ArgosyUniversity
COURSE SYLLABUS
B7670
Financial Reporting Theory
Faculty Information
Faculty Name: Dr Roberto Castaneda, CPA
Campus:Argosy Chicago
Contact Information:312-498-2028
Office Hours:
Short Faculty Bio:
Roberto Castaneda,DBA, Argosy University (concentration in accounting),MM/MBANorthwestern University’s Kellogg Graduate School of Management (concentrating in finance and marketing) and BSC from DePaul University (concentrating in accounting and marketing). Dr. Castaneda is also a certified public accountant. Dr. Castaneda has over 28 years experience in finance and accounting with companies such as American Express, McDonald’s, PepsiCo, Arthur Andersen, Price Waterhouse and Trammell Crow Consulting. Dr. Castaneda currently consults with a number of Fortune 500 companies and non-profit organizations on organizational financial literacy issues. Some of his awards and honors include “2002 Illinois Literacy Foundation” for promoting literacy in Illinois, “American Express Chairman’s Award” ForQuality, and the “PepsiCo International GAAP Award” on internal controls. He is also a member of the Illinois CPA Society, AICPA Society, and Financial Executives International. Dr. Castaneda also serves as a board of director for non-profit organizations including President of the Illinois Literacy Foundation, Center for Economic Progress, and Grants Panelist for the Chicago Cultural Center.
Course description:
This course will study the utility of financial statement interpretation in the strategic process of management. An intensive study and critical examination of accounting and financial reporting theories, concepts and standards; evaluations of the pronouncements of accounting standard-setters and financial reporting regulators will be an integral part of this course.
Course Pre-requisites: None
Required Textbook:
Through the Argosy University eBrary collection:
Riahi-Belkaoui, Ahmed. (1998). Critical financial accounting problems: Issues and solutions. Greenwood Publishing Group.
ISBN: 9781567201161
Smith, Malcolm. (2003). Research methods in accounting. Sage Publications. ISBN: 9780761971467
Recommended Readings:
Needles, B.E. & Powers, M. (2007). Financial accounting. (9/e). Houghton Mifflin Company.
ISBN: 978-0-618-62676-2
Course length: 7.5 Weeks
Contact Hours: 45 Hours
Credit Value: 3.0
Program Outcomes:
- Research
- Performing – Design, conduct, and justify applied research in a business context using appropriate methodology
- Understanding – Evaluate and apply existing theory and research to current business practice
- Communication
- Oral – Present orally, complex business information that is concise, clear, organized, and well supported in a professional manner appropriate to the business context
- Written – Present in writing, complex business information that is concise, clear, organized, and well supported in a professional manner appropriate to the business context using required format
- Critical Thinking/Problem Solving
- Critical thinking – Evaluate relevance of established theory to current business practice and identify gaps in current literature
- Problem Solving/Decision Making – Given a business situation, diagnose the underlying causes of the situation, evaluate possible solutions, in relation to underlying business theory and determine and defend appropriate course of action
- Information Literacy - Conduct an exhaustive literature search from a variety of sources, evaluate the credibility of the sources, and apply that information to create new knowledge
- Team
- Leadership - Conduct an exhaustive literature search from a variety of sources, evaluate the credibility of the sources, and apply that information to create new knowledge
- Collaboration - Given a case study or business situation collect, assimilate, and disseminate the views of stakeholders
- Ethics
- Ethics - Given a case study or business situations, evaluate the ethical dimensions of decision situations and personal, social, and corporate responsibility not absolved by market forces
- Diversity
- Diversity - Given a case study or business situation evaluate the multicultural dimensions of decision situations and multicultural solutions to business situations
Accounting Concentration
- Analysis
- Financial Analysis - Evaluate results of accounting analyses including audit, financial, and risk analyses to determine appropriate business strategies
- Systems - Evaluate effectiveness of comprehensive accounting systems in meeting the goals of an organization
Course Objectives:
- Identify and apply current regulations that have been promulgated to ensure consistency and uniformity in financial reporting. (Program Outcomes: 1.1, 1.2, 3.1, 3.2, 5.1)
- Applyconcepts and the conceptual framework for revenue and expense recognition for financial reporting and evaluating managerial recognition and materiality arguments. (Program Outcomes: 1.1, 1.2, 2.2, 3.1, 3.2, 3.3, 7.1, 7.2)
- Critically analyze annual reporting requirements and of financial statements relationships, transaction reporting, various audit report types, and the influence of Sarbanes-Oxley Act of 2002 on internal controls and financial reporting. (Program Outcomes: 1.2, 2.2, 3.1, 3.2, 4.1, 5.1, 7.1, 7.2)
- Applyconcepts and principles for liability recognition and reporting including, unearned revenue, incomes taxes payable, warranties and payroll related liabilities. (Program Outcomes: 1.2, 3.1, 3.2, 3.3, 4.2, 6.1, 7.1, 7.2)
- Examine the characteristics of revenue and capital expenditures for long-lived assets including lease accounting evaluation and cash flow implications. (Program Outcomes: 1.2, 2.1, 2.2, 3.2, 3.3, 7.1, 7.2)
- Examine the characteristics of financial reporting for the issuance of common, preferred and treasury stock transactions by identifying components of stockholders equity and contributed capital transactions. (Program Outcomes: 1.2, 2.1, 2.2, 3.1, 3.2, 3.3, 7.1, 7.2)
- Analyzethe disclosure and financial reporting requirements of extraordinary items, discontinued operations and non-recurring items as opposed to income from operations transactions. (Program Outcomes: 1.2, 2.1, 2.2, 3.1, 3.2, 3.3, 7.1, 7.2)
- Compute and evaluate various profitability, liquidity and solvency ratio computations used in measuring financial performance. (Program Outcomes: 1.1, 1.2, 2.2, 3.2, 3.3, 4.1, 4.2, 7.1, 7.2)
- Critically analyze consolidated financial statement combination methods including foreign subsidiary, minority interest and goodwill transactions and reporting. (Program Outcomes: 1.1, 1.2, 2.2, 3.1, 3.2, 3.3, 3.4, 5.1, 7.1, 7.2)
- Synthesize current literature on a topic relevant to this course and discuss any controversies or differences of opinion that exist in the literature. (Program Outcomes: 1.1, 1.2, 2.2, 3.1, 3.2, 3.3, 3.4, 5.1, 7.1, 7.2)
Assignment Table
Module / Topics / Readings / Assignments1 /
- Overview of financial reporting and the evolution of GAAP
- Managerial and Financial accounting differences
- Financial Statements and their relationships
- Transaction recording, accounting cycle and the worksheet tool
- Key elements in the annual report
/ The financial accounting standards continue to evolve with new promulgated accounting literature similar to how business evolves to keep pace with competition. The Financial Accounting Standards Board (FASB) identifies these changes in accounting standards on its Web site. The site is open to the public for comment, disclosures of changes underway, and guidance to practitioners, educators, and students in the field of accounting.
For this assignment, you will look closely at issues discussed by practitioners at the FASB site, select one for in-depth study, and then participate with classmates in the selection of two specific issues that you will discuss in later modules.
To begin, select a public company and review the most recent 10K Item, Management’s Discussion and Analysis—Recent Accounting Pronouncements section. Select one of the recent accounting pronouncements addressed by the company and research it using the FASB Web site. Research how the pronouncement came about, comments letters written by other companies, and the exposure draft document.
Write a 3–4 page paper on the pronouncement that addresses the following:
- How did the accounting pronouncement come about? What need did regulators address through this pronouncement?
- Did the final pronouncement change from its original draft? Discuss the changes.
- What were some of the comments letters written by other companies on this pronouncement? Were their concerns addressed and how?
- Based on your synthesis of comment letter information and authoritative sources, what are your recommendations for proper financial reporting and disclosure?
2 /
- Objectives of financial reports and Sarbanes-Oxley Act of 2002 (SOX) management certification of the financial statements implications
- Consistency, conservatism and full disclosure
- Merchandising businesses and internal controls
- Perpetual inventory valuations and system dynamics
Walker, D. (2002) Integrity: Restoring Trust in American Business and the Accounting Profession.
The Sarbanes-Oxley Act: A Guide to the Sarbanes-Oxley Act. / Read the scenario and associated questions below. Research the pertinent issues and explain accounting options for the scenario.
You have recorded a revolving line of credit on your company’s financial statements due within the next 10 months as a long-term liability. The board of directors of the company has asked you to explain why you have done so. The company has been in default with its loan covenants, but prior to the issuance of the financial statements, the bank granted a loan waiver.
With reference to the above scenario, answer the following questions in 1–2 paragraphs each:
- What promulgated accounting literature would you use to support your rationale?
- What criteria should be met prior to reflecting this loan as a long-term liability?
- Why would recording the loan as a long-term liability from a business point of view make sense, apart from compliance with promulgated standards?
- Write a response to the board of directors explaining your position. Be sure to discuss how this decision can impact the company's financial position and what other long-term implications this can have on the company.
3 /
- Managing inventories and the implications of decision making for inventory valuations
- SOX’s internal control requirements for inventories
- Credit policies and managing accounts receivables,
- Ethics in Accounts Receivable valuation, presentation and disclosures
- Notes Receivable characteristics and reporting
Time to Act on Corporate Governance. Ernst & Young.
Winters, B. (2004). Choose the Right Tools for Internal Control Reporting. The Journal of Accountancy Online.
/ Read the scenarios and associated questions below. Research the pertinent issues and explain accounting options for the scenarios.
GM decided to rollout a program that expanded the warranty period from three years to ten years or 100,000 miles on the purchase of its new cars to consumers.
US Cellular phone decided to provide customers with roll-over minutes. This is a program whereby, if the allotted monthly minutes are not used, the customer can use them the following month, up to one year.
A credit card company decides to offer a new proprietary stored value card to its customers that can be sold in stores. This is where customers add value to the company’s card and use it as the need arises to purchase good and services.
Apple computer decides to reduce the price of its new iPhone and refund those customers who purchased the phone over the previous 60 days.
Three years after the acquisition, JP Morgan Chase Bank decides to change the name of First Chicago to JP Morgan Chase. The company had initially recorded goodwill for the purchase of First Chicago, which included allocating a portion of the goodwill value to the name of the acquired company “First Chicago.”
With reference to each scenario, develop a 1–2 paragraph response foreach of the following five questions:
- Which promulgated accounting standards did the company need to consider prior to implementing the initiative? Explain your answer.
- When should the accounting department get involved with these initiative (before or after the decision has been made and why so)?
- How much of a role should the accounting department play in determining the impact of these initiatives on the organization and why?
- What steps do you think the accounting department needs to take as this new initiative is being rolled out? Explain your answer.
- What type of financial statements and footnote disclosures on this initiative should be considered and why?
4 /
- Evaluating and reporting liabilities
- Accounting for contingencies and estimated liabilities
- Decision making for long-lived assets
- Fixed Asset valuation, acquisitions, dispositions, and disclosures
EFFORT STARTED TO REVAMP LEASE ACCOUNTING.Practical Accountant, Sep2006, Vol. 39 Issue 9, p18-18, 1/5p; (AN 22232163) / Research the FASB and AICPA Web sites. On the FASB Web site, identify the promulgated accounting literature that is currently under review, in draft form, or on the EITF agenda. Identify the promulgated accounting literature that relates to goodwill and revenue recognition. After reviewing the literature, develop a 1–2 paragraph response for each of the following questions:
- Are there any EITF or SOP pronouncements issued or underway and what are they? What do they address?
- What are the major pronouncements that provide authoritative guidance?
- Identify a current company that has addressed these issues in its financial reporting and discuss its approach. (To select a company, visit and type the company's stock symbol and review its SEC 10K filings.)
- How has accounting literature on this topic evolved from ARBs to FASBs?
5 /
- Long-term liabilities and managerial decision making
- Bond characteristics, issuances and valuation
- Contributed capital structure, policies and performance measurements
- Stock types, issuances, retirements and repurchases
Revenue-Recognition Decisions: A Slippery Slope?By: Clark, Ronald L. CPA Journal, Oct2006, Vol. 76 Issue 10, p6-9, 3p; (AN 22843023) / Goodwill reporting is another prominent issue discussed by accounting practitioners and one that provides an excellent basis for research in this course.
Read the case study below. Write a 4–5 page white paper that focuses on proper accounting treatment of goodwill. Your white paper should explain the proper accounting treatment to nonfinancial managers. (Please see the downloadable document located in Doc Sharing for information on developing a white paper.)
A major Fortune 500 company (nonregulated) acquired a smaller company for $1B three years ago. When the parent company purchased this organization, it paid a 50% premium (of the then stock price) and recorded about 35% of the purchase price as goodwill. The amount of goodwill remains a significant asset on the parent company’s books and records.
The subsidiary company is about to announce in a press release that, because of competitive pressures in the market place, it needs to reduce its current year forecasted sales and net income by 30% and 40%, respectively. The company’s executives believe this decrease will continue in future years. The CEO of the company asked you to prepare a white paper explaining to the board of directors and executive management what type of complications this would have on the company’s books and records.
- What promulgated accounting literature should the company follow? Explain your rationale.
- Are there any other onetime charges associated with the economic event of the decline in sales and profits? Why or why not?
- Other than the decline in sales and net income, is there any impact to cash flow and why or why not?
- Research and determine how other companies have treated this type of economic event on their books and records. What type of accounting disclosures were made, if any?
- Should this impact be shown on the parent company's or subsidiary's books and records and why or why not? Why would any announcement need to be made to the public?
- What would you recommend to the Board of Directors and CEO as additional steps that must be taken in accounting as part of this sales and net income decline announcement? Explain your rationale.
- Wayman, R. (n.d.). Impairment charges: The good, the bad, and the ugly. Investopedia. Retrieved September 1, 2008, from
- Summary of Statement No. 142: Goodwill and Other Intangible Assets. Financial Accounting Standards Board Web site. Retrieved September 1, 2008, from
- Duffy, R. E., & Cordier, D. S. (n.d.). Goodwill impairment: The new FASB. 20th Annual Advanced Business Valuation Conference. Retrieved September 1, 2008, from
6 /
- Accounting for discontinued operations, extraordinary events and non-recurring items
- Earnings per share, dividends and stock splits
- Statement of Cash Flows, presentation, classifications and ethics
"Tracking" Common Stocks and the Potential for Misuse of the Two-Class Method of Calculating Earnings Per Share.By: Maddox III, Robert L.. Management Accounting Quarterly, Autumn2002, Vol. 4 Issue 1, p16-20, 5p; (AN 11683374)
8 ways to boost your cash flow.By: Waisberg, Deena. Profit, Jun2006 Profit 100, p17-17, 2/3p; (AN 21381351) / Read the scenario and associated questions below. Research the pertinent issues and write a 4–5 page white paper to explain accounting options for the scenario. As you develop your paper, you may discuss your findings with your peers.
XM Radio was depreciating its satellites over 20 years (total cost of $20 million for each of five satellites). It was recently discovered that the satellites’ useful life is only seven years due to the intensity of the sun’s rays.
With reference to the scenario, answer the following questions:
- What is the accounting implication in this situation and why?
- What promulgated accounting standard should be followed? Provide your rationale.
- How and when should this discovery be recorded in the financial statements of the company? Explain your response.
- If the company issues quarterly financial statements and the discovery is made in the third quarter, should this impact be shown prospectively or retroactively and in what specific time period? Explain your response.
- As the accountant, what would you recommend to management and why? Prepare a white paper addressing the accounting implications. Explain your rationale.
7 /
- Performance measurement from an internal and external perspective
- Financial analysis, ratio computations and interpretation for profitability, solvency and organizational liquidity
- Consolidated financial statements, foreign subsidiary reporting and accounting for investments and goodwill
Accounting Consistency- Key to Stockholder Information.By: McCosh, Andrew M.. Accounting Review, Oct67, Vol. 42 Issue 4, p693, 8p, 4 charts; (AN 4511770)
Kane, G. (1997). Accounting for Transfers of Financial Assets Under SFAS No. 125 Risks and rewards are out, and control and financial components are in. The CPA Journal.
/ Research the FASB and AICPA Web sites. On the FASB Web site, identify the promulgated accounting literature that is currently under review, in draft form, or on the EITF agenda. Identify the promulgated accounting literature that relates to goodwill and revenue recognition. After reviewing the literature, provide a 1–2 paragraph response for each of the following questions:- Are there any EITF pronouncements issued or underway and what are they? What issues do they address?
- What are the major pronouncements that provide authoritative guidance?
- Identify a current company that has addressed these issues in its financial reporting and discuss its approach. (To select a company, visit and type the company's stock symbol and review its SEC 10K filings.)
- How has accounting literature on this topic evolved from ARBs to FASBs?
8 /
- Annual Report analytical review and investment considerations
Final Paper
Pick a topic or topics relevant to the course and conduct a literature review. Evaluate current issues, discuss any controversies or differences of opinion that exist in the literature and propose recommendations for the future. Cite your sources using APA format. Paper length TBD by instructor. / Research Paper
See below for specific discussions on the final paper due on the last day of class. Be sure to begin this assignment as soon as you can as it will require in-depth research and analysis.
One report in APA style (10 pages) will be due at the end of class along with presenting your findings to the class. At the end of the readings, and select one of the accounting issues.
- Visit the FASB website and identify what are some of the issues and the current resolution.
- Identify a company that is currently faced with this accounting issue.
- Examine the company’s recent 10K and 10Q SEC filings to see how the organization has addressed this issue to the users of the financial statements.
- In your own opinion, are the disclosures adequate? What other information may need to be disclosed? With the final resolution of the FASB issue, how will this impact the company’s income statement and balance sheet?
Grading Criteria