Accounting and Financial Analysis for Debt and Equity Markets and Transaction Structuring
This course is designed to quickly introduce you to (or, preferably, refresh your knowledge of) basic financial accounting [first two weeks of class] and then aims to aggressively increase your ability to be a highly sophisticated user of financial statements. After taking this course, you should improve your ability to determine a firm's accounting policy for a particular type of transaction and to determine how that policy choice affects its primary financial statements. You will also learn how to question whether these effects fairly reflect the underlying economics of the firm's transactions. Asking these questions involves an interplay between accounting, economics, finance, law and business strategy. You should therefore greatly improve your ability to use an accounting report as part of an overall assessment of the firm's strategy and the potential rewards and risks of dealing with the firm.
The teaching approach will be a roughly equal combination of lecture time and demanding case applications of the lecture material that will involve group case assignments that will form the basis for in-class discussion of the cases. The technical knowledge acquired from the lecture material is applied to cases where the main goal is to examine how the reported financial statements would differ if the firm had used different accounting policies. The focus is on modifying the reported financial statements in order to obtain the cleanest possible inputs for use in such applications as equity valuation, transaction structuring and credit analysis.
As this will be the first offering of this course, the precise topics to be discussed have not yet been finalized. They are likely to include the accounting for, and interpretation of: revenue recognition, intercorporate investments, organizational structures (e.g., franchising), debt, and leases. Intensive group hand-in cases will be used to illustrate how the flexibility in financial reporting can reflect both the economics of the firm and the incentives of the managers creating the financial statements.
It is strongly recommended that students registering for this course have some prior exposure to accounting course work, at least at the level of Fundamentals of Accounting for Attorneys (LAWS 79112) or Legal Elements of Accounting (LAWS 79102).
Grading will be based on case assignments, short homework assignments, class participation, and a final exam.
Philip G. Berger