Financial Reporting and Analysis: Course Outline (MBA-Finance)
The objective of the course is to create competency of reading and understanding the financial statements.
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
- 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 Superseded by IAS 1 in 1997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