Course Outline Winter 2016

Financial Statement Analysis ACCT 354

Instructor:
Office:

Zvi Singer
Bronfman 334

Email: zvi.singer@mcgill.ca
Phone: (514) 398-6240

Class Schedule:
Section 1 5617 Monday and Wednesday 1:05 2:25 pm, Room 046
Section 2 4597 Monday and Wednesday 2:35 3:55 pm, Room 045
Office Hours: Monday and Wednesday 4:00 5:00 pm, or by appointment
Course Overview and Objectives: The main purpose of the course is to teach you the
processes and methods of financial statement analysis by which users extract
information to answer questions about the firms performance. This course takes an indepth look into financial statements and shows how information therein can be analyzed
and processed to assist various stakeholders (investors, managers, regulators, etc.) in
their business decisions. The course will help you to discriminate substance from form of
corporate financial reports, including assessing the impact of alternative accounting
methods, management biases and stakeholder interests in the analysis and valuation of
the firm. The course uses cases and real world examples to convey the material and to
highlight important issues.
Course Prerequisites:
MGCR 211, Introduction to Financial Accounting, MCGR 341, Finance 1
Course Evaluation:
Homework (4 individual cases; no more than 1 per topic)
Participation
Midterm Exam (Friday February 26)
Term Team project (Due April 20)
Term Team project presentation (last week, April 11&13)
Final Exam (during final exam period, TBD)
Total

5%
5%
30%
15%
5%
40%
100%

Right to submit written work in English or French: In accord with McGill Universitys
Charter of Students Rights, students in this course have the right to submit in English or
in French any written work that is to be graded.
Academic Integrity: McGill University values academic integrity. Therefore all students
must understand the meaning and consequences of cheating, plagiarism and other
academic offences under the Code of Student Conduct and Disciplinary Procedures

Acct 354 Outline Fall 2011

(see http://www.mcgill.ca/integrity/ for more information). Instructor generated course

materials (e.g., handouts, notes, summaries, exam questions, etc.) are protected by law
and may not be copied or distributed in any form or in any medium without explicit
permission of the instructor.
Role of Office Hours: Office hours are not meant just to answer material related
questions. You are welcome to review with me your progress on the project, discuss
learning strategies, etc.
Text (background reading):
International Financial Statement Analysis, 3rd edition, by Thomas Robinson, Elaine
Henry, Wendy Pirie, and Michael Briohahn. Wiley, 2015. ISBN: 978-1-118-99947-9. It is
available either through the bookstore or online. The Wiley ebook link is:
http://ca.wiley.com/WileyCDA/WileyTitle/productCd-1118999479.html
It is also available on Amazon and other online vendors.
This book is also useful for CFA Level 1 exams. A copy of this textbook will be on
reserve in the library: http://mcgill.worldcat.org/oclc/779740486.
Reference Texts:
Financial Accounting: A Users Perspective Fifth or Sixth Canadian Edition, by
Hoskins, Fizzell, and Cherry. (Textbook from BCom, Introduction to Financial Accounting
course). A copy of this textbook will be on reserve in the library.
Class preparation, Class Participation and Homework:
Preparation: I will post the lecture slides in advance to mycourses. While I will cover
the slides I class, I may rush over some of them at times. I expect you to have made a
first read of the slides before coming to class.
The last page of the course outline entails the class schedule. The most right column
lists mini-cases we will discuss in class. You need to read them before class and come
prepared to discuss them. During class I will allocate time to discuss the questions of the
case in groups. Time should be used to exchange your views regarding the answers to
the questions, not to familiarize yourself with the case. Except for the first case, I will not
bring copies to class.
Class participation: It is important to attend classes. The class is composed of lectures
and class discussion of examples to highlight key concepts and clarify areas of difficulty.
Attendance is not mandatory, but class participation is assigned 5% of the grade, and it
is impossible to participate without attending class. Participation will be evaluated on
both quantitative and qualitative dimensions.
Homework (mini cases): You need to submit individual written answers to 4 of the
cases. You can only choose one case per topic (some topics will have more than 1 mini
case). Homework may NOT be done in groups or pairs. Homework will be graded on
effort and completeness base. Points will not be deducted for wrong answers.
Homework is due in the beginning of class the topic is discussed.
Term project
Students will be asked to analyze the financial statements of a publicly traded company
and write a report in teams of 3 or 4. The purpose of the report is to conduct a critical
assessment of the financial reporting practices of the company, adjustment to the
financial statements as appropriate, and a projection of the income statements for the
Acct 354 Outline Fall 2011

next 3 years. The report should be 8 to 10 pages long, plus numerical appendices &
graphs if needed. The information in the appendices should only complement the report,
and not be used to shift information from the report. For the report, each team should
first pick a public company to analyze. You should send me the information about the
team members and the company no later than Wednesday, Feb.24th. Feel free to come
and discuss with me potential companies. You may work with students from the other
section, but you need to make sure to be available for the project presentation if most of
the group members are from the other section.
Term project report format
1. The report should begin with executive summary, A 1-page overview of your paper,
your main findings and your conclusion.
2. Main body of the report should include the following components:
a. Industry and Competitiveness analysis
b. Business models and corporate governance analysis
c. An overview of the accounting policies
d. A critical assessment of the reporting quality of the balance sheet, income
statements, statement of cash flows, and the note disclosure
e. The analysis in (d) should lead to identification of some adjustments (at least 2) to
the financial statements.
f. Using the insight from (D) and (e) should lead to the projection of the income
statement for the next 3 years
g. Conclusion
Sections d-f should be the heart of the analysis.
Term project is due on Wednesday April 1 because term papers due dates must be
before the last 2 weeks of the end of the semester. None-the-less, I will accept late
submission with no penalties until April 11, the date of the first presentation.
Term project presentation
In the last week, each team will be asked to present its term project analysis in class,
using PowerPoint slides. Presentation should be of between 10 & 15 minutes. The
presentation must be conducted by all team members.
Exams
The midterm will be held Friday February 26. (closed-book, 1 double-sided formula
sheet).
The final exam will be held during the final exam period (closed-book with 1 formula
sheet allowed)
There will be NO make-up exams for students who miss the midterm. The weight of the
mid-term exam will then be transferred to the final exam.
Practice Problems:
Robinson text these are multiple choice type questions.
The suggested problems from Robinson & Hoskins are listed on Mycourse for each
Topic. Though the completion of the practice problems is not mandatory, they may be a
good way to understand and internalize the course material.

Acct 354 Outline Fall 2011

FSA Class Schedule Fall 2012

LECTURE
WEEK

1
2
3
4
5
6
7

TOPIC

Robinson
Chapt
er

Mini Cases

Jan.
7&11
Jan.
13&18
Jan.
20&25
Jan. 27
& Feb.1
Feb.
3&8
Feb.
10&15
Feb.
17&22

Introduction to FSA
Financial Reporting Environment
Income statement

Ch 1
Ch 3
Ch 4

King Digital Entertainment

Balance Sheet
Cash Flow Statement
Earnings Quality

Ch 5
Ch 6
Ch 11&17

IBM, Zynga, Game Shell

Financial Statement Analysis &

Corporate governance
Financial Information Credit &
Equity Analysis
Assets A/R, Inventory

Ch 7

Apple

Feb. 24
&Mar.7

Assets Long-lived Assets

Ch 9

Ch 12
Ch 8

AR: Bombardier vs. Rio

Tinto, Intel vs. Cisco
Inventory: Blackberry,
Tesla
Bombardier

Midterm Topics 1-8 Friday February 26 3-5 pm

Review tutorial TBD

Mar.
9&14

1
0
1
1
1
2

Mar.
16&21
Mar.
23&30
Apr.

1
3

Apr.
11&13

Feb. 29 Mar. 4 Reading Week Have Fun!

Investments & Consolidated
Ch 15
Demand Media
Financial Statements
Guest speakers: Gaby Merhi, Senior
Consultant, Deloitte, Alexandre
Duchesne, Partner, Deloitte.
Liabilities, Debt & Leases
Ch 10
Air Canada
Leases & Deferred Taxes

Ch 10, 13

Pensions

Ch 14

Pensions article

4
&
6
Term project presentations
Final Exam (Cumulative) - TBA

Acct 354 Outline Fall 2011