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Accounting Notes Financial Accounting, Analysis and Valuation Notes

Ac330 Stream I Syllabus Notes

Updated Ac330 Stream I Syllabus Notes

Financial Accounting, Analysis and Valuation Notes

Financial Accounting, Analysis and Valuation

Approximately 85 pages

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:

  1. Articulation of financial statements

    1. What affects equity?

      1. Other comprehensive income

      2. Other changes in equity

      3. Transactions with owners

    2. Statement of changes in equity

    3. Clean surplus accounting

    4. Dirty surplus accounting

    5. Advantages of 2 income statements

  2. Revision of historical cost accounting

    1. Basic accounting equation

      1. Shareholders’ funds equation

    2. Accruals and matching

    3. Prudence

    4. IAS1 terminology

      1. Alpha headings

    5. Taxation calculation

    6. Sales calculation

    7. Purchases calculation

    8. Expenses calculation

    9. Recognised dividends

    10. Share premium account

    11. Statement of comprehensive income format

    12. Statement of changes in equity format

    13. Revaluation of non-current assets

      1. IAS16

      2. Cost model

      3. Revaluation model

      4. Disposal of revalued assets

    14. IAS8 (Accounting policies)

    15. IAS2 (Inventory)

    16. IAS37 (Provisions)

    17. IAS39 (Financial instruments)

  3. Business combinations

    1. Group accounts

      1. Purchase (‘Acquisition’) accounting

        1. IAS27

        2. IFRS3

        3. Determining control

          1. Dominant influence

          2. Significant influence

            1. Associate (IAS28, IFRS3)

            2. Equity method

          3. Joint venture (IAS31)

            1. JV as an entity

              1. Proportional consolidation (IAS31)

              2. Equity method

              3. Disclosure

            2. JV as a non-entity

          4. Portfolio investment

          5. Effect of group accounting choice on H’s shareholders

        4. Issues with purchase accounting

        5. Date of acquisition

        6. Consolidated balance sheet

          1. Goodwill calculation

          2. Pre vs. post-acquisition profits

          3. Non-controlling interest

          4. Inter-company balances

          5. Unrealised inter-company profits

            1. Provision for unrealised profit

          6. Revaluations to FV on acquisition

          7. Balance sheet checks

        7. Consolidated income statement

          1. Time-apportioning

          2. Partly owned subsidiary

          3. Inter-company transactions

        8. Inter-company dividends

          1. Dividends from pre-acquisition profits

      2. Merger accounting

        1. Pooling of interests

          1. IFRS6

        2. Merger reserve

        3. Merger relief

        4. Why do managers favour merger accounting?

      3. ‘Fresh-start’ accounting

    2. IASB and FASB convergence project

      1. Entity theory of the firm

      2. Revised IFRS3

        1. Option to value NCI at FV

          1. Limitations

      3. Revised IFRS3/IAS27

        1. Partial disposals of subsidiaries

      4. Revised IFRS3

        1. Invisible goodwill

      5. Unresolved issues

        1. In-process research and development (IPRD)

          1. US FASB SFAS141(R)

            1. Recognise IPRD

            2. Expense subsequent R&D

          2. IASB IFRS3 & IAS38

            1. Recognise IPRD

            2. Capitalise subsequent development

        2. No progress on ‘fresh start’ accounting

        3. Defining control

          1. Special purpose entities

            1. US FASB FIN46

              1. Consolidation of SPEs

            2. ASB FRS5

              1. ‘Risks and rewards’ approach

          2. IAS27 (and SIC-12)

            1. Emphasis on power to govern activities

    3. IASB’s response to financial crisis

      1. Redefines control

        1. IFRS10 (Consolidated Financial Statements)

        2. IFRS11 (Joint Arrangements)

        3. IFRS12 (Disclosure of interests in other entities)

  4. Empirical research in financial accounting

    1. Balls & Brown, 1968; Beaver, 1968

    2. Capital markets based research

      1. Relationships between share prices and earnings

    3. Positive accounting theory

      1. Assumptions

      2. Agency theory

        1. Jensen and Meckling, 1976

        2. Information asymmetry

        3. Moral hazard

        4. Agency costs

          1. Monitoring costs

          2. Bonding costs

          3. Demand for contracts

            1. Role of accounting information

      3. Propositions

        1. Bonus plan hypothesis

          1. Management compensation contracts

            1. Share options

            2. Asymmetric contracts

            3. ‘Big bath’

          2. Debt covenants hypothesis

            1. Debt contracts

            2. Typical financial convenants

              1. Incentives

        2. Political cost hypothesis

          1. Political visibility and accounting policy choice

            1. Incentives for managers

      4. Accounting policy choices

        1. Inventory valuation

        2. Finance vs. operating leases

        3. Merger vs. purchase accounting

        4. Capitalization of intangible assets

        5. Provision for doubtful debt

        6. Impairments

        7. Deferring revenues

      5. Criticisms of PAT

    4. Information content studies

      1. Earnings as predictors of prices

        1. Market...

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