AMIS 4200 Advanced Accounting John Fellingham

Preliminary Syllabus

AMIS 4200 Advanced Accounting John Fellingham

Autumn 2017 Fisher 406

Office hours: Tu 1:30 – 2:15 (starting in SB 305)

General Description

The course deals with theory and practice in the academic discipline of accounting. In particular, accounting will be treated as an information science. That is, not only is accounting a conveyor of information, the accounting activity, itself, resides in an environment in which information is a first order phenomena. Accounting affects, and is affected by, the information environment.

The first topic treats the accounting double entry system as an information channel. The central question is: How much information gets through the channel? Some important mathematical results are accessed for a sensible answer to the question: the fundamental theorem of linear algebra, orthogonality, optimization, and projection results. The second topic, arbitrage free pricing of derivative securities, utilizes the results from the first topic. Some additional results are derived including the fundamental theorem of finance.

The third topic is accounting valuation for derivative securities. The information perspective is retained. Long lived assets, leases, and other dynamic accounting issues are studied within the information frame.

The final accounting topic is business combinations, and, in particular, the effect of the information environment on efficient combinations, and the interaction of accounting and information. Some further information results are useful for the study of business combinations, as well as the optimal use of information in investment settings. Some similarities between investment and production settings are analyzed.

Text and Reading Materials

All of the exercises and the suggested readings are from the manuscript entitled Accounting: An Information Science available on the course website.

u.osu.edu/fellingham.1/homepage

There are some other (optional) sources which will be referred to from time to time, as they cover derivatives, hedge funds, business combinations, and the use of information in particular business settings.

The Smartest Guys in the Room by Bethany McLean and Peter Elkind

When Genius Failed by Roger Lowenstein

Conspiracy of Fools by Kurt Eichenwald

Fortune’s Formula by William Poundstone

The Quants by Scott Patterson

The Big Short by Michael Lewis

Course Requirements and Grading

Grades will be assigned based on cumulative performance in the course, using the following weights for the components:

Making a positive contribution

to the learning environment 20%

Midterm (Oct. 19*) 35%

Comprehensive final exam 45%

No makeup midterm exams are offered. Students must provide a valid reason in advance or will receive zero credit for the exam.

Examinations

The exams are cumulative, closed book, and closed note. Calculators are allowed, personal computers and other electronic devices are not. Make-ups for the final exam will be given only for reasons acceptable according to University guidelines. The final will be given at the time determined by the University.

Preliminary schedule for AMIS 4200 autumn 2016:

Topics / Readings / Problems
Accounting as an information science / Ch. 1 / Exercises1.1, 1.2, 1.3
Alternative representations of accounting / Ch. 2.1 – 2.3 / Example 2.1
Linear algebra representation / Ch. 2.4 / Example 2.1 (cont.)
Accounting as a communication channel / Ch. 3.1 – 3.2 / Examples 3.1, 3.2
Computing yrow – quadratic program* / Ch. 3.3 / Example 3.3
Computing yrow – orthogonality conditions and nullspace / Ch. 3.4 – 3.5 / Example 3.2 (cont.), examples 3.4, 3.5
Fundamental theorem of linear algebra; multiple loops / Ch. 3.8 – 3.9 / Example 3.8
Chapter 3 exercises / Exercises 3.1, 3.3, 3.5, 3.10, 3.11, 3.12
Theorem of the separating hyperplane / Ch. 4.1 / “simple” example
Accounting illustration of the theorem / Ch. 4.2 – 4.3 / Example 4.1
Arbitrage free pricing / Ch. 4.4 / Example 4.2
Multiple equilibria / Ch. 4.5 / “expanded” example
Ch. 4 exercises / Exercises 4.1, 4.3, 4.4, 4.12, 4.13
Continuous compounding and rates of return / Ch. 6.1.1 / Exercises 6.18, 6.19
Long-lived assets, amortization, and economic income / Ch. 6.1.3, 6.2 / Example 6.1
Steady state accounting / Ch. 6.3 / Example 6.1 (cont.), exercises 6.2, 6.10
Accounting for leases / Exercise 6.6
Mutual information / Ch. 8.1.1 / Example 8.1
Kelly criterion / Ch. 8.1.2 / Example 8.2
The mutual information theorem / Ch. 8.1.3 / Example 8.3, 8.4
Law of large numbers / Ch. 8.2.1 / “running example”
Maximum entropy probability assignment / Ch. 8.2.2 / Example 8.5
Financial statements and information / Ch. 8.3 / Examples 8.6, 8.7
Social welfare and accounting / Ch. 8.4 / Example 8.8
Chapter 8 exercises / Exercises 8.2, 8.3, 8.12, 8.13, 8.18, 8.25, 8.29, 8.30
Synergy, information, and goodwill / Ch. 12.1 / Example 12.1
Chapter 12 exercises / Exercises 12.19, 12.20, 12.21

Items with asterisk (*) might be omitted or de-emphasized depending on time issues.

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