Seminar 1 Agenda Introduction to AC2101 Course Syllabus and Requirements
Introduction to Fundamental Concepts
2 AC2101: Course Instructor
Name: Choo Teck Min
Office: S3-01B-44 Tel: 67905685 Email: atmchoo@ntu.edu.sg Office hrs: By appointment. Email or call before stopping by. Groups: 1 (Mon 8:30 am SR7, Wed 8:30 am SR20) 3 (Mon 10:30 am SR7, Wed 10:30 am SR20) 7 (Tues 10.30 am SR6, Thur 10.30 am SR7)
4, 5, 6 & 7 7, 8, 9 & 10 3 Liabilities: a. Financial liabilities b. Deferred tax liabilities
11, 12 13,14,15 & 16 4 AC2101 Course Syllabus Contents Seminar # 4 Equity (e-Lecture) 17 5 Revenue a. Revenue recognition principles & criteria b. Customer loyalty programmes c. Construction contracts
18 18 19,20 & 21 6 Expenses a. Expense recognition principles b. Share-based payments and employee stock options a. Employee benefits
22 22, 23 & 24
24 5 AC2101 Course Format Seminars 24 x 2 hours (twice per week, with some exceptions) Includes 1 e-Lecture (Seminar 17)
6 AC2101 Course Matters A. Course materials 1. Textbook (NCKL) 2. Seminar readings (Course Main Site on Edventure) 3. Accounting standards (http://www.asc.gov.sg/frs/frsEffective01012013.htm) 4. Interpretations of accounting standards (http://www.asc.gov.sg/frs/ifrsEffective01012013.htm) 5. Exposure drafts (http://www.asc.gov.sg/draft.htm) 6. Seminar outlines (Course Main Site on Edventure) 7. Seminar slides (Seminar Groups Site on Edventure)
7 AC2101 Course Matters B. Pre-Requisites
1. AB1102 2. Use of financial calculator to do present value-related computations 3. Bring clickers to every class
8 AC2101 Course Assessment Components Weights Basis 1 Seminar participation 15 Individual 2 Group project presentation 15 Group & individual (50% each) 3 Term quiz 20 Individual 4 Final exam 50 Individual Total 100 9 Seminar Participation: Expectations A. Pre-seminar 1. Complete ALL assigned readings in seminar outline 2. Attempt ALL assigned questions in seminar outline B. During seminar 1. Clicker questions 2. Voluntary participation 3. Cold calls C. Post-seminar 1. Review seminar slides & discussions 2. Review/complete assigned questions 3. Clarify all outstanding questions & doubts 4. Post updated presentation slides if your group is in charge of the formal presentation for that week. (Project Discovery) Pedagogy Students take active responsibility for their learning Instructor plays a facilitating role 10 Project Presentation: Expectations A. Pre-seminar 1. Project questions available in seminar outline released 2 weeks beforehand 2. Email slides in powerpoint format to your respective instructors and upload on course main site (Assignments folder) for the Turnitin anti-plagiarism check by stipulated deadline as stated on the COURSE OUTLINE; clearly labeling project number, seminar group number and members names in the 1 st slide 3. Penalties are imposed for late submission and a high degree of similarity to other submissions. B. During seminar presentation 1. Based on submitted slides, no changes allowed 2. 20 to 25 minutes of presentation time, followed by Q&A by fellow students & instructor. Penalties are imposed for poor time management. 3. Presentation skills (individual) and presentation content (group) C. Post-seminar presentation 1. Amend slides based on class discussion 2. Upload revised slides in PDF format to Discussions folder in your respective seminar groups site within a week from presentation 11 Term Quiz & Final Exam A. Term Quiz 1. Feb 28, 2014 (Fri) 4:30 pm LKC LT 2. Open book; usually MCQ plus 2 short questions; 1.5 hours 3. Seminars 1 to 12
B. Final Exam 1. May 8, 2014 (Thurs) 1 pm 2. Open book; usually three questions with multiple parts; 2.5 hours 3. Seminars 1 to 24 (i.e., everything) 12 Seminar 1 Fundamental Concepts Objective of accounting (Review of AB1102) Why do we need accounting? (Review of AB1102) Characteristics of useful accounting information (Review of AB1102) What does the generation of accounting information involve? Recognition Measurement Disclosure GAP in Statement of Financial Position
13 Use of Clickers Please set your clicker channel to this SRs channel number: 1. Press the Go button on your clicker 2. Enter the SRs channel number (XX) 3. Press the Go button on your clicker again. You should see a flashing green light. Per the new FRS Conceptual Framework (2011), the objective of financial reporting is to provide 15 1 2 0% 0% 1. Info about the fin position, performance and changes in fin position of an enterprise that is useful to a wide range of users in making economic decisions 2. Fin info about the reporting entity that is useful to existing & potential investors, lenders and other creditors in making decisions about providing resources to the entity Why do we need accounting?
Information asymmetry between stakeholders
Adverse Selection: information advantage
Moral Hazard: unobservability of managers effort
16 Per the new FRS Conceptual Framework (2011), the fundamental qualitative characteristics of useful financial info include 17 1 2 3 4 5 6 7 0% 0% 0% 0% 0% 0% 0% 1. Comparability 2. Faithful representation 3. Relevance 4. Reliability 5. Understandability 6. Timeliness 7. Verifiability 1. Relevance Predictive value; Confirmatory value; Materiality (nature & size; entity-specific) 2. Faithful representation Complete (within bounds of materiality & costs); Neutral; Free from error ( accurate in all respects) 3. Comparability Over time; Across different entities; achieved via consistency; uniformity 4. Understandability Clearly & concisely 5. Timeliness 6. Verifiability Different knowledgeable & independent observers could reach consensus, not necessarily complete agreement
Review: Qualitative Characteristics 18 Items (1) & (2): fundamental QC Items (3) to (6): enhancing QC Recognition - Process of incorporating an item in an entitys statement of financial position or comprehensive income - General recognition criteria (conceptual framework): 1. Meet the definition of a financial statement element 2. Probable inflow/outflow of future economic benefit 3. Cost or value can be reliably measured - Item-specific recognition criteria Found in the accounting standards governing the specific item Accounting Recognition, Measurement & Disclosure 19 Probable = More likely than not (in practice, > 50%) Found in specific FRSs Applicable only to the specific accounting items covered in the FRSs May not be fully consistent with the general recognition principles Specific recognition principles 20 Measurement - Process of determining the monetary amount of an item to be recognized & carried in the F/S - The focus of this and next seminar Disclosure - Accounting standards often require that certain information be disclosed either in the main body of or in the notes to the financial statements. - Is it the same as presentation?
Relationship?
Accounting Recognition, Measurement & Disclosure 21 Concepts of Measurement
What is measurement?
How to go about measuring?
Problems of measurement in accounting?
23 What is measurement?
Measurement is the assignment of numerals to represent the magnitude of an attribute of a phenomenon.
Phenomenon: object or event to be measured Attribute: characteristic or quality of the phenomenon that is to be measured
24 How to go about measuring? Identify relevant phenomenon Identify relevant attribute of the phenomenon Find a reliable way to assess the magnitude of the relevant attribute of the relevant phenomenon (i.e., measurement scale) Estimation may often be needed substitute with a different phenomenon, a different attribute, or both.
Seminar Question 2: Measurement in Accounting: Unit Seminar Question 3:
Unit of measure?
Nominal $
Purchasing power
29 Problems of Measurement in Accounting
Seminar Question 4: Is aggregation (e.g. total assets) meaningful?
Problems:
Mixed attributes, and
Mixed unit of measure
30 31
Year P/B Ratio Average Price-to-Book Ratio of the S&P 500 Companies, Dec 1977- Mar 2001 (Source: Lev 2001)
1980s 2000 Current price to book ratio is about 7 Hence, GAP in the Statement of Financial Position! Problems of Measurement in Accounting Seminar Question 5:
Webber (2000) article key issues or concerns?
33 When BBB Ltd uses the historical cost of a car that it owns, adjusted for the cars estimated accumulated depreciation, as a measure of fair market value of the car, BBB Ltd is using:
34 A. B. C. D. E. 0% 0% 0% 0% 0% A. Relevant attribute of a substitute phenomenon B. Relevant attribute of a relevant phenomenon C. Substitute attribute of a relevant phenomenon D. Substitute attribute of a substitute phenomenon E. None of the above
Which one of the following statements below is FALSE?
35 A. B. C. D. E. 0% 0% 0% 0% 0% A. Comparability and understandability are referred to as enhancing qualitative characteristics in The Conceptual Framework for Financial Reporting (2011). B. Based on Miller and Mosso (1983), direct observation of the relevant attribute of the relevant phenomenon provides the first-order quality of measurement. C. Under The Conceptual Framework for Financial Reporting (2011), the objective of financial reporting is to provide information that is useful to a wide range of users, including the suppliers, customers and government, in making economic decisions. D. The mixed attributes problem in accounting is one of the reasons causing a difference in the net book value of the firm and its market price. E. Financial information is capable of making a difference in decisions if it has predictive value or confirmatory value or both.
SEBI On Tuesday Made A Forceful Plea To The Supreme Court To Punish Sahara Chief Subrata Roy Along With His Two Firms and Their Directors For Not Complying With Its Order For Refunding Rs 24