International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
Course outline:
INTERNATIONAL ISSUES IN
FINANCIAL REPORTING AND VALUATIONS
For:
KIMEP INTERNATIONAL SUMMER SCHOOL,
Kazakhstan,
2011
Instructor: Dr Ashish Varma
Ph.D
Fellow Institute of Cost and Works Accountants of India
( Set up by an Act of Indian Parliament, )
MBA ( Finance)
Assistant Professor ( Accounting and Finance)
IMT, Ghaziabad
India.
Email: avarma@imt.edu, sir_ashish@rediffmail.com
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
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LEARNING OBJECTIVES:
The course is designed to enrich the participant’s understanding of
contemporary issues in Financial Reporting and Firm Valuation.
The course is an interesting amalgam of practices and choices which a
manager needs to appreciate and address in both strategic and tactical
context.
The course also brings to the fore the challenges and concerns which are
relevant in this day and age for multinational managers engaged in
financial reporting and business valuation.
The course will also address contemporary developments in the field of
accounting and valuations and discuss the perspective in which
regulations are made. Certain aspects of Internal audit and internal
controls, the convergence to IFRS, technological developments will also
be discussed.
At the end of the course the student should be able to address the
following agenda:
1. Conceptualize the role of accrual based accounting data in
determining firms value.
2. Appreciate good and bad accounting and valuation practices, undo
any accounting distortions by recasting a firms accounting numbers
and improve the reliability of conclusions.
3. Appreciate accounting as a system for measuring and forecasting
value addition.
4. Synthesize accounting and valuations.
5. Distinguish between conservative and liberal accounting.
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
The course should be interest to ( inter alia ) those contemplating a career in
Business Analysis, banking, consulting, public accounting and corporate
finance.
PREREQUISITES:
A basic understanding of Financial Reporting is needed to make the most of
this course.
The prior understanding of GAAP will ensure that a deeper understanding of
industry practices in the international perspective can be build during this
course.
PEDAGOGY
The course will be delivered with an amalgam of Lectures, Presentations, Cases
discussions . The latest academic research will be integrated with the industry
approaches.
Role play will be conducted in a case study discussion to let the participant have
a feel of the situational concerns which multinational managers face.
The participants are especially encouraged to share their views on latest
industry happenings. This will also be facilitated by working on the assignments
given by the instructor at the end of the lecture.
The cases will be pre distributed and the students are expected to go through the
readings and be adequately prepared for the case assigned for the day.
At the conclusion of the discussion of each case the participants are expected to
write a 1 page summary of the entire discussion which needs to be submitted to
the instructor.
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
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COURSE CONTENT
Session 1 to 9: (Each session of 1 hr duration)
 The international architecture of corporate reporting framework and the
available GAAP choices , Experience of the Emerging Markets
 Fair Value in times of volatility : Relevance and challenges
 IFRS Convergence in India: Are we ready ?
 IFRS in China; IFRS in Canada
 Revenue recognition : US GAAP and IFRS , A comparison: BIOVAIL
Revenue Recognition and FOB Sales Accounting
 Comparison between US GAAP and IFRS : An analysts perspective for
Financial Statement Analysis and Firm Valuation
 Investors reaction to management’s earnings guidance : KRISPY
KREME
 Do annual reports communicate corporate strategy ? The Indian
Experience.
CASELET FOR DISCUSSION:
INFOSYS TECHOLOGIES, INDIA.
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
CASE STUDY :
 Harnishfeger Inc.
 GE 2000: Quality of Earnings Assessment
 Kim Park (Assets and Liabilities )
ASSIGNMENT:
 Undertake a detailed library / internet search for the current
financial reporting concerns and challenges faced by an
industry of your choice with reference to a specific
company. Then the participants are required to study its
equity share valuation for the past few quarters and enlist
peculiar trends ( if any) and link it to the financial
performance during the period.
Also the participant will submit a 3 page report to the
instructor in session 9.
My expectation from the write up is that it is well written,
logically argued and supported by numbers.
SUGGESTED READINGS:
1. Bloomenthal Harold S, “ Sarbanes Oxley Act in Perspective” ( St Paul,
MN : West Group ) 2002
2. Bertoni M , Derosa B ( 2005) “ Comprehensive Income , Fair Value, and
Conservatism: A conceptual framework for reporting financial
performance” Paper presented to 5th International conference on European
Integration, Competition and Cooperation, Lovran , April 22-23, 2005.
3. Ackerlof G (1970) The market for Lemons : Quality Uncertainty and the
market mechanism. The Quarterly journal of Economics 84 , pp 488 -500.
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
Session 10 to 20 (Each session of 1 hr duration):
 The organization and structure of audit market : The future direction ?
 Introduction to Inter corporate investment practices, Related Party
Transactions, International taxation and Transfer Pricing issues : An
Auditor’s challenge.
 Revisiting the ‘Going concern’ principle in times of financial turmoil.
 XBRL : Extensible Business Reporting Language; The imperatives for
managers
 Sarbanes Oxley Act and its Indian equivalent of Clause 49 of the listing
agreement: How successful are the regulations ?
CASE:
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Jimmy Fu and Moog Inc.
Silic: Cost or Fair Value on Adoption of IFRS
Sipef : Biological Assets at Fair Value under IAS 41
Trans global
ASSIGNMENT:
 Probe into the alleged or admitted accounting issues with the
following companies and submit a brief note on the same:
Bristol Myers,
Computer Associates,
Enron
Worldcom
Tyco and
Vivendi.
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
READINGS:
1. World Growth Grinds to a Virtual Halt, IMF Urges decisive global policy
response, “ IMF Survey Online, January 28, 2009.
2. Vasal V K (2003) “ Internet XBRL and Online Business Reporting’,
Chartered Accountant , Jun 1215- 1226.
3. Hemmer T and Labro E ( 2008) “On the optimal relation between
properties of managerial and financial reporting systems” Journal of
Accounting Research 46 (5) pp 1209 -1240
Session 21 to 29(Each session of 1 hr duration)
 Earning quality : Audit committee and Earnings quality, Models for
measuring earnings quality and their shortcomings; Article Businessline
 Forecasting of earnings , Anchoring the value on earnings, Prototype
valuation
 Disclosures in Annual reports: Content analysis of annual reports
 Disclosure quality : The impact of Foreign investment, Promoters
Holding on the quality of disclosures.
 Detecting accounting manipulation and transaction manipulation
 Introduction to Valuation techniques and practices.
CASE:
 SATYAM FIASCO , INDIA
 CITI Group 2007: Financial Reporting and Regulatory Capital
 Molex
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
ASSIGNMENT:
 Re Work Satyam’s numbers on a spread sheet and do a detailed
index, trend and vertical analysis for the restated numbers? Did the
markets miss out on anything? Email the spread sheets to the
instructor with your name clearly mentioned in the subject line.
 Read General Electrics (GE)
opinion on the same.
code of conduct and give your
READINGS:
 Shafer W “ Effect of Materiality , Risk and Ethical perceptions on
Fradulent Reporting by Financial Executives , Journal of Business
Ethics 38, 3 ( 2002) : 243 – 263.
 Stephen H Penman, “ Financial Statement Analysis and Security
Valuation”, Mc Graw Hill International Edition., Chapter 1 to 5.
 Timmons H and B Wassener (2009) “ Satyam chief admits huge
fraud” New York Times , Jan 7, 2009.
Session 30 to 39 (Each session of 1 hr duration)
 Valuation: A critique of DCF methodology, The comparable company
method and its relevance.
 Quality of Corporate governance : Evidence from around the world
For Innate and discretionary accrual quality and corporate governance
 Behavioural Issues in Accounting : Managerial choices
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
 Pension plan crisis in USA
 Off balance sheet financing , Reading the fine print for decision making.
CASE:
LEASING IN THE AIRLINE INDUSTRY
Hurry Date: Valuation
ASSIGNMENT:
 Read the Auditing complexities clearly understanding the role of an
auditor in protection of minority interest, creation of stake holder value
and business sustainability.
OR
 The auditor oversight bodies : France – Compagnie Nationale des
Commissaires aux Comptes, Germany – Institute der Wirtschaftsprüfer,
Japan – Japanese Institute of Certified Public Accountants, Netherlands
– Netherlands Institute of Register accountants, United Kingdom –
Accountancy Foundation (2000), United States – Public Company
Accounting Oversight Board (2002). Visit their websites and develop
an understanding of their recommendations. ( Any two)
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
READING:
1. Wild, Subramanyam, Halsey, “ Financial Statement Analysis” 8 e, Mc
Graw Hill, International Edition.
2. Bhide, A and H H Stevenson , “ Why be honest if Honesty Doesn’t Pay”
Harvard Business Review, ( September – October 1990), pp 121- 129.
Session 40 to 45 (Each session of 1 hr duration)
:
 VALUATIONS: Challenges in Valuation of

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Multi business Valuation
Valuing cyclical companies
Valuing foreign subsidiaries
Valuation outside the united states
Valuation in emerging market
Using option pricing methods to value
flexibility.
 Valuing banks
 Valuing Dot.coms
 Valuing insurance companies
 Key lessons from the financial crisis and stock market bubbles
 Corporate sustainability performance issues and ensuring sustainable
earnings: What happened to BP in 2010 and the impact on DJSI.
 CEO envy and Merger waves: The truth!
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
CASE STUDY:
 TATA CORUS DEAL
 MITTAL STEEL
ASSIGNMENT:
 Write a brief note on the developments in IFRS
IAS 18: DP Revenue Recognition
IAS 27: ED Consolidated Financial Statements
IAS 31: ED Joint Arrangements
IAS 32, IAS 39, IFRS 7: Financial Instruments
READINGS;
1.Richard J (2004) “ The secret past of Fair Value: Lessons from history
applied to the French Case” Accounting in Europe , Vol 1, No.1, pp 95107.
2.Blumenstein R and Pulliam S , “ Worldcom Report finds Ebbers played a
role in inflating revenue “ Wall Street Journal, June 6 , 2003.
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EVALUATION PARAMETERS
Class Assignment: 20%
Case summary : 20%
Final Exam: 60%
Dr Ashish Varma / IMT / KIMEP / 2011
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International issues in Financial Reporting and Valuations / Dr Ashish / IMT/ KIMEP / 2011
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SUGGESTED READINGS
1. Wild, Subramanyam, Halsey “ Financial Statement
Analysis” 8e , Mc Graw Hill International Edition 2003.
2. Epstein Barry J, Jermakowicz Eva K, “IFRS”, Wiley
2010-11,
3. Sidney Cottle , Roger F Murray and Frank E Block ,
Graham and Dodd’s Security Analysis , Reprinted Mc
Graw Hill.
4. Alex Berenson “ The Number” New York, Random
House, 2003.
5. Howard Schlitz “ Financial Shenanigans” 2 e, Mc Graw
Hill, 2003
6. Choices , Values and Frames by Kahnerman and Twersky
, Cambridge 2000.
7. Infosys, Annual Report 2009
8. The Financial Accounting Standards Board’s (FASB)
statement of Financial Accounting Standards No. 142,
“Goodwill and Other Intangible Assets”.
Dr Ashish Varma / IMT / KIMEP / 2011
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