysis,
financial analysis, and
prospective analysis.