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15.515

Financial Accounting

4-0-5 units · Graduate

An intensive introduction to the interpretation of financial information. Adopts a decision-maker perspective of accounting by emphasizing the relation between accounting data and the underlying economic events generating them. Class sessions are a mixture of lecture and case discussion. Assignments include textbook problems, analysis of financial statements, and cases. Restricted to first-year Sloan master's students.

Fall 2003

Topics

  • Overview and Introduction - Setting the Stage and the Course Framework
  • Principles of Accrual Accounting
  • Elements of an Annual Report and Financial Ratios
  • Revenue Recognition and Accounts Receivable
  • Revenue Recognition
  • Accounting for Inventory and COGS
  • The Matching Principle and Long-lived Assets
  • Matching Principle: Property, Plant, and Equipment
  • The Statement of Cash Flow
  • Accounting for Taxes
  • Marketable Securities and Valuation Adjustments
  • Current Liabilities and Contingencies and an Introduction to Long-Term Debt
  • Long-Term Debt
  • Debt and Valuation
  • Leases
  • Stockholders’ Equity
  • Acquisitions
  • Current Issues in Financial Reporting
  • Introduction to FSA
  • Course Review and Wrap-Up

Readings

  • The reading assignments listed below are what you should read before coming to class. The class lectures assume this reading has been done, and while you may not completely understand the material you will have a familiarity with the concepts and transactions we will be covering each day. Additional short readings (e.g., recent business press articles) will be distributed in class.
    Listed reading
  • Readings that refer to “Pratt” can be found in the course textbook, J. Pratt, Financial Accounting in an Economic Context , 5th ed., John Wiley & Sons, Inc. Other readings are from the Intel 2002 Annual Report, which is available for download from the website . “CP” stands for the Case Pack of readings that students purchase. ( Note that the CP is not available online to OCW users .) ↗
    Listed reading
  • Pratt, Chapters 1 & 2.
    Listed reading
  • CP: Mueller, Gernon, and Meek. An International Perspective on Financial Accounting . Chapter 1 in Accounting: An International Perspective . 4th ed. Irwin, 1997.
    Listed reading
  • Other: Basic Book-keeping , on the course server and distributed with your orientation materials.
    Listed reading
  • LEC #: 2 · TOPICS: Principles of Accrual Accounting · READINGS: Pratt, Chapters 3 & 4.
    Reading assignment
  • Pratt, Chapters 3 & 5.
    Listed reading
  • Intel 2002 Annual Report
    Listed reading
  • Pratt, Chapter 6, Review Chapter 3, especially pp. 83-85, “The principles of matching and revenue recognition”, Chapter 4, p. 126 “Unearned (Deferred) Revenues.”
    Listed reading
  • Intel: Revenue Recognition , p. 54, and the line “Deferred Income on Shipments to Distributors” in the balance sheet.
    Listed reading
  • LEC #: 5 · TOPICS: Revenue Recognition · READINGS: CP: Bruns, William J., Jr., and Susan S. Harmeling. Circuit City Stores, Inc (A) . Boston, MA: Harvard Business School Publishing, 1993. Case No. 9-191-086.
    Reading assignment
  • Pratt, Chapter 7.
    Listed reading
  • CP: Accounting for Manufacturing Companies, Understanding LIFO / FIFO .
    Listed reading
  • Pratt, Chapter 9, Chapter 4 (pp. 118 - 130).
    Listed reading
  • CP: Wilson, G. Peter. Understanding the Statement of Cash Flows . Boston, MA: Harvard Business School Publishing, 1992. Note No. 9-193-027.
    Listed reading
  • LEC #: 8 · TOPICS: Matching Principle: Property, Plant, and Equipment · READINGS: CP: Bruns, William J., Jr., and Eric J. Petro. Depreciation at Delta and Pan Am (A) . Boston, MA: Harvard Business School Publishing, 1993. Case No. 9-190-035.
    Reading assignment
  • Pratt, Chapter 14.
    Listed reading
  • Pratt, Chapter 8, through pp. 332.
    Listed reading
  • Pratt, Chapter 10.
    Listed reading
  • CP: Bruns, William J., Jr., and Susan S. Harmeling. Accounting for Frequent Fliers . Boston, MA: Harvard Business School Publishing, 1993. Case No. 9-192-040.
    Listed reading
  • Pratt, Chapter 11, through pp. 484, Appendix B “The Time Value of Money” (pp. 689+).
    Listed reading
  • CP: Barth, Mary E., and Charles A. Nichols III. First National Bank Corp. (A) . Boston, MA: Harvard Business School Publishing, 1994. Case No. 9-192-042.
    Listed reading
  • LEC #: 15 · TOPICS: Leases · READINGS: Pratt, Chapter 11, pp. 484 to end, review Appendix B “The Time Value of Money” (p. 689+).
    Reading assignment
  • Pratt, Chapter 12.
    Listed reading
  • Pratt, Chapter 8, pp. 332 to end, Appendix 8A, Appendix 9A.
    Listed reading
  • CP: Matsumoto, Dawn, and Robert Bowen. Microsoft’s Financial Reporting Strategy. Boston, MA: Harvard Business School Publishing, 2000. Case No. 9-100-027.
    Listed reading
  • Read In Class: Charan, Ram, and Julie Schlosser. Ten Questions Every Board Member Should Ask . Fortune , October 27, 2003.
    Listed reading

Prerequisites & course information

Prereq: Permission of instructor G (Fall) 4-0-5 units Credit cannot also be received for 15.511 , 15.720

Sources