University Tees: Introducing fundamentals of management accounting in a small business

This case introduces sophomore-level managerial accounting students to pricing decisions. The case also offers an opportunity to discuss the concepts of business strategy, business risk, and cost drivers. Students draw on concepts such as relevant costing, breakeven analysis, and contribution format income statements to recommend price quotes for a small business.¹     

Financial accounting choice and earnings management

This paper presents a case that exposes students in graduate accounting or MBA financial accounting classes to the concepts of accounting choice and earnings management. In the case, students role-play as a manager who, facing conflicting incentives, must make and defend three expense estimates for a hypothetical company. Students also read selected business press articles that introduce earnings management and that highlight the importance of the issue to the business community. The articles give students some background from which to approach the choices they will make with respect to the financial statements.     

Financial accounting choice and earnings management

This paper presents a case that exposes students in graduate accounting or MBA financial accounting classes to the concepts of accounting choice and earnings management. In the case, students role-play as a manager who, facing conflicting incentives, must make and defend three expense estimates for a hypothetical company. Students also read selected business press articles that introduce earnings management and that highlight the importance of the issue to the business community. The articles give students some background from which to approach the choices they will make with respect to the financial statements.     

财务会计的本质、特点及其边界

为了指明财务会计的本质特点 ,我认为财务报表是财务报告的中心部分 ,而报表附注、其他财务报告等传送财务信息方法仅是次要的手段。在财务报表上确认的任何项目 ,都必须符合可定义性、可计量性、相关性与可靠性的特征。会计程序包括计量、记录和报告都必须以确认为基础。因此 ,财务报表的信息可以按真实和公允的要求来描述财务业绩和现金流量。财务会计的基本职能既不试图提供可能的未来的信息 ,又不产生非财务信息。财务会计的主要目的是通过它的报表反映一个企业经济活动及其结果的真实图像。结论 :财务会计作为一门学科是历史科学 ;作为一项实务是一个信息系统 ,它的任务是为企业提供历史的财务信息。     

Tell me a story: Using creative writing in introductory accounting courses to enhance and assess student learning

Low student motivation, apprehension and anxiety towards accounting, and diversity in learning styles are a few incentives for employing non-traditional tools for teaching introductory accounting courses. Three modes of storytelling – fairy tales, fables, and poetry – are used in financial and managerial accounting courses to enhance and assess student learning. We find the storytelling exercises give us good insight as to whether students genuinely understand course content. Students indicate that storytelling helps them to understand accounting concepts and make the course more fun. Assignment outcomes have been used at conferences and campus events and have generated conversations about accounting beyond business faculty.     

Introducing XBRL through a financial statement analysis project

In this project, we introduce business and accounting students to the application of eXtensible Business Reporting Language (XBRL) through the use of interactive data. Students study the basic concepts and potential benefits of interactive data and XBRL. Students learn to extract the financial reports of two companies in the same industry. Then, using traditional financial analysis techniques (ratio analysis) students can compare the performance of these companies. Thus, the project accomplishes two important objectives: it introduces students to the benefits and features of XBRL-tagged financial reporting and interactive data, and it shows how this medium can be used to facilitate the analysis of financial statements. The project uses free, publicly available interactive data tools to accomplish these objectives.This project is appropriate for any level of financial accounting course in which students use public company financial statements to generate financial ratios and conduct analysis on them. We aim the project at MBA-type introductory accounting courses. In addition, we show how it can easily be expanded to be applied to higher level financial statement analysis courses, both at the undergraduate and graduate levels. The project provides some background into how XBRL-tagged financial reporting is generated, while the main focus is on application of interactive data and not the technology itself. Since XBRL is now mandated by the US Securities and Exchange Commission (SEC) for most reporting entities, it is critical for today’s business students to be familiar with this method of communicating financial information.     

Accounting Regulation and Management Discretion—A Case Note

This article explores the manipulation of published financial reports in order to counter the potentially unfavourable impact of newly introduced regulation. In this case the reported capital ratio of a major British building society was enhanced using a sale and leaseback transaction with a related party and a change in depreciation policy, methods which reflected limited alternatives. Analysis of the case is set in the context of the sector and addresses the questions of whether these manipulations were within then‐prevailing generally accepted accounting principles and why, despite disclosure in the society's financial statements, they failed to attract public comment or concern, regulatory action or an audit qualification. In examining a major British mutual financial organization we depart from traditional analyses of managerial discretion in accounting choices in British companies.     

Solving an international corporation’s travel dilemma

This instructional case, using the New Hampshire subsidiary of a London-based company, examines a financial reporting manager’s actual role in minimizing corporate travel expense and the related record keeping necessary to ensure ISO 14001 compliance. Students must use both quantitative and non-quantitative data to evaluate several alternatives while considering corporate policy ramifications of their ‘accounting’ decision. This case is designed primarily for the introductory managerial accounting course; and if used early in the semester, will reinforce course vocabulary. In addition, the case can be used later in the semester to provide a realistic application illustrating relevant costing and decision-making.     

Accountants for the Public Interest: strategy implementation and performance measurement for a nonprofit organization

This case describes strategic issues and the operations of Accountants for the Public Interest (API), a national organization that is dedicated to making volunteer accounting services available to financially disadvantaged individuals and nonprofit organizations. API is a well-known nonprofit organization that receives financial support from the accounting profession. In addition to discussing strategic decisions facing API, the case covers performance measurement topics commonly integrated in managerial and cost accounting courses. API's Board of Directors (BOD) must make important strategic planning and implementation decisions during a period of change. One Board member has suggested using performance measures to assess API's progress in implementing strategy and achieving goals. Students are asked to develop financial and nonfinancial measures relevant to API's strategy and to show how their suggested measures would appear in a balanced scorecard. Whether CPAs should be obligated to provide volunteer accounting services to the community is another issue that the case requires students to address.     

Forrest gump—Accountant: A study of accounting in the motion picture industry

This case is designed to be used in a junior/senior level cost/managerial course or an MBA level managerial course. It provides instructors with the ability to address a wide variety of issues while demonstrating the interrelationships in the various sub-areas of financial, managerial and tax accounting. The entertainment industry is used as a backdrop where the instructor may cover any or all of the following topics: cost terminology, cost behavior, C-V-P analysis, compensation, control, overhead allocation, ethics, revenue recognition, tax recognition, matching, and valuation issues. The case can be used for individual assignments, but it is particularly well suited for a group assignment.     

Accounting in the fifth grade—is it too early?

This paper describes a project that teaches principles of accounting and Microsoft Excel to gifted and talented fifth graders. The course material was adapted from a college course usually taught at the sophomore level. Students learned about business transactions, financial statements, and business decision-making. Score differences on pretests and posttests showed learning at a statistically significant level (P<0.01). Fifth graders’ posttest scores were not statistically different (P>0.05) from college sophomores who took the same test. The importance of this project is that elementary age students can form very favorable impressions of accounting, which may be beneficial to the students and to the accounting profession. Almost all of the fifth grade students desired to learn more about accounting. This project is also an excellent opportunity to involve Beta Alpha Psi in a rewarding service experience.     

Academicians' and practitioners' views on the content and importance of the advanced financial accounting course

This study reports the results of a survey of accounting academicians and accounting practitioners in public and private accounting. The purpose of the study was to examine the content and importance of the advanced financial accounting course. The results indicate that most schools require the course for accounting majors and the topics most often covered are consolidations and business combinations, partnership accounting, governmental/nonprofit accounting, and foreign currency accounting. Regarding the respondents' perceptions of what should be covered in this course, academicians indicated that significantly more time should be devoted to consolidations and business combinations while accounting practitioners indicated that a broader range of topics should be covered in the course. Also, academicians are more in agreement with the statement that the advanced financial accounting course is a good indicator of students' analytical skills. The results of this study should be of interest to accounting departments that are reviewing their curricula and individuals teaching advanced financial accounting.     

Out-West Products, Inc.: A financial modeling and decision analysis case

The Out-West Products, Inc. instructional case requires students to build a comprehensive financial model to support planning and decision-making. Part 1 of this team-oriented Excel project requires students to construct a baseline model, while Part 2 provides sensitivity analysis and decision-making extensions. The case incorporates cost-volume-profit, accounting income versus cash flow, and benchmarking analyses. Case objectives provide students with a realistic financial modeling experience that includes: building models; linking data across financial statements; testing solutions and analyzing scenarios; and improving critical thinking skills. These objectives closely align to the AICPA Core Competency Framework for Entry into the Accounting Profession. The case can be used in introductory and upper-division managerial accounting, upper-division cost accounting, and MBA managerial accounting courses, and can be modularized to achieve instructor-specific objectives.     

Is Polaris a HOG? A Case Study*

The main usefulness of a general purpose financial statement centers on its comparability to the financials produced by an entity's competition. This case works for both undergraduate and graduate students because it offers comparisons between two well known recreation industry companies. Financial statement analysis is a lesson which serves as an appropriate capstone to financial accounting education. Analyzing the financial statements of competing entities explains “why” accountants must implement the intricate “how” which produces the statements and the resulting decision models such as ratios and common‐sized statements. Compared to previous generations, current students will be more responsible for managing their own retirement funds. This case can help students start to appreciate investment analysis by providing enough detail for any level student to conduct financial statement evaluations that make comparisons to find successful fundamental business strategies.     

The FASB exposure draft on accounting for business combinations and intangible assets: an instructional assignment

Accounting standards are constantly evolving to meet the needs of a rapidly changing business environment and changes in accounting theory. Accounting students need to be familiar with the content of Exposure Drafts, since these documents reflect the Financial Accounting Standards Board's (FASB) position on current financial reporting issues. Students are generally not well versed on the standard setting process and how contextual factors affect this process. The purpose of this instructional assignment is to enhance students' understanding of how contextual factors affect the standard setting process within the context of the Exposure Draft on “Business Combinations and Intangible Assets.” The assignment requires that students examine the Exposure Draft and answer questions designed to elicit responses as to why the FASB is considering a new standard and the impact the standard would have on current accounting procedures and financial statements.     

Capital markets research in accounting

I review empirical research on the relation between capital markets and financial statements. The principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the political process. The capital markets research topics of current interest to researchers include tests of market efficiency with respect to accounting information, fundamental analysis, and value relevance of financial reporting. Evidence from research on these topics is likely to be helpful in capital market investment decisions, accounting standard setting, and corporate financial disclosure decisions.     

Virtually Perfect Corporation*

This case provides an example of a high technology company that is expanding and is facing cash flow constraints. It details financial reporting issues relating to the company’s most recent set of financial statements. It requires students to assume the role of a newly appointed auditor, to prepare a report analyzing the key issues and to provide advice to the owners of the Company. Students are faced with a set of integrated financial accounting and reporting issues. The case incorporates some overview audit issues, but it is most suitable as a capstone case in intermediate financial accounting, for use in either undergraduate or MBA courses.     

Bach Music Inc.: Impact of Price Pressure,Capacity Constraints,and a Special Order on Management Decision Making

This case has been developed for an introductory management accounting course at the undergraduate and MBA levels. Although the setting is relatively simple, it illustrates several management accounting issues that are relevant to firms of every size that produce a product or service under competitive pressures and capacity constraints. The case also integrates several topics that are often viewed as abstract by the students. Specifically, it deals with the concepts around cost‐volume profit analysis in a realistic environment, the tension between short‐term and long‐term decisions, discounted cash flow analysis, the impact of managerial incentives and compensation on decision making and the impact of operating leverage on profitability. The case was used successfully several times in an introductory course at the MBA level. Surveys of the students reveal that the case has contributed significantly to their learning and has clarified the concepts introduced in the case.     

The Effect of Analysts' Adjustments in the Context of Loan Assessment

This paper demonstrates that improvements in the classification of loan default can arise through making simple accounting adjustments to the financial statements of small firms prior to calculation of ratios. However, the improvement in loan default classification exists only on a univariate basis. The adjustments do not increase default classification when a multivariate linear discriminant model is employed. The data base comprises commonly used financial ratios extracted from the financial statements of 40 small New Zealand businesses with manufacturing or distribution activities.     

Condominium Townhouse Investment

This accounting case involves the evaluation of various alternatives based on a real‐life personal property investment. The Condominium Townhouse Investment (CTI) case uses introductory management accounting concepts and analyses to introduce students to the case method of learning. The main concepts reinforced are relevant costs and revenues, including differentiating between opportunity and sunk costs. Students are not only asked to define and identify these items, but to consider choices centered on the decision alternatives in their role as accountants in public practice. This case is especially valuable because it offers students the chance to become engaged in an analysis and decision‐making situation that they can relate to both personally and professionally because, one day, they themselves are likely to become involved in a home ownership decision. The case focuses on real estate as a personal business investment, and requires both qualitative and quantitative analysis, with more emphasis on the qualitative aspect. In addition, the teaching notes include methods and strategies for students to use in an introductory managerial accounting class or level‐1 MBA class.