Institut für Betriebswirtschaftslehre

Welcome to

Advanced Financial Accounting

Prof. Dr. Hui Chen

Introduction Advanced Financial Acounting, H. Chen 1

Institut für BetriebswirtschaftslehreImportance of financial accounting

Big Picture:

Why is financial accounting important?• Efficient economic resource allocation

Why is there a demand for financial accounting?• To provide financial information that is useful to

capital providers • To assist potential investors and creditors in valuing

the firm• To monitor the actions of management

Introduction Advanced Financial Acounting, H. Chen 2

Institut für BetriebswirtschaftslehreObjectives of financial accounting

To provide information that is:

• Useful in investment and credit decisions • Useful in assessing future cash flows • Useful in assessing enterprise resources, claims to

resources and associated changes

“Accounting is the language of business.”

Introduction Advanced Financial Acounting, H. Chen 3

Institut für BetriebswirtschaftslehreAn example – Nestle

Nestle 2019 financial statements were just released:

…

Who prepared the results?

Who audited the results?

Who read the results (and attended the conference call

and asked many questions)?

How did Nestle do in 2019?

What happened to their stock price?

etc…

Introduction Advanced Financial Acounting, H. Chen 4

Institut für BetriebswirtschaftslehreWhat will you learn in AFA class?

Advanced topics in financial accounting:

• accounting for corporate investment and business combination

• equity and cost methods of accounting for investments

• how to prepare consolidated financial statements• accounting for foreign currency transactions and

translations• international accounting diversity and regimes

• etc.

Introduction Advanced Financial Acounting, H. Chen 5

Institut für BetriebswirtschaftslehreWho needs to know these?

If you work in:

• finance & accounting in larger corporations• investment • auditing

• financial regulation• etc.

Introduction Advanced Financial Acounting, H. Chen 6

Institut für BetriebswirtschaftslehreWhen you finish…

You should be able to:

• understand accounting for investments and business combination

• prepare consolidated accounting statements• feel comfortable in reading and using the information

presented in companies’ financial reports • analyze and evaluate firms’ accounting activities +

choices and their implications• understand the similarities/differences among different

accounting regimes• comment on the current events related to these topics

Introduction Advanced Financial Acounting, H. Chen 7

Institut für BetriebswirtschaftslehreRegulatory framework in Switzerland

Introduction Advanced Financial Acounting, H. Chen 8

• Schweizerische Obligationenrecht, or Swiss Code of Obligations (SCO), is the fundamental commercial law of Switzerland

• SCO mandates that companies meeting certain criteria (ownership structure, size, etc.) must provide audited consolidated financial statements

• The consolidated financial statements can be prepared following IFRS, US GAAP, or Swiss GAAP FER

• Publically-traded firms in SIX Swiss Exchange- must follow IFRS, US GAAP if traded in main standard- may also follow Swiss GAAP FER if traded in

domestic standard

Institut für BetriebswirtschaftslehreWhat accounting rules does Switzerland use?

As of Jan. 2015:

Introduction Advanced Financial Acounting, H. Chen 9

Institut für BetriebswirtschaftslehreWhat if the rules change?

Introduction Advanced Financial Acounting, H. Chen 10

• Accounting is a living/changing/growing institution

• IFRS is especially changing constantly• Some of the methods we learn in this class will

change (eg. foreign currency hedging)• However, the fundamental concepts will remain• Keep yourselves informed with future changes

• By nature of the topic, AFA class mainly focuses on IFRS and US GAAP

Institut für BetriebswirtschaftslehreTextbook

Advanced Accounting, 13th Edition. Hoyle, Schaefer, Doupnik. McGraw-Hill Publishing, 2017.

Introduction Advanced Financial Acounting, H. Chen 11

• The textbook is written mainly for U.S. GAAP users, and discusses IFRS implication in every chapter

• In advanced accounting topics, IFRS and U.S. GAAP are 99% the same (rules are jointly issued)

• Additionally, we will discuss differences in Swiss GAAP FER wherever necessary

Institut für BetriebswirtschaftslehreTextbook – eBook Option

Connet website:

https://connect.mheducation.com/class/h-chen-spring-2020-3

• Go to the website • Fill in your email and other information

• You will have the option to purchase an e-access to the book for a year.

Introduction Advanced Financial Acounting, H. Chen 12

Institut für BetriebswirtschaftslehreSupplementary materials

Introduction Advanced Financial Acounting, H. Chen 13

• Intermediate Accounting (Keiso, Weygandt, and Warfield)

• Intermediate Accounting, IFRS Edition (Keiso, Weygandt, and Warfield)

• Annual reports and 10K filings• Press & research publications

Institut für BetriebswirtschaftslehreHow will we learn?

Introduction Advanced Financial Acounting, H. Chen 14

• Lectures

• Guest speakers• Exercises• Homework

• Cases• Real life examples• Etc.

Institut für BetriebswirtschaftslehreExam and Grading

Introduction Advanced Financial Acounting, H. Chen 15

FINAL EXAM:

• Comprehensive written exam

• 90 minutes

• Date : Monday, June 15

• Time: 10:00-12:00 (including prep. time),

• Location: KOL-F-118, KOL-H-312

Institut für Betriebswirtschaftslehre

Questions?

Introduction Advanced Financial Acounting, H. Chen 16