Last updated: July 28, 2014, subject to change.

Financial Accounting – B30000 – 04, 05, 06

Autumn 2014

Financial Accounting

Professor: Anastasia Zakolyukina aaz@chicagobooth.edu

HPC 435 773.834.4838

Teaching Assistants: Jung-Ho Choi jchoi4@chicagobooth.edu

Faculty Assistant:

Section 04: Monday, 8:30 am – 11:30 am Harper, TBA

Section 05: Monday, 1:30 pm – 4:30 pm Harper, TBA
Section 06: Tuesday, 1:30 pm – 4:30 pm Harper, TBA

Weekly review sessions Tuesday, 12:15 pm – 1:15 pm Harper, TBA

starting on October 7: see Review sessions schedule on Chalk
Office hours: by appointment

Exam review sessions 5:00 pm – 7:00 pm with me Harper, TBA

on Oct 30, Dec 4:

Course description:
Accounting is the language used to measure and communicate an entity’s economic activity. A
solid understanding of this language is important for being an informed user of financial
statements. It requires us to consider how financial reporting information can be utilized,
which, in turn, requires us to learn how corporate financial reports are prepared. To facilitate
your learning, this class combines lectures and discussions of the assigned materials. The
assigned cases serve as a basis for class discussion and provide a challenging test of your
understanding of the topic. They are based on corporate financial statements and illustrate the
issues associated with various accounting methods and the manner in which the related
information is disclosed. Additionally, these cases demonstrate the real world magnitude of
income and balance sheet differences under alternative accounting methods, as well as a
variety of financial reporting practices.

This course prepares students for more advanced finance and financial statement analysis
courses. By the end of the course, you should have a basic understanding of (1) the
fundamental concepts underlying financial reporting systems; (2) the role of judgments and
estimates in the preparation of financial reports; (3) and how to read, analyze and interpret
them.
Last updated: July 28, 2014, subject to change.

Course materials:
 Course Web Site: Course materials will be posted on https://chalk.uchicago.edu/. You will
need a CNET ID and password to access Chalk.
 Class Handouts: The lecture handouts will be distributed right before each class.
 Recommended textbook: Hard or electronic versions of 4th edition of Financial Accounting
by Dyckman, Magee, and Pfeiffer (published by Cambridge Business Publishers).

Course grade:
Grades for this course will be based on a midterm exam, a comprehensive final exam, class
participation, and graded homework assignments. The following weights will be used in
calculating your final grade:

Midterm exam 20%

Final exam 50%
Homework assignments 10%
Classroom performance 20%
Total 100%

If your final exam score is higher than your midterm score, the midterm score will be updated
by the score on the final exam. In such cases, the final exam is worth 70% of your final grade.
Attendance in week 1 is required if you are planning to register for the course.

Students needing a provisional grade in order to graduate must have a midterm score. No
pass/fail is allowed.

Exams:
The midterm and the final exams will be closed book and closed notes. You are also
encouraged to bring a calculator that does not have outside access (i.e., no internet, phone, or
texting capabilities). The exam schedule is as follows:

Midterm in class exam B30000 – 04: Monday, November 3, 8:30 am – 10:00 am

(1 hour 30 minutes) B30000 – 05: Monday, November 3, 1:30 pm – 3:00 pm
B30000 – 06: Tuesday, November 4, 1:30 pm – 3:00 pm

Final exam B30000 – 04: Monday, December 8, 8:00 am – 11:00 am

(3 hours) B30000 – 05: Monday, December 8, 3:00 pm – 6:00 pm
B30000 – 06: Tuesday, December 9, 3:00 pm – 6:00 pm

Please have your name card displayed during the examinations.

All students should plan to take both exams at the scheduled time for their section. There will
be no changes to the final exam schedule set by the Chicago Booth. Check your schedules
carefully and please enroll in the section only if you can attend the midterm exam and final
exam at the scheduled times. Make-up exams are not possible.

I do not return final exams, although a student can arrange a time with my faculty assistant to
look over his or her final exam at my faculty assistant’s office and decide about a request to re-
grade. Requests to re-grade an exam must be made in writing within one week of when the
midterm exam is returned or final exam is graded. The entire exam will be re-graded, which
may result in a higher or lower grade.
Last updated: July 28, 2014, subject to change.

Classroom performance:
Classroom performance is comprised of participation in class discussions, preparation for class,
short in-class quizzes, and attendance during class. Your class participation grade will be based
on your contribution to class discussion, not based on the amount of time you talk. Note that
comments or questions made before or after class, in email correspondence or in phone
discussions, while welcome, will not be counted toward class participation. Cold calls are fair
game.

Attendance is required for all sessions. Tardiness, entering or leaving during class, and/or lack
of attendance will have a negative effect on your classroom performance grade, and, in
extreme cases, could lead to a failing grade for the course. There will be no negative evaluation
consequences if you miss or if you are unprepared for one class and let me know in advance.
Finally, please turn off all forms of communication devices during the lectures, the review
sessions, and exams.

Self-study problems:
Several self-study problems from the textbook are assigned for each class. Solutions to the self-
study problems will be posted on Chalk.

Graded homework assignments:

Graded homework assignments are due at 8:30 am on Mondays regardless of your section.
Assignments submitted late will not be considered. All assignments must be submitted
electronically via Chalk.

Weekly graded homework assignments are based on real financial statements. These
assignments are intended to enhance your understanding of real world companies’ financial
statements and transactions. In keeping with the complexity of real world accounting issues,
the material in the graded assignments is more challenging than the textbook self-study
problems. Your write-up of the assignment should be short and concise, preferably no longer
than one page, and be computer generated. The assignments will be graded based mostly on
effort displayed.

You are allowed to discuss the assignments and prepare the write-ups in groups of no more
than three students. You may work with students across sections, if you like. Note that to get
the most out of these group assignments, I strongly recommend that each member works on
each assignment individually before discussing it with the group to reconcile differences. Even
if you worked in a group, you must submit your individual copy of a write-up on Chalk to
obtain a credit. By submitting the assignment, you confirm that you contributed to the
homework assignment. You may skip one homework assignment without any penalty. Upload
your homework to Chalk and fill in your group member names in the comment section. Make
sure to click submit. Please do not email me or TA your homework.

Please also bring a copy of the write-up to class for the discussion.
Last updated: July 28, 2014, subject to change.

Class preparation:
You are required to read the assigned chapters before the class. Some classes with start with
short quizzes related to the assigned material. It is helpful that you start working on the self-
study problems from the textbook prior to the class.

Review sessions:
Review sessions will be offered throughout the quarter. Please, consult Chalk for exact times
and locations. Attendance at review sessions is strictly optional; these sessions are designed
only to provide additional help to students who are having trouble with the basic material. That
is, review sessions will provide an opportunity to ask question about the material covered in
class and recommended self-study problems. Neither additional material on a given topic nor
new material to be discussed in future classes will be introduced in the review session. You are
likely to find these sessions helpful if you have no accounting background or feel you would
like to go over a given topic again. Feel free to come and go during review sessions; you are
not obligated to stay for the entire session.

Please email the TA (jchoi4@chicagobooth.edu) specific questions about material we covered

in class or self-study problems you would like to be discussed at review sessions.

If you need my help outside the normal class hours, do not hesitate to contact me via email. I
can then set up either a phone or office appointment with you. You can direct your content-
related questions to the TA (you can CC me) and allow for some time before he answers. If
you have administrative questions, please email me directly.

Policy on incomplete grades:

An incomplete grade ``I’’ will be awarded to students who meet class requirements and
demonstrate their efforts in learning the course but are unable to take the final exam due to an
unforeseen emergency. An incomplete grade is not a substitute for a failing grade.

Chicago Booth honor code: http://programs.chicagobooth.edu/docs/handbook.pdf

Any communication among students during the exam is strictly forbidden. Students are not
permitted to discuss any part of an exam (including both questions and answers) with other
students until the exam has been taken by all the sections of this course.

“No student shall represent another's work as their own. No person shall receive disallowed
assistance of any sort, or provide disallowed assistance to another student, at any time before,
during, or after an examination or with respect to other graded work for a course.”

Students will be required to sign the following honor pledge on each exam:“I pledge my honor
that I have not violated the Honor Code during this examination [or homework assignment].”

Class courtesy:
Students are expected to be in their seats with their cell-phones turned off prior to the start of
the class. Laptop computers are allowed in class to make notes or read class related materials.
Browsing internet (including social networks websites) and chatting is not allowed. Such
activities during the class distract other students.
Last updated: July 28, 2014, subject to change.

Course Outline and Specific Assignments

Below, (T) stands for Textbook problems; (C) stands for material posted on Chalk; (H) stands
for Harvard Business School cases posted on Chalk.

Week 1, Introduction to accounting and statement of financial position

Monday, Sep 29 Assignment to bring to class (do not submit on Chalk):
Tuesday, Sep 30 (C) Twitter, Inc.
Reading:
Chapter 1, Chapter2
Self-study:
(T) M1-24, P1-36, C1-45, M2-25, E2-32, E2-45, E2-46

Week 2, Understanding income and cash flow statements

Monday, Oct 6 Assignment due at 8:30 am on Monday, October 6:
Tuesday, Oct 7 (C) DNA Storage, Inc.
Reading:
Chapter 3, Chapter 4
Self-study:
(T) M3-29, E3-32, P3-43, M4-22, E4-42, E4-43

Week 3, Interpreting revenue and accounts receivable

Monday, Oct 13 Assignment due at 8:30 am on Monday, October 13:
Tuesday, Oct 14 (H) Statement of Cash Flows: Three Examples
Reading:
Chapter 6
Self-study:
(T) M6-17, M6-16, M6-18, E6-34, E6-37, P6-44

Week 4, Interpreting cost of goods sold and inventories

Monday, Oct 20 Assignment due at 8:30 am on Monday, October 20:
Tuesday, Oct 21 (H) Microsoft’s Financial Reporting Strategy (Part 1)
Reading:
Chapter 7
Self-study:
(T) M7-17, M7-18, E7-26, E7-30, P7-33, P7-36

Week 5, Fixed assets and midterm review

Monday, Oct 27 Assignment due at 8:30 am on Monday, October 27:
Tuesday, Oct 28 (H) Depreciation at Delta Air Lines and Singapore Airlines(A)
(please answer the questions on p. 4 or the case)
(C) Dow Chemical Company
Reading:
Chapter 8 (pp. 365 - 380)
Self-study:
(T) M8-11, E8-24, E8-27, E8-28, P8-36, P8-38
Last updated: July 28, 2014, subject to change.

Week 6, Midterm Examination (closed book, closed notes)

Monday, Nov 3 Intangible assets
Tuesday, Nov 4 Optional:
(C) Coca-Cola, Inc.
Reading:
Chapter 8 (pp. 380 - 388)
Self-study:
(T) M8-17, E8-31, E8-34, P8-37

Week 7, Liabilities, leases, and long-term debt

Monday, Nov 10 Assignment due at 8:30 am on Monday, November 10:
Tuesday, Nov 11 (H) Microsoft’s Financial Reporting Strategy (Part 2)
Reading:
Chapter 9, Appendix A, Chapter 10 (pp. 453 – 466)
Self-study:
(T) EA-2, EA-15, M9-31, M9-32, E9-41, E9-45, P9-52, P9-53, P9-
56, M10-12, P10-37,

Week 8, Deferred taxes and shareholders’ equity

Monday, Nov 17 Assignment due at 8:30 am on Monday, November 17:
Tuesday, Nov 18 (H) Lehman Brothers and Repo 105
(C) Hewlett - Packard, Inc.
Reading:
Chapter 10 (pp. 476 – 483), Chapter 11
Self-study:
(T) M10-22, E10-31, E10-33, P10-40, P10-41, M11-35, M11-36,
P11-56

Week 9, Investments and financial ratios

Monday, Nov 24 Assignment due at 8:30 am on Monday, November 24:
Tuesday, Nov 25 (C) Delta Air Lines, Inc.: Deferred Tax Liability
(C) Adobe Systems, Inc.
Reading:
Chapter 12 (pp. 555 - 572), Appendix 12A, Chapter 5
Self-study:
(T) M12-12, E12-25, P12-44, E12-33

Week 10, Earnings quality and comprehensive review

Monday, Dec 1 Assignment due at 8:30 am on Monday, December 1:
Tuesday, Dec 2 (H) Longtop Financial Technologies (A)
(C) Starbucks, Inc.
Reading:
(H) Quality of Earnings Analysis

Final exam week: B30000 – 04: Monday, December 8, 8:00 am – 11:00 am

B30000 – 05: Monday, December 8, 3:00 pm – 6:00 pm
B30000 – 06: Tuesday, December 9, 3:00 pm – 6:00 pm