The course is designed to provide the tools necessary to conduct a reasonably sophisticated financial statement analysis. The focus is on the use of financial statements, although this requires some understanding of the process by which financial statements are produced. It will benefit students that want to become bankers, investors, analysts, or any other job that requires more than a superficial understanding of financial reporting. The course is also a good replacement for B30000 for students that have already taken an introductory accounting class (if in doubt, see online self-assessment test).
We will not limit our study to the financial statements per se. We will also work with supplemental disclosures, which help the user to interpret the financial statements and to understand better the economic transactions that gave rise to them. The techniques we will employ will be useful for variety of purposes including (but not limited to) equity, credit, and complex deals (such as MA) analysis. Although this course does not cover forecasting, valuation, or models of complex deals, a thorough understanding of financial reporting issues is critical to being able to use such techniques. As a result, this course will be especially useful as a prelude to Financial Statement Analysis (B30130), Advanced Financial Analysis and Valuation for Global Firms (B30131), and Accounting, Economic, and Regulatory Issues in Complex Deals (B30200).
Topics covered typically include: pro forma financial statements; convertible instruments; EPS; stock-based compensation accounting; accounting for investments; accounting for income taxes; revenue recognition; lease accounting; foreign currency translation. Where significant, differences between US GAAP and international standards (IFRS) will be highlighted.
Class discussions will draw from actual financial statements. Short cases based on actual financial statements will be required. There will be two exams.
The course is also likely to prove useful to those preparing to take the CFA or CPA exams.