Thursday, 1 January 2015

ACCT2542 CORPORATE FINANCIAL REPORTING AND ANALYSIS

ACCT2542  CORPORATE FINANCIAL REPORTING AND ANALYSIS




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AIMS OF THE SUBJECT

This subject is concerned with external accounting and reporting practices and, in particular, the accounting and financial reporting practices of listed public companies. It is intended for students who will be involved in the preparation or use of company financial statements whether as accountants, financial executives, taxation officers, auditors, financial analysts, actuaries or legal advisors.

The subject builds on the foundations laid in ACCT1501 and ACCT1511 Accounting and Financial Management 1A and 1B. More complicated business transactions are considered, including accounting for complex groups of companies such as, consolidation accounting. Regulatory requirements for the preparation of financial statements for individual companies and groups will be covered. Also covered are accounting problems in certain specific areas, including tax effect accounting and accounting for insurance companies and superannuation plans.

An important aim of the subject is to provide opportunities for practising the communication of accounting knowledge. In addition, the subject attempts to challenge the student to think critically about corporate financial reporting by fostering an appreciation of:

(a)      alternative accounting practices and issues relating to their application;

(b)     accounting standards and similar pronouncements pertaining to various accounting issues;

(c)      the frequency of use of particular accounting techniques by Australian companies;

(d)     the role of the Conceptual Framework in evaluating accounting issues

(e)      the role of the harmonization programme in shaping accounting standards; and

(f)      relevant research on the effects of accounting policy choices on financial statements, capital markets and decision-making behaviour.

Technical accounting knowledge must be accompanied by skills in problem identification, analysis and solution as well as the ability to communicate clearly orally and in writing. Such skills are developed through training and practice. This objective is achieved in the course by requiring students to submit written assignments and providing them case studies in tutorials that will give them an opportunity to participate in class discussions.

TEXTS AND ABBREVIATIONS USED

Deegan      Deegan, C. Australian Financial Accounting, 3rd ed. Irwin McGraw Hill, 2002. See McGraw-Hill website for student resources (http://www.mcgraw-hill.com.au/mhhe/acc/deegan3e).

Eddey         Eddey, P; N. Arthur and J. Knapp Accounting for Corporate Combinations and Associations 5th ed. Prentice-Hall, 2001.

Sup Materials Supplementary Materials for ACCT2542 Corporate Financial Reporting Analysis and ACCT 2552 Corporate Financial Reporting Analysis (Honours), School of Accounting, University of NSW, 2002.

Handbook Parker, C. (ed.) Accounting Handbook 2002, Volume 1 of the Accounting and Auditing Handbook 2002, Prentice-Hall. The contents of the Handbook are generally available for viewing or downloading from the AASB’s homepage, hence,


we are not compelling students to purchase the handbook. However, since we are going to use the contents of the handbook quite frequently for this course and also for ACCT3563 next year, the costs of printing the standards and other policy statements may exceed actual cost of the text. We leave it up to the student to decide whether they would wish to buy the text or download the material as we use them. (http://www.aasb.com.au/pronouncements/standards_index.htm)

Note: The Deegan and Eddey textbooks will also be used as in ACCT 3563 in Session 1, 2003.



REFERENCE BOOKS (Students should not purchase these books as all are held on Open Reserve, Main Library)

Deloitte Touche Tohmatsu, Summary of Accounting Requirements, 14th Edition 2002. (This publication is not available in Open Reserve but can be accessed through http://www.deloitte.com.au/downloads/sumacc02.pdf)

Henderson, S., and G. Peirson, Issues in Financial Accounting, 9th ed., Longman, 1999.

Jubb, P., Langfield-Smith, I. And Haswell, S., Company Accounting, 3rd ed., Nelson 2002.

Leo, K.J., and J.R. Hoggett, Company Accounting in Australia, 4th ed., Wiley, 1998, and 5th Wiley 2001

Leo, K.J., C.J. Lambert, and J.W. Sweeting (eds), Financial Accounting Issues, Wiley 1996

Leo, K.J. and J. Radford (eds) Financial Accounting Issues, 2nd ed. Wiley 1999.

Nobes, C., and R. Parker (eds) Comparative International Accounting, 5th ed., Prentice Hall, 1998.

Parker, C. and B. Porter CPA Summary Of Australian GAAP 2002 6th ed., Accountnet Pty Ltd, 2002.

PricewaterhouseCoopers, Value Accounts Investment Management: Annual and Interim Financial Reporting 2002. (This publication is not available in the open reserve but available at http://www.pwcglobal.com/au/eng/ins-sol/publications/index.html)

Scott, W.R. Financial Accounting Theory, Prentice Hall 1997

Shanahan, J.B., and M.A. Shanahan, Guide to Accounting Standards, 7th ed., John and Margaret Shanahan, 1997.

Trotman, K. and M. Gibbins, Financial Accounting: An Integrated Approach, ITP Nelson 1998.

Whittred, G., I. Zimmer, and S. Taylor, Financial Accounting: Incentive Effects and Economic Consequences, 5th ed, Harcourt Brace, 1999.


ASSESSMENT

The weighting of the final (composite) mark will be as follows:

(a)                Mid-session test  ( Friday, 13th September 2002

1:30 to 3:15 pm or 3:30 to 5:15 pm at the Square House)
30%
(b)
Tutorial hand-in assignments
15%
(c)
Group assignment  (Due, 5pm 18 October 2002)
15%
(d)
Final examination
40%


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100%


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The coverage of the mid-session test will be Lecture Weeks 1-6 and Tutorial Weeks 2-7. The mid-session test will comprise of multiple choice questions worth 30 marks. The final examination will cover the whole course but with emphasis on lecture topics from Weeks 7-14. More information on the structure of the mid-session test and the final examination will be provided closer to examination date. A selection of past mid-session and final examination paper questions will be posted on the Course website (see below). Students should note that the course content has changed substantially from previous semesters, hence past exams may not be a reliable guide to examinable material.


CLASS ARRANGEMENTS

Students are expected to attend two one-hour lectures weekly. They are also expected to attend one 11/2 hour tutorial weekly, beginning Week 2. Attendance at lectures and tutorials is compulsory. An attendance record will be taken in each tutorial and used in considering marginal cases at the end of session. IF STUDENTS ATTEND LESS THAN 80 PER

CENT OF THEIR POSSIBLE CLASSES THEY MAY BE REFUSED TO SIT FOR THE FINAL ASSESSMENT.

Tutorials

Tutorials will emphasise the application of problem-solving skills to specific questions, and also review and discuss assigned readings and case studies. The tutorials should assist students

(a) to master technical aspects of the topics assigned, (b) to appreciate the patterning and directions of change within the discipline and (c) to understand some of the important disputes in the discipline, and the processes by which these are addressed and/or resolved.

Students are expected to read all tutorial questions and attempt to answer them before the tutorial. Students must prepare a submittable form of the answers to all questions on a weekly basis. The tutor is expected to collect and mark at least 4 weeks during the semester but only the best 3 marks will form part of the final assessment. Refer to tutorial handout for the assessment criteria. Preliminary assistance materials may be provided on the WebCT for complex problems as deemed appropriate. For example, a worksheet may be provided for some of the consolidation problems. Students are also expected to bring the prescribed text to tutorials as questions are mostly taken from the prescribed text.

Whilst class participation is not formally part of the assessment, constructive participation in tutorials can have a positive impact on your final grade.

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Group Assignment

In the first tutorial (Week 2), your tutor will assign students to syndicates of four. Each syndicate will work on the class assignment that is worth 15 marks and due on 18 October 2002 at 5pm (Week 11). Details of the class assignment will be discussed in Week 4. EACH

SYNDICATE MEMBER MUST BE INVOLVED IN THE PREPARATION AND FINALISATION OF THE GROUP ASSIGNMENT. Problems encountered by students concerning the group assignment must be discussed with their tutor no later than Week 9.


ACCT 2552 CFRA HONOURS

Students enrolled in the honours stream, ACCT 2552, must enrol in one of the honours tutorials. Honours students must still attend all the lectures in ACCT 2542. Inquiries about CFRA Honours should be directed to Dr Gerry Gallery.

STAFF CONSULTATION

Members of staff teaching the course will be available for consultation at specified hours or by appointment. Problems should be directed in the first instance to your tutorial instructor. Staff members assigned to the course are listed below:


Room
Contact Information
Dr Maria Balatbat (CFRA Course Coordinator)
Quad 3103
9385 5808
Dr Gerry Gallery (CFRA Honours)
Quad 3096
9385 5813
Mr Andrew Bowman
Quad 3089
9385 6283
Ms Michelle Chang
Quad 3089
9385 6283
Mr Robert Czernkowski
Quad 3081
9385 5807
Mr Max Hewitt
Quad 3118
9385 6081
Mr Martin Lee
Quad 3089
9385 6283
Dr Richard Morris
Quad 3066
9385 5818


Queries about the TAS system and changing tutorials during weeks 1-2 of session should be addressed to Chris McNamara or Jen Horan during their office hours, both of whom are in Quad 3113 (phone 9385 5907). Special difficulties may be referred to Dr. Maria Balatbat, the staff member in charge of the subject.

Initially, the website will contain the Course Outline and Tutorial Programme. During session, lecture notes, lecture handouts, tutorial solutions, preliminary assistance materials, and various announcements will be posted progressively on this website, together with a selection of past examination papers. Lecture notes and most handouts will be posted at the end of the week the relevant lecture was given. Please consult this website weekly at the very least.

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ACADEMIC MISCONDUCT (from University Calendar)

Students are reminded that the University regards academic misconduct as a very serious matter. Students found guilty of academic misconduct are usually excluded from the University for 2 years. Because of the circumstances in individual cases the period of exclusion can range from one session to permanent exclusion from the University.

The following are some of the actions that have resulted in students being found guilty of academic misconduct in recent years:

1.      taking unauthorised materials into an examination;

2.      submitting work for assessment knowing it to be the work of another person;

3.      improperly obtaining prior knowledge of an examination paper and using that knowledge in the examination

4.      failing to acknowledge the source of material in an assignment.

SUPPLEMENTARY EXAMINATION AND SPECIAL CONSIDERATION

Students who believe that their performance in this subject, either during session or in an examination, has been adversely affected by sickness, misadventure or other circumstances beyond their control may apply for special consideration for affected assessments.

Such applications should be submitted to the Registrar and Deputy Principal (at the student centre) as soon as practicable after the occurrence and in any event not later than seven days after the final examination in this subject.

Dates of Supplementary Examinations. Students may be required to sit for an oral or written supplementary examination. The supplementary final examination will be held on Thursday, 19 December 2002 from 9.15 am to 12.30 p.m. The supplementary Mid-Session Test will be held on Thursday 19 December, 2002 from 2 pm to 3.30 pm. In general, supplementary examinations will only be offered to students who have been prevented from taking the Mid-session test or Final Examination (as the case may be), or who has been placed at a serious disadvantage during the examination, and whose circumstances have improved considerably in the period since the relevant examination was held. Failure to attend a supplementary examination, if you have been granted one, will result in forfeiture of any additional assessment granted to you.

students will go through it assignment4finance@gmail.com


FIN 200 Corporate Financial Management

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check theirs e-mails on this address or contact the course coordinator prior to scheduled supplementary exams. Notification by post will no longer occur.


RECOMMENDATIONS TO STUDENTS

How to study this subject. The subject covers many topics and there is a lot of reading, including technical material from accounting standards. To assist your studies, the following advice is offered. Do the following steps in the order shown:

(a)    Read all required readings prior to lectures and tutorials.

(b)   Attend all lectures and take notes. Lecture notes and handouts will be posted on the Course website at the end of each week, but they will not convey everything the lecturer says. Handouts not available on WebCT are obtainable from the lecturer for the relevant week. In preparing for exams, note which aspects of each topic the lectures cover and/or the lecturer has emphasised.

(c)    Attend all tutorial classes. You must attempt all questions each week prior to your scheduled tutorial. Make use of Preliminary Assistance Materials (PAM) provided for complex exercises. Since classes are only 90 minutes, your tutor may not have time to cover all questions every week, but we expect you to know the answers to all the set questions, whether covered in class or not.

(d)   The details you need to know from the accounting standards and similar documents will become apparent from lectures and tutorials. You must learn the skill of identifying and then learning the most important parts of accounting standards. Such as coverage of the standard, basic prescriptions and disclosure requirements.

(e)    The five weeks on consolidation accounting are sequential, that is, each week builds on what has gone the previous week. It is important that students stay up to date with this work and not leave studying it until the last minute

Students will benefit if they obtain recent annual reports of several listed public companies and observe the manner in which the legal requirements and the various accounting standards discussed in the subject are complied with in practice. Perusing articles in the financial press pertaining to company earnings and related announcements (which may refer to accounting techniques used by the firms) will also prove useful.

Since ACCT 1511 (Accounting and Financial Management IB) is a prerequisite for this subject, it is assumed that students know the basic accounting process. Those students who do not feel confident should re-study the relevant parts of the first year text, Trotman and Gibbins, Financial Accounting: An Integrated Approach.

This subject is only offered in second session each year. It can be very inconvenient in terms of pre-requisites for other subjects if you fail this subject. Avoid the difficulties that can arise in completing your degree by passing the subject the first time round. Resolve to stay up-to-date and work in advance all assignments for tutorials especially on complex topics in the course such as: tax-effect accounting and consolidation. You may have trouble coping if you leave too much work to the end of the session. Create a strong foundation for the later material by starting work on the subject early this session and maintaining a consistent work schedule in each week of the course.

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SUMMARY OF TOPICS

WEEK 1 (29 July – 2 August) Dr Maria Balatbat

A. Institutional arrangements for financial reporting in Australia

1.      Objectives of external financial reporting (SAC 2)

2.      Regulation of Australian external financial reporting

3.      Standard setting process

4.      Role of conceptual framework

5.      Harmonisation  of accounting standards

6.      Critique of existing regulation

Reading:

Deegan:  Chapter 1

Sup Materials:  Section A, Reading 1

Reference:

Handbook:     Policy Statement 5 “The Nature and Purpose of Statements of

Accounting Concepts”

SAC 2 “Objectives of General-purpose Financial Reporting”

B. Revaluation of non-current assets

1.        Contrast between cost and fair value of non-current assets

2.        Upward and downward revaluations of non-current assets

3.        Recoverable amount test

Note:  Tax-effect accounting on revaluation will be covered in Weeks 2 and 3.

Reading:

Deegan:    Chapter 5

Sup Materials:  Section A, Reading 2 & 3

Reference:

Handbook:    SAC 4, paras 14, 38

AASB 1010 "Recoverable Amount of Non-Current Assets"

AASB1041 "Revaluation of Non-Current Assets"

WEEKS 2 and 3  (5-16 August) Mr Robert Czernkowski

Tax-effect Accounting

1.        Differences between accounting profit and taxable income - permanent & temporary differences

2.        Alternative methods of accounting for income tax – liability method vs balance sheet approach - impact on assets, liabilities and income tax expense

3.        Requirements of new AASB 1020 - balance sheet approach

4.        Changes in company tax rate

5.        Tax losses

6.        Economic consequences and business reaction to tax effect accounting

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Reading:

Deegan:  Chapter 17

Sup Materials: Section B (Note that the paper by Goodwin refers to the exposure drafts (Eds) that preceded SAC 4. There are no significant differences between those EDs and SAC4 on the points raised by Goodwin.)

Reference:

Eddey:         Pages 98-104

Handbook: AASB 1020 "Income Taxes"

SAC4 "Definition and Recognition of Element in the Financial Statements"


WEEK 4  (19-23 August) Dr Gerry Gallery

[Note: In Weeks 4 - 6, evening lectures (Stream C) will be held on Thursdays only from 6pm to 7:30pm at the Dwyer Theatre. Consequently, tutorial group 19 will start at 7:30pm instead of 7pm during these weeks.]

Financial Statement Reporting and Disclosure

1.      Statements for financial position and performance

2.      Statement format and supplementary disclosures

3.      Other major disclosure requirements

Reading:

Deegan, Chapter 16

Jubb, Smith & Haswell, Chapter 15: Reporting on Financial Position (Lecture Handout)

ASIC Media & Information Release 02/22 (Lecture Handout) Reference:

Handbook:

AASB 1018 " Statement of Financial Peformance" AASB 1040 " Statement of Financial Position"
AASB 1034 " Financial Report Presentation and Disclosure"

further in coming chapters it is important to read out  other chapters too:


WEEK 5  (26-30 August) Dr Gerry Gallery

Liabilities - Nature, recognition and measurement

1.        What is a liability in accounting?  Definition and recognition tests in SAC 4.

2.        (i) Contingencies and (ii) executory contracts (also called agreements equally proportionately unperformed [AEPUs])

3.        Liability measurement - net present value, face value or market value

4.        Accounting for debentures and notes

(a)        Issue at a discount or premium;

(b)        Zero coupon debentures

(c)        Choice of discount rate for NPV - current market rate vs implicit rate (AAG 10)

5.        Debt vs equity - preference shares and convertible notes

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Reading:

Deegan: Chapter 9

Chapter 13 pp 401-403 on preference shares

Chapter 14 pp 414-416, 432-436 (On pp 435-435 consider only disclosure

requirements for financial liabilities)

Sup Materials:  Section C

Reference:

Handbook: AASB 1033, "Presentation and Disclosure of Financial Instruments" (paras 4.1-4.4.2; 5.6-5.6.9; Appendix paras 18-30 (use residual valuation method only to value convertible notes);

Also the following items are all on floppy disk at back of Handbook: Abstract 26 on cyclical maintenance, Abstract 35 on disclosure of contingent liabilities ED 88 on provisions & contingencies, AAG 10 on Measurement of monetary assets and liabilities

Note:   Derivative financial instruments such an interest rate swaps, options and futures contracts are covered in ACCT 3563 Issues in Financial Reporting and Analysis. Those parts of Deegan that deal with derivatives are outside the scope of ACCT2542.


WEEK 6  (2-6 September) Dr Gerry Gallery

Accounting for employee entitlements and superannuation plans

1.        What are employee entitlements?

2.        The controversy over the appropriate accounting by employer companies for their superannuation obligations and other employee entitlements, with an emphasis on liability recognition and measurement

3.        Requirements of AASB 1028

4.        Defined benefit and defined contribution superannuation plans (pension schemes)

5          Measurement of assets and accrued benefits by superannuation plans. Are accrued benefits liabilities?

6          Financial reporting options by superannuation plans to members and others (AAS 25)

Reading:

Deegan: Chapters 12, 21 Reference:

Handbook:  AASB 1028 "Employee Benefits"

AAS 25 "Financial Reporting by Superannuation Plans"

AAG 13 (Accounting Guidance Release) "Determination of using discount rates for measuring certain liabilities at present value" - available in floppy disk at the back of the handbook)



Mid-session test cutoff

Coverage Lecture Weeks 1-6

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WEEK 7  (9-13 September) Dr Maria Balatbat

Accounting for General Insurance and Life Insurance Companies

1.        Revenue recognition

2.        Insurance claims – long-tail vs. short-tail business; discounting to NPV

3.        Valuation of assets – investments versus other assets

4.        Recognition of internally developed goodwill by life insurance companies

5          Disclosure requirements

6.        Standards AASB 1023 and 1038 vs. Standards AASB 1010/1041 and 1021

7.        Industry reaction to AASB 1023

Reading:

Deegan:  Chapter 20

Sup Materials: Section D

Reference:

Handbook:      AASB 1023 "Financial Reporting of General Insurance Activities

AASB 1038 "Life Insurance Business"

WEEK 8  (16-20 September) Robert Czernkowski

Consolidation Accounting 1

1.        The economic entity

2.        Subsidiaries and the concept of “control” in AASB 1024

3.        Acquisition of assets in business combinations

a)      Measurement - acquisition cost

b)      Recognition - control vs significant influence

4.      Goodwill and discount on acquisition

5.      The basic elimination entry (BEE)

6.      Consolidation worksheets

Reading:

Eddey: Chapter 1, Chapter 2 (Sections 2.1 - 2.3)

Sup Materials:  Section E

Reference:

Handbook:  AASB 1024 "Consolidated Accounts"

AASB 1015 "Acquisition of Assets"

AASB 1013 "Accounting for Goodwill"

WEEK 9 (23-27 September) Dr Maria Balatbat

Consolidation Accounting 2

1.        Revaluation of non-current assets

2.        Post-acquisition profits

3.        Dividends

a)    pre-acquisition

b)   post-acquisition

4.        Outside equity interest - An introduction to partially owned subsidiaries

5.        Multi-year consolidation worksheet

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Reading:

Eddey: Chapters 2 (section 2.4 only), 3 and 4

Sup Materials: Section E

Reference:

Handbook:  AASB 1024 "Consolidated Accounts"


Mid-session Recess

28 September - 7 October 2002
WEEK 10  (8 – 11 October) Dr Maria Balatbat

Consolidation accounting 3

1.      Intra-group transactions

2.      Unrealised profits on opening and closing stocks

3.      Consolidation worksheet

Reading:

Eddey: Chapter 5 (Sections 5.1 - 5.2 only)

Sup Materials: Section E

Reference:

Handbook:  AASB 1024 "Consolidated Accounts"

WEEK 11  (14-18 October) Dr Richard Morris

Consolidation Accounting 4

1.      Multiple subsidiaries - An introduction to indirect ownership interest

2.      Calculation and presentation of outside equity interest

Reading:

Eddey Chapter 6 (omitting section 6.4)

Sup Materials: Section E

Reference:

Handbook:  AASB 1024 "Consolidated Accounts"


WEEK 12  (21 - 25 October) Dr Richard Morris

Consolidation Accounting 5 - Contemporary issues

1.      Critique of goodwill accounting

2.      Impairment test - intangible assets

3.      Tax consolidation

4.      Segment accounting

Reading:

Eddey, Chapter 12

Supp Materials: Section E

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Reference:

Handbook:    AASB 1024 "Consolidated Accounts"

AASB 1013 "Accounting for Goodwill"

AASB 1005 "Financial Reporting by Segments"


WEEK 13  (28 October - 1 November) Dr Richard Morris

Accounting for Investment in Associates

1.      Revisit the difference between an associate and a subsidiary?

2.      Ways to account for investment in associates (cost or proportional one-line consolidation)

3.      Implementation of equity accounting

4.      Equity accounting saga in Australia and AASB 1016

5.      Conceptual issues about equity accounting

Reading:

Eddey,  Chapter 9 (except section 9.3.3 and 9.7.5)

Sup Readings, Section F

Reference:

Handbook, AASB 1016 "Accounting for investment in associates"

WEEK 14  ( 4 -8 November) Dr Maria Balatbat

A. Accounting for Joint Ventures

1.      What is a joint venture?  How does it differ from subsidiaries and associates?

2.      Joint Venture Entities vs Joint Venture Operations

3.      Are joint ventures part of the economic entity

4.      How to account for joint venture? Equity accounting or line-by-line (proportional consolidation)

5.      AASB 1016 vs AASB 1006

Reading:

Eddey: Chapter 11, sections 11.1-11.5 and 11.8 Reference:

Handbook:   AASB 1016 "Accounting for investment in associates" AASB 1006 "Accounting for joint ventures"

B. Revision

1.                  Summary of ACCT 2542

2.                  Revision questions

3.                  Coverage of final exams


ACC 100 Introduction of Accounting
FNCE 20000 Business Finance


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