USC Marshall Executive MBA Program-San Diego
Financial Reporting Syllabus and Schedule
Professor:
Mark DeFond
email: defond@marshall.usc.edu
Office: (213) 740-5016
Home: (818) 790-2435
COURSE AND OBJECTIVES:
The aim of this course is to provide the student with a solid grounding in the fundamental
underlying financial reporting practices. The course will concentrate on general underlying concepts with
a significant emphasis on applications. The Dyckman text is used to introduce the concepts and the
mechanics associated with the accounting topics covered in the course. With this as a starting point we
then consider the effects and implications of the topics in real-world settings. This is accomplished
primarily through the analysis of Cases that focus on the annual reports of actual publicly held
corporations.
The course is, by its nature, demanding. The assigned text readings and cases require a high level
of preparation and most students need to devote a reasonable amount of time in order to gain a full
understanding of the materials presented and discussed. Homework Assignments and Cases should be
attempted prior to each class meeting, although they are not collected. You are encouraged to work in
groups to prepare for the Assignments. The best way to learn accounting is to work through accounting
problems. Solutions to the Homework problems in the text will be provide to you.
COURSE MATERIALS:
Required Text Book:
Dyckman, Magee and Pfeiffer, Financial Accounting, Fourth Edition, Cambridge Business
Publishers 2014
Cases:
The assigned Cases are prepared by the instructor and are included in the packet of materials
provided to you by the EMBA program office.
Course Grades
The final grade in the Financial Reporting course will be based on the following:
Three quizzes (25% each)
75%
Case Solution
25%
Schedule for Theme 1
# Date
1
9/7/15
Topic
Primary Financial Statements and
The Balance Sheet
2 9/10/15
Measuring Performance: The Income
Statement
3 9/10/15
Joint Case with Finance and Marketing
1
Readings, Homework, Cases1
Deliverables
Reading:
Magee, Dyckman, Pfeiffer
Chapters 1 & 2
2
Cases:
The Big Picture; Chicken
Feet Burgers
Homework Problems:3
M1-24; P1-36; M2-18;
E2-42
Reading:
Magee, Dyckman, Pfeiffer
Chapter 3
Case:
Chicken Feet Mania
Homework Problems:
Q3-10: Q3-12; Q3-14;
Q3-16; P3-42 (part a only)4
TBA
The Homework Problems refer to the problems at the end of each chapter of Dyckman et al.
These problems are designed to help solidify the concepts covered in the class but will not be
specifically covered in class and are not collected or graded. Also, you only need to know the
“financial statement effects template” approach to answering the homework problems when
other approaches are also asked for (such as journal entries and T-accounts).
2
Cases DO NOT HAVE TO BE TURNED IN. We will go over them in class.
3
Homework assignments do NOT HAVE TO BE TURNED IN. They are assigned to help you
get practice with the topics covered in each chapter.
4
Just do the “financial statement effects template” portion of part a only. You are NOT required
to make the journal entries.
Schedule for Theme 2
# Date
Topic
1 10/10
Quiz #1 at beginning of class
+
Reporting Cash Flow Information
2 10/11
Short-Term Operating Assets
3 9/24
4 9/25
Quiz #2 at beginning of class
+
Long-Term Operating Assets &
Reporting Investments
Accounting for Financial
Obligations
5 11/21
Quiz #3 at beginning of class
+
Ratio Analysis
6 11/22
Ratio Analysis, continued
+
Wrap up
Readings, Homework, Cases
Reading: Dyckman, Magee, Pfeiffer
Chapter 4
Homework Problems: M4-22; P4-46
Deliverables
Quiz
(20 min.)
Reading: Dyckman, Magee and
Pfeiffer, Chapter 6 (p. 277-284) and
Chapter 7 (p. 317-336)
Homework: M6-18, 19; M7-17, M719
Reading: Dyckman, Magee and
Pfeiffer, Chapter 8 (365-380); Chapter
12 (p. 572-580)
Homework: M8-11; M8-13; Q12-8;
M12-17
Quiz
(20 min.)
Reading: Dyckman, Magee and
Pfeiffer, Chapter 9 (p. 405-411; 419426)
Homework: M9-31, M9-32, E9-47
Case: Mondo-Bondage
Reading: Dyckman, Magee and
Pfeiffer, Chapter 5
Homework Problems: M5-17; M521; E5-27
Case: Analyze This!
Quiz
(20 min.)
+
Case due at
beginning
of class
Theme I, Session 1
Class Session:Mark DeFond
Topic: Introduction to the Primary Financial Statements and the Balance Sheet
Purpose: The overarching objective of our first two sessions is to provide students with
a basic grounding in the fundamentals of financial reporting and the process that
generates financial reports. Our first session begins with a big picture overview of the
primary financial statements. We use a real company’s annual report to make the big
picture more concrete. We then go through a case that is designed to “look under the
hood” of the accounting model by demonstrating how a balance sheet is constructed. In
the process, we discuss some of the concepts and principles that underlie the accounting
model. Students are not required to learn the formal system of “debits and credits” in this
course (although all of the details are presented in the text and I am happy to answer any
questions you may have about debits and credits). Instead, we will employ a more userfriendly approach that uses a “financial statement effects template.” This is an alternative
to using debits and credits, and is introduced it the assigned text.
Learning Objectives
 Understand the “geography” of the prmary financial statements
 Introduction to the basic components of the balance sheet and income statement
 Deeper understanding of the conceptual underpinnings of the balance sheet
 Learn the mechanics of how balance sheets are created.
Topic Outline
 The primary financial statements
o The balance sheet
 Assets = Liabilities + Owners’ Equity
o The income statement
 Net income = Revenues - Expenses
 The balance sheet
o How are assets and liabilities defined?
o When are assets and liabilities “recognized” in the balance sheet
 How to account for basic balance sheet transactions
Assignment:
Reading: Dyckman, Magee, Pfeiffer Chapter 1 and Chapter 2
Case: The Big Picture; Chicken Feet Burgers
Suggested Homework Problems: M1-24; P1-36; M2-18; E2-42
Theme I, Session 2
Class Session: Mark DeFond
Topic: Measuring Performance: the Income Statement
Purpose: This session extends the previous session by introducing the Income Statement,
including the fundamental concepts that govern revenue and expense recognition and
measurement. This session builds on the basic principles and concepts that were laid
down in the first session and, importantly, formally introduces the notion of “accrualbasis” accounting, a very old but very ingenious method of measuring the flow of wealth
over time. We also discuss some of the differences and similarities between financial
reporting in the U.S. and financial reporting in other countries around the world.
Learning Objectives
 Understand the conceptual underpinnings of the income statement
 Understand how the income statement “articulates” with the balance sheet
 Learn the mechanics of how income statements are created.
Topic Outline
 The income statement
o How are revenues and expenses defined?
 How do they relate to balance sheet accounts?
o When are revenues and expenses “recognized” in the income statement
 What is the revenue recognition principle?
 What is the matching concept?
 How to account for basic income statement transactions
Assignment:
Reading: Dyckman, Magee, Pfeiffer, Chapter 3
Case: Chicken Feet Mania
Homework Problems: Q3-10: Q3-12; Q3-14; Q3-16; P3-42 (part a only)5
Just do the “financial statement effects template” portion of part a only. You are NOT required
to make the journal entries.
5
Theme 2, Session 1
Class Session: Mark DeFond
Topic: Reporting Cash Flow Information
Purpose: The Cash Flow Statement is a critical tool in evaluating management’s
investing and financing strategies and in understanding issues of financial health. In this
session we first compare and contrast earnings and cash flows as measures of
performance, then spend time attempting to understand the mechanics of the cash flow
statement. We conclude with Cases where cash flows can be used as a diagnostic tool to
gain deeper insights into the firm and how it is managed. We also compare how U.S.GAAP reporting compares with International Financial Reporting Standards in terms of
reporting Cash Flow information.
Learning Objectives
 Understand the difference between cash flows and accrual-based net income
 Understand how cash flows are related to accounting earnings
 Understand the different roles of cash flows and earnings in period performance
evaluation
Topic Outline
 What are the sources and uses of cash flows?
o Operating cash flows
o Investing cash flows
o Financing cash flows
 What is a cash flow statement and how is it organized?
 What can be inferred from cash flow statements?
 What do cash flow statements look like for
o Growing companies?
o Mature companies?
o Declining companies?
Assignment:
Reading: Dyckman Pfeiffer Chapter 4
Suggested Homework Problems: M4-22; P4-46
Theme 2, Session 2
Class Session: Mark DeFond
Topic: Short Term Operating Assets
Purpose: Operating assets are the assets that companies employ to generate profits for its
owners. And it is difficult to over-emphasize the importance of accounting for short term
operating assets. Accounts Receivable and Inventory are two short term operating
accounts. Measurement and recognition of these accounts are critical in capturing firm
performance. Accounts receivable and inventory accounting are also classic examples of
how balance sheet accounting has important implications for the income statement.
Valuation of receivables and inventories are particularly subject to management’s
discretion and the issues related to these accounts are generalizable to a variety of
accounts and settings.
Learning Objectives
 Understand the basic concepts that underlie the accounting for current operating
assets
 Learn how accounts like inventory and receivables have balance sheet and income
statement implications
 Apply your accounting knowledge by looking at some real world cases of
inventory accounting.
Topic Outline
 The fundamental nature of operating assets
o Expenses waiting to happen
o Fundamental trade off between “stock” versus “flow”
o The case of “bloated balance sheets”
o The self-correcting nature of misstatements
 Measurement and recognition issues related to
o Accounts receivable
o Inventories
Assignment:
Reading: Dyckman, Magee and Pfeiffer, Chapter 6 (p. 277-284) and
Chapter 7 (p. 317-336)
Suggested Homework Problems: M6-18; M7-17, M7-19
Theme 2, Session 3
Class Session: Mark DeFond
Topic: Long-Term Operating Assets & Investments
Purpose: While timely financial reporting requires matching expenses to the revenues
they create, long-lived assets present some thorny problems in accurately capturing
expenses. In particular, the proper accounting for fixed assets requires a deep
understanding of the concepts of “capitalization” versus “expensing.” As we will see in
class, some real world companies have had a particularly difficult time correctly
measuring their fixed assets. We will also cover the basics of accounting for “business
combinations,” which are the long-term majority investments in other companies.
Learning Objectives
 Understanding the nature of long versus short term assets
 The concepts of “capitalization” versus “expensing”
 when and how to apply each
 What are the consequences of inaccurate measurement of fixed assets
 Understand how companies account for long term majority investments in other
companies
Topic Outline
 The fundamental nature of long lived assets
o Recognizing long-term operating assets in the balance sheet
o Measuring the period benefits of capitalized assets
 The basics of majority ownership in other companies
o Minority versus majority ownership
o Accounting for goodwill
Assignment:
Reading: Dyckman, Magee and Pfeiffer, Chapter 8 (365-380); Chapter 12 (p. 572-580)
Homework: M8-11; M8-13; Q12-8; M12-17
Theme 2, Session 4
Class Session: Mark DeFond
Topic: Accounting for Financial Obligations
Purpose: This session introduces the class to the fundamentals of accounting for liabilities.
We begin by looking at the problems inherent in accounting for liabilities in general, and then
move on to some issues related to accounting for a major source of financing for a large
number of public companies: bonds. We will also discuss some of the accounting issues
related to some controversial topics, such as accounting for leases and taxes.
Learning Objectives
 Understand the basic concepts that underlie the nature of debt and other obligations.


Learn how companies recognize and record their obligations.
Apply your accounting knowledge by looking in detail at the accounting for bonds.
Topic Outline
 Accounting for obligations in general
o Off balance sheet financing
o Contingent liabilities
o Long term obligations
 Fixed contract obligations
o Bonds
o Leases
Assignments:
Reading: Dyckman, Magee and Pfeiffer, Chapter 9 (p. 405-411; 419-426)
Suggested Homework Problems: M9-31, M9-32, E9-47
Case: Mondo-Bondage
9
Theme 2, Session 5 and 6
Class Session: Mark DeFond
Topic: Ratio Analysis
Purpose: The financial statements tell a story, and a careful analysis of the accounting
ratios can reveal the plot. This session demonstrates how information in the financial
reports can be used to evaluate management performance, credit risk, and valuation
issues. The majority of the session will be spent getting our hands dirty by unlocking
some interesting mysteries contained in the Wal-Mart annual report.
Learning Objectives
 Understand the basic drivers of firm value.
 Learn how financial statement analysis evaluates operating, financing and
investing activities.
 Apply your accounting knowledge looking at the financial ratios of a real
company.
Topic Outline
 What can we learn from financial statement analysis?
 Primary ratio ratio categories for measuring performance
o Operating ratios
o Investing ratios
o Financing ratios
 Return on equity
o Summary performance measures
Assignment:
Reading: Dyckman, Magee and Pfeiffer, Chapter 5
Suggested Homework Problems: M5-17; M5-21; E5-27
Case: Analyze This!
Turn in your solutions to the Case at the beginning of class
10