Financial Reporting and Analysis: Course Outline (MBA-Finance)

An Overview of Financial Reporting

• The history of Accounting
• Development of Accounting Standards: From 1929 NY Stock crash to International Financial Reporting Standards (IFRS)
• The Security Exchange Commission of Pakistan (SECP) and regulatory requirements for Financial Reporting.

• Underlying issues and objectives of financial reporting: capital maintenance, temporal distributions etc

Conceptual Framework

• The history of conceptual framework
• Major Issues on agenda
• Rule based vrs. Principal based standards debate
• The ambiguity of financial terminology and efforts to standardize interpretations

Important IAS and IFRS

• IAS 1 Presentation of Financial Statements, IAS 5 Information to Be Disclosed in Financial Statements – Originally issued October 1976, effective 1 January 1997. Superseded by IAS 1 in 1997
• IAS 2 Inventories
• IAS 7 Statement of Cash Flows
• IAS 38 Accounting for Research and Development Activities
• IAS 18 Revenue
• IAS 36 Impairment of Assets
• IAS 38 Intangible Assets
• IFRS 10 Consolidated Financial Statements
• IFRS 13 Fair Value Measurement

Preparation of Financial Statements

• Balance Sheet
• Profit and Loss Account/ Income Statement

• Cash Flow Statement with another company

Issues and Controversies in Financial Reporting

• Earnings Management
• Red flags
• Incentives that might induce the company mgt. to manipulate earnings.
• Fraud triangle
• Risk factors related to attitude and rationalizations that may lead to fraudulent accounting.
• Common accounting warning signs and methods of detecting them.
• Accounting shenanigans on cash flow statement.
• Stretching out payables.
• Financing of payables.
• Securitization of receivables.
• Using stock buybacks to offset dilution of earnings.

Financial analysis techniques

• Ratio analysis
• Common size financial statements
• Charts in financial analysis
• Limitations of ratio analysis
• Activity, liquidity, solvency, profitability and valuation ratios
• Equity analysis, credit analysis, and segment analysis
• Integration of tools to model and forecast earnings

Financial Statement Analysis: Applications

• Company’s past financial performance evaluation and finding company’s strategy reflected in past financial performance.
• Basic projection of a company’s
• Role of financial statement analysis in assessing the credit quality of a potential debt investment.
• Financial statement analysis in screening

• Appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company