Fundamentals of Financial Reporting and Analysis - Harvard Business School MBA Program

Fundamentals of Financial Reporting and Analysis

Course Number 1388

Professor David F. Hawkins
Fall; Q1Q2; 3 credits
24 Sessions
Project

Career Focus

Any student who anticipates using financial statements ("financials") to pursue business opportunities, and manage business entities within the context of the increasing globalization of commerce and finance, should find this course extremely useful. Since most countries including the United States of America either have or plan to adopt or converge with International Financial Reporting Standards ("IFRS"), the course is also useful to those students anticipating careers with either a global or a particular country orientation, including the U.S.A. The course is also useful to those students who simply want to expand their knowledge of IFRS and US-Generally Accepted Accounting Principles (US-GAAP) and enhance their ability to analyze financial statements.

Course Objective

The course's objective is to prepare students for success in the globalization of the world's economies by enhancing the student's ability to read, analyze and use financial statements prepared using either IFRS or US-GAAP.

Course Content and Organization

The course content and organization is built upon several themes. The first theme is in order to understand financial statements prepared using US-GAAP the user must appreciate the influence on US-GAAP of the attempts of the International Accounting Standards Board and the US Financial Accounting Standards Board to converge IFRS and US-GAAP. The second theme is to competently use financial statements in a global context the user must appreciate that while IFRS may be global in adoption its application in practice can be significantly influenced by local. This second theme leads to the third theme. Namely, when analyzing IFRS or IFRS converged based financial statements of individual companies, the analyst must have an appreciation of both where the reporting company's country's accounting standards stand in their evolution from legacy GAAP to possible full adoption of IFRS and the institutional forces influencing this evolution and its application in practice.

Using case discussions, lectures, technical notes, and exercises, the course will sharpen students' ability to analyze financial statements in a global context beyond using simple ratio analysis. In the process of analyzing financial statements, the student's knowledge of IFRS/US-GAAP will be expanded beyond the level achieved in FRC.

A typical class discussion will cover some aspect of IFRS or US-GAAP as it applies, in whole or part, to a particular issue involving a decision faced by a financial analysts or manager and, in some cases, regulatory authorities. Particular IFRS and US-GAAP covered includes, but is not limited to, accounting for consolidated financial statements, hedges, operations in different currencies, off balance sheet entities, hybrid securities, inflation, deferred taxes, revenue recognition, investments, business acquisitions, and complex financial structures. Other topics covered include the measurement of earning per-share; the politics of implementing IFRS at the global, regional, and country level; the role of global and local audit firms and local regulators in monitoring the quality of financial statements prepared using IFRS or one of its local variations and US-GAAP; and the potential influence of a country's pre IFRS adoption of accounting standards and practices ("legacy GAAP") on its post IFRS adoption reporting practices. Financial analysis topics included accounting risk assessment and quality of earnings determinations. The course grade is based on class participation and a final paper or exam.

There are no prerequisites for the course.