|| AC31010 |
|| FINANCIAL STATEMENT ANALYSIS |
|| 2006/2007 |
|| Professor Kevin M P Holland |
|| Semester 1 |
|| AC32920 |
| Course delivery
|| Lecture || 15 Hours. |
|| Seminars / Tutorials || 5 Hours. |
|Assessment Type||Assessment Length/Details||Proportion|
|Semester Exam||2 Hours ||100%|
|Supplementary Exam||2 Hours Students may, subject to Faculty approval, have the opportunity to resit this module, normally during the supplementary examination period||100%|
After completing this module students should be able to:
examine the use of financial information data for evaluating corporate performance,
understand the factors that help to explain a firm's choice of accounting policies and discuss their implications for earnings management,
evaluate the techniques and limitations of cross-sectional and time series analysis and discuss their application for evaluating corporate performance including the prediction of corporate failure,
understand the relationship between accounting information and share prices.
This module focuses on the role of corporate financial information in assisting external decision makers i.e. economic agents external to the firm concerned. An important element of the available information concerns performance. However, measuring a company'r performance is a subjective process. In exercising judgment prepares of financial reports can also be subject to a number of economic incentives which can introduce bias into the reporting process. The resulting outcome of the reporting process can therefore represent a trade off between the incentives of the information producers and the needs of external decision makers. This can be problematical because, by definition, external decision makers may be unable to observe directly the processes and judgements involved nor always observe the incentives facing prepares.
This module examines:
the information demands made on firms and the incentives they face in responding,
the methods external users can employ in analysing financial information,
the contrasting information relevance and valuation roles for financial information, and
the consequences of the incentives facing the various parties involved on the financial reporting process
The module content is delivered in five sections covering:
1. Factors influencing the demand and supply of financial information.
2. Cross sectional and time series analysis of accounting data including earnings prediction and event prediction
3. The theoretical and empirical relationship between accounting earnings and returns
4. Factors influencing accounting policy choice and earnings management
5. The valuation relevance of financial statement information including methods and implications.
Students taking this module will have the opportunity to develop and practice a wide range of transferable skills. In lectures students will develop listening and note taking skills. In preparation for tutorials students will develop their reading, note taking, analytical, independent research, writing and IT skills. Tutorial discussions will help students to develop their listening, explaining and debating skills, as well as team work and problem solving. The examination will test students' analytical and writing skills under time constaints.
** General Text
In addition to the above texts students are required to read a number of articles. A full reading list and module outline is available via Blackboard (http://alto.aber.ac.uk)
and will be distributed in the first lecture
Barker, Richard Determining value : valuation models and financial statements
Mulford, Charles The Financial numbers game : detecting creative accounting practices
Rees, William Financial Analysis
2nd edition. Prentice-Hall 0132882833
Scott, William R. Financial Accounting Theory
3rd edition. Prentice-Hall 0130655775
Watts, Ross L. Positive Accounting Theory
This module is at CQFW Level 6