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THE UNIVERSITY OF
NEW SOUTH WALES
SCHOOL OF ACCOUNTING
ACCT3563 ISSUES IN FINANCIAL REPORTING
AND ANALYSIS
Course Outline
Session 1, 2005
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OBJECTIVES OF THE SUBJECT
This subject deals with issues in external financial reporting by listed public companies and
similar entities. It is intended for students majoring in accounting who will be involved in
the preparation or use of company financial statements whether as accountants, financial
executives, taxation officers, auditors, financial analysts, or legal advisors.
ACCT2542 Corporate Financial Reporting and Analysis, the prerequisite for this subject,
dealt with company accounting and the preparation of financial statements by groups of
entities controlled by a parent company. ACCT 3563 extends what you learnt in ACCT 2542
by covering financial reporting issues that are currently controversial. These issues concern
important questions about (i) the existence, recognition and measurement of assets, liabilities,
revenues or expenses, (ii) whether accounting information is useful to investors, and (iii) the
role of accounting information in contracting. Examples include accounting for leases,
foreign currency tranactions, accounting for derivatives, accounting in the extractive
industries, expanded disclosure regimes, and accounting issues arising from recent corporate
failures.
A major theme running through ACCT 3563 is that students should know not only the
practical bookkeeping aspects of financial reporting topics but also the underlying conceptual
(theoretical) issues and the political and economic forces that shape regulatory and corporate
responses to them. The recent collapses of Enron and Worldcom in the USA, and HIH and
One.Tel in Australia emphasise the importance of this theme. Different theoretical
perspectives on accounting issues are presented, in particular agency theory and the
conceptual framework/accounting standards perspectives. Students will be expected to
understand, explain and critique both perspectives’ views about accounting issues in the
Course.
LEARNING OUTCOMES
At the completion of most topics covered in ACCT 3563, students should understand the
following in relation to that topic:
(i) Whether an asset, liability, revenue or expense exists for accounting purposes, as per
the Conceptual Framework and the IASB-based Australian accounting standards;
(ii) whether recognition in financial statements should occur, or footnote disclosure only;
(iii) what measurement method(s) are used;
(iv) practical bookkeeping and display techniques appropriate to the topic;
(v) what political forces appear to have shaped relevant accounting standards and other
regulations, including the role of the harmonisation programme;
(vi) what economic factors appear to motivate companies in the way they actually report
financial information about the topic;
(vii) whether information provided in financial statements is useful to investors and
creditors.
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(viii) better students will be able to synthesize or identify interrelationships between each of
these learning attributes, and will be able to integrate knowledge across topics
From 1 January 2005, Australian companies are required to prepare their financial statements
in accordance with International Financial Reporting Standards. This is a major change for
Australian business. Australian versions of these IFRSs have been introduced, and will be
covered in relevant topics in this course.
COURSE WEBSITE
There is a website for this subject on WebCT. The website will contain the Course Outline,
Tutorial Programme, a staff listing, and hotlinks to useful support resources. During Session,
lecture notes, lecture handouts, tutorial solutions, frequently asked questions (FAQs) and
various announcements will be posted progressively on the website, together with a selection
of past examination papers. Each week, solutions to questions for that week's tutorial will be
placed on the website in advance. Students must download these solutions from the website
and bring them to class. Students will be expected to attempt all questions before each
tutorial.
EMAIL
Each UNSW student has an email account based on his/her student number, i.e.
[email protected]. It will be used if staff wish to directly communicate
with students, for example to notify them that they have been granted a supplementary exam.
Please check your email account regularly. Other email addresses such as Hotmail, Yahoo,
Optusnet, or Ozemail will not be used. Students should observe correct protocol in sending
emails to staff. Emails to staff should contain your name, student number and your tutorial
number and time. Emails without this information will not be answered.
TEXT BOOKS: students are expected to have copies of the following:
1. Deegan, C., Australian Financial Accounting, 4thnd edition, McGraw-Hill, 2005.
2. Whittred, G, I Zimmer, S. Taylor and P. Wells Financial Accounting: Incentive
Effects and Economic Consequences 6th Edition, Thomson, 2004
3. ACCT 3563/3573 Supplementary Materials, School of Accounting, 2005
The 4th edition of Deegan covers the new Australian accounting standards operative
from 1 January 2005. Do not buy second hand copies of the 3rd edition of Deegan
because it does not cover the new accounting standards introduced from 1 January
2005. Second hand copies of Whittred 6th edition may be bought, if available. For the
Supplementary Materials, only purchase the 2005 version, not earlier years.
RECOMMENDED REFERENCE BOOK – Many weeks’ readings contain references to
new AASB standards introduced on 1 January 2005. You are not expected to know all the
details of these standards, only those details highlighted by your lecturers and tutors.
However, you may wish to buy this reference book, which contains the new standards:
CPA Australia Accounting Handbook 2005, Volume 1 Prentice Hall, 2005
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Note about Accounting Handbook: The Australian Accounting Standards Board allows free
downloading of the new AASB accounting standards, Conceptual Framework documents,
Policy Statements and exposure drafts from the AASB’s website (www.aasb.com.au – under
AASB Standards 2005).
Useful websites:
School of Accounting, UNSW www.accounting.unsw.edu.au
University of NSW www.unsw.edu.au
The Australian Accounting Standards Board: www.aasb.com.au
The Institute of Chartered Accountants in Australia: www.icaa.org.au
Australian Society of CPAs: www.cpaaustralia.com.au
The International Accounting Standards Board: www.iasb.org.uk
Australian Securities and Investments Commission: www.asic.gov.au
Australian Stock Exchange: www.asx.com.au
Financial Accounting Standards Board: www.fasb.org
Australian company annual reports are available from the Connect 4, Datanalysis and
Mergent Online databases on Sirius in the UNSW library website
(www.library.unsw.edu.au), and also from www.EquitiesInfo.com.au
OTHER REFERENCE BOOKS: (Students should not purchase these as all are held on
Open Reserve, Main Library)
Alfredson, K, K. Leo, R. Picker, P. Pacter, J. Radford Applying International Accounting
Standards John Wiley 2005
Belkaoui, A.R. and S. Jones, Accounting Theory 2nd Australian Edition, Academic Press,
2000, chapter 5 on the Conceptual Framework.
Brealey, R.A. and S.C. Myers Principles of Corporate Finance (latest edition, McGraw Hill,
chapters on leasing, options, and hedging
Godfrey, J., A. Hodgson, S. Holmes, Accounting Theory, 5th ed. (Wiley, 2003).
Henderson, S., and G. Peirson, Issues in Financial Accounting, 9th ed., Longman, 1999 and
10th ed. 2002.
Jubb, P., I. Langfield-Smith, and S. Haswell Company Accounting, 3rd ed Nelson 2000
Leo, K.J., and J.R. Hoggett, Company Accounting in Australia, 5th ed., Wiley, 2001 and 4th
ed. 1998.
Leo, K.J. and J. Radford (eds) Financial Accounting Issues, 2nd ed. Wiley 1999.
Nobes, C., and R. Parker (eds) Comparative International Accounting, 6th ed., Prentice Hall,
2001, and 5th ed. 1998.
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Peirson, G, R. Brown, S. Easton and P. Howard, Peirson and Bird’s Business Finance 7th ed.,
McGraw-Hill 1998 (chapters 16 [leasing], 18 [futures contracts] and 19 [options], and
21 [international financial management])
Scott, W.R. Financial Accounting Theory Prentice Hall 3rd ed. 2003
WORKLOAD EXPECTATIONS
It is expected that you will spend at least ten hours per week studying this course. This time
should be made up of attending classes, reading, research, working on exercises and
problems, performing internet searches. In periods where you need to complete assignments
or prepare for examinations the workload may be greater.
Over commitment has been a cause of failure for many students. You should take the
required workload into account when planning how to balance study with employment
and other activities.
ASSESSMENT
The weighting of your total (composite) mark will be as follows:
(a) Mid-session test in Week 7 on Friday 22 April (90 minutes) 25
(b) Final Examination (3 hours) 50
(c) Group assignment (due by 5pm Friday 27 May, week 12) 20
(d) Class mark 5
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100
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Students must have a satisfactory performance in each component of their assessment,
or they may fail the subject (they will be given a UF grade) even if their composite mark
is greater than 50.
MID-SESSION TEST – Friday 22 April, Week 7 (25 MARKS)
Scope and Objective:
The scope of the mid-session test will be the first ten lectures (weeks 1-5) and the first five
tutorials (weeks 2-6). The purpose of the mid-session test is to test students’ knowledge
midway through the course and provide timely feedback of their progress at that point.
Time and Venue:
The mid-session test will be held on Friday 22 April from 10.00am to 12.00noon at the
Squarehouse UNSW, in the Anzac Rooms 1, 2, 3, 4, Kingsford Rooms 1 and 2, Kensington
Room and John Clarke Gallery A and B. Further details will be provided later. The actual
test will be of 90 minutes duration including 10 minutes reading time. The test will be run in
one sitting only.
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FINAL EXAMINATION (50 MARKS)
Scope:
The final examination will cover the whole course but with more emphasis on work not
examined in the mid-session test. More information on the structure of the test and the final
examination will be provided later. A selection of past mid-session and final examination
papers will be posted on the Course website. Students should note that the course content
changed substantially in 2002 so some topics on past papers before 2002 are no longer taught
in this subject.
Time and Venue:
The final examination will be run in the examination period after the end of the session. It is
your responsibility to find out the day, time and location of the final examination from the
UNSW website.
CLASS MARK 5 marks
Attendance at tutorials is compulsory. Your tutor will keep weekly attendance sheets. The
class mark will be assigned on the basis of class attendance, according to the following
formula, although individual tutors may vary from it to reward students who contribute well
in class. Absences due to illness have been factored into the formula so that no excuses for
absences will be accepted.
Number of tutorials attended Mark
12 or more 5
11 4
10 3
9 2
8 1
7 or less zero
GROUP ASSIGNMENT (WEEK 12, FRIDAY 27 MAY 2005, 20 MARKS)
This project will be completed in syndicates of students. Further details will be released later
AVOID PLAGIARISM AND OTHER FORMS OF ACADEMIC MISCONDUCT:
The following is taken from the Faculty’s website at www.fce.unsw.edu.au/current_students/
“Plagiarism entails taking and using as one’s own, the thoughts or writings of another
without acknowledgement including:
(a) where paragraphs, sentences, a single sentence or significant part of a sentence which
are copied directly, are not enclosed in quotation marks and appropriately footnoted;
(b) where direct quotations are not used, but ideas or arguments are paraphrased or
summarised, and the source of the material is not acknowledged either by footnoting
or other reference within the text of the paper; and
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(c) where an idea, which appears elsewhere in print, film or electronic medium, is used or
developed without reference being made to the author or the source of the idea.”
Also
“Plagiarism involves using the work of another person and presenting it as one’s own. Acts
of plagiarism include copying parts of a document or audiovisual, or computer based material
without acknowledging and providing the source for each quotation or piece of borrowed
material.
Similarly, using or extracting another person’s concepts, experimental results or conclusions,
summarising another person’s work or, where there is collaborative preparatory work,
submitting substantially the same final version of any material as another student constitutes
plagiarism. Moreover, encouraging or assisting another person to commit plagiarism is a
form of improper collusion and may attract the same penalties.”
Students caught committing plagiarism in their group assignment or hand-in assignments will
be severely penalised. They will be given zero marks for that component of the subject
and they may fail the subject. Further action will be taken in serious cases, which could
result in the student being excluded from the University for one or more Semesters. See
following section on “Academic Misconduct”.
Relevant material about academic misconduct has been placed under the tab for “Current
students” at: www.fce.unsw.edu.au/current_students/responsibilities.shtml
All students should read the material on this website.
ACADEMIC MISCONDUCT
Students are reminded that the University regards academic misconduct as a very serious
matter. Students found guilty of academic misconduct are severely penalised. The penalty
depends on the seriousness of the misconduct but can range from a reduction in marks,
failing the subject, to exclusion from the University for a semester or permanently.
The University’s official policy on Academic Misconduct states: “The following are
important examples of the actions which have resulted in students being found guilty of
academic misconduct in recent years:
Misconduct concerning examinations
• taking unauthorised materials into an examination;
• impersonation in examinations;
• permitting another student to copy answers in an examination;
• exchanging notes between students in an examination;
• improperly obtaining prior knowledge of an examination paper and using that
knowledge in the examination;
• removing an examination paper from an examination room when it is specified that
the paper is not to be retained by the student;
Misconduct concerning academic works
• failing to acknowledge the source of material in an assignment;
• quoting without the use of quotation marks even if the source is acknowledged;
• plagiarism;
• submitting work for assessment knowing it to be the work of another person”
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SUPPLEMENTARY EXAMINATIONS AND SPECIAL CONSIDERATION
Students who believe that their performance in this subject, either during session or in an
examination, has been adversely affected by sickness, misadventure or other circumstances
beyond their control may apply for special consideration for affected assessments.
Such applications should be submitted to the Registrar and Deputy Principal (at the student
centre) as soon as practicable after the occurrence and in any event not later than seven days
after the final examination in this subject.
Dates of Supplementary Examinations:
Students may be required to sit for an oral or written supplementary examination. The
supplementary Mid-Session Test will be held on Thursday 21 July, 2004 from 2 pm to 3.30
pm. The supplementary Final Examination will be held on Thursday 21 July, 2004 from 9.15
am to 12.30 p.m. In general, these supplementary examinations will only be offered to a
student who has been prevented from taking the Mid-Session Test or Final Examination (as
the case may be) or who has been placed at a serious disadvantage during the examination,
and whose circumstances have improved considerably in the period since the relevant
examination was held. Failure to attend a supplementary examination, if you have been
granted one, will result in forfeiture of any additional assessment granted to you.
Note: If granted a supplementary exam, you will be notified by email using your
[email protected] email address, so please consult that email address.
Any other email addresses you may have, such as Hotmail, Ozemail, Optusnet, or Yahoo,
will not be used for these notifications. Notification by letter in the post will not occur.
Students will not be granted another supplementary exam because they did not access their
university email.
CLASS ARRANGEMENTS
Students are expected to attend two one-hour lectures each week. They are also expected to
attend one 1-hour tutorial weekly, beginning week 2. ATTENDANCE AT LECTURES
AND TUTORIALS IS COMPULSORY. Attendance at lectures and tutorials is
compulsory. An attendance record will be taken in each tutorial and used in considering
marginal cases at the end of session. IF STUDENTS ATTEND LESS THAN 80 PER
CENT OF THEIR POSSIBLE CLASSES THEY MAY BE REFUSED FINAL
ASSESSMENT.
Tutorials will emphasize the application of problem-solving skills to specific questions and
review assigned readings. The tutorials should assist students (a) to master practical aspects
of the topics assigned, (b) to appreciate the patterning and directions of change within the
discipline and (c) to understand the conceptual framework and agency theory perspectives on
each topic, and to understand some of the important disputes in the Accounting discipline and
the processes by which these are addressed and/or resolved.
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STAFF CONSULTATION
Members of staff teaching the course are shown below. A staff consultation timetable will be
posted on WebCT. Problems should be directed in the first instance to your tutorial
instructor. Special difficulties may be referred to Associate Professor Richard Morris, the
course coordinator.
Room Phone Email
Associate Professor Richard Quad 3066 9385 5818
[email protected] Morris (CourseCoordinator)
Dr Gerry Gallery (Honours Quad 3096 9385 5813
[email protected] stream)
Dr Andrew Ferguson Quad 3090 9385 6443
[email protected]Robert Czernkowski Quad 3081 9385 5807 [email protected]
Gary Pflugrath Quad 3116 9385 5840 [email protected]
Shrutika Chugh Quad 3115 9385 5823 [email protected]
Brian Booth (part-time) Quad 3113 9385 5907 [email protected]
TAS AND TUTORIAL ALLOCATIONS
Students can register for a tutorial or change an existing allocation in John Goodsell Lab 1. If
the room is full, overflow should go to QUAD Lab 6. These rooms are available Monday 28
February to Friday 4 March from 9am to 5pm. Attendants will be on duty to assist students
Monday – Friday in JG Lab 1 and Monday – Wednesday in QUAD lab 6. The attendants
will be wearing a black FCE T shirt and will have a nametag. All tutorial allocations and
changes must be put through TAS.
HONOURS STREAM ACCT 3573: The honours course (ACCT 3573) will be taught by Dr
Gerry Gallery. A separate course outline for the honours stream will be distributed in the
first honours seminar. Honours students attend the ACCT 3563 lectures, a weekly one- hour
tutorial and a weekly one-hour honours seminar. Tutorials and seminars commence in week
2. To take ACCT 3573, you must have a minimum average mark of 75% in ACCT 2532 and
ACCT 2552. Students not already in the Honours Programme who have a minimum average
mark of 75% in ACCT 2522 and ACCT 2552 may enrol in ACCT 3573 but must get
permission first from Dr Gallery.
ADVICE TO STUDENTS
How to study this subject. ACCT 3563 covers many topics and there is a lot of set reading,
including technical material from accounting standards. To assist your studies, the following
advice is offered. Do the following in the order shown:
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(a) Attend all lectures and take notes. Lecture notes and handouts will be posted on
the Course website, but they will not contain everything the lecturer says. In
preparing for exams, note which aspects of each topic the lectures cover and/or
the lecturer has emphasised. It is surprising how many students do not follow this
simple advice, and thus put themselves at a disadvantage.
(b) Attend all tutorial classes. Make sure you understand the answers to all the
questions set. Answers to questions will be posted on the course website before
the relevant tutorial, and students must download these and bring them to their
tutorial. Answers to all questions will be uploaded after the week’s tutorials have
all finished. Since classes are only 60 minutes, your tutor may not have time to
cover all questions every week, but we expect you to know for examination
purposes the answers to all the set questions, whether they are covered in class or
not. Some tutorials have additional practical questions listed at the end which are
for you to practice at home
(c) Read the textbook readings. The textbooks by Deegan and by Whittred, Zimmer,
Taylor & Wells cover the factual material on accounting topics quite well.
Students sometimes complain that with two textbooks there is too much reading.
However, the advantage of two books is that two different perspectives are
brought to bear on many topics, which should assist students’ learning. Your two
textbooks adopt quite different theoretical positions on accounting issues covered
in the Course. The Whittred book focuses on the economic consequences of
accounting policy choices. It is based on an agency theory/costly-contracting
perspective (see Preface page xii), which strongly influences the book’s attitude to
accounting policy choices, accounting standards and regulation. In a nutshell, its
theoretical stance is that private contracting between stakeholders in a firm will
produce the optimum accounting solution for that firm, in terms of reducing
agency costs and providing decision useful information to stakeholders.
Accounting standards can in some cases upset that equilibrium and thus be
suboptimal. The formulation of new accounting standards aimed at improving
financial reporting or covering emerging financial reporting issues is outside the
scope of the book (see page 52). That is, in Whittred, regulators exogenously
determine new accounting standards, and the book sometimes offers little
guidance on the a priori theoretical correctness of accounting standards. Whittred
does have a good summary of empirical research on accounting choices, and its
end of chapter exercises are excellent. References to Australian accounting
standards in Whittred are out of date after 1 January 2005 and should be ignored
In contrast, the Deegan book adopts a more eclectic approach. Although it covers
agency theory, it also examines accounting issues from the perspective of their
consistency with accounting standards and the conceptual framework and it
suggests ways in which the standards and practice can be improved. The
economic consequences of accounting choices are just one of many factors that
standard setters must allow for in standard setting. Deegan’s approach assumes
that private contracting will not always result in the best solution to an accounting
issue. Sometimes there will be “market failures” which can only be remedied by
new regulations such as accounting standards. Deegan also covers the new
accounting standards regime introduced 1 January 2005
You must be able to explain the differences between the theoretical positions in
Deegan and Whittred when they arise in various topics.
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(d) Read the remainder of the set reading. Do not neglect the items in the
Supplementary Materials as exam questions are often based on them.
(e) Closer to the exam date(s), work through specimen mid-session test and final
examination questions, which will be posted on the Course website. Be very
cautious if consulting past papers before 2002 in the University Library, because
many topics before 2002 are not covered in the Course now. All prior exam
papers are prepared in accord with the pre-2005 accounting standards
(f) Study the subject consistently throughout session and do not leave it until the last
minute to study for the exams. Many topics in the course are very intellectually
demanding and cannot be successfully crammed in the last few days before the
exams.
Students will benefit if they read articles in the financial press pertaining to company
earnings, company failures and related announcements (which may refer to accounting
techniques used by companies).
As ACCT 2542 is a prerequisite for this subject, it is assumed that students know basic
company accounting, including consolidation accounting. Students who do not feel confident
that they do should re-study the relevant parts of their ACCT 2542 textbooks.
STUDENT SUPPORT:
The University provides a number of student support services to assist students who have
difficulties. These services include:
Education Development Unit
Additional learning support, tailored to the needs of FCE students, is available from the
Education Development Unit (EDU) in the Faculty. The EDU offers a range of services for
FCE students including:
• Academic skills workshops run throughout the session;
• Printed and on-line study skills resources e.g. referencing guide, report writing and exam
preparation;
• A drop-in resource centre containing books and audio visual material that can be
borrowed;
• A limited consultation service for students with individual or small group learning needs.
More information about the EDU services including on-line resources, workshop details and
consultation request forms are available from the EDU website.
Contacts and location:
EDU Web: http://education.fce.unsw.edu.au
EDU Location: Room 2039, Level 2 Quadrangle Building
EDU services are free and confidential and are available to students of the Faculty of
Commerce and Economics.
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Other UNSW support
In addition to the EDU services, the UNSW Learning Centre provides academic skills
support services for students. The Learning Centre is located on Level 2 of the Library and
can be contacted by Phone: 9385 3890 or through their website: http://www.lc.unsw.edu.au/.
Students experiencing problems of an academic or personal nature are encouraged to contact
the Counselling Service at UNSW. This service is free and confidential and run by
professional counsellors. The Counselling Service is located on Level 2, Quadrangle East
Wing, and can be contact on 9385 5418.
The Student Support Officer for the Faculty of Commerce and Economics provides
assistance to:
(a) students on probation or referral
(b) AusAID scholarship holders
(c) Other students experiencing difficulties
The Faculty’s Student Support Officer is Julie Vivas, in John Goodsell G17 (phone 9385
3754; fax 9385 2947; email [email protected])
Equity issues. Students with disabilities or other equity issues should contact the
University’s Equity and Diversity Unit located in the Applied Sciences Building on lower
campus (www.equity.unsw.edu.au).
ACCOUNTING STUDENT SOCIETIES.
You are encouraged to join one of the student societies run by the Institute of Chartered
Accountants in Australia (www.icaa.org.au) and by CPA Australia
(www.cpaaustralia.com.au). Their websites contain useful information for students such as
technical material on accounting standards and study resources.
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SUMMARY OF TOPICS
WEEK 1 (28 February - 4 March) Dr Richard Morris
Nature and objectives of external financial reporting
1. Accounting standards and the conceptual framework
2. International Financial Reporting Standards
3. Continuously Contemporary Accounting (CoCoA)
Reading:
Deegan: 4th ed. Ch 1, skim read sections 1.1 – 1.3, then carefully read section 1.4 to
end of chapter; and Ch. 2 pp 104-106.
Whittred et al;. pages 465-467.
WEEK 2 (7-11 March) Dr Andrew Ferguson
Alternative Accounting Theories
1. Positive vs normative theories
2. Evidence of the association between agency costs and external financial reporting
3. The dependence of financial contracting on accounting information
4. Choice of accounting methods by companies
4. Critique of positive accounting theory
Reading:
Deegan: 4th ed. Ch 2, sections 2.1 – 2.5 (pages 76-101, 118)
Whittred et al., Ch 1.
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WEEK 3 (14 – 18 March) Robert Czernkowski
Reporting Firm Performance
1. What is income?
2. Recognition and measurement of income
3. An illustration: long-term construction contracts
4. Earnings per share – basic and diluted
Reading:
Whittred, et al.: Chapter 4 (pages 82-87 only)
Deegan 4th ed: Chapters 15 sections 15.1, 15.2, 15.6. Chapter 25
Handbook: Standards AASB 118, AASB 111, AASB 101, AASB 108, AASB 133.
WEEK 4 (21-24 March) Associate Professor Richard Morris
Reporting Firm Performance (continued)
1. Disclosure and presentation in the new AASB 118
2. The value relevance of earnings
3. Earnings management and how to detect it
Reading:
Whittred, et al.: Chapter 4 (pages 87-93 only)
Deegan 4th ed: Chapter 16
Supplementary Materials: Readings 1 and 2 by Dechow & Schrand; and Revsine,
Collins & Johnson.
Handbook: Standards AASB 101, AASB 108, AASB 118, AASB 120.
Easter Recess: 25 March to 3 April
WEEK 5 (4 – 8 April) Dr Andrew Ferguson
Accounting for the Extractive Industries
1. Asset recognition & measurement and revenue recognition in the extractive industries
2. The alternative methods to account for preproduction costs within the historical cost
framework: immediate expensing, expense and reinstate, full cost, successful efforts,
area of interest
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3. The development of accounting standards in the US and Australia, and the
accompanying political pressures
4. Capital market reaction to the standards
5. Attempts to overcome the deficiencies of historical cost - the alternative of reserve
recognition accounting (RRA) in the USA
6. Voluntary recognition of reserves in Australia
Reading:
Deegan: 4th ed. Chapter 19
Whittred et al., ch 10, pages 242-244; ch 17, pages 412-423
Handbook: AASB 1022, AASB 6. Both Deegan and Whittred refer to AASB 1022.
AASB 6 was released in December 2004 after the Deegan book had gone to press.
Mid-session test cut-off (test covers lectures for weeks 1-5)
WEEK 6 (11-15 April) Dr Andrew Ferguson
Accounting for leases by lessees and lessors
1. Economic importance of leasing and the types of lease contracts (variations in length,
payments, executory costs, ease of cancellation, residual values, bargain purchase
options)
2. Underlying accounting issues. Is a lease an asset/liability of the lessee or of the lessor,
and how should the asset/liability be measured?
3. The “new approach” proposal
4. Finance vs operating leases and the accounting treatments for the lessee and the lessor
5. Sale-leaseback transactions
6. Review of the empirical evidence, including the economic consequences of lease
capitalisation
Reading:
Deegan: 4th ed. ch. 10
Whittred et al., Ch 8 (ignore pp 202-203 on leveraged leases)
Supplementary Materials: Readings 3-6 (by McGregor, Monson, AAA Financial
Accounting Standards Committee, and ASIC)
Handbook: AASB 117
WEEK 7 (18- 22 April) Associate Professor Richard Morris
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A. Goodwill and Identifiable Intangible Assets (IIAs)
1. What are Goodwill and IIAs? Are they the same?
2. Identification, recognition and measurement of IIAs
3. Research and development (R&D)
Is R&D an asset for accounting purposes?
If R&D is an asset, how should it be measured and reported?
4. Impairment test for goodwill
Reading
Deegan 4th ed. Chapter 7, chapter 26, pages 887-889.
Handbook: AASB 3, AASB 138
B. Guidance on group project
WEEK 8 (25 - 29 April) Gary Pflugrath
Accounting for Foreign Currency Transactions
1. Exchange rates: historical rate vs spot rate vs forward rate
2. Exchange gains and losses from foreign transactions (exchange rate risk)
3. Measurement principle in AASB 1012: all unsettled foreign transactions to be revalued
using spot rate at balance date with immediate recognition in SFPe of gains/losses
4. Qualifying assets
5. Accounting for unhedged foreign transactions
6. Accounting for specific hedges in foreign currency transactions
Reading:
Deegan 4th ed. chapter 31 sections 31.1 – 31.6 (pages 1031-1065)
Handbook: AASB 121, AASB 139
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WEEK 9 (2-6 May) Robert Czernkowski
Accounting for Derivatives
1. Derivatives – a form of financial instrument
2. Hedges – an example of a derivative financial instrument
3. Derivatives used for hedging vs derivatives used for speculation
4. Types of hedges –
specific vs general vs natural
fair value vs cash flow vs net investment on foreign operation
5. Accounting for general hedges in foreign currency transactions
6. Accounting for futures contracts
Reading:
Deegan 4th ed Chapter 14, sections 14.1, 14.3, 14.4 (pages 504-524 only), section 14.5
Deegan 4th ed. chapter 31 section 31.6 (pages 1049 - 1065)
Handbook: AASB 139
WEEK 10 (9-13 May) Robert Czernkowski
Accounting for Derivatives (continued)
1. Accounting for futures contracts (continued)
2. Accounting for options
3. Accounting for swaps
4. Evaluation of accounting for derivatives
Reading:
Deegan: 4th ed Ch 14, sections 14.1, 14.3, 14.4 (pages 504-523 only);
Deegan 4th ed. Ch 31, section 31.7 (pages 1065-1070).
Supplementary Materials : Readings 7 and 8 on Joint Working Group’s proposal to
abolish hedge accounting and the Group of 100’s response
Handbook: AASB 139
WEEK 11 (16-20 May) Gary Pflugrath
Expanded Disclosure Regimes in Financial Reporting
1. Continuous reporting
2. Triple bottom line reporting
Reading:
Deegan: 4th ed. chapter 33
Supplementary Materials: Reading 9 ASX Continuous Disclosure: Listing Rule 3.1
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Week 12 (23-27 May) Gary Pflugrath
Accounting Issues Arising From Recent Corporate Failures
Corporate collapse and creative accounting
1. The nature and causes of corporate collapses
2. Implications and costs of collapses
3. Contributing accounting factors
4. The Enron, HIH, OneTel, Harris Scarfe collapses and accounting failures
5. Regulatory responses
Reading:
Supplementary materials:
Reading 10 Clarke and Dean “Corporate Collapses Analysed”
Reading 11 Dellaportas et al. “Creative Accounting”
Reading 12 Healy and Palepu “The Fall of Enron
WEEK 13 (30 May - 3 June) Associate Professor Richard Morris
Business ethics and financial reporting
1. What are ethics? What are business ethics? Why study ethics in accounting?
2. Teleological ethical theories
3. Deontological ethical theories
4. Ethical principles and natural reason – Aristotle’s Nichomachean Ethics
5. Unethical trends in modern business
6. Ethical issues and dilemmas in financial reporting
Reading:
Supplementary materials, readings 13 – 16 by Henderson & Peirson; Vardy & Grosch;
Aristotle’s Nicomachean Ethics.
WEEK 14 (6-10 June) Associate Professor Richard Morris
A. Business Ethics and financial reporting (continued)
Reading: as for week 13
B. Course Wrap-Up
