Post on 16-Dec-2015
A little about myself…
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Commerce Degree - 2010 - Memorial University of Newfoundland
MBA - 2012 - MUN / Université Catholique de Lyon
Ernst & Young - 2012/13 - Montreal & St. John’s (Canada)
Phd International Business – 2013 – Trinity College Dublin (Ireland)
Emerging Markets Global analysis of firm level multinationality
This week its Accounting and Beyond
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Session 1 Session 2
Tuesday Financial Statements/Expenses/Revenues Accounting Cycle & Accounts
Wednesday The Balance Sheet The Income Statement
Thursday The Cash Flow Statement Tools & Techniques
Friday Tax Havens Exam
Grading Scheme
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Exam at the end of the week (70%) Will cover material from Tuesday, Wednesday, Thursday, & Friday Multiple Choice Questions
Participation throughout the four days of lecturing (10%) Open conversation about topics will be encouraged along with
attendance of all sessions
Tax Haven Coverage by each assigned group (20%) Work in groups during the 4 days to present findings on Tax
Haven
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Grading Scheme
Group Work Friday 1 or 2 members of the group will present with
or without the help of Powerpoint (7-10 minutes) Choose a Tax Haven and explain what makes that
country/region a haven for Multinationals What large Multinationals have subsidiaries here? Is this good or bad for the local economy? What is your view on this country/region being a tax
haven? Submit a one page document summarizing your
findings
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Assigned Groups
Group Number Group Number
1 Andrascikova Viktoria 1 Kučerová Hana
2 Duduci Meri 2 L.Khaleel Ahmed
3 Dvořáková Kristýna 3 Luo Zihao
4 Fiala Ondřej 4 Matuška Jakub
5 Gerasimova Sunchitsa 5 Melnikova Yulia
6 Gouri Boyinová Sumudu Namali 6 Nguyen Thuy Dung
7 Hroníčková Šárka 7 Novak Martin
8 Khodykina Liudmila 8 Pelikánová Iva
9 Klimíček Jan 9 Pešice Ondřej
10 Kopáč Michal 10 Rakhmonov Burkhon
1 Ropická Martina 1 OLCINA ANA
2 Schimonová Marika 2 Belova Alena
3 Stevens Nasiru 3 Silvestre Rafael
4 Šimáková Kristýna 4 Broermann Dorothee
5 Terš, Bc. Ondřej 5 Spielmann Franck
6 Turková Markéta 6 Khodykina Liudmila
7 Verbenko Klavdiya 7 Žīgurs Kristaps
8 Ye Fang Qi 8 Nachid Yassine
9 Adebayo Kadiri Charles
10 Peinado de la Vega Joaquín
Map or Maze
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A map helps its user reach a desired destination through clarity of representation.
A maze attempts to confuse its user by purposefully introducing conflicting elements and complexities that prevent reaching the desired goal.
Financial statements have the potential for being both map and maze.
Financial Statements as a Map
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Form the basis for understanding the financial position of a firm
Allow users to assess historical and prospective financial performance
Present clear representations of a firm’s financial health
Financial Statements as a Maze
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Overwhelming amount of information
Unreliable auditing
Constantly changing and complex policies and reporting requirements
Considerable discretion given to management
Key information hidden or omitted
Map or Maze
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The main objectives are:ensure that financial statements serve as a
map, not a maze,demonstrate how to read and evaluate
financial statements,provide the tools and techniques needed to
complete a comprehensive financial statement analysis, and
encourage intelligent decision making.
Map or Maze
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Usefulness of Information
Financial positionSuccess of operationsPolicies and strategies of managementInsight into future performance
Map or Maze
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Volume of Information Financial statements Notes to the financial statements Auditor’s report Five-year summary of key financial data High and low stock prices Management’s discussion and analysis of
operations Other material
Map or Maze
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Volume of InformationGenerally accepted accounting principles
(GAAP)Securities and Exchange Commission (SEC)Financial Accounting Standards Board (FASB)International Accounting Standards Board
(IASB)Issues Statements of Financial Accounting
Standards (SFASs)
Map or Maze
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Where to Find a Company’s Financial Statements
Annual report Financial statements Public relations material Sent to shareholders and prospective investors Corporate website
Map or Maze
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The Financial Statements
Balance sheet (or statement of financial position)
Income statement (or earnings statement)
Statement of stockholders’ equity
Statement of cash flows
Map or Maze
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Notes to the Financial Statements
Integral part of the statements
Summary of the firm’s accounting policies
Details about particular accounts
Other supplementary information
Map or Maze
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Auditor’s Report
Attests to the fairness of the presentation of financial statements
Sarbanes-Oxley (SOX) Act of 2002
Map or Maze
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Auditor’s Report Types of reports
Unqualified reports (FS give a true and fair view) Qualified reports (FS are misstated, no affect) Adverse opinion (FS are misstated, not conforming
with GAAP) Disclaimer of opinion (Opinion cannot be formed on
FS) Unqualified opinion with explanatory language
Map or Maze
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Financial Reporting ReformsSOX Title I – Public Company Accounting Oversight
Board (PCAOB)SOX Title II – prohibits non-audit services during
an external auditSOX Titles III and IV – corporate responsibilitySOX Title IX – harsh penalties for violations
Map or Maze
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Proxy Statement
Used to solicit shareholder votes Important in assessing
who manages the firm how management is paid conflict of interest issues
Map or Maze
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Missing and Hard-to-Find Information Employee relations with management Morale and efficiency of employees Reputation of the firm Firm’s prestige in the community Effectiveness of management
Map or Maze
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Continued
Provisions for management successionPotential exposure to regulation changesPublicity in the mediaCompanies operating in several lines of
unrelated business
Quality of Financial Reporting
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Many opportunities for management to affect quality
Timing of revenue and expense recognition
Discretionary items
Revenues26
Assets earned by a company’s operations and business activities
Revenue account is an equity account with credit balance
Typically seen as… Operating Revenues Non-Operating Revenues
Revenues27
Operating Revenue Sales (Manufactures, Wholesalers, Retailers) Rent (Landlord to Tenant) Consulting Services (Professional Services
Provided)
Non-Operating Revenue Interest Revenue
Revenues28
Aaron’s Body Shop repairs cars for local auto dealers. Aaron is currently working on a fender repair for Bill’s Auto Lot. After Aaron finishes the repair, he sends Bill a $1,000 invoice for the labor and records the sale in his accounting system by debiting accounts receivable and crediting revenues.
Aaron records the income because he performed the work and has earned the revenue even though Bill hasn’t actually paid Aaron yet.
Expenses29
Costs incurred to generate revenueExpense accounts decrease the overall
equity balanceThere are many examples of expenses
that can occur for a business, all fit into 2 categories Operating Expenses Non-Operating Expenses
Expenses30
Operating Expenses Rent, Wages, Utilities, Advertising
Non-Operating Expenses Interest Expenses
Loan Interest from banks
Expenses31
Corey’s Food Truck, Inc. is a local food company that delivers sandwiches. Corey places new deli orders for $100 every Monday to a local butcher. When Corey places his order, he debits supplies for $100 and credits cash for $100. This journal entry records the asset, cash, being used up to generate revenues by making sandwiches.
At the end of the year how much does Corey spend on deli meat?
This will be listed as an expense on his income statement.