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Finance and Financial Reporting
PART B - Spring 2021
Part B lectures – Charles O’Connor
Tuesdays – 11.00 – 12.00 Lecture
Tuesdays – 12.00 – 13.00 Tutorial
Introduction
Module Outline & Aims
• Financial reporting, accounting standards & governance
• Review of accounting conventions in financial statements
• Introduction to corporate financial statements
• Accounting techniques to prepare financial statements
• Basic interpretation of financial statements
Lectures/Texts
• One 2-hour lecture per week for 10 weeks
– 1st Hour Introduces accounting concepts & techniques
– 2nd Hour Workings and solutions to practice questions
– Relevant chapters from course text - Interpreting Company Reports &
Accounts; Holmes, Sugden, Gee 10th edition (Prentice-Hall)
Additional readings: (to be advised)
Coursework
• 2 In-class multiple choice tests in weeks 06 and 11
Exam
• PART B: closed book written examination in May 2021
Format – (see earlier years) + multiple choice (mct)/written questions
Lecture 01: Introduction to financial accounting
• What is financial accounting
• Who are users of financial information
• Why companies prepare annual reports
• What information is contained in annual reports
• What are the main purposes of directors reports
• Who are the users of financial information
Financial Accounting
• Accounting is collecting, analysing and communicating
financial information
• This information will direct business decision making
• To produce information, companies use computerised
data systems that can identify, record, and analyse the
relevant financial information
Financial/Management Accounting
• There are 2 related activities:
– Financial accounting
– Management accounting
• Financial accounting:
– Generates reports and accounts for external users
– The content is regulated by law
– The content covers the accounting period recently ended
• Management accounting:
– Generates reports and accounts for internal users only
– The content is determined by management
– The content can include future periods (budgets)
External Users of Financial Accounts
Owners Customers Competitors
Employees
Managers and their
representatives
Business
Lenders Government
Investment Community
Suppliers
analysts representatives
Company Annual Reporting Rationale
• Principal way in which accounts users are kept informed
about activities, progress and future plans of companies
• Form & content are subject to law & accounting standards
• Deadline is usually 9 months after the financial year end
• By law a certain information must be disclosed
• Special disclosure rules exist for certain industries
(eg insurance companies, banks, pension funds, charities)
Annual Reporting Rationale (cont’d)
• Annual reports include specified financial statements as
well as narrative reporting (notes to accounts)
• Further disclosures are required where companies are
listed on recognised stock exchanges e.g. corporate
governance and remuneration reports
• Annual reports of larger companies generally include further
disclosures beyond the narrow requirements set down by the
law and accounting standards obligations
Content of Annual Reports
[ex Companies Act 2006 & current Accounting Standards (IAS)]
• Auditors report (where required)
• Directors report
• Statement of financial position (balance sheet)
• Statement of profit or loss (income statement)
• Cash flow statement
• Statement of changes in equity
• Notes to financial statements
Content of Directors Report
• Directors reports contain narrative information about the
business prepared by the directors
• Company Law requires certain information to be disclosed in
directors reports, including:
– Financial results, paid/proposed dividends and share buy backs
– Summary of principal activities in the year, future likely activity, key
strategic decisions made by directors and post-balance sheet events
– Charitable donations
– Details of directors and their shareholdings
– Geographical analysis of turnover (listed companies)
End
Lecture 01: Introduction;
Homework: HSG Ch’s 1,2,4,5
QUs Neman; Wills; Dobson;
Readings – Users & Legals;
Standard setting;
Financial vs Management Accounts;
Intro to Balance Sheets;
