AMIS 4200 Advanced Accounting
Autumn 2013
Office hours: MW 1:30 – 2:15
John Fellingham
Fisher 406
General Description
The course deals with theory and practice in the academic discipline of accounting. In
particular, accounting will be treated as an information science. That is, not only is
accounting a conveyor of information, the accounting activity, itself, resides in an
environment in which information is a first order phenomena. Accounting affects, and is
affected by, the information environment.
The first topic treats the accounting double entry system as an information channel. The
central question is: How much information gets through the channel? Some important
mathematical results are accessed for a sensible answer to the question: the fundamental
theorem of linear algebra, orthogonality, optimization, and projection results. The second
topic, arbitrage free pricing of derivative securities, utilizes the results from the first
topic. Some additional results are derived including the fundamental theorem of finance.
The third topic is accounting valuation for derivative securities. The information
perspective is retained.
The final accounting topic is business combinations, and, in particular, the effect of the
information environment on efficient combinations, and the interaction of accounting and
information. Some further information results are useful for the study of business
combinations, as well as the optimal use of information in investment settings. Some
similarities between investment and production settings are analyzed.
Text and Reading Materials
All of the exercises and the suggested readings are from the class notes available on the
course website.
http://fisher.osu.edu/~fellingham_1/Fellingham.html
There are some other (optional) sources which will be referred to from time to time, as
they cover derivatives, hedge funds, and the use of information in particular business
settings.
The Smartest Guys in the Room by Bethany McLean and Peter Elkind
When Genius Failed by Roger Lowenstein
Conspiracy of Fools by Kurt Eichenwald
Fortune’s Formula by William Poundstone
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Course Requirements and Grading
Grades will be assigned based on cumulative performance in the course, using the
following weights for the components:
Making a positive contribution
to the learning environment
Quiz (Sept. 27)
Midterm (Nov. 1)
Comprehensive final exam
20%
20%
20%
40%
No makeup midterm exams are offered. Students must provide a valid reason in advance
or will receive zero credit for the exam.
Examinations
The exams are cumulative, closed book, and closed note. Calculators are allowed,
personal computers and other electronic devices are not. Make-ups for the final exam
will be given only for reasons acceptable according to University guidelines. The final
will be given at the time determined by the University.
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Preliminary schedule for AMIS 4200 autumn 2013:
Topics
Readings
Problems
Accounting as an information
science
Ch. 1
Alternative representations of
accounting
Ch. 2.1 – 2.3
Linear algebra representation
Ch. 2.4
Example 2.1 (cont.)
Accounting as a
communication channel
Ch. 3.1 – 3.2
Examples 3.1, 3.2
Computing yrow – quadratic
program
Ch. 3.3
Computing yrow –
orthogonality conditions and
nullspace
Ch. 3.4 – 3.5
Fundamental theorem of linear
Ch. 3.8 – 3.9
algebra; multiple loops
Theorem of the separating
hyperplane
Ch. 4.1
Accounting illustration of the
theorem
Ch. 4.2 – 4.3
Arbitrage free pricing
Ch. 4.4
State probabilities
Ch. 4.5
Multiple equilibria
Ch. 4.6
Derivative pricing and horse
racing*
Example 2.1
Example 3.3
Example 3.2 (cont.), example
3.4, 3.5
Example 3.8
Exercises 3.1, 3.3, 3.5, 3.9*
Chapter 3 exercises
Ch. 4 exercises
Exercises1.1, 1.2, 1.3
“simple” example
Example 4.1
Example 4.2
Example 4.2 (cont.)
“expanded” example
Exercises 4.1, 4.3, 4.4, 4.13
Exercises 4.5, 4.6, 4.7
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Accounting and equilibrium –
historical cost and mark to
Ch. 5.1 – 5.2
market
Example 5.1
Accounting and equilibrium –
Ch. 5.3
valuation in the row space
Examples 5.2, 5.3
Accounting and equilibrium –
Ch. 5.4
null component
Example 5.4
Ch. 5 exercises
Exercises 5.1, 5.2, 5.3, 5.6, 5.7,
5.8, 5.9, 5.12, 5.13, 5.14
Continuous compounding and
Ch. 6.1.1
rates of return
Exercises 6.16, 6.17, 6.18, 6.19,
6.20
Shannon’s theorem
Ch. 8.1
The additivity property
Ch. 8.2
Mutual information and Kelly
Ch. 8.3 – 8.4
criterion
Mutual information theorem
Ch. 8.5
Alternative frames for Kelly
criterion*
Ch. 8.6.1
An accounting connection
Ch. 8.7
Chapter 12 exercises
Example 8.2
Example 8.3, footnote 3
Examples 8.4, 8.5
Example 8.6
Examples 8.8, 8.9
Exercises 8.2, 8.4, 8.14, 8.15,
8.16, 8.17, 8.18, 8.19, 8.20
Chapter 8 exercises
Synergy, information, and
goodwill
Example 8.1
Ch. 12.1
Example 12.1
Exercises 12.21, 12.22
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