Accounting 476: Performance Measurement Issues
Leventhal School of Accounting
University of Southern California
Fall 2010
Class number 442-14150R
Professor:
Office:
Telephone:
E-mail:
Class Hours:
Classroom:
Office Hours:
Kenneth A. Merchant
HOH 606
(213) 821-5920
kmerchant@marshall.usc.edu
T/Th 4:00-5:50 p.m.
ACC 303
By appointment. Arrange by e-mail. I will do my best to
accommodate your schedule.
For Campus-Wide Emergencies:
Emergency Info Line
USC Emergencies
Information
USC Info Line
213-740-9233
213-740-4321
tune into KUSC Radio at 91.5 (FM)
213-740-2311
Prerequisites:
Open to all accounting and business majors and minors, after
completing BUAD-250b or BUAD-281 or BUAD-305 or ACCT410.
Disabilities:
Any student requesting academic accommodations based on a
disability is required to register with Disability Services and
Programs (DSP) each semester. A letter of verification for
approved accommodations can be obtained from DSP. Please be
sure the letter is delivered to me as early in the semester as
possible. DSP is located in STU 301 and is open 8:30AM to
5:00PM, Monday through Friday. The phone number for DSP is
213-740-0776.
Honor Code:
The Leventhal School Student Honor Code took effect on
September 1, 1993. All students are subject to the Code and are
responsible for familiarizing themselves with it. If needed, copies
may be obtained from the receptionist in ACC 101.
Text:
K.A. Merchant and W.A. Van der Stede (2007), Management
Control Systems: Performance Measurement, Evaluation and
Incentives. London: Financial Times/Prentice-Hall, 2nd edition.
ACCT 476 (Performance Measurement Issues)
Course Objectives
This course is designed to broaden and deepen your conceptual and technical
understanding of accounting as it is used for management purposes. The emphasis in the
course is on financial controls, which dominate in importance at managerial levels in all
but the smallest organizations. Using financial controls requires managers to make
decisions about: (1) responsibility structures (e.g., cost centers, profit centers), (2)
performance measures (e.g., market, financial, and/or non-financial measures and their
combinations), (3) performance evaluations, which take into consideration performance
targets or other benchmarks, and (4) rewards (including performance-dependent
compensation). The course is issue-oriented, with current and emerging issues as a major
focus.
The course is built around a textbook—Merchant and Van der Stede’s
Management Control Systems. The text will be supplemented with some new cases that
will be distributed via Blackboard.
The focus of most of the classes will be on a case that brings the topics “to life”
and provides issues for us to discuss. The readings are intended to provide background
that is useful for informing the case discussions. For each case, I will provide some
Discussion Questions. These questions are intended to help frame and focus your reading
and consideration of the course materials.
The cases require advance preparation and thought. I encourage you to prepare
the cases in a study group. Much of the learning comes from sharing and discussing your
ideas with your peers.
Grading
In-class quizzes
E-mail questions and class participation
Final exam
Total Points
50 points
50 points
100 points
200 points
The quizzes will be given in a few classes on an unannounced basis. As protection
against the possibility of a bad day or an unlucky absence, in computing my course
grades I will disregard the lowest quiz score.
On the bottom of many of the class assignments, you will see that I have included an “email question.” Prior to noon before our class pertaining to that assignment, please send me
an e-mail message answering the question(s) for that day’s class. This is not intended to be a
2
ACCT 476 (Performance Measurement Issues)
time-consuming obligation. Your answers should be brief—three sentences or less for each
question.
Your answers to the e-mail questions serve multiple purposes. First, they help me to get to
know you and to see how you think. Second, these messages open the communication
channels between us. Since you have to send me a message, it is easy to append another
thought. In the past some students have used this opportunity to ask a question on another
topic or to give me some feedback about the course. I welcome this. I might also respond
immediately to your e-mail question answer. Third, your e-mail answers help me orient the
class discussion. For example, they help me both to judge the mindset of the class and to
find people with unique perspectives. Finally, the questions are functional because they
encourage good advance preparation. The regularity with which you input your e-mail
question answers on a timely basis and the quality of your answers will form part of your
participation grade.
I assign a material proportion of the grade based on class participation. I do this for
several reasons. First, it improves my grading accuracy. I think I can learn more from
hearing you share your ideas in a long series of classes than I can from reading what you
write in a short exam session. I keep track of participation in every class.
But perhaps more important than that, grading class participation motivates class
participation, and having highly interactive class sessions helps the learning process. Active
class participation encourages students to be well prepared and thus to become active, rather
than passive, learners. Participation provides students with the opportunity to gain from the
experiences and talents of everyone in the class. And class participation helps students
improve their oral communication skills. This is important because research shows that
people in the business world tend to spend very little time reading and even less time
writing reports. A great deal of managers’ and other professionals’ interactions with
others are through oral communication.
Class participation evaluations will be based primarily on the quality of the participation in
classroom discussions. To be clear on what I am looking for regarding class participation,
and to further aid in your preparation, I have listed below some characteristics of effective
class participation:
(1) Does the student make points that are especially pertinent to the discussion? Do
they increase the understanding of the class or are they simply a regurgitation of
the problem or case facts?
(2) Is there continuity in one's contribution from what has been said previously
during class, or are the comments disjointed, isolated, or tangential? The best
class contributions are those that reflect not only excellent preparation, but also
good listening, interpretive and integrative skills.
(3) Do the comments reflect a willingness to put forth new, challenging ideas or are
they always agreeable and "safe"?
3
ACCT 476 (Performance Measurement Issues)
(4) Is the participant able and willing to interact with others by asking questions,
providing supportive comments or challenging constructively what has been
said?
Your participation will be evaluated based on a near-continuous scale, the end points of
which can be described as follows:
Outstanding Contributor:
This person's contributions reflect exceptional
preparation, and the ideas offered are always substantive and provide major insights
and direction for the class. If this person were not a member of the class, the quality
of the discussions would be diminished significantly.
Unsatisfactory Contributor: This person may be absent from class or someone
who rarely participates in class discussion. Alternatively, this person’s contribution
in class reflects inadequate preparation and/or understanding. Ideas offered are not
substantive and provide few, if any, insights and never a constructive direction for
the class. Integrative comments and effective arguments are absent. Class
comments are either obvious, isolated from the main discussion, or confusing to the
class.
The final exam will be a take-home exam, likely a case or two. You can take this exam
as an individual or as a group. The groups can be as large as four people. In the middle of
the course I will ask you to tell me if you will be taking the exam as an individual or in a
group, and if in a group, who is included in your group. The answers to the final exam
must be deposited in my mailbox in the lobby of the School of Accounting Building by 5
p.m. on Thursday, December 9.
No make-up exams or quizzes will be given (see LSOA policy on incompletes).
The policy of the Marshall School of Business applies to the retention of graded material.
Required Course Materials
To be purchased:
Merchant, K.A. and W.A. Van der Stede, Management Control Systems, London:
Financial Times/Prentice-Hall, 2nd edition, 2007.
You can buy new or used as you wish. Just make sure that you get the second edition of
the book (yellow cover).
To save you money, I will distribute some newer cases (i.e., not included in the book)
using Blackboard. Please print these cases. In my opinion, you cannot prepare a case well
4
ACCT 476 (Performance Measurement Issues)
just by reading it on a computer screen. You need to have a hard copy that you can study,
annotate, and bring to class for reference.
5
ACCT 476 (Performance Measurement Issues)
Class/topic schedule:
Class date
Primary topic
Oct 19
The control function of management, the roles of performance
measures, and things that can go wrong
Oct 21
Results controls
Oct 26
Financial responsibility structures
Oct 28
Performance measures
Nov 2
Financial performance targets
Nov 4
Dealing with the distorting effects of uncontrollables
Nov 9
Control impacts of the Sarbanes-Oxley Act of 2002
Nov 11
Earnings management and the roles of controllers and CFOs
Nov 16
Financial reporting problems and corporate governance
Nov 18
ERM: Measuring and managing risk
Nov 23
Industry application: Retail brokerage
Nov 25
No class—Thanksgiving
Nov 30
Industry application: A Not-for-Profit (USC)
Dec 2
Industry application: Banking
Final exam distributed at the end of this class.
Dec 9
Take-home final exams due by 5 p.m.
6
ACCT 476 (Performance Measurement Issues)
The Leventhal School of Accounting adheres strictly to the grading standards of the University
and the School of Business Administration. Additionally, the Leventhal School of Accounting has
supplemented those standards with certain others. For students' convenience, and to prevent
misunderstanding, these additional standards are summarized below.
GRADING STANDARDS
The following grades are used: A - excellent; B - good; C - fair; D - minimum passing; F - failure.
The grade of F is awarded for failing work at the end of the semester. The assignment of
minuses and pluses when earned is required.
The grade of W (Withdraw) is assigned if the student officially withdraws after the third week
but before the end of the twelfth week of the semester. No withdrawals will be permitted after
the end of the twelfth week except by student petition to the University's Committee on
Academic Policies and Procedures.
Students may elect to audit courses during the first three weeks of the semester. A course
taken for audit (V) will be assessed at the current tuition rate. A course taken for audit (V) will
not receive credit and will not appear on the USC transcript or grade report. Under no
circumstances will the University allow a change in the registration status of a course from letter
grade or credit to audit (V) or vice versa after the third week of a given semester.
The grade of IN (Incomplete, i.e., work not completed because of documented illness or some
other emergency occurring after the twelfth week of the semester) is reserved for those highly
unusual cases where, due to circumstances judged fit by the Dean of the Leventhal School of
Accounting, the student is unable to complete a specified single item of the course
requirements by the time final grades are submitted.
IN grades can be removed only by the student completing the missing requirements of the
course to the satisfaction of the instructor.
Marks of IN in courses numbered below 500 must be removed by the end of the semester
following the one in which the mark of IN was assigned. If not removed within the specified
time limit, marks of IN automatically become marks of IX (expired incomplete), with the
exception of thesis and dissertation, and compute in the GPA as an F. A student may remove
the IN only by completing the work not finished as a result of illness or emergency. It is not
possible to remove an incomplete by re-registering for the course. Previously graded work
may not be repeated for credit.
7
ACCT 476 (Performance Measurement Issues)
G.P.A. PREREQUISITES FOR UNDERGRADUATE ACCOUNTING COURSES
The grade point average prerequisites for any undergraduate student enrolled in any accounting
course is a minimum 2.5 gpa for all completed accounting courses. In computing grade point
average prerequisites, BUAD 250ab, 305 and 302T are considered accounting courses.
Grades in accounting courses taken at other institutions will not be included in the computation
of the cumulative accounting grade point average.
When a student's cumulative accounting grade point average falls below 2.5, the student is
placed on probation. If a student on probation does not regain a minimum accounting
cumulative GPA of 2.5 after completing the next 12 semester hours in all courses (including
accounting courses) attempted within the University, that student will not be permitted to
continue as an accounting major in the Leventhal School of Accounting. Exceptions to this policy
may be granted only in unusual circumstances by the Academic Standards Committee of the
Leventhal School of Accounting. Decisions of the Academic Standards Committee are final.
To be removed from probationary status, a student may elect either to take another accounting
course or courses for which prerequisites are met or to repeat an accounting course or courses
in an attempt to earn a higher grade. Regardless of the course of action taken, all courses
completed will be counted in computing the cumulative accounting grade point average.
The grade of "W" in an accounting course taken while a student is on probation will not extend
probation. The probation period ends at the end of that semester during which the student
completes a cumulative total of 12 semester hours of courses in any subject(s) at the university.
Under no conditions will the student be permitted more than two successive semesters,
including the summer semester, to complete the 12 semester hours of courses.
Students must attain a minimum 2.5 cumulative accounting grade point average to graduate
with a Bachelor of Science in Accounting degree.
See the USC Catalogue for further restrictions on including grades in repeated classes in the
overall grade point average computation.
8
ACCT 476 (Performance Measurement Issues)
OTHER ACADEMIC STANDARDS
1.
Students enrolled in any class offered by the Leventhal School of Accounting are expected
to uphold and adhere to the standards of academic integrity established by the Leventhal
School of Accounting Student Honor Code. Students are responsible for obtaining,
reading, and understanding the Honor Code System handbook. Students who are found
to have violated the Code will be subject to disciplinary action as described in the
handbook. For more specific information, please refer to the Student Honor Code System
handbook, available in class or from the receptionist in ACC 101.
2.
The ability of students to write clearly and concisely is a necessary prerequisite to success
in accounting work. Accordingly, students will be required to demonstrate writing
capability in all accounting courses. This may be accomplished primarily through the
inclusion of essay-type questions on course examinations.
Important Dates for Fall 2010
Last Day to Register/Add without Late Fee
Friday, August 20
First Day of Class
Monday, August 23
Last Day to Add or Drop w/out a “W” (Session 431)
Monday, August 30
Labor Day, University Holiday
Monday, September 6
Last Day to Add or Drop w/out a “W” (Regular session)
Friday, September 10
Resumes for Resume Book Due
Wednesday, September 8, 5pm
Meet the Firms
Tuesday, September 21, 6pm-9pm
Last Day to Drop with a “W” for ACCT courses (Session 431)
Monday, September 27
Final Exams for ACCT courses (Session 431)
Monday, October 11 - Friday, October 15
Last Day to Add or Drop w/out a “W” for ACCT courses
Session 442)
Monday, October 25
Last Day to Drop with a “W” for regular session classes
Friday, November 12
Thanksgiving, University Holiday
Thursday & Friday, November 25 & 26
Last Day to Drop with a “W” for ACCT courses (Session 442)
Wednesday, November 24
Last Class Meeting
Friday, December 3
Final Examinations
Wednesday, December 8 – Wednesday, December 15
Winter Recess
December 16 – January 9
9