Financial Accounting Core

Bio Overview Grading Help Materials Midterm Final Schedule

Overview

The course is structured around the following major uses of accounting data by managers, financial analysts, consultants, and other professionals as described below:

Keep a record of transactions to run the business. We will study the terms and systems used by accountants to record transactions and to ensure the accounting system's integrity. We will distinguish cash flows from income flows and study how financial statements are connected.
Measure past performance to reward superior performance or penalize inferior performance: We will study how financial performance measures affect incentives and behavior and discuss the trade-off between relevance vs. reliability of performance measures. We will examine some well known cases of earnings management and fraud.
Identify areas of strengths and weaknesses for making strategic decisions affecting the future: We will discuss a simple analytical framework (the DuPont model) that helps us compare companies and understand how their strategic choices affect their published financial statements.

Important Stern Policy Document

Please read this important document regarding Stern policies by clicking here.

Behavior expected from you in the classroom

We expect you to behave as adults attending a professional meeting.

Coming late to class or leaving early is not acceptable unless there are exceptional reasons beyond your control.
Computer and mobile phone use in class are prohibited.
You are expected to attend all classes. However, there is no attendance taken, and there is no explicit penalty for missing classes. We take no responsibility for helping you if you miss classes. There will be no backup copies of any handouts distributed in class. You will have to copy them from your friends.

The difference between the Finance and Non-Finance versions of the accounting course

Based on requests from students over the years, Stern has split the accounting core course into two sets of sections: two sections for students taking Foundations of Finance in fall and two sections for students who will take Finance in spring. The only difference between the finance and non-finance sections is that the non-finance sections are smaller, and they cover the concepts of Time Value of Money at a slower pace. Otherwise, the content, pace, and exams will be identical for the two sections, and they will be graded on a common curve.

Grading

As per Stern policy, no more than 35% of the class can be given an A or A-. If your overall score is more than 50%, you will not get C or below in the course. It is not possible to predict the A range.
Midterm: 40%.
Final: 60%. The Final is cumulative and can replace the midterm if you score higher on the final. This option will NOT apply if you miss the midterm. Your aggregate score on the course that will form the basis of your letter grade is max(midterm*40%+final*60%, final*100%). The midterm will not replace the final.
I do not give out grades for the midterm as it misleads students. Remember that the final exam is 60% of the grade, and one cannot predict what the grade will be without looking at the final.
Exams will not be rescheduled for any reason except medical or family emergencies. Weddings, reunions, recruiting, or other events are not valid reasons for rescheduling. If you have a qualified disability and require academic accommodation during this course, please contact the Moses Center for Students with Disabilities (CSD, 998-4980) at least one week before the scheduled exam time to be guaranteed accommodation. [This is their requirement, not mine.]

Help

My office: KMC 10-86, 212-998-0021 dgode@stern.nyu.edu
I will hold review sessions from time to time.

Materials

I use my materials. Therefore, there is no required textbook, and you need not purchase anything.
Classes are not videotaped unless there is a special session.

Practice

Extensive practice questions are included in the packet with their answers. There are no formal assignments to turn in.

Midterm

I will send out an email with room assignments on the day before the exam.
It is a closed-book, closed-notes exam. You cannot view any information saved in any medium (computer, calculator, iPhone) during the exam.
Please bring a calculator. [For the final, you will need a calculator with the power function and the present value functions. An advanced financial calculator is not necessary.].
No makeup midterm will be given unless you miss the midterm due to medical/family emergencies. If you miss the midterm for any other reason, its weight will be shifted to the final.
The midterm will cover material until and including October 21.

Final

I will send out an email with room assignments on the day before the exam.
It is a closed-book, closed-notes exam. You are not allowed to view any information saved in any medium (computer, calculator, iPhone) during the exam.
Please bring a calculator with the power function and the present value function. An advanced financial calculator is not necessary.
The final exam covers the entire course, including the material covered before the midterm.
The final exam will not have any questions directly based on the several real financial statements we went through in class
If you miss the final for any reason except medical/family emergencies, you will get an incomplete grade for the course. No makeup exam will be given.

Schedule

This outline will be updated throughout the course.
Finance 1: MW 09:00am-10:20am in KMC 2-60;B01-1306-01-F2009@stern.nyu.edu
Non-finance 1: MW 10:30am-11:50am in KMC 3-120; B01-1306-02-F2009@stern.nyu.edu
Non-finance 2: MW 1:30pm-02:50pm in KMC 3-120; B01-1306-03-F2009@stern.nyu.edu
Finance 2: MW 03:00pm-04:20pm in KMC 2-60; B01-1306-04-F2009@stern.nyu.edu

Date	Topic
Sept 9, W	Accounting terms, transactions, and systems
Sept 8, M	Performance measures: Cash flows vs. income flows; design of incentive systems
Sept 10, W	Relationships between the three financial statements
Sept 15, M	Salient ratios related to each statement: margins, net asset turnover, cash flow generation
Sept 17, W	When revenues lead receipts: Accrued revenues or receivables --Transactions, ratios, and projections
Sept 22, M	When revenues lag receipts: Deferred revenues or advances -- Transactions, ratios, and projections
Sept 24, W	When expenses lead payments: Accrued expenses or payables -- Transactions, ratios, and projections
Sept 29, M	When expenses lag payments: Deferred expenses or prepayments -- Transactions, ratios, and projections
Oct 1, W	No class
Oct 6, M	Examples: Inventories and Payables -- Transactions, ratios, and projections; cost flow assumptions -- LIFO vs. FIFO
Oct 8, W	Examples: Property, Plant, and Equipment -- Transactions, ratios, and projections; investing vs. operating activities
Oct 13, M	When receipts and payments are not revenues and expenses: Debt financing
Oct 15, W	The 10:30 AM class will be held in KMC 3-55. When receipts and payments are not revenues and expenses: Equity financing:
Oct 20, M	An integrative framework for analysis: The DuPont model and the value drivers
Oct 22, W	No class; midterm on Sunday
Oct 26, SUNDAY	Midterm: 1-4 PM.
Oct 27, M	How growth affects financial statements and ratios; The “canceling differences” theorem
Oct 29, W	Handling uncertainty: Allowances and reserves as liabilities
Nov 3, M	Handling uncertainty: Allowances and reserves as contra-assets
Nov 5, W	When managers manipulate statements; A different perspective on understanding the links between the three major statements
Nov 10, M	When cash flows stretch over time Non-finance section: Time value of money Finance section: Accounting for bonds and long-term liabilities
Nov 12, W	Non-finance section: Mortgages and bonds Finance section: Leases
Nov 17, M	Non-finance section: Accounting for interest Finance section: Deferred taxes
Nov 19, W	Non-finance section: An introduction to equities Finance section: Deferred taxes
Nov 24, M	Non-finance section: Dividends and buybacks Finance section: Investments in debt; trading, held-for-sale, and held-to-maturity securities; controversies with fair value accounting
Nov 26, W	No class; Thanksgiving
Dec 1, W	Non-finance section: Mergers and acquisitions Finance section: Investments in equities; equity method and strategic interactions; Mergers and acquisitions -- Goodwill
Dec 3, M	Another look at cash flows and interrelations between financial statements (both sections)
Dec 8, W	Another look at an integrative framework for analysis (both sections)
Dec 15, M	Final: 9 AM to Noon. 2-60, 1-70, 2-65 and 2-70

Financial Reporting