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

The objective of the course is to create competency of reading and understanding the financial statements.

Course Contents

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 Superseded by IAS 1 in 1997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.

Course Contents

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