Current Issues in Financial Reporting and Disclosure
All mba students would benefit from taking this course. In particular, all students majoring in equity research, corporate finance, strategy, management consulting, investment banking, or company management should consider taking this highly integrative course. The course is further a requirement for the accounting major.
Financial reporting is used to inform investors and potential investors but also produces numbers that are used in contracting between shareholders, managers, creditors and others. Regulators use financial reports to make assessments of competitive conditions and financial strength. At various times, management makes financial reporting and/or transaction design decisions to obtain some objective with these various user groups. With this in mind, this second year course in financial reporting and analysis has two main objectives:
- To expand the participants’ ability to analyze and interpret financial statements and notes and develop an understanding and appreciation of the various incentives and pressures impacting on financial reporting decisions, and
- To examine advanced financial reporting topics and how the application of generally accepted accounting principles in these areas affect reported earnings and financial position.
Throughout the course, the emphasis will be on examining the topics from the perspectives of external users of information, rather than preparers. The classes will consist of case discussions, lectures, group presentations, a term project on quality of earnings, and guest presentation(s). We will integrate material from accounting, finance, strategy, and management in all our discussions.
Although not a focus of this course, most of the material we cover is highly relevant for the CFA program. In fact, most CFA candidates find financial reporting to be the most challenging part of the exam.
Taxation and Decision Making
Students aspiring to be decision-makers in the Business World should take this course. Virtually all business transactions involve an income tax component and transactions can often be structured to achieve a more favourable tax treatment, while still achieving the overall objectives of the transaction. In order to understand and compare these transactions, one has to have a general understanding of the tax rules.
This course will develop a student’s ability to identify, understand, and evaluate tax-planning opportunities and will provide an overview of the income tax system and how it impacts business and investment decisions. The material will focus on tax planning concepts and the effect of taxes on business decisions, rather than detailed tax rules and legal research. We begin by developing a conceptual framework for evaluating how tax rules affect financial decisions. The framework is then applied to various types of financial decisions, including savings vehicles, compensation planning, international tax issues, financial statement analysis, capital structure, and mergers, acquisitions, and divestitures.
The objectives of the course are achieved through a combination of lectures, selected current readings and the application of the concepts to problems and cases. After taking this course students are expected to be able to identify the key income tax issues associated with business and investment activities, have a conceptual understanding of the income tax implications of the issues identified, and analyze alternatives on an after-tax basis.
Financial Statement Analysis
Basically, all MBA students could, and should, take the course. In particular, students interested in careers in consulting, corporate finance, equity research, investment banking, and anybody who wants to run a corporation.
The objective of this course is to develop a set of tools for in-depth financial statements analysis and valuation. This course emphasizes the theme of the “Accounting Art of War” (paraphrasing Sun Tzu) and extends it. The class emphasizes analysis rather than mechanical work.
In order to analyze financial statements and the reporting strategy of companies we need to understand the underlying motivation of management to shade their financial statements in the way it best serves their overall strategy. The course builds upon the foundation established in the first year course in Financial Accounting, and thus assumes a basic familiarity with financial statement preparation using accrual accounting. The course emphasizes an integrative approach and, as such, has strong links with economics, marketing, finance and strategy. Consistent with this goal we use a textbook that applies a strategic framework to analyze companies.
Predicting the past, as opposed to predicting the future, is not a useful goal, Consequently, beyond case analyses (predicting the past) the course has in it a project to analyze real companies in real time applying all of the tools taught up to that point in the course (predicting the future).
The course has in it three modules:
- Global and strategic analysis of profitability and risk
- The Accounting Art of War
- Forecasting financial statements, valuation and reverse engineering of stock prices
Each of these modules has in it a lecture part, a case study to test our knowledge and the analysis of real companies in real time.
Financial Distress and Insolvency
Donna L. Losell
Students who wish to know what alternative courses of action are open to them in cases of financial instability and corporate insolvency - whether they are managers, directors, creditors or turnaround specialists.
This course examines the process of corporate bankruptcy in Canada including exposure to the language of insolvency, identification of key players in insolvency, identification of the advantages of selecting certain insolvency regimes over others, corporate governance issues in distressed firms, exploration of instability prediction models and turnaround strategies for firms in financial difficulties as well as additional topics of interest to managers.
Financial distress is part of the normal business environment with thousands of businesses going bankrupt every year in Canada alone. Since bankruptcy is a significant presence in the business environment, the objective of this course is to introduce students to the theoretical concepts and practical realities of financial instability and insolvency including the language and key players, the legal and management processes needed to ensure not only that there is as high a return to creditors and equity holders as possible in the circumstances but that the regulatory requirements have been fulfilled. Students are also introduced to short term metrics and longer term models used to predict bankruptcy as well as turnaround strategies available to troubled companies. The intention of this course is to show students that they often have options in instability and insolvency situations whether they are managers, directors, creditors or equity holders. All second year MBA students are welcome.
Students interested in understanding how the legal environment interacts with the business environment. Students interested in studying current cases that illustrate the dynamic interaction of business and law in today’s business environment.
This course is intended to focus participant’s attention on those areas of law that typically effect a business’s operations. In addition, we will examine those areas of law that reflect on the role of directors and officers. Recent case law provides numerous examples that illustrate the conflicting roles managers often find themselves in.
Businesses operate within a complex environment of legal issues. Management must be able to not only recognize these issues, but also have an understanding of how to resolve them effectively and efficiently. This requires an appreciation of the Canadian legal system and the way that legal experts can offer assistance. The material will be examined through cases that reflect the legal principles being discussed during the class sessions. Participants will be expected to do some further legal research to complete assignments.
Business Analysis and Valuation
Anyone pursuing a career where one needs to analyze financial statements “intelligently.” This obviously includes those interested in finance related professions such as Investment Banking, Research and Investment Management. Students interested in consulting and marketing also find this course useful because of its approach that focuses on business analysis with tie-ins to corporate strategy.
This course will help you value businesses using financial statements. We will discuss how accounting regulations and managerial discretion influence presented financial statements. You will understand how to interpret financial statements, analyze cash flows, make judgments about earnings quality and uncover hidden assets and liabilities. You will also be exposed to research from accounting and finance that focuses on how financial statement analysis can be used in devising trading rules. Finally, we will use financial statement analysis prospectively to forecast and value firms using cash flow based and accounting based methods.
The course will consist of the following five modules. In the first module (strategic and industry analysis) you will learn why the critical first step is to understand industry structure and a company’s strategic choices. The second module (accounting analysis) will provide you with a framework to understand and evaluate a firm’s accounting and disclosure choices and learn how to adjust financial statements to ensure better comparability. The third module (financial analysis) will present a comprehensive framework for ratio analysis where a firm’s operations are separated from its financing to better understand the true drivers of profitability and risk. The fourth module (prospective analysis) will expose you to techniques of integrated forecasting, where you will apply the insights from the earlier modules and apply them to truly understand what the future holds for the firm being analyzed. You will then use these forecasts to value firms using a variety of techniques including DCF, multiples and abnormal earnings based valuation methods. In the fifth module, you will apply the business valuation techniques in a variety of settings including credit analysis, security analysis and M&A.