FINANCIAL ACCOUNTING AND REPORTING
(Last update: July 25, 2015)
PROFESSOR
Course leader: Hervé Stolowy
E-mail: stolowy@hec.fr
Building W2, Rm # 57
Ext 9442
Assistant: Brigitte Madéo
Email: madeo@hec.fr
Building W2, Rm # 41
Ext 7308
Teaching team: Hervé Stolowy (September),
Vedran Capkun (September),
Florian Hoos (January and Part-time)
OVERVIEW
The course is an introduction to Financial Accounting & Reporting designed for business
students with the assumption that the knowledge of a unique accounting system (the US, the
UK or the French one) is not sufficient. The main purpose of this course is to deal with the
measurement of value created (and value creation from the point of view of outside decisionmakers) and the use of financial accounting information.
The approach is based on the following ideas:
We adopt a user perspective, rather than a producer one, because most MBA students
will become users of financial statements, internal (managers, executives) or external
(investors, analysts…), rather than preparers of financial statements. Thus the same
financial information a company uses to assess its performance internally is used by
investors and analysts to determine how to assess a company in the marketplace.
When faced with a complex problem, we begin examining the problem by a general
overview of the possible solutions and what impact they will have on a company’s
financial decisions. This requires an a-national or non-national approach--it is more
useful to take time explaining the various possible solutions than studying the way a
particular country handles the issue. In the first part of the course, all the developments
are not based on a specific country but on a generic country. In the second part of the
course, we mainly refer to International Financial Reporting Standards (IFRS), though
occasionally we will mention the US approach to the problem. Since over 100 countries
have adopted IFRS, students should be able to understand financial statements
produced in many countries.
The comparative part of the course is based on a topic-based (issue) approach, rather
than a country approach.
LEARNING OUTCOMES
When you successfully complete this course, you should be able to:
Understand the process of accumulating, identifying, measuring and recording
economic information
Appreciate the use of accounting information for external decision making
Understand the underlying similarities and differences of generally accepted accounting
-
principles in the world
Understand the importance of financial statement analysis for fund managers, financial
analysts, strategy advisors and the stakeholders of the company
Master the different “tools” used to perform a financial statement analysis.
KEY TOPICS
The course has been structured to take into account these objectives and to allow for a gradual
progression from the simpler to the more complex topics.
The fundamental concepts are fairly simple and do not require any advanced knowledge of
quantitative sciences - but, please be careful, since the application of these principles to a
particular situation will often require considerable thought and reflection.
Classroom sessions have been grouped together into the following homogeneous blocks so that
you can more readily evaluate your own progress and identify particular problems on which
you may require help and advice:
-
Introduction: Accounting - the language of business
Part one: The accounting model
Part two: International and comparative financial accounting: a topic-based approach
Part three: Financial statement analysis.
COURSE MATERIALS
Required textbook
Financial Accounting and Reporting: A Global Perspective (co-authored by Prof. Hervé Stolowy
with Prof. Michel Lebas and Prof. Yuan Ding), Cengage Learning, Andover, UK, 4th edition 2013.
This book is specifically tailored for the approach used in this course.
Online resources
Several resources will be made available online from two different websites:
The course’s Website, run by the instructors, accessible from the following address:
http://www.hec.fr/finacc
Login: To be communicated later.
Password: To be communicated later.
The book’s Website, run by the Publisher, at the following address:
https://login.cengage.com/cb/login.htm (enter the Students’ area).
Required cases
You will be provided with a printed course pack for this course. This course pack includes the
syllabus, assignments and slides (in a four-per-page format). Review problems with solutions
and slides (in a one-per-page format) are only available online.
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TEACHING METHODS
Cases and exercises (See the list of group works at the end of this document).
PREREQUISITES
No prior knowledge of accounting is required to follow and to understand the content of this
course.
GRADING
Counseling
The essential role of your teacher is to make sure that you attain the necessary level of
competence in the subject. In that respect you can expect (wherever necessary) to receive
advice from him based on a continuous ongoing evaluation process - undertaken partly by him
and partly by yourself.
If you yourself recognize that you have difficulties and problems before the course teacher has
identified them then you should not hesitate to contact him.
Your course instructor is available to discuss particular difficulties with you either at the end of
each class room session or in his office. In this latter case, you can contact him by e-mail:
capkun@hec.fr, hoos@hec.fr or stolowy@hec.fr.
Principles
In the context of a continuous evaluation process the grading received at the end of the course
is based on two criteria:
(a) The ability to present orally the basic accounting techniques and financial concepts (a
manager has to argue his view point);
(b) The capacity to demonstrate a written mastery of the basic accounting techniques and
financial concepts (a manager has to show his understanding of documents).
Operationally, this means that the grading of each individual will take account of the quality of
classroom participation and the standard of written analysis.
Elements in grading (tentative – will depend on the section and the time constraints)
Your final grading will contain different items weighted as follows:
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Group work
 One report on a case study (choice made in the list in Appendix 1
below) – This case study must compulsorily include a
comparison with a peer company [with the exception of
Assignment 7.3 and Satyam] – Send the report by e-mail (word
file) and hand-in a hard copy. Deadline = beginning of the
session when the case is covered.
 One typewritten group assignment (choice made in the list in
Appendix 2 below) - Hand-in a hard copy. Deadline = beginning
of the session when the assignment is covered.
Individual work: Final test (open book)
Total
30 points
10 points
60 points
100 points
Grading scale
Grading is based on ECTS (European Credit Transfer System):
90-100
75-89
60-74
51-59
50
30-49
0-29
A
B
C
D
E
FX
F
Pass
Pass
Pass
Pass
Pass
Fail
Fail
However, the above table is purely indicative as it will be implemented in conjunction with the
following rule (source: 2012 HEC MBA Rules & Policies Handbook):
“Professors are expected to implement the following grade distribution:
A: 40% of the class
B: 50% of the class
C+D+F: 10% of the class”
Availability of exams
The exams will be kept by the course instructors and can be seen by the students by
appointment.
BIOGRAPHY
Vedran CAPKUN
01 39 67 96 11 / capkun@hec.fr
Vedran Capkun is an Associate Professor of Accounting at HEC Paris (Jouy-en-Josas, France). He
holds a Degree in Economics and Business Administration (University of Split, Croatia), a Master
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of Science degree in Banking and Finance (University of Lausanne, Switzerland) and a Ph.D.
from University of Lausanne, Switzerland. His research and teaching interests include financial
and international accounting, and focus more specifically on bankruptcy, IFRS, operational
performance and executive compensation. He published in Accounting, Organizations and
Society, the International Journal of Operations and Production Management and the Journal of
Law, Economics and Organization.
Vedran Capkun is a member of the Association Francophone de Comptabilité (AFC), the
European Accounting Association (EAA), the American Accounting Association (AAA), and the
American Law and Economics Association (ALEA). He is an associate editor of Comptabilité –
Contrôle – Audit, the official journal of the AFC. Vedran Capkun teaches financial accounting in
the MBA graduate program.
Hervé STOLOWY
01 39 67 94 42 / stolowy@hec.fr
Hervé Stolowy is a Professor of accounting at HEC Paris. He holds a Degree in Business
Administration (ESCP – Paris), a Masters’ degree in Law (University Paris-Val de Marne), a B.A.
in Russian and American Studies (University Paris-Sorbonne), a Ph.D. in Financial Accounting
(University Paris-Panthéon-Sorbonne) and an “Habilitation à Diriger des Recherches”
(“Qualified Doctoral Dissertation Supervisor”). He is a certified “expert comptable” (French
equivalent of a chartered accountant or certified public accountant).
He has authored and co-authored nine books (including “Financial Accounting and Reporting –
A Global Perspective”, Cengage Learning, Andover, UK, 4th edition, 2013, in collaboration with
Michel Lebas and Yuan Ding), chapters in 10 collective works and published over 65 articles in
academic and applied journals (incl. Accounting Auditing & Accountability Journal, Accounting,
Organizations and Society, Comptabilité – Contrôle – Audit, Contemporary Accounting
Research, European Accounting Review, Finance – Contrôle – Stratégie, Journal of International
Business Studies, The International Journal of Accounting, Issues in Accounting Education,
Journal of Accounting and Public Policy). His research and teaching interests span financial and
international accounting, and focus more specifically on accounts manipulation, intangibles,
international accounting harmonization and statement of cash flows. He is a member of the
Association Francophone de Comptabilité (AFC), European Accounting Association (EAA),
American Accounting Association (AAA), and Canadian Academic Accounting Association
(CAAA). He is a past president of AFC, the past co-editor of Comptabilité – Contrôle – Audit, the
official journal of the AFC and the past chair of the Standing Scientific Committee of the EAA. He
is Editor-elect of the European Accounting Review, the official journal of the European
Accounting Association.
Hervé Stolowy teaches financial accounting in the different graduate programs of HEC Paris:
introduction to financial accounting and financial statement analysis (HEC-MBA Program, HECEMBA Program and HEC Master of Science in Management – Grande Ecole).
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SCHEDULE
Class
Learning objectives
1.
General introduction
Definition of financial accounting
Users of financial accounting
Introduction to the accounting process
Introduction to the financial statements
- Balance sheet
Accounting equation (balance sheet
equation)
Income statement
Notes to financial statements
Principle of double entry
Examples of transactions
Introduction to the financial statements
Notion of depreciation
Consumption and inventory
Profit appropriation
Introduction to financial statement
analysis
Accounting principles and end-of-period
adjustments
Accounting principles.
End-of-period entries: adjusting entries,
change in value of fixed assets, change in
value of current assets
International accounting
International
Accounting
Harmonization
Comparative accounting
Presentation of IASB – List of
International Accounting Standards
Financial statements presentation
Balance sheet
Income statement
Notes to financial statements
Statement of cash flows
Tangible assets
Basic principles: definition, difference
between tangible assets and inventories,
difference between tangible assets and
expenses
Acquisition: definition of acquisition cost
Depreciation: main concepts; straight
line and declining balance methods; how
to record depreciation
Self-constructed assets
2.
3.
4.
5.
6.
7.
8.
Required
readings
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Chapter 1
pp. 2-21
Cases and
exercises to
prepare
Costas (reading)
Cases and
exercises for
review
-
Chapter 2
pp. 37-59
A 1.3 Xenakis
Verdi (reading)
A 2.4 Corelli (1)
Chapter 2
pp. 59-77
A 2.1 MCQ
R 2.1 Vivaldi 1
A 2.2 Vivaldi (3)
R 2.2 Vivaldi 2
A 2.5 Corelli (2)
R 2.3 Albinoni
A 2.6 adidas Group
Chapter 4
A 4.1 MCQ
pp. 120-142 A 4.4 Lalo
R 1.1 MCQ
R 4.1 Adam
Chapter 5
Update on
pp. 162-169 international
accounting
harmonization
Chapter 5
A 5.1 MCQ
pp. 169-186 A 5.4 Nokia &
others
R 5.1 Orkla
R 5.2 Holcim
Chapter 7
A 7.1 MCQ
pp. 250-271 A 7.3 Reporting
277-281
A 7.6 Tippett (only
SL and DDB)
A 7.9 Honda
Motors
R 7.1 Gibbons
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Intangible assets
Definition
Recognition
Treatment of changes in value
Accounting for R&D
Inventories
Classification of inventory
Recording of inventory
Financial analysis of inventory
Introduction to financial instruments
Business combinations
Consolidation: full consolidation, equity
method and proportional consolidation
Accounting for goodwill
Chapter 8
A 8.1 MCQ
pp. 291-308 A 8.7 Granados
310-312
R 8.1 Turina
R 8.2 De Falla
Chapter 9
A 9.8 McDonald’s
pp. 321-330 and others
337-339
R 9.1 Ericsson
Chapter 10
pp.348-358
370-374
R 13.1 Mater &
Filia
A 13.1 MCQ
A 13.2 Mutter &
Tochter
Chapter 13
pp. 464-487
Statement of cash flows
Chapter 14 A 14.1 MCQ
Objectives and usefulness of a statement pp. 499-519 A 14.2 Smetana
of cash flows
(1)
Preparation of the statement of cash Chapter 17
flows (IAS 7/FAS 95 model)
pp. 574-579 A 17.2 Smetana
- Analysis of the statement of cash flows
(4)
A 17.5 Procter &
Gamble (2)
Income statement analysis
Chapter 16 A 16.2 Smetana
Common-size income statements
pp. 554-566 (3)
Common-size income statements by
A 16.3 Procter &
nature: value added statement and
Gamble (1)
statement of intermediate balances
A 16.4 Club
Méditerranée
Balance sheet analysis
Chapter 15 A 15.2 Smetana
Common-size balance sheets
pp. 528-545 (2)
Common-size balance sheet: the link
AA 15.12
between working capital, working capital
Petrochina
needs and net cash
Ratio analysis
Chapter 18
Corporate social
responsibility:
pp. 601-611 Satyam accounting
scandal
Corporate social responsibility
Final test
Appendix 1: List of case studies
1.
2.
3.
4.
5.
6.
7.
8.
Assignment 2.6 adidas Group (Introduction to financial statement analysis)
Assignment 7.3 Reporting for tangible assets in different sectors of activity
Assignment 7.9 Honda Motors (Financial analysis of tangible assets)
Assignment 17.5 Procter & Gamble (2) (Statement of cash flows analysis)
Assignment 16.3 Procter & Gamble (1) (Income statement analysis)
Assignment 16.4 Club Méditerranée (Income statement analysis)
Additional Assignment 15.12 Petrochina (Balance sheet analysis)
Corporate social responsibility: Satyam accounting scandal
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R 14.1 Dvorak (1)
R 17.1 Mitsubishi
Electric
R 16.1 Chugoku (2)
R 15.1 Dvorak (2)
R 15.2 Chugoku (1)
Appendix 2: List of possible typewritten group assignments
1.
2.
3.
4.
5.
6.
7.
8.
A 4.4 Lalo
A 5.4 Nokia & others
A 7.6 Tippett
A 8.7 Granados
A 13.2 Mutter & Tochter
A 14.2 and A 17.2 Smetana (1) and (4)
A 16.2 Smetana (3)
A 15.2 Smetana (2)
ESTIMATED WORKLOAD
Generally, the estimated time required to prepare a regular class meeting is 60 minutes.
However, the time required to prepare the assignments varies across the different assignments
(from one to three hours for some case studies).
It should be reminded that the participants can choose the assignments and cases to hand in
during the course (see above).
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