IMBA財政會計課件英文版

IMBAFinancialAccountingInstructor:GuohuaJiang(姜國華）IMBAFinancialAccountingInstr1UniversityofCalifornia,Berkeley(加州大學伯克利分校)田長霖，陳省身，李遠哲，趙元任，張愛玲,錢穎一。。。MostrecentNobelPrizewinners:DanielMcFadden(2000),GeorgeAckerlof(2001)UniversityofCalifornia,Berk2IMBA財政會計課件英文版3Whata“great”timeforaccounting?Orisn’tit?Accounts:angelsordevils?Youmayhatethem,butyouhavetohavethem2002,theyearofaccountingEnron,Worldcom,GeorgeW.Bush,DickCheneyBlameaccountingonanything,frominvestorlossestoSaddamHusseinhidingnuclearweaponButwestaycool!Whata“great”timeforaccoun4TimeMagazine:PersonsoftheYear2002:WhistleblowersCynthiaCopperofWorldcomColleenRowleyofFBISherronWatkinsofEnronTimeMagazine:Personsofthe5Whenyouthinkofaccountants,whatimagecomesuptoyourmind?

Whenyouthinkofaccountants,6TheFatherofAccounting-LucaPacioli(1445-1517)HewroteafamousmathematicsbookInonechapterheinventeddouble-entryaccountingsystemHetaughtLeonardoDaVinciperspectiveandproportionality.Theknowledgewasusedtopaint“theLastSupper”TheFatherofAccounting-Luca7DowJonesIndustrialAverage1930-2002DowJonesIndustrialAverage18DJIA,NASDAQ1990-2002DJIA,NASDAQ1990-20029BacktoSquareOne:DJIA1998-2002BacktoSquareOne:DJIA1998-10DorDot.bomb-NASDAQ1998-2002DorDot.bomb-NASDAQ19911TheThreeMajorStockExchangesTheThreeMajorStockExchange12TheRegulatorofU.S.StockMarketTheRegulatorofU.S.StockMa13ThecurrentSECcommissionersThecurrentSECcommissioners14WhoissueAmericanAccountingStandardsWhoissueAmericanAccounting15InternationalAccountingStandardsInternationalAccountingStand16“BigFour”InternationalAccountingFirmsErnstYoung(worldwiderevenue2002:$10.1billions,4.3billionsintheU.S.)PriceWaterhouseCoopersDeloitte&ToucheKPMGArthurAnderson(oops!)“BigFour”InternationalAccou17AuditorOpinionsUnqualified

“Unqualified”opinionisactuallygoodopinion, confused?Iwas.QualifiedDisclaimerofopinionAdverseopinionAuditorOpinionsUnqualified18GeneralElectric2001AnnualReport(10K)GeneralElectric2001AnnualR19TheusersofaccountingandeconomicconsequenceofaccountingdecisionsEquityinvestorsCreditorsGovernmentCustomerSuppliersLaborunionTheusersofaccountingandec20InvestingMottoTwofriendswenthuntinginthejungle.Allofasudden,abearjumpedoutofnowhereandcameafterthem.A:Run!B:No,itishopeless,wewon’toverrunabear.A:ButIdonothavetorunfasterthanthebear.Ionlyneedtorunfasterthanyou!InvestingMottoTwofriendswen21FinancialAccountingandTaxAccountingTaxaccountingisdesignedbyIRS,InternalRevenueServiceMajordifferenceinrevenuerecognitionandexpenserecognitionTaxaccountingcanembedgovernment’seconomicpoliciesFinancialAccountingandTaxA22GoalsofthiscourseHowtoreadfinancialstatementHowtointerpretfinancialstatementWhatinferencestodrawfromfinancialstatementHowtobaseeconomicdecisionsontheinformationinfinancialstatementAlanguagetocommunicateinbusinesscommunityTomakefriendsGoalsofthiscourseHowtorea23SyllabusAfinancialstatementuser’sperspectiveEmphasizetwoissues:EarningsManagementandvaluationFrequentmini-caseanalysisOnebigcaseanalysis,individuallyoringroupsNewsarticleswillbetestedinfinalexamExpecttoreadALOT!SyllabusAfinancialstatement24EarningsManagement:Rao,Teoh,Wong,ReviewofAccountingStudies,1998EarningsManagement:Rao,Teoh25Earningsrestatements–MinWu,HKUSTEarningsrestatements–MinWu26IMBA財政會計課件英文版27IMBA財政會計課件英文版28Accounting-basedValuationWhoaremypeers?Earningsmultiples,book-valuemultiples,salesmultiplesEVA?,Economicvalueadded,Residualincomevaluation(RIV),Edward,Bell,OhlsonModel(EBO)Inoneword,Sharevalue=f(earnings,bookvalue,dividend,cashflow,etc.)Accounting-basedValuationWho29Accounting-basedValuation-2Accounting-basedValuation-230Howimportantisaccountinginformation?January22,2003,aftermarketclosed,AT&T(stocksymbolT)announced:

Revenuefor4thquartershrankto$9.3billionfrom10.2billioninthe4thquarterofpreviousyear

Lossfromcontinuingoperationswidenedto$611millionfrom$216million.Howimportantisaccountingin31Howimportantisaccountinginformation?

(F)Howimportantisaccountingin32Howimportantisaccountinginformation?IntheweekendbeforeMonday,Feb.3,2003,Mattel(MAT)announcedfourthquarterresults:Revenueincreasedfromthefourthquarterayearearlierby6.9%to$1.56billion.Netincomeincreasedby35%to$186.1million.Earningspershare(EPS)increasedto42centsfrom31cents.Howimportantisaccountingin33Howimportantisaccountinginformation?

(F)Howimportantisaccountingin34ValueInvestingValueInvesting35AccountingconceptsandprinciplesEntityconceptReliabilityprinciple(objectivityprinciple)CostprincipleGoing-concernconceptStable-of-monetary-unitconceptConservatismprincipleAccrualaccountingconceptAccountingconceptsandprinci36EntityconceptAcompanyisanindependententity.Onlytransactionsthatarerelatedtothecompanyitself,notaparticularpersonworkingforthecompany,shouldbeconsideredcompanyaffairandberecorded.Example:theownerofanicecreamstoregivesanicecreamtohisniece;thisactisnotabusinesstransaction,itisfamilyaffair.Butifhegivestoaneighbor’sniece,itisabusinesstransaction.Itiscalledpromotion.EntityconceptAcompanyisan37Reliabilityprinciple(objectivityprinciple)

Accountingnumbers1)shouldbeverifiable,and2)canbeconfirmedbyanindependentobserver.Examplesofunreliablenumbers: Men’sweight Women’sage NumberofyearsaPh.D.takestofinishhisdegree CEO’spay Enron’searningsReliabilityprinciple(objecti38HistoricalCostPrincipleAllacquiredassetsshouldberecordedattheiractualcost,I.e.,theamountofmoneypaidtoobtaintheasset,eventhoughthecostofthesameassettodayisdifferent.Why?Historicalcostisreliable.HistoricalCostPrincipleAlla39Going-concernconceptItislikepeopleinthepastwhowishanemperorlivesforever,weassumecompaniesliveforever,althoughtheytendtodiefast.Why?Becauseifweassumegoing-out-of-businessconcept,manywiredthingswillhappen. 1)Assetsneedtoberecordedatcurrentmarketprices 2)Liabilitieswillhavetoberepaidrightaway 3)Earningsandbookvaluesdonotmatter Going-out-of-businessistheexception,nottherule.Going-concernconceptItislik40Stable-of-monetary-unitconcept

Onedollartoday=OnedollartomorrowWhy?PurchasingpowerchangesduetoinflationordeflationButweareok.Ifthechangeinpricelevelisnottoodramatic,weholdthestable-of-monetary-unitconcept.Otherwise,everyaccountwillhavetobeadjustedeveryquarter.Stable-of-monetary-unitconcep41Conservatismprinciple

Thetensionbetweencreditorsandshareholdersandthetensionbetweenshareholdersandmanagementdictatethataccountingisconservative.Reportbadnewsinfinancialstatementsasearlyandascompleteaspossible;reportgoodnewsinfinancialstatementsonlyaftertheuncertaintysurroundingthegoodnewsisresolved.Conservatismprinciple

Theten42Conservatismprinciple-examplesResearchanddevelopmentexpendituresAdvertisingexpenditureOtherpromotionexpendituresRelationshipbuildupcostsAlltheseexpenditureswilllikelygeneratefuturebenefitsforthefirm.Buttheyareexpensed,notcapitalizedasassetsonbalancesheetbecausetheirbenefitsareuncertainandhardtomeasure.Conservatismprinciple-examp43AccrualAccountingRevenue:recognizewheneveritisearned,notwhencashchangeshandsExpense:recognizewheneveritisincurred,notwhencashchangeshandsAccrualAccountingRevenue:rec44FinancialStatementsBalanceSheet:atapointintime,i.e.,December31,balancesheetmeasureshowmuchassetthecompanyown,howmuchdebtthecompanyowe,andhowmuchequityshareholdershaveinthecompany Assets=Liabilities+EquityIncomeStatement:duringtheperiodendingonthebalancesheetdate,i.e,duringtheyear,howmuchrevenuesthecompanygenerates,howmuchexpensesareusedtogeneratetherevenues,andtheearnings(Revenues–Expenses).Profitsincreaseequityonbalancesheet,whilelossesdecreaseequityonbalancesheet.StatementofRetainedEarnings:Beginningequity+Earnings–Dividends=Earningsequity(onbalancesheet)FinancialStatementsBalanceSh45Whataccountsgowhere?BalanceSheetaccounts:1)canandcanonlybemeasuredatapointintime,2)physicallyorquasi-physicallyexist,and3)canbecarriedoverandusednextperiodIncomeStatementaccounts:2)canandcanonlybemeasuredinanintervaloftime,2)doesnotphysicallyexist,and3)cannotbecarriedovertonextperiodWhataccountsgowhere?Balance46FinancialStatementsStatementofCashFlows Cashisking. Threesections:Operating,Investing,Financing Operating:cashflowsrelatedtothenormaloperationofthefirm Investing:cashflowsrelatedtoinvestmentinassetsthatgenerateoperatingcashflowinthefuture Financing:cashflowsfromandtoshareholdersandcreditorsFinancialStatementsStatement47FinancialStatement:IncomeStatementFinancialStatement:IncomeSt48IMBA財政會計課件英文版49IMBA財政會計課件英文版50IMBA財政會計課件英文版51Formoreaboutbasicfinanceaccounting,gotocoursewebsiteandread‘Apremieronaccounting”IMBA財政會計課件英文版52演講完畢，謝謝觀看！演講完畢，謝謝觀看！53IMBAFinancialAccountingInstructor:GuohuaJiang(姜國華）IMBAFinancialAccountingInstr54UniversityofCalifornia,Berkeley(加州大學伯克利分校)田長霖，陳省身，李遠哲，趙元任，張愛玲,錢穎一。。。MostrecentNobelPrizewinners:DanielMcFadden(2000),GeorgeAckerlof(2001)UniversityofCalifornia,Berk55IMBA財政會計課件英文版56Whata“great”timeforaccounting?Orisn’tit?Accounts:angelsordevils?Youmayhatethem,butyouhavetohavethem2002,theyearofaccountingEnron,Worldcom,GeorgeW.Bush,DickCheneyBlameaccountingonanything,frominvestorlossestoSaddamHusseinhidingnuclearweaponButwestaycool!Whata“great”timeforaccoun57TimeMagazine:PersonsoftheYear2002:WhistleblowersCynthiaCopperofWorldcomColleenRowleyofFBISherronWatkinsofEnronTimeMagazine:Personsofthe58Whenyouthinkofaccountants,whatimagecomesuptoyourmind?

Whenyouthinkofaccountants,59TheFatherofAccounting-LucaPacioli(1445-1517)HewroteafamousmathematicsbookInonechapterheinventeddouble-entryaccountingsystemHetaughtLeonardoDaVinciperspectiveandproportionality.Theknowledgewasusedtopaint“theLastSupper”TheFatherofAccounting-Luca60DowJonesIndustrialAverage1930-2002DowJonesIndustrialAverage161DJIA,NASDAQ1990-2002DJIA,NASDAQ1990-200262BacktoSquareOne:DJIA1998-2002BacktoSquareOne:DJIA1998-63DorDot.bomb-NASDAQ1998-2002DorDot.bomb-NASDAQ19964TheThreeMajorStockExchangesTheThreeMajorStockExchange65TheRegulatorofU.S.StockMarketTheRegulatorofU.S.StockMa66ThecurrentSECcommissionersThecurrentSECcommissioners67WhoissueAmericanAccountingStandardsWhoissueAmericanAccounting68InternationalAccountingStandardsInternationalAccountingStand69“BigFour”InternationalAccountingFirmsErnstYoung(worldwiderevenue2002:$10.1billions,4.3billionsintheU.S.)PriceWaterhouseCoopersDeloitte&ToucheKPMGArthurAnderson(oops!)“BigFour”InternationalAccou70AuditorOpinionsUnqualified

“Unqualified”opinionisactuallygoodopinion, confused?Iwas.QualifiedDisclaimerofopinionAdverseopinionAuditorOpinionsUnqualified71GeneralElectric2001AnnualReport(10K)GeneralElectric2001AnnualR72TheusersofaccountingandeconomicconsequenceofaccountingdecisionsEquityinvestorsCreditorsGovernmentCustomerSuppliersLaborunionTheusersofaccountingandec73InvestingMottoTwofriendswenthuntinginthejungle.Allofasudden,abearjumpedoutofnowhereandcameafterthem.A:Run!B:No,itishopeless,wewon’toverrunabear.A:ButIdonothavetorunfasterthanthebear.Ionlyneedtorunfasterthanyou!InvestingMottoTwofriendswen74FinancialAccountingandTaxAccountingTaxaccountingisdesignedbyIRS,InternalRevenueServiceMajordifferenceinrevenuerecognitionandexpenserecognitionTaxaccountingcanembedgovernment’seconomicpoliciesFinancialAccountingandTaxA75GoalsofthiscourseHowtoreadfinancialstatementHowtointerpretfinancialstatementWhatinferencestodrawfromfinancialstatementHowtobaseeconomicdecisionsontheinformationinfinancialstatementAlanguagetocommunicateinbusinesscommunityTomakefriendsGoalsofthiscourseHowtorea76SyllabusAfinancialstatementuser’sperspectiveEmphasizetwoissues:EarningsManagementandvaluationFrequentmini-caseanalysisOnebigcaseanalysis,individuallyoringroupsNewsarticleswillbetestedinfinalexamExpecttoreadALOT!SyllabusAfinancialstatement77EarningsManagement:Rao,Teoh,Wong,ReviewofAccountingStudies,1998EarningsManagement:Rao,Teoh78Earningsrestatements–MinWu,HKUSTEarningsrestatements–MinWu79IMBA財政會計課件英文版80IMBA財政會計課件英文版81Accounting-basedValuationWhoaremypeers?Earningsmultiples,book-valuemultiples,salesmultiplesEVA?,Economicvalueadded,Residualincomevaluation(RIV),Edward,Bell,OhlsonModel(EBO)Inoneword,Sharevalue=f(earnings,bookvalue,dividend,cashflow,etc.)Accounting-basedValuationWho82Accounting-basedValuation-2Accounting-basedValuation-283Howimportantisaccountinginformation?January22,2003,aftermarketclosed,AT&T(stocksymbolT)announced:

Revenuefor4thquartershrankto$9.3billionfrom10.2billioninthe4thquarterofpreviousyear

Lossfromcontinuingoperationswidenedto$611millionfrom$216million.Howimportantisaccountingin84Howimportantisaccountinginformation?

(F)Howimportantisaccountingin85Howimportantisaccountinginformation?IntheweekendbeforeMonday,Feb.3,2003,Mattel(MAT)announcedfourthquarterresults:Revenueincreasedfromthefourthquarterayearearlierby6.9%to$1.56billion.Netincomeincreasedby35%to$186.1million.Earningspershare(EPS)increasedto42centsfrom31cents.Howimportantisaccountingin86Howimportantisaccountinginformation?

(F)Howimportantisaccountingin87ValueInvestingValueInvesting88AccountingconceptsandprinciplesEntityconceptReliabilityprinciple(objectivityprinciple)CostprincipleGoing-concernconceptStable-of-monetary-unitconceptConservatismprincipleAccrualaccountingconceptAccountingconceptsandprinci89EntityconceptAcompanyisanindependententity.Onlytransactionsthatarerelatedtothecompanyitself,notaparticularpersonworkingforthecompany,shouldbeconsideredcompanyaffairandberecorded.Example:theownerofanicecreamstoregivesanicecreamtohisniece;thisactisnotabusinesstransaction,itisfamilyaffair.Butifhegivestoaneighbor’sniece,itisabusinesstransaction.Itiscalledpromotion.EntityconceptAcompanyisan90Reliabilityprinciple(objectivityprinciple)

Accountingnumbers1)shouldbeverifiable,and2)canbeconfirmedbyanindependentobserver.Examplesofunreliablenumbers: Men’sweight Women’sage NumberofyearsaPh.D.takestofinishhisdegree CEO’spay Enron’searningsReliabilityprinciple(objecti91HistoricalCostPrincipleAllacquiredassetsshouldberecordedattheiractualcost,I.e.,theamountofmoneypaidtoobtaintheasset,eventhoughthecostofthesameassettodayisdifferent.Why?Historicalcostisreliable.HistoricalCostPrincipleAlla92Going-concernconceptItislikepeopleinthepastwhowishanemperorlivesforever,weassumecompaniesliveforever,althoughtheytendtodiefast.Why?Becauseifweassumegoing-out-of-businessconcept,manywiredthingswillhappen. 1)Assetsneedtoberecordedatcurrentmarketprices 2)Liabilitieswillhavetoberepaidrightaway 3)Earningsandbookvaluesdonotmatter Going-out-of-businessistheexception,nottherule.Going-concernconceptItislik93Stable-of-monetary-unitconcept

Onedollartoday=OnedollartomorrowWhy?PurchasingpowerchangesduetoinflationordeflationButweareok.Ifthechangeinpricelevelisnottoodramatic,weholdthestable-of-monetary-unitconcept.Otherwise,everyaccountwillhavetobeadjustedeveryquarter.Stable-of-monetary-unitconcep94Conservatismprinciple

Thetensionbetweencreditorsandshareholdersandthetensionbetweenshareholdersandmanagementdictatethataccountingisconservative.Reportbadnewsinfinancialstatementsasearlyandascompleteaspossible;reportgoodnewsinfinancialstatementsonlyaftertheuncertaintysurroundingthegoodnewsisresolved.Conservatismprinciple

Theten95Conservatismprinciple-examplesResearchanddevelopmentexpendituresAdvertisingexpenditureOtherpromotionexpendituresRelationshipbuildupcostsAlltheseexpenditureswilllikelygeneratefuturebenefitsforthefirm.Buttheyareexpensed,notcapitalizedasassetsonbalancesheetbecausetheirbenefitsareuncertainandhardtom