Course enrollment and registration is handled through the office of Dr. Reed Peoples, Department Chair, Department of Accounting at ACC. Please contact his administrative assistant, Katy Gott at 512-223-4800 for specific details on registration requirements, course approval and deadlines. The instructor does not control the registration for this course. 

NOTE FROM THE INSTRUCTOR:

Prospective students should be aware that this course is offered in a format similar to that of a graduate-level course. As such,students are expected to spend approximately 10 - 12 hours per week on course activities (reading the text, researching case studies, completing quizzes, studying for exams, and completing weekly group assignments). Time management will be essential for students. Some students may need to spend more or less time than this based on personal circumstances.

Assignment deadlines are establiished on the first day of class and are strictly enforced unless there are extenuating circumstances as determined by the instructor. Extenuating circumstances are those involving the entire class.

For a more detailed syllabus, please review the syllabus posted in Blackboard. This syllabus is intended to be a brief overview of the course and is subject to change. The final syllabus will be posted in Blackboard and a hard copy will be distributed during the first week of the semester.

Before enrolling in ACNT 2376, you must have completed ACNT 2304 Intermediate Accounting II with a grade of "C" or better or an equivalent course at another institution. Students who have not completed the prerequisite courses or who cannot document completion will be withdrawn from the class.

Basic computer skills utilizing internet, word processing, spreadsheet (Excel), and presentation (Power Point) software are recommended for all accounting courses. Generally, all assignments are to be prepared on the computer and presented in a format that would be acceptable in a business environment.  Access to computers is available at the college. 

Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 9th edition; James Wahlen, Stephen Baginski, and Mark Bradshaw. Cengage Publishing. Digital version including MindTap.

• Active, meaningful participation in class discussion and activities.
• Completing assigned lab and research assignments.
• Successfully completing exams and quizzes.
• Completing a comprehensive financial analysis case study for a publicly traded company.

Your grade will be determined by an assessment of your success in engaging the subject matter.  The following point scale is used to determine the course grade:

Grade Change Policies: Click on this link to view the policy. See Student Handbook: www.austincc.edu/handbook/policies2.htm

ABSOLUTELY NO LATE ASSIGNMENTS WILL BE ACCEPTED.

UNIT A (Modules 1-5):

Module  1 - Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Module  2 - Asset and Liability Valuation and Income Recognition

Module  3 - Income Flows versus Cash Flows: Understanding the Statement of Cash Flows

Module  4 - Profitability Analysis

Module  5 - Risk Analysis

UNIT B (Modules 6-9): 

Module  6 - Accounting Quality

Module  7 - Financing Activities

Module  8 - Investing Activities

Module  9 - Operating Activities

UNIT C (Modules 10-14): 

Module  10 - Forecasting Financial Statements

Module  11 - Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Module  12 - Valuation: Cash Flow Based Approaches

Module  13 - Valuation: Earnings Based Approaches

Module  14 - Valuation: Market Based Approaches 

STUDENT LEARNING OUTCOMES: 

Upon completion of this course, the student should be able to analyze and interpret the financial statements and related footnores for publicly traded companies by using the following tools:

     a. The evaluation of the quality of financial information, 

     b. Vertical and horizontal analyis, 

     c. Ratio analysis of liquidity, solvency, risk, and profitability, 

     d. Strategic analysis, and 

     e. Prospective analysis.

LEARNING OBJECTIVES:

Chapter 1: Overview of Financial Reporting, Financial Statement Analysis, and Valuation

1. Describe the six-step analytical framework that is the logical structure for financial statement analysis and valuation. 

2. Apply tools for assessing the economic characteristics that drive competition in an industry, including (a) Porter's five forces framework, (b) value chain analysis, and (c) economic attributes framework; then identify the firm's specific strategies for achieving and maintaining competitive advantage within that industry.

3. Explain the purpose, underlying concepts, and format of the balance sheet, income statement, and statement of cash flows, and the importance of accounting quality.

4. Obtain an overview of useful tools for analyzing a firm's profitability, growth, and risk, including financial ratios, common-size financial statements, and percentage change financial statements, as well as how to use this information to forecast the future business activities of a firm, and to value a firm. 

5. Consider the role of financial statement analysis and valuation in an efficient capital market, and review empirical evidence on the association between changes in earnings and changes in stock prices. 

6. Review sources of financial information available for publicly held firms.

Chapter 2: Asset and Liability Valuation and Income Recognition

1. Describe the mixed attribute measurement model for assets and liabilities, and how it provides relevant and representationally faithful information to financial statement users.

2. Explain how changes in valuations of assets and liabilities on the balance sheet are recognized on the income statement and statement of comprehensive income. 

3. Understand that financial reporting and tax reporting are two different systems, and are linked by permanent differences and deferred tax assets and liabilities. 

4. Utilize an analytical framework to map business transactions and events to the balance sheet and income statement. 

Chapter 3: Income Flows versus Cash Flows: Understanding the Statement of Cash Flows

1. Identify the purpose of the statement of cash flows and the importance of understanding a firm's cash flows. 

2. Describe the structure and interpretation of operating, investing, and financing cash flow activities on the statement of cash flows. 

3. Analyze information in the statement of cash flows to determine where the firm is in its life cycle. 

4 Understand the relations among the statement of cash flows, the income statement, and the balance sheet.

5. Prepare a statement of cash flows from balance sheet and income statement data. 

6. Examine additional uses of cash flow information. 

Chapter 4: Profitability Analysis

1. Evaluate firm profitability using techniques such as per-share analysis, common-size analysis, percentage change analysis, segment profitability analysis, and alternative measures of income. 

2. Understand rate of return analysis as a summary of firm performance, and demonstrate how to interpret the return on assets (ROA) and its components: profit margin and total assets turnover. 

3. Analyze and interpret return on common shareholder' equity (ROCE) and its components, especially successful use of financial leverage to increase the return to common shareholders. 

4. Link economic and strategic factors to ROA and ROCE.

5. Describe the benefits and limitations of using ratios like ROA and ROCE as part of understanding the historical performance of a company. 

Chapter 5: Risk Analysis

1. Understand required disclosures about a firm's risk exposures and risk management activities. 

2. Define financial flexibility and decompose the return on common equity to assess financial flexibility. 

3. Apply analytical tools to assess working capital management and short-term liquidity risk. 

4. Explain the benefits and risks of financial leverage and apply analytical tools to assess long-term solvency risk. 

5. Use risk analysis tools to assess credit risk.

6. Apply predictive statistical models to assess bankruptcy risk. 

7. Recognize the distinction between firm-specific risks, indicated by various financial statement ratios, and systematic risk, estimated with market equity beta.

Chapter 6: Accounting Quality

1. Describe the concept of quality of accounting information, including the attributes of economic content and earnings persistence. 

2. Describe the characteristics of balance sheet quality and earnings quality. 

3. Define earnings management and describe the conditions under which managers might be likely to engage in it. 

4. Identify the different types of liabilities, how judgment can affect liability recognition and measurement, and how off-balance-sheet financing can affect accounting quality. 

5. Identify how asset recognition and measurement rules and judgments can affect accounting quality. 

6. Evaluate the effects on profitability assessment and earnings persistence of various items that occur infrequently but can have a large impact on reported financial statements. 

7. Assess accounting quality by partitioning earnings into its accrual and cash flow components. 

8. Compute the Beneish Manipulation Index to assess the likelihood of earnings manipulation. 

9. Explain the effect of two sets of accounting rules (IFRS and US GAAP) on worldwide financial comparability. 

Chapter 7: Financing Activities

1. Describe the financial statement reporting of investments by owners (equity issuances) and distributions to owners (dividends and share repurchases).

2. Explain the accounting for share-based compensation (stock options, stock appreciation rights, and restricted stock).

3. Identify the components of other comprehensive income. 

4. Apply financial reporting principles to long-term and short-term debt (bonds, notes payable, leases, and troubled debt).

5. Explain the accounting for and financial reporting of hybrid securities. 

6. Describe how operating and capital leases affect financial statements, and make adjustments required to convert operating leases to capital leases. 

7. Explain how economic effects of derivatives used to hedge interest rate risk are reported in financial statements. 

Chapter 8: Investing Activities

1. Describe the accounting and reporting for a firm's investments in tangible and intangible productive assets. 

2. Discuss the exercise of judgment used in the allocation of costs through the depreciation and amortization process.

3. Apply the rules for testing the impairment of different categories of long-lived assets, including goodwill.

4. Describe the accounting and reporting for investments in debt and equity securities. 

5. Describe variable-interest entities, sometimes referred to as special-purpose entities, and explain the need for the primary beneficiary to consolidate them. 

6. Understand the translation process for subsidiary financial statements denominated in a foreign currency to facilitate consolidation with a US parent. 

Chapter 9: Operating Activities

1. Discuss and apply the criteria for the recognition of revenues from operating activities, as well as the related assets, liablities, and cash flows. 

2. Discuss and apply the criteria for the recognition of expenses from operating activities, as well as the related assets, liabilities, and cash flows. 

3. Use the financial statement and note information for corporate income taxes to analyze the firm's tax strategies. 

4. Identify the effects of pensions and other postemployment benefits on the financial statements. 

Chapter 10: Forecasting Financial Statements

1. List and describe the general forecasting principles and the seven steps of the forecasting framework. 

2. Build forecasts of future balance sheets, income statements, and statements of cash flows by applying the seven-step forecasting framework to project: (a) revenues, (b) operating expenses, (c) operating assets and liabilities, (d) financial leverage, capital structure, and financial income items, (e) provisions for taxes, net income, dividends, share repurchases, and retained earnings, (f) a balance sheet that balances, and (g) cash flows. 

3. Understand how and when to use short cut forecasting techniques. 

4. Test the validity of your forecast assumption and results. 

5. Test the sensitivity of your forecasts to variations in critical assumptions and parameters. 

6. Develop forecast models that are flexible and comprehensive, enabling you to respond quickly and effectively when a company announces important new information. 

Chapter 11: Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

1. Describe the general valuation model and its culminating role in the six-step analysis and valuation process. 

2. Explain the fundamental equivalence of valuation based on expected future dividends, free cash flows, and earnings. 

3. Estimate expected rates of return on equity capital as well as weighted-average costs of capital, which will be used to discount future payoffs to present value. 

4. Explain the dividends-based valuation approach, including the relation between cash flows to the investor versus cash flows reinvested in the firm. 

5. Measure dividends, establish a forecast horizon, and value continuing dividends. 

6. Bring all of the elements together in the dividends-based valuation model, and estimate firm value. 

7. Assess the sensitivity of firm value estimates to key valuation parameters, such as discount rates and expected long-term growth rates, and make investment decisions. 

Chapter 12: Valuation: Cash Flow Based Approaches

1. Describe cash flow based valuation models and their conceptual and practical strengths and weaknesses. 

2. Measure free cash flows for all debt and equity stakeholders, as well as free cash flows for common equity shareholders, and explain when each measure is appropriate. 

3. Estimate the firm value using the: (a) present value of future free cash flows for common equity shareholders, discounted at the required rate of return on equity capital, (b) present value of future free cash flows for all debt and equity stakeholders, discounted at the weighted-average cost of capital. 

4. Understand how to implement the free cash flows based valuation approaches by applying them to estimate share value. 

5. Assess the sensitivity of firm value estimates to key valuation parameters such as discount rates and expected long-term growth rates. 

Chapter 13: Valuation: Earnings Based Approach

1. Describe earnings based valuation and explain the different valuation implications of earnings, dividends, and free cash flows. 

2. Explain the conceptual and practical strengths and weaknesses of earnings based valuation. 

3. Demonstrate a conceptual understanding of residual income valuation by (a) utilizing book value of common shareholders' equity, comprehensive income, dividends, and clean surplus accounting, (b) measuring required income, (c) measuring residual income, (d) determining the value of common equity.

4. Demonstrate a conceptual understanding of residual income valuation with finite forecast horizons and continuing value computations. 

5. Demonstrate a practical understanding of residual income valuation by applying the approach to value the common shares. 

6. Assess the sensitivity of share value estimates to key parameters, such as discount rates and expected long-term growth rates. 

7. Describe four important implementation issues for the residual income valuation approach. 

8. Identify potential causes of errors if the residual income, free cash flows, and dividend valuations do not produce identical value estimates. 

Chapter 14: Valuation: Market Based Approaches

1. Explain the practical advantages and disadvantages of using market-based valuation multiples such as market-to-book (MB) and price-earnings (PE) ratios to assess the capital market's relative valuation of a particular stock. 

2. For market-to-book (MB) ratios: (a) apply a version of the residual income valuation model to compute the value-to-book (VB) ratio, (b) make investment decisions by comparing the VB ratio to the MB ratio, (c) explain why VB and MB ratios differ across firms and the impact of the following factors on VB and MB ratios: (1) risk and the cost of equity capital, (2) growth, (3) differences between current and expected future earnings, and (4) alternative accounting methods. 

3. For price-earnings (PE) ratios: (a) understand the theory and the practical approach to compute and use the firm's value-earnings (VE) ratio, and compare it to the PE ratio, (b) incorporate growth into the PE ratio to compute the price-earnings growth (PEG) ratio, (c) use PE and PEG ratios to analyze share prices over time and across firms, and to make investment decisions, (d) explain why VE and PE ratios differ across firms and the impact of (1) risk and the cost of equity capital, (2) growth, (3) differences between current and expected future earnings, and (4) alternative accounting methods. 

4. Reverse engineer a firm's stock price to determine the implied expected return or the implied expected long-run growth rate. 

5. Explain the notion of capital market efficiency in valuation and the empirical evidence on the degree to which the capital markets efficiently impound earnings information into share prices. 

The Austin Community College District concealed handgun policy ensures compliance with Section 411.2031 of the Texas Government Code (also known as the Campus Carry Law), while maintaining ACC’s commitment to provide a safe environment for its students, faculty, staff, and visitors.

Beginning August 1, 2017, individuals who are licensed to carry (LTC) may do so on campus premises except in locations and at activities prohibited by state or federal law, or the college’s concealed handgun policy.

It is the responsibility of license holders to conceal their handguns at all times. Persons who see a handgun on campus are asked to contact the ACC Police Department by dialing 222 from a campus phone or 512-223-7999.

If you would like additional information regarding the ACC concealed handgun policy, please see the complete policy online at Campus Carry.

Austin Community College has received the designation of Qualifying Educational Credit for the Uniform CPA Examination by the Texas State Board of Public Accountancy (Board).  This course meets the requirement for an Accounting Ethics course as required by the Board.  Please review the information on our website. It is the student’s responsibility to understand and comply with the requirements of the Board.

To become a CPA in Texas, you must have a minimum of a bachelor’s degree that includes 150 hours of college credit, including 36 hours of accounting, an approved 3 credit hour accounting ethics course and 24 credit hours of business courses.  Passage of the Uniform CPA Exam and appropriate supervision by a CPA are also required.

H.B. 1508 Disclosure:  To become a CPA in Texas, the Board has a statutory obligation (The Public Accountancy Act, Chapter 901 of the Occupations Code, Section 901.253) to determine that any person awarded a Texas CPA certificate is of good moral character.  Good moral character is demonstrated by the lack of a history of dishonest or felonious acts. The Board considers several areas in evaluating an applicant's moral character. These include

·         Responses to questions on the application relating to arrests, charges, convictions, probations and/or deferred adjudications of a felony or misdemeanor other than misdemeanor driving offenses such as moving violations (NOTE: DWIs are not considered misdemeanor driving offenses).

·         The Board will access the Federal Bureau of Investigation (FBI) database and the Texas Department of Public Safety – Crime Records Division files using an established fingerprint process for each person who submits an Application of Intent. The fingerprint process allows the Board to receive information on all arrests, charges, convictions, probations and deferred adjudications of misdemeanor and felony offenses that occur in any U.S. state or territory. Records of these activities are reported to the Board for further investigation. If an applicant was 17 years of age or older at the time of the arrest, it should be reported to the Board. You are not required to report criminal records that have been expunged or sealed by an order of the court. You are required to report criminal records subject to a non-disclosure order.  Any subsequent arrest will automatically be reported to the Board for further investigation.

For students in this course who may have a criminal background, please be advised that the criminal background could keep you from being licensed by the State of Texas.  If you have a question about your background and licensure, please speak with your faculty member or the department chair. You also have the right to request a criminal history evaluation letter from the applicable licensing agency.