Accounting for Decision Making - iba

Accounting for Decision Making For: IBA Academic Committee By: Rustom Kavasji Chairman, Accounting & Law, IBA, Karachi

Course Objectives To provide an senior executive perspective of advanced financial and management accounting To learn techniques for analysis of financial information and improved decision making and value creation and measurement.

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Grading • Class Participation / Assignments (30%) – Qualitative – Interactive • Two written Case Analysis / Reports (20%) • Home Assignments (10%) • Mid Term (20%) – Combination of case analysis and short questions • Final Exam (20%) – Combination of case analysis and short questions – Comprehensive 3

Course Outline & Calendar Session Detail 1

Introduction

2

Understanding Costs, Expenses, & Financial Management

3

Understanding Financial Statements and Role of Revenue

4

Cost - Volume - Profit Analysis

5

Tactical Decision Making & Relevant Costing

6-7

Capital Budgeting – I & II

8

Transfer Pricing & Responsibility Accounting

9

Fiscal Planning, Budgeting, Control & Variance Analysis

10

Internal Control & Internal Auditing

11

Performance Measures & The Balanced Scorecard

12

Accounting Conventions regarding IAS, IFRS, GAAP, and Compliance

13

Activity Based Costing

14

Service Department Cost Allocations

15 - 28

Cases 4

Ammar Textiles The Transfer Pricing Problem Highlights transfer pricing as a key factor in competitiveness of textile exports and why calculation and determination of an accurate transfer price between the Pakistani manufacturing operation and Muscat is critical for Ammar’s successful entry into new markets 5

Zulsham Engineering Cost Volume Profit Analysis Shows the usefulness of CVP as a [planning and decision making tool for Zulsham and an illustration of the nature of costs in the real world. Highlights key issues in CVP’s link to product pricing.

6

Dell Computers Working Capital Management Shows the effectiveness of good working capital and cash management in organizational growth. The case highlights good operational WC management as key in Dell’s success while also indicating some pitfalls along the way. 7

The Dublin Shirt Company Cost Allocations and Pricing An excellent case study that illustrates the peril of poor management due to incorrect cost allocations and hidden costs, buried within lumped cost structures, in turn leading to poor product pricing and ineffective customer profitability analysis. 8

The IBETO Group Accounting & ERP Systems Illustrates the necessity for ERP and builds a case for an E-Enterprise. Shows the transformation of a conglomerate’s redundant information systems to the adoption of a state-of-the-art ERP system and the issues and challenges along the way in selection of a system. 9

The Chase Manhattan Bank Accounting & Compliance Illustrates the real world, real life challenges that face a team of banking executives as they are confronted between trade-offs and hard choices between sustaining profitability and remaining compliant with statutes and directives issued by the State Bank of Pakistan. 10

Kincaid Manufacturing Supply Chain Cost Management Illustrates critical issues that inflate costs due to weakness and inefficiencies within the supply chain function of Kincaid and highlights the critical importance of the procurement function in good supply chain management.

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Analysis of Financial Statements For: IBA Academic Committee By: Rustom Kavasji Chairman, Accounting & Law, IBA, Karachi

Course Objectives To provide an overview of accounting and understanding of accounting flow for non accountants. To enhance reading ability and understanding of financial information. To learn techniques for analysis of financial statements for purposes of determining and selecting superior investment opportunities among large public sector corporations. 13

Course Content Overview of Financial Statement Analysis  Review and understanding of Financial Statements  Objectives of Financial Statement Analysis

Sources of Financial Information    

Sources of Financial Statements; Role of IFRS & GAAP Detailed class practice of financial statement preparation Challenges in Interpreting financial statements Assessing quality of Financial Statements, Red Flags & Warnings

Annual Report Analysis  What are Annual Reports  Annual Report diagnosis; Regulatory framework; Chairman’s review  Auditor Report, Director’s report, Measurement, Notes to Accounts

Income Statement Analysis  IS - Revenue recognition, income taxes, deferred taxes,  IS - Extraordinary items, effect of change in accounting principles 14

Course Content (Continued) Balance Sheet Analysis  BS - Consolidated statements, Reserves, commitments  BS - Contingencies, Changes in equity

Statement of Cash Flows  SCF - Review of Cash Flows and importance of Cash Flows  SCF - Detailed Analysis of Statement of Cash Flows Analysis of Liquidity, Solvency, Profitability & Growth  Liquidity, Profitability, Solvency & Growth  Investor, Institutional Investors & Government Presentations and Analysis of Financial Statements  Student presentations of financial statements of Pakistani Corporations 15

Grading • Class Participation / Assignments (30%) – Qualitative – Interactive • Term Project (30%) – Class Presentation (15%) – Written Term Report (15%) • Mid Term (15%) – Combination of case analysis and short questions • Final Exam (25%) – Combination of case analysis and short questions – Comprehensive

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Class Participation & Term Project The Presenter / Group

Class

1

• Corporate Executive seeking funding

Investors

2

• Investment Advisor approaching Client

Or

3

• Equity Financial Analyst working for agency

Clients

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Class Participation & Term Project C L A S S P A R T I C I P A T I O N

Attack Them! 1. I N V E S T O R S

2.

3.

4. 5.

Select Annual Report of any public (i.e. shares traded on KSE) company during FY’s 2010 – 2011 Prepare a detailed analysis of the company for presentation in class. You must pick a company that you would invest in and prepare an overall analysis of why you would invest in that corporation for a minimum of 3 – 5 years. Multidimensional Analysis • Industry Analysis • Potential for future growth and success • Liquidity • Risk & Reward • Competitor Analysis If possible interview top management or executives of that corporation (optional but likely to enhance your score) Present & defend conclusions in class + written term report 18

Class Participation & Term Project Company Selection

• First Come First Serve. Initial proposal to be submitted by the 5th session of the course.

Presentations

• From session 16 onwards. The class and myself must be provided a photocopy of the annual report of your selected company, at least one session before your presentation

Written Report

• All written reports to be submitted by the 25th session of the semester

All written submissions relating to term project must be printed not hand written

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