Largary MACC 413 syllabus.doc


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Largary MACC 413 syllabus.doc

  1. 1. LEHIGH UNIVERSITY Revised 12.21.04 Department of Accounting MACC 413 (Tu/Th: 10:45-Noon) Fall 2004 Corporate Financial Reporting Professor Largay COURSE CONTENT AND OBJECTIVES This course addresses the nature of corporate financial reporting, its role in providing decision-useful information to capital market participants, and theoretical and empirical assessments of its performance. Topics include the role of accounting information in the “financial reporting revolution,” efficient markets theory and research, economic consequences, positive accounting theory, executive compensation, earnings management, standard-setting and the FASB’s conceptual framework, harmonization of international accounting principles, and selected current reporting issues. The course explicitly addresses the following Learning Objectives adopted by the Lehigh University Accounting Department. Skill Objectives The teaching approach and nature of the course assignments should enable students to: 1. Cultivate and develop a capacity for life-long, self-learning. 2. Refine oral and written communication skills. 3. Refine problem-solving skills, including critical thinking and decision-making skills. Content Objectives At the end of this course, students should be able to: 4. Describe the efficient markets hypothesis and summarize the results of the empirical tests of that hypothesis. 5. Explain how accounting information affects security prices and cite related research results. 6. Discuss potential economic consequences of accounting information 7. Contrast positive accounting theory with normative theory and critique the research evidence. 8. Explain the role of accounting information in owner/manager conflicts and executive compensation. 9. Discuss issues surrounding harmonization of international accounting standards. 10. Understand and interpret SEC Form 20-F—reconciliation of non-US GAAP to US GAAP. 11. Explain earnings management and approaches to detecting it. 12. Explain the standard-setting process and the nature and significance of the FASB’s conceptual framework. 13. Discuss how important concepts—financial reporting objectives, qualitative characteristics of accounting information, and financial statement elements—influence actual accounting standards. 14. Use the popular press and the Internet to research financial reporting issues and obtain financial information. REQUIRED READING MATERIALS
  2. 2. 2 Scott, W., Financial Accounting Theory, 3e (Prentice-Hall, 2003); three copies of all assigned articles are on reserve in Fairchild-Martindale Library. OFFICE HOURS Office hours are scheduled in 420 Rauch Business Center (phone: 610-758-3409; fax: 610-758-6429; e-mail: for 1:30PM - 4PM on Monday and Wednesday, and by appointment. MACC 413—Corporate Financial Reporting Fall 2004 TEACHING APPROACH I believe in getting you involved in the learning process to the maximum extent possible. For this reason, and because of the time pressures in this course, you often will be reading, and completing assignments, before the material is discussed in class. I expect you to be prepared for each class by reading the assigned material and completing the assignments as best you can, to participate in the discussions of the various topics, and to be responsive when called on. Even though this approach will on occasion be painful, you will find that it leads to a higher level of learning and deeper understanding. GRADING The course grade is composed of the following: Midterm examinations (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% Problem assignments and class participation . . . . . . . . . . . . . . . 20% Term project and presentation . . . . . . . . . . . . . . . . . . . . . . . . . . 30% 100% TERM PROJECT AND PRESENTATION Organize yourselves into diverse groups of 4 with males, females and international students distributed among the groups. As the course unfolds each group shall identify a topic of interest to them that will build on but not repeat the course content. Each group will prepare a professional 15-page double-spaced term paper on their subject and make a seamless 30-minute class presentation of their findings. Prepare the term paper professionally—use 1” margins, 12-point type, page numbers, section headings, proper footnote format—and give exact sources of all direct quotes. Your classroom presentations can use PowerPoint or conventional slides. Presentations will be made in class on November 23 and 30, and December 2; the term paper is due in RBC 420 by 4PM on December 2, 2004. Topics include but are not limited to: analysts’ forecasts, conservatism in accounting, earnings quality, standard-setting models, fraudulent financial reporting, unrecorded intangible assets, business combinations, stock compensation, the role of accounting in global capital markets, earnings management, etc. EXAMINATIONS AND ASSIGNMENTS Examinations are individual closed-book efforts. If you inform me ahead of time that you must miss an exam, I will seek to make other arrangements; otherwise a missed exam will be given a zero. You may work in groups to discuss the assignments, but each of you must develop and prepare your own unique responses to be handed in at the end of class for grading the day they are assigned. It is NOT acceptable to copy from another source. Do all assignments on the computer. Bring a printed copy to be marked up and handed in at the end
  3. 3. 3 of class. Solutions that are late or e-mailed are not accepted. To allow for the occasional assignment that is not handed in on time, I drop the two lowest assignment grades. Do not seek exceptions to this policy by explaining why you did not hand in a particular assignment. Prepare all assignments but the first ones to be collected for grading are Chap 2—14, 20 and Chap 3—12, 20, due on August 31. MACC 413—Corporate Financial Reporting Fall 2004 SCHEDULE OF ASSIGNMENTS Date Topic Readings/Problems from Scott 8/24 The Financial Reporting Revolution Chap 1, 2 8/26 " " " " Chap 2—6, 9, 13, Chap 3 8/31 " " " " Chap 2—14, 20; Chap 3—12, 20 9/2 Efficient Markets Theory and Research Chap 4—2, 8; Bloomfield (2002) 9/7 " " " " " Chap 4—10, 11; Chap 5 9/9 " " " " " Chap 5—7, 8, 21 9/14 Measurement Perspective, Econ. Consequences Chap 6—5, 10, Chap 7 9/16 " " " " Chap 7—9, 14; Chap 8 9/21 Positive Accounting Theory Chap 8—5, 9; Revsine (1991) 9/23 " " " Chap 8—14, 16; WZ (1986, 1-14); WZ (1990); Sterling (1990) 9/28 Agency Theory, Owner/Manager Conflict Chap 9—2, 6, 10 9/30 " " " " Chap 9—9, 13 10/5 Examination (8/24 – 9/30 10/7 No Class—Pacing Break 10/12 Executive Compensation Chap 10—2, 5 10/14 " " Chap 10—8, 11
  4. 4. 4 10/19 Earnings Management Chap 11—6; Schipper (1989) 10/21 " " Chap 11—5, 7, 9 10/26 International Harmonization, SEC Form 20-F Presenter—Tom Whittle, KPMG 10/28 Standard Setting and Conceptual Framework Chap 12—15, 18 11/2 International Harmonization, SEC Form 20-F Presenter—Tom Whittle, KPMG MACC 413—Corporate Financial Reporting Fall 2004 SCHEDULE OF ASSIGNMENTS (CONT.) Date Topic Readings/Problems from Scott 11/4 Standard Setting and Conceptual Framework Chap 13—7, 8, Gellein (1980) 11/9 International Harmonization, SEC Form 20-F Presenter—Tom Whittle, KPMG 11/11 Standard Setting and Conceptual Framework Chap 13—10, Storey and Storey (1998)—47-66, 67-87 11/16 " " " " " AAA FASC (2003), Nelson (2003), Schipper (2003) 11/18 Examination (10/12 - 11/16) 11/23 Group Presentations 11/25 No Class—Thanksgiving Vacation 11/30 Group Presentations 12/2 " " SUPPLEMENTARY READINGS AAA Financial Accounting Standards Committee (FASC), “Evaluating Concepts-Based vs. Rules-Based Approaches to Standard Setting,” Accounting Horizons, Mar 2003; 73-89. Beaver, W. Financial Reporting: An Accounting Revolution, 3rd Ed. (Prentice-Hall, 1998) Bloomfield, R. “The ‘Incomplete Revelation Hypothesis’ and Financial Reporting,” Accounting Horizons, Sep 2002; 233-243. Cearns, K. Reporting Financial Performance: A Proposed Approach, FASB Special Report, 1999.
  5. 5. 5 Dechow, P. and D. Skinner, “Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators,” Accounting Horizons, Jun 2000; 235-250. Dye, R. and S. Sunder, “Why Not Allow FASB and IASB Standards to Compete in the U.S.?” Accounting Horizons, Sep 2001; 257-271. Edwards, E. “The State of Current Value Accounting,” The Accounting Review, Apr 1975; 235-245. Financial Accounting Standards Board. “Using Cash Flow Information and Present Value in Accounting Measurements,” Statement of Financial Accounting Concepts No. 7 (FASB: Norwalk, CT) 2000. MACC 413—Corporate Financial Reporting Fall 2004 SUPPLEMENTARY READINGS (CONT.) Frost, C. and M. Lang, “Foreign Companies and U.S. Securities Markets: Financial Reporting Policy Issues and Suggestions for Research,” Accounting Horizons, Mar 1996; 95-109. Gellein, O. “The Conceptual Framework: Needs and Uses,” FASB Viewpoints, 8.19.80; 1-4. Gernon, H. and G. Meek, Accounting: An International Perspective, 5/e (Irwin McGraw-Hill, 2001). Haskins, M., K. Ferris and T. Selling, International Financial Reporting and Analysis, 2/e (Irwin McGraw-Hill, 2000). Heath, L. “The Conceptual Framework as Literature,” Accounting Horizons, Jun 1988; 100-104. Johnson, L. T. and A. Lennard. Reporting Financial Performance: Current Developments and Future Directions, FASB Special Report, 1998. ______ and K. Petrone. The FASB Cases on Recognition and Measurement, 2nd Ed.(FASB: Norwalk, CT), 1995. Kirk, D. “Corporate Accounting and Accountability in Turbulent Times,” FASB Viewpoints, 6.1.81; 1-6. Levitt, A. “The Importance of High Quality Accounting Standards,” Accounting Horizons, Mar 1998; 79-82. McGregor, W. “An Insider’s View of the Current State and Future Direction of International Accounting Standard Setting,” Accounting Horizons, Jun 1999; 159-168. Miller, P. “The Conceptual Framework as Reformation and Counterreformation,” Accounting Horizons, Jun 1990; 23-32. Nelson, M. “Behavioral Evidence on the Effects of Principles- and Rules-Based Standards,” Accounting Horizons, Jun 2003; 91-104. Revsine, L. “The Selective Financial Misrepresentation Hypothesis,” Accounting Horizons, Dec 1991; 16-27.
  6. 6. 6 Saudagaran, S. and J. Diga, “Financial Reporting in Emerging Capital Markets: Characteristics and Policy Issues,” Accounting Horizons, Jun 1997; 41-64. Schipper, K. “Commentary on Earnings Management,” Accounting Horizons, Dec 1989; 91-102. _______. “Commentary on Analysts’ Forecasts,” Accounting Horizons, Dec 1991; 115-121. _______. “Principles-Based Accounting Standards,” Accounting Horizons, Mar 2003; 61-72. _______. and L. Vincent, “Earnings Quality,” Accounting Horizons, Supplement 2003; 97-110. Solomons, D. “The FASB’s Conceptual Framework: An Evaluation,” Journal of Accountancy, Jun 1986; 114-124. MACC 413—Corporate Financial Reporting Fall 2004 SUPPLEMENTARY READINGS (CONT.) Sterling, R. “Relevant Financial Reporting In An Era of Price Changes,” Journal of Accountancy, Feb 1975; 42-51. ______. “Positive Accounting Theory: An Assessment,” Abacus, Vol. 26, No. 2, 1990; 97-135. Storey, R. “Conditions Necessary for Developing a Conceptual Framework,” FASB Viewpoints, 3.3.81; 1-6. ______. and S. Storey. The Framework of Financial Accounting Concepts and Standards, FASB Special Report, 1998. Watts, R. “Conservatism in Accounting Part I: Explanations and Implications,” Accounting Horizons, Sep 2003; 207-221. ______. “Conservatism in Accounting Part II: Evidence and Research Opportunities,” Accounting Horizons, Dec 2003; 287-301. ______. and J. Zimmerman (WZ). Positive Accounting Theory (Prentice-Hall, 1986). ______. “Positive Accounting Theory: A Ten-Year Perspective,” The Accounting Review, Jan 1990; 131-156.