Accounting Notes Financial Accounting, Analysis and Valuation Notes
AC330: Financial Accounting, Analysis and Valuation
These notes cover the AC330 Financial Accounting, Analysis and Valuation course at LSE. "The course addresses the theory and practice of financial reporting. Accounting practices are examined in the light of historical development, regulatory requirements, theories of income and capital and other approaches to accounting theory and to the use of accounting information in business analysis and valuation.
Financial accounting with particular ref...
The following is a more accessible plain text extract of the PDF sample above, taken from our Financial Accounting, Analysis and Valuation Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Articulation of financial statements
What affects equity?
Other comprehensive income
Other changes in equity
Transactions with owners
Statement of changes in equity
Clean surplus accounting
Dirty surplus accounting
Advantages of 2 income statements
Revision of historical cost accounting
Basic accounting equation
Shareholders’ funds equation
Accruals and matching
Prudence
IAS1 terminology
Alpha headings
Taxation calculation
Sales calculation
Purchases calculation
Expenses calculation
Recognised dividends
Share premium account
Statement of comprehensive income format
Statement of changes in equity format
Revaluation of non-current assets
IAS16
Cost model
Revaluation model
Disposal of revalued assets
IAS8 (Accounting policies)
IAS2 (Inventory)
IAS37 (Provisions)
IAS39 (Financial instruments)
Business combinations
Group accounts
Purchase (‘Acquisition’) accounting
IAS27
IFRS3
Determining control
Dominant influence
Significant influence
Associate (IAS28, IFRS3)
Equity method
Joint venture (IAS31)
JV as an entity
Proportional consolidation (IAS31)
Equity method
Disclosure
JV as a non-entity
Portfolio investment
Effect of group accounting choice on H’s shareholders
Issues with purchase accounting
Date of acquisition
Consolidated balance sheet
Goodwill calculation
Pre vs. post-acquisition profits
Non-controlling interest
Inter-company balances
Unrealised inter-company profits
Provision for unrealised profit
Revaluations to FV on acquisition
Balance sheet checks
Consolidated income statement
Time-apportioning
Partly owned subsidiary
Inter-company transactions
Inter-company dividends
Dividends from pre-acquisition profits
Merger accounting
Pooling of interests
IFRS6
Merger reserve
Merger relief
Why do managers favour merger accounting?
‘Fresh-start’ accounting
IASB and FASB convergence project
Entity theory of the firm
Revised IFRS3
Option to value NCI at FV
Limitations
Revised IFRS3/IAS27
Partial disposals of subsidiaries
Revised IFRS3
Invisible goodwill
Unresolved issues
In-process research and development (IPRD)
US FASB SFAS141(R)
Recognise IPRD
Expense subsequent R&D
IASB IFRS3 & IAS38
Recognise IPRD
Capitalise subsequent development
No progress on ‘fresh start’ accounting
Defining control
Special purpose entities
US FASB FIN46
Consolidation of SPEs
ASB FRS5
‘Risks and rewards’ approach
IAS27 (and SIC-12)
Emphasis on power to govern activities
IASB’s response to financial crisis
Redefines control
IFRS10 (Consolidated Financial Statements)
IFRS11 (Joint Arrangements)
IFRS12 (Disclosure of interests in other entities)
Empirical research in financial accounting
Balls & Brown, 1968; Beaver, 1968
Capital markets based research
Relationships between share prices and earnings
Positive accounting theory
Assumptions
Agency theory
Jensen and Meckling, 1976
Information asymmetry
Moral hazard
Agency costs
Monitoring costs
Bonding costs
Demand for contracts
Role of accounting information
Propositions
Bonus plan hypothesis
Management compensation contracts
Share options
Asymmetric contracts
‘Big bath’
Debt covenants hypothesis
Debt contracts
Typical financial convenants
Incentives
Political cost hypothesis
Political visibility and accounting policy choice
Incentives for managers
Accounting policy choices
Inventory valuation
Finance vs. operating leases
Merger vs. purchase accounting
Capitalization of intangible assets
Provision for doubtful debt
Impairments
Deferring revenues
Criticisms of PAT
Information content studies
Earnings as predictors of prices
Market...
Buy the full version of these notes or essay plans and more in our Financial Accounting, Analysis and Valuation Notes.
AC330: Financial Accounting, Analysis and Valuation
These notes cover the AC330 Financial Accounting, Analysis and Valuation course at LSE. "The course addresses the theory and practice of financial reporting. Accounting practices are examined in the light of historical development, regulatory requirements, theories of income and capital and other approaches to accounting theory and to the use of accounting information in business analysis and valuation.
Financial accounting with particular ref...
Ask questions 🙋 Get answers 📔 It's simple 👁️👄👁️
Our AI is educated by the highest scoring students across all subjects and schools. Join hundreds of your peers today.
Get Started