Indian Institute of Management Calcutta

Programme: MBA

Name of the Course: Corporate Financial Reporting and Analysis

Core / Elective : Core Cap (for Elective) : Not Applicable

Credit: 3 Credits

Academic Year & Term: 2022-23, Term-I

Course Coordinator: Prof. Arpita Ghosh

Email: [email protected]

Instructor: Prof. Arpita Ghosh (Sessions 1–20 for two sections)

Affiliation: IIM Calcutta (Finance & Control Group)
Email: [email protected]

Instructor: Prof. Manju Jaiswall (Sessions 1– 20 for two sections)

Affiliation: IIM Calcutta (Finance & Control Group)
Email: [email protected]

Instructor: Prof. Sudhir S. Jaiswall (Sessions 1– 20 for two sections)

Affiliation: IIM Calcutta (Finance & Control Group)
Email: [email protected]

Introduction to Course /Course Description

Corporate financial reports are an important source of economic and financial information about a company for
its investors and other stakeholders. Companies prepare financial statements, which form the core of the annual
report, based on generally accepted accounting principles (GAAP). Accounting is viewed as the business
language used by companies to communicate with investors. Business managers need to understand this language
and, in addition, know how their decisions impact the firm’s financial statements. They should be able to analyze
the financial statements and assess their firm’s performance vis-a-vis the competition, as well as evaluate the
financial strengths and weaknesses of its vendors and customers.
This is the first course in accounting. It focuses on financial statements, accounting policies, and financial
analysis. The learning in each session would depend crucially on ideas introduced in previous sessions.

Course Objective and Key-takeaways from the course

Course Objective: The objective of the course is to enable the students

• learn the mechanics & the process of recording transactions,
• acquire the conceptual understanding and technical skills needed to prepare, understand, and analyze
corporate financial statements and some important disclosures, appearing in the Annual Reports of the
companies, and
• gain an application-based understanding of domestic as well as international GAAPs

Key-takeaways: At the end of this course, students should understand:

• The basic structure of balance sheet, profit and loss statement, and cash flow statement.
• The process of recording transactions and preparation of financial statements
• The nature of items that usually appear in corporate financial statements
• Generally Accepted Accounting Principles
• Analysis of financial statements

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Programme Level Learning Goals: The course aims to help students achieve the following learning goals and
objectives:

Goal 1. Critical Thinking Skill [1 (a & b)]: Attain knowledge in the functional area of financial accounting as
well as the ability to think critically and apply the skills acquired to identify, appraise and arrive at reasonable
conclusions to accounting problems in organizations
• Objective a: Attain theoretical and practical understanding of the financial accounting concepts
• Objective b: Develop critical thinking ability through analytical treatment of important contemporary
problems and issues related to financial reporting. For example, critically think about the effect of choice
of accounting policies on usefulness of financial statements
Goal 2. Acquiring Ethical Values [2 (b)]: Ability to recognise and handle ethical issues related to financial
reporting.
• Objective b: Understand the issues of ethical importance specific to misuse of accounting discretion
leading to window-dressing of the financial statements

Goal 3. Acquiring Global Perspective [3(b)]: Develop an understanding of the contemporary financial reporting
issues with a global perspective
Objective b: Acquire the ability to understand and comprehend financial reporting issues and practices
prevalent in international arena. For example, the course uses two textbooks – one US GAAP based and
the other IndAS based (primarily, in line with IFRS). It also involves case discussions, textbook and real-
life examples involving some of the accounting issues in international context.

Goal 4. Communication Skills [ 4 (a, b & c)]: Develop their capacity to articulate thinking and ideas through
verbal and written communications, at a managerial level
• Objective a: Acquire the ability to organize the thought process about presentation of financial
statements and evaluation thereof
• Objective b: Demonstrate the understanding of corporate communication through annual report in
analyzing financial strengths and weaknesses of a company
• Objective c: Acquire the ability to articulate the findings of ‘Financial Statement Analysis’ of real-
life companies in a coherent and structured written format (a two-page executive summary and a
detailed report) towards building a managerial case for financial decisions

Goal 6. Problem solving skills [6 (a)]: Acquire capacity to apply their professional knowledge and skills to
diagnose and resolve business problems in actual organizational settings
• Objective a: Acquire the ability to identify accounting related problems in both real life settings
(for several Indian Companies) and through simulated situations (in HBS and IIMC cases)

International Components in your course (if any)

The international component of the course comes from use two textbooks – one US GAAP based and another
IndAS based (primarily, in line with IFRS). It also involves case discussions, textbook and real-life examples
involving some of the accounting issues in international context.

Pre-requisites: None
Required Textbook(s)
• Pre-Midterm: “Financial Accounting – Tools for Business Decision Making”, Kimmel, Weygandt, &
Kieso, International Student Version, Wiley Publications, Seventh Edition [KWK]
• Post-Midterm: “'First Course in Financial Accounting for Business Managers”, Asish K. Bhattacharyya,
Platinum Publishers. [AKB]

Recommended Textbook(s): None

Pedagogy: Lectures, Discussions of Cases and Analysis of Financial Statements

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Course Pack Distribution to students: Course material (if required) will also be issued from the Programme
office
• Textbooks: KWK and AKB
• Richie Advisors Pvt Ltd
• Chemalite, Inc. (HBS)
• Ayman Bose: Accounting for PPE under Ind AS (IIMC)
• Soft Copies of Annual Report of two Indian Companies: Asian Paints and Infosys

Technology enabled learning component for your course:

• The Technology enabled learning component of the course comes the students using various IT-
enabled analytical tools, techniques and methods for collecting and analysing data for solving problems
of ratio analysis, horizontal and trend analysis, towards better understanding of financial performance
and position of business.

Evaluation Components
Components Weightage
Two Quizzes*: 20%
Mid‐term examination 30%
End‐term examination 30%
Project: 20%

*Any student who misses the quiz (even on health ground) would be given a chance of appearing for re-quiz at
the time of reexam/makeup exam. However, the marks obtained in such a re-quiz would be degraded by 30%
while calculating his/her final score for grading.

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Session Plan

S No. Topic Intended learning outcome References

1&2 Introduction & Accounting Equation The student should be able to: Reading: KWK Chapter 1
a. Users & Principal Uses of Accounting a. Identify Users & Principal Uses of Accounting (thorough), 3 (Only
b. Classification of Business Transactions b. Classify business transactions into three broad categories: Learning Objectives 1 & 9
c. Qualitative characteristics of Operating, Investing or Financing on pages 84‐92 & 110‐111)
Accounting Information c. Understand qualitative characteristics of Accounting Information
Problems: KWK Chapter 1:
d. Accounting Cycle d. Understand Accounting Cycle & Process
E1‐15, E1‐16; Chapter 3:
e. Basic Accounting Principles e. Understand Accounting Principles and Concepts: Separate Entity,
BE3‐2, E3‐4
Assumptions and Concepts Going Concern, Money Measurement, Accounting Period,
f. Basic Accounting Equation Materiality, Realization, Matching, Conservatism, Historical Cost,
g. Elements of Financial Statements Fair Value, Cash & Accrual Accounting, Event and Transaction CASE: Richie Advisors Pvt Ltd
f. Explain the meaning of Assets, Liabilities, Equity, Income,
Expenses, Dividend, and Retained Earnings
g. Apply Accounting Equation to explain the impact of transactions
on Income, Expenses, Assets, Liabilities and Equity

3, 4 & 5 Accounting Mechanics The student should be able to: Reading: KWK Chapter 3
a. Account a. Understand which accounts are affected in a transaction (Only Learning Objectives 2‐8
b. Effect of a transaction on Accounting b. Understand and apply the rules of debiting and crediting an on pages 92‐110), 4(thorough)
Equation account
c. The Rules of Debit and Credit c. Pass journal entries of transactions (both cash and credit Problems: KWK Chapter 3:
d. Steps in Accounting Cycle – transactions) under accrual accounting. BE3‐8, P3‐5A; Chapter 4:
Journalizing, Ledger Posting, Passing d. Prepare adjustment and closing entries under accrual accounting. BE4‐1, E4‐13, P4‐7A
Adjustments and Closing entries, e. Prepare Ledger Accounts. CASE: Richie Advisors Pvt Ltd
Preparing Trial Balance f. Prepare an initial Trial Balance, Adjusted Trial Balance and Post-
e. Basics of adjusting entries and closing closing Trial Balance
the books

6, 7 & 8 Preparing and Understanding Income The student should be able to: Reading: KWK Chapter 5
Statement a. Prepare an Income Statement (thorough), Chapter 4 (review).
a. Income statement: Single-step and b. Distinguish between single-step and multi-step income statement
Multi-step c. Know the difference between Product Cost versus Period Cost
b. Product Cost versus Period Cost d. Understand and compute following items:
c. Different line items in multi-step i. Net Sales
Income Statement like Net Sales ii. Cost of Goods Sold

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S No. Topic Intended learning outcome References
COGS, Gross Profit, Operating iii. Gross Profit Problems: KWK Chapter 4 = E4‐6;
Profit, EBIT, Net Profit iv. Operating Expenses Chapter 5 = E5‐7, E5‐8, P5‐5A,
d. Deferred and current tax v. Operating Profit BYP5‐6
e. Earnings Per Share vi. Non-Operating Incomes, Gains, Expense & Losses Ethical Issues: BYP4-8
f. Indian format of Income Statement vii. Earnings before Interest and Taxes (EBIT)
viii. Finance Charges Handout (the format as per Schedule
ix. Earnings before Taxes (EBT) III Division II of the Companies Act,
x. Tax Expenses (Current tax and Deferred tax) 2013)
xi. Net Profit, Profit After Taxes (PAT), or Profit/Loss for the
period Asian Paints & Infosys ‐ Standalone
xii. Basic and Diluted EPS Income Statement & its Notes.
e. Know the format of the Statement of Profit & Loss as per
Schedule III (Division II) of the Companies Act, 2013.
Understand the standalone Income Statement of Asian Paints & CASE: CHEMALITE INC. (HBS)
Infosys.

8, 9 & Preparing and Understanding Balance The student should be able to: Reading: KWK Chapter 2
10 Sheet i. Prepare Classified Balance Sheet (thorough), Chapter 3
a. Elements of Balance Sheet ii. Understand and compute following items: (review), 4 (review), and 5
b. Classified Balance Sheet iii. Total Assets - Current & Non-current (review)
c. Assets & Liabilities: Current & Non- iv. Property, Plant, & Equipment (net)
current, Financial & non-financial v. Receivables net of Allowance for Doubtful Debt Problems: KWK Chapter 2 = E2‐5,
d. Shareholder’s Equity – Equity Share vi. Financial Assets E2‐8, P2‐3A; Chapter 3 = P3‐3A
Capital, Other Equity (Reserves & vii. Current Assets & Liabilities, Net Working Capital
Surplus), Bonus Share, Buyback, and viii. Total Liabilities - Current & Non-current
Stock Split ix. Financial Liabilities
e. Schedule of Property, Plant and x. Total Borrowings (Short-term Borrowings, Current Maturities Handout (the format as per Schedule
Equipment of Long-term Borrowings, Long-term Borrowings, III Division II of the Companies Act,
f. Net working Capital Preference Share Capital) 2013)
g. Indian format of Balance Sheet xi. Total Equity (Equity Share Capital, Other Equity/Reserves &
Surplus, Equity Shares, Bonus Shares, Stock Split and Asian Paints & Infosys ‐ Stand Alone
Equity Share Buyback) Balance Sheet & its Notes.
a. Know the format of the Balance Sheet as per Schedule III CASE: CHEMALITE INC. (HBS)
(Division II) of the Companies Act, 2013.
b. Understand standalone Balance Sheets of Asian Paints & Infosys

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S No. Topic Intended learning outcome References
11, 12 & Financial Statement Analysis ‐ Tools & The student should be able to: Reading: KWK Chapter 13
13 Application a. Prepare and Interpret Trend Analysis and Common Size (thorough)
a. Comparative Analysis: Horizontal & Statements Handout on Ratios
Vertical b. Calculate and Interpret Financial Ratios
b. Ratio Analysis: Liquidity, Efficiency, i. Cost Structure and Profitability Ratios Problems: KWK Chapter 10
Profitability, solvency, market-based ii. Efficiency or Turnover Ratios BYP10‐4; Chapter 13 P13.3A,
c. DuPont Analysis iii.Leverage or Solvency Ratios P13.5A, BYP13.7
d. Assessment of financial performance iv. Liquidity Ratios
& health of companies – across time, v. Market based ratios Ethical Case :BYP10.9
over the periods vi. Perform DuPont Analysis of ROE
c. Discuss and explain the change in financial position and Financial
Performance of a company

13 to 16 Preparing, Understanding & Analyzing The student should be able to: Reading: AKB Chapter 5
Cash Flow Statements a. Classify cash flows into Operating, Investing or Financing flows
a. Usefulness & Format of Cash Flow b. Understand and compute Cash and Cash Equivalents (C&CE)
Statement (Indian format) c. Compute Cash Flow from Operating Activities under Indirect
b. Cash and Cash Equivalents Method
c. Classification cash flows into d. Compute Cash Flow from Operating Activities under Direct Problems: AKB Chapter 5 -
Operating, Investing or Financing Method 5C.1, 5F.3, 5F.4, 5F.7 & 5F.9
flows i. Cash collected from Customers
d. Cash Flow from Operating Activities: ii. Cash paid to Supplier of inventory Self-study: AKB Chapter 5 -
Indirect & Direct Method iii. Cash paid for Conversion Costs & Operating Expenses Review problems : R5.1 to R5.5
e. Cash flow from Investing Activities iv. Cash paid for Income Taxes
f. Cash Flow from Financing Activities e. Compute Cash flow from Investing Activities
g. Use of Cash Flow Statement to i. Capital Expenditure
evaluate a company ii. Proceeds from Sale of Fixed Assets
iii. Receipt of Investment Income (Interest & Dividend
Received) Asian Paints and Infosys ‐ Standalone
iv. Cash used to Purchase of Investments Cash Flow Statement
v. Proceeds from Sale of Investments
f. Compute Cash Flow from Financing Activities
i. Payment of Interest
ii. Proceeds from Issue of Borrowings
iii. Retirement of Borrowings
iv. Dividend & Dividend Taxes Paid
v. Proceeds from Issue of Equity Shares
vi. Cash used to Buy Back of Equity Shares
g. Analyze Cash Flow Statement to evaluate a company

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S No. Topic Intended learning outcome References
16 to 19 Accounting for Property, Plant, & The student should be able to: Reading:
Equipment (PPE) – a. Understand the provisions for ascertaining the historical cost of AKB Chapter 8 (pages 316-333
a. Accounting for Acquisition, Property, Plant, & Equipment (PPE) and compute the historical until cost model, 336-346 until
Depreciation, Impairment, and cost. evidence available from internal
Disposal b. Understand the provisions for Depreciation and Amortization and reporting, 348 from key concepts
b. Operating Versus Financial Lease compute Depreciation on PPE (SLM & WDV only). – 361)
c. Presentation in financial statements c. Understand the provisions for impairment of PPE and compute Exclude: Revaluation model,
d. Impact on Ratios impairment loss & reversal of impairment loss. sum-of-the-years digits method,
d. Understand the provisions for PPE retirement / disposal and depletion, impairment loss & its
compute Gross Block, Net Block, and the gain or loss on reversal for a cash generating
retirement / disposal. unit.
e. Differentiate between Operating and Financial Lease; explain
Right of Use assets, their initial and subsequent measurements AKB Chapter 9 (pages 368-377)
from the point of view of a lessee; compute their capitalized
value, lease liability, and interest expense over the years in the CASE: AYMAN BOSE: Accounting
books of the lessee. for PPE under Ind AS (IIMC)
f. Ascertain the impact of all the above on financial statements and
ratios. Problems: AKB Chapter 8-
8F.6, 8F.9, 8F.12

Self-Study : AKB Chapter 8-

Problem 8A.1 – 8A.10

20 Inventory Reporting and Analysis The student should be able to: Reading:
a. Classification and determining a. Understand and apply the provisions on Inventory accounting AKB Chapter 9 (pages 380-391)
inventory i. Understand and apply Inventory Costing methods: FIFO, KWK Chapter 6 (pages 236 ‐ 250)
b. Perpetual and Periodic Inventory LIFO, & Weighted Average Cost methods
system ii. Know the difference between FIFO and LIFO Problems: AKB Chapter 9 –
c. Inventory Costing under FIFO, LIFO, iii. Ascertain the value of COGS and Closing Inventory 9F.8, 9F.10, 9.F11, 9F.13
& Weighted Average Cost methods a. Ascertain the impact of all the above on financial statements and
d. Inventory Valuation Methods ratios. Self-Study :
e. Presentation in financial statements KWK problems - E6.5, E6-15
a. Impact on Ratios AKB 9F.6

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 Mapping for Corporate Financial Reporting and Analysis with Programme Level Goals

Goal 1 Goal 2 Goal 3 Goal 4 Goal 6

Acquiring Acquiring Global Ability to Problem
Critical Thinking
Ethical Perspective Articulate Solving
Values

Corporate Corporate Corporate

Corporate Corporate
Financial Financial Financial
Financial Financial
Reporting and Reporting Reporting and
Reporting and Reporting and
Analysis and Analysis Analysis
Analysis 1 (a & b) Analysis 3(b)
2(b) 4 (a, b & c) 6 (a )

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 Reference Document

Aim & Objectives of the Post Graduate Programme: The overall goal of the PGP is to produce world-class
management professionals with a global perspective who are competent to lead and transform organisations anywhere
in the world. . Our students would:

Learning Goals
1. Possess state-of-the-art knowledge of theory and practice in all functional fields of management and
the ability to think critically, and apply them to diagnose and find solutions to organisational
problems, even in unfamiliar or uncertain situations

Learning Objectives
Our students would be able to :
a. Attain theoretical and practical understanding of the functions and processes involved in managing an
organization
b. Develop critical thinking ability through analytical treatment of important contemporary problems
and issues
c. Acquire the ability to design approaches and use relevant models and tools to analyse situations and
solve practical business problems
d. Acquire the ability to persuasively recommend managerial solutions issuing from the process of
decision analysis applied on managerial situation/s
e. Acquire the ability to present a structured analysis of managerial situation/s using various strands of
interpretations

2. Develop and apply ethical values to analyse and solve organisational problems
Learning Objectives
Our students would be able to :
a. Understand the realm of ethics ( morality, values, ethos) and its importance to society
b. Understand the issues of ethical importance specific to the domain of business
c. Understand the role of manager/leader as an ethical individual and as a professional
d. Understand the need and importance of institutionalizing Ethics within the organization
e. Develop an understanding of corporation’s duty to all the stakeholders
f. Acquire the ability to appreciate the necessity of ethical practices for sustainable growth and
profitability

3. Develop a global perspective that is built upon knowledge of economic, technological, regulatory and
political forces that are shaping a new international order in the 21st century
Learning Objectives
Our students would be able to :
a. Familiarize with global factors/phenomenon affecting the business scenario
b. Acquire the ability to understand and comprehend issues and practices prevalent in the international
arena
c. Develop competence in analysing changes in international and domestic environment
d. Respond to such changes through appropriate organizational decisions

4. Develop their capacity to articulate their thinking and ideas through verbal and written communications, at
a professional (manager/consultant) level and to deliver the same
Learning Objectives
Our students would be able to :
a. Acquire the ability to organize the thought process
b. Demonstrate understanding of main points
c. Acquire the ability to articulate the findings in a coherent and structured format to build a managerial
case analysis
d. Acquire the ability to customize messages/ solutions for diverse managerial situations
e. Acquire the ability to deliver a professional quality formal presentation by exhibiting clarity and
appropriate pace, coherent structure, credibility, effective use of visual aids, appropriate body

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 Learning Objectives
language

5. Be able to appreciate the dynamics of Information Technology acquisition and absorption by present day
business organizations and develop ability to use modern IT enabled decision support tools for improved
understanding of business

Learning Objectives
Our students would be able to :
a. Acquire the ability to learn various IT-enabled analytical tools , techniques and methods for solving
problems
b. Acquire familiarity of methods for comparing different state-of-the-art computing platforms
c. Acquire the ability to use appropriate analytical techniques in a case setting to identify possibilities of
deploying Information Technology for competitive advantage
d. Acquire competence in use of IT tools in modelling managerial decision making situations

6. Acquire capacity to apply their professional knowledge and skills to diagnose and resolve business problems
in actual organizational settings
Learning Objectives
Our students would be able to :
a. Acquire the ability to identify organizational problems in both real life settings and through simulated
situations
b. Acquire the ability to interpret and apply knowledge of concepts
c. Acquire the ability to design appropriate responses to solve identified problems by using appropriate
tools, techniques & framework taught in courses
d. Acquire the ability to apply structured analytical thinking to solve an organizational problem

7. Acquire the leadership qualities and the competence needed for leading organizational change
Learning Objectives
Our students would be able to :
a. Understand the theories of leadership
b. Understand the theories of organizational change
c. Demonstrate understanding of complex human issues arising from the implementation of change
d. Understand individuals’ and groups’ behavior and motivation

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