Accounting for Decision
Making
For: IBA Academic Committee
By: Rustom Kavasji
Chairman, Accounting & Law, IBA, Karachi
Course Objectives
To provide an senior executive perspective of
advanced financial and management
accounting
To learn techniques for analysis of financial
information and improved decision making and
value creation and measurement.
2
Grading
• Class Participation / Assignments (30%)
– Qualitative
– Interactive
• Two written Case Analysis / Reports (20%)
• Home Assignments (10%)
• Mid Term (20%)
– Combination of case analysis and short questions
• Final Exam (20%)
– Combination of case analysis and short questions
– Comprehensive
3
Course Outline & Calendar
Session Detail
1
Introduction
2
Understanding Costs, Expenses, & Financial Management
3
Understanding Financial Statements and Role of Revenue
4
Cost - Volume - Profit Analysis
5
Tactical Decision Making & Relevant Costing
6-7
Capital Budgeting – I & II
8
Transfer Pricing & Responsibility Accounting
9
Fiscal Planning, Budgeting, Control & Variance Analysis
10
Internal Control & Internal Auditing
11
Performance Measures & The Balanced Scorecard
12
Accounting Conventions regarding IAS, IFRS, GAAP, and Compliance
13
Activity Based Costing
14
Service Department Cost Allocations
15 - 28
Cases
4
Ammar Textiles
The Transfer Pricing Problem
Highlights transfer pricing as a key factor
in competitiveness of textile exports and
why calculation and determination of an
accurate transfer price between the
Pakistani manufacturing operation and
Muscat is critical for Ammar’s successful
entry into new markets
5
Zulsham Engineering
Cost Volume Profit Analysis
Shows the usefulness of CVP as a
[planning and decision making tool for
Zulsham and an illustration of the nature
of costs in the real world. Highlights key
issues in CVP’s link to product pricing.
6
Dell Computers
Working Capital Management
Shows the effectiveness of good working
capital and cash management in
organizational growth. The case
highlights good operational WC
management as key in Dell’s success
while also indicating some pitfalls along
the way.
7
The Dublin Shirt Company
Cost Allocations and Pricing
An excellent case study that illustrates
the peril of poor management due to
incorrect cost allocations and hidden
costs, buried within lumped cost
structures, in turn leading to poor
product pricing and ineffective customer
profitability analysis.
8
The IBETO Group
Accounting & ERP Systems
Illustrates the necessity for ERP and
builds a case for an E-Enterprise. Shows
the transformation of a conglomerate’s
redundant information systems to the
adoption of a state-of-the-art ERP
system and the issues and challenges
along the way in selection of a system.
9
The Chase Manhattan Bank
Accounting & Compliance
Illustrates the real world, real life
challenges that face a team of banking
executives as they are confronted
between trade-offs and hard choices
between sustaining profitability and
remaining compliant with statutes and
directives issued by the State Bank of
Pakistan.
10
Kincaid Manufacturing
Supply Chain Cost Management
Illustrates critical issues that inflate costs
due to weakness and inefficiencies
within the supply chain function of
Kincaid and highlights the critical
importance of the procurement function
in good supply chain management.
11
Analysis of Financial
Statements
For: IBA Academic Committee
By: Rustom Kavasji
Chairman, Accounting & Law, IBA, Karachi
Course Objectives
To provide an overview of accounting and
understanding of accounting flow for non
accountants.
To enhance reading ability and understanding
of financial information.
To learn techniques for analysis of financial
statements for purposes of determining and
selecting superior investment opportunities
among large public sector corporations.
13
Course Content
Overview of Financial Statement Analysis
 Review and understanding of Financial Statements
 Objectives of Financial Statement Analysis
Sources of Financial Information




Sources of Financial Statements; Role of IFRS & GAAP
Detailed class practice of financial statement preparation
Challenges in Interpreting financial statements
Assessing quality of Financial Statements, Red Flags & Warnings
Annual Report Analysis
 What are Annual Reports
 Annual Report diagnosis; Regulatory framework; Chairman’s review
 Auditor Report, Director’s report, Measurement, Notes to Accounts
Income Statement Analysis
 IS - Revenue recognition, income taxes, deferred taxes,
 IS - Extraordinary items, effect of change in accounting principles
14
Course Content (Continued)
Balance Sheet Analysis
 BS - Consolidated statements, Reserves, commitments
 BS - Contingencies, Changes in equity
Statement of Cash Flows
 SCF - Review of Cash Flows and importance of Cash Flows
 SCF - Detailed Analysis of Statement of Cash Flows
Analysis of Liquidity, Solvency, Profitability & Growth
 Liquidity, Profitability, Solvency & Growth
 Investor, Institutional Investors & Government
Presentations and Analysis of Financial Statements
 Student presentations of financial statements of Pakistani Corporations
15
Grading
• Class Participation / Assignments (30%)
– Qualitative
– Interactive
• Term Project (30%)
– Class Presentation (15%)
– Written Term Report (15%)
• Mid Term (15%)
– Combination of case analysis and short questions
• Final Exam (25%)
– Combination of case analysis and short questions
– Comprehensive
16
Class Participation & Term Project
The Presenter / Group
Class
1
• Corporate Executive
seeking funding
Investors
2
• Investment Advisor
approaching Client
Or
3
• Equity Financial Analyst
working for agency
Clients
17
Class Participation & Term Project
C
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A
S
S
P
A
R
T
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C
I
P
A
T
I
O
N
Attack Them!
1.
I
N
V
E
S
T
O
R
S
2.
3.
4.
5.
Select Annual Report of any public (i.e. shares traded on
KSE) company during FY’s 2010 – 2011
Prepare a detailed analysis of the company for presentation
in class. You must pick a company that you would invest in
and prepare an overall analysis of why you would invest in
that corporation for a minimum of 3 – 5 years.
Multidimensional Analysis
•
Industry Analysis
•
Potential for future growth and success
•
Liquidity
•
Risk & Reward
•
Competitor Analysis
If possible interview top management or executives of that
corporation (optional but likely to enhance your score)
Present & defend conclusions in class + written term report
18
Class Participation & Term Project
Company
Selection
• First Come First Serve. Initial proposal to
be submitted by the 5th session of the
course.
Presentations
• From session 16 onwards. The class and myself
must be provided a photocopy of the annual
report of your selected company, at least one
session before your presentation
Written
Report
• All written reports to be submitted by
the 25th session of the semester
All written submissions relating to term project must be printed not
hand written
19
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Accounting for Decision Making - iba