November 9, 2015

1. November 9, 2015 An Introduction to Managerial Accounting

2. What is Managerial Accounting? Your lecturer About you and why you are here Course outline and process Get started Today’s Agenda

3. The capture and analysis of information (financial and operational) that can be used to support the planning, executing and controlling of an organization Its audience is internal to the organization, as opposed to financial accounting, which addresses external audiences Managerial accountants provide the reports and analysis to help business leaders make decisions to maximize value over time What is Managerial Accounting?

4. Education BA in Economics, Dalhousie University, Halifax, Canada MBA in Finance and Accounting, University of Toronto, Canada Profession Principal in a Corporate Development partnership Mergers & Acquisitions, Financings, Restructurings ….. Experience CIBC, Ernst & Young, Celestica, Spar, independent clients Importance of Managerial Accounting to my role Critical to understanding the financial state of a business Provides a framework for forecasting A tool for optimizing a business (together with market analysis) Assess value of the business About Your Lecturer

5. This is a tremendous time for China … …. and as its future business leaders, a tremendous opportunity for you As participants in the global economy, my clients are very interested in doing business with China It’s a great opportunity for me to be here with you and share my experiences. I look forward to learning from you Why I am Here

6. Why Are You Here? • It is helpful for me to understand your motivations in order to best tailor the course to your needs. • Educational objectives? • Career objectives?

7. Objective: To provide a core understanding of managerial accounting, its techniques, calculations and analysis Text: Ray H.Garrison, Peter C. Brewer,& Eric W .Noreen, Introduction to Managerial Accounting, 6th Ed, McGrawHill 2012 Major subjects: Costs – types and behaviour Accounting Systems – types and circumstances Financial Forecasts/Budgeting Analysis for Superior Decision Making Lectures, Tutorials, Self & Group Study Course Outline

8. Assessment Course Outline

9. Attendance Lectures Tutorials Participation & Quizzes Answering questions in class and tutorials Asking questions in class and tutorials Homework completion Attendance, Participation, Quizzes

10. Subject matter: Chapters 1 to 7 Materials covered in class and tutorials Short answers and problem solving Emphasis on ability to apply judgment November 20, 2015 90 minutes Mid-Term Exam – 20%

11. You will be divided into groups Select a public company of your choice and submit financial statements Describe the company and explain why the company was selected; what kind of accounting systems might the company use? Write and present Together, we will simplify the accounts for modeling purposes Make your own assumptions and forecast/budget (I/S, B/S, C/F) for three years Conduct ratio analysis and draw conclusions about the company Each group is to present final results – Starting December 2nd Each individual is to select a role (CEO, CFO, Sales, Production Manager, etc) and present 5 - 10 minutes of observations Audience to prepare questions for presenters Submit and present final results – BEFORE presentation Case Study - 30%

12. Subject matter: Garrison/Brewer Chapters 1 to 13 Materials covered in class and tutorials Short answers Eg, definitions and/or fill in the blank Problem solving Applying knowledge to specific challenges Demonstrating an ability to apply judgment Friday – December 4, 2015 120 minutes Final Exam – 50%

13. Let’s Get Started • Objectives and Relevance of Managerial Accounting • Differences from Financial Accounting • Enterprise Risk Management • Corporate Social Responsibility

14. Planning Directing and Motivating Controlling Managerial Accounting Supports the Management Functions • Forecasting • Budgeting • Ordering • Hiring • Allocating resources • Compensation structures • Tracking to budget/ • Cost control • Exception reporting • Revisiting budgets

15. Comparison of Financial and Managerial Accounting

16. Classifying Costs • A good Managerial Accountant thinks and uses judgment to arrive at or develop the best approach to support decision making • This requires a deep understanding of costs and when to use the many classifications there are: • Period versus Product • Prime versus Conversion • Fixed versus Variable • Direct versus Indirect • Sunk Costs • Opportunity Costs • Differential Costs and Differential Revenue • Of course any cost item can fit into a number of these categories

17. Enterprise Risk Management

18. Enterprise Risk Management

19. Measurement Skills A good manager complements an understanding of strategy, risks, and business processes with data-driven analysis. The key to effective analysis is to understand that the question you are addressing defines what you measure and how you analyze the data.

20. Measurement Skills What net income should my company report to its stockholders? Measure and report historical data that complies with applicable rules. How will my company serve its customers? Measure and analyze mostly nonfinancial, process-oriented data. Will my company need to borrow money? Measure and analyze estimated future cash flows.

21. Measurement Skills Planning The primary purpose of this course is to teach measurement skills that managers use to support planning, controlling, and decision-making activities. Controlling Decision Making

22. Six Skills of an Effective Leader Technical competence High integrity Understand how to implement organizational change Strong communication skills Capable of motivating and mentoring other people Effectively manage team-based decision processes Leadership Skills

23. Code of Conduct for Management Accountants The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practiceconsists of two parts that offer guidelines for:  Ethical behavior.  Resolution for an ethical conflict.

24. IMA Guidelines for Ethical Behavior Recognize and communicate professional limitations that preclude responsible judgment. Follow applicablelaws, regulations,and standards. Maintain professional competence. Competence Provide accurate, clear, concise, and timely decision-support information.

25. IMA Guidelines for Ethical Behavior Do not disclose confidential information unless legally obligated to do so. Do not use confidential information for unethical or illegaladvantage. Confidentiality Ensure that subordinates do not disclose confidential information.

26. IMA Guidelines for Ethical Behavior Mitigate conflicts of interest and advise others of potential conflicts. Refrain from conduct that would prejudice carrying out duties ethically. Integrity Abstain from activities that might discredit the profession.

27. IMA Guidelines for Ethical Behavior Communicate information fairly and objectively. Disclose delays or deficiencies in information timeliness, processing, or internal controls. Credibility Disclose all relevant information that could influence a user’s understanding of reports and recommendations.

28. Follow employer’s established policies. For an unresolved ethical conflict: Discuss the conflict with immediate supervisor or next highest uninvolved managerial level. If immediate supervisor is the CEO, consider the board of directors or the audit committee. Contact with levels above the immediate supervisor should only be initiated with the supervisor’s knowledge, assuming the supervisor is not involved. IMA Guidelines for Resolution of an Ethical Conflict

29. IMA Guidelines for Resolution of an Ethical Conflict • For an unresolved ethical conflict (continued): • Except where legally prescribed, maintain confidentiality. • Clarify issues in a confidential discussion with an objective advisor. • Consult an attorney as to legal obligations.

30. Without ethical standards in business, theeconomy, and all of us who depend on it forjobs, goods, and services, would suffer. Abandoning ethical standards in business would lead to a lower quality of life with lessdesirable goods and services at higher prices. Why Have Ethical Standards? Ethical standards in business are essential for asmooth functioning economy.

31. Corporate Social Responsibility Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. Customers Employees Suppliers Communities Stockholders Environmental & Human RightsAdvocates CSR extends beyond legal complianceto include voluntary actions that satisfy stakeholder expectations.

32. Corporate Social Responsibility

33. Review • Objectives and Relevance of Managerial Accounting • Differences from Financial Accounting • Enterprise Risk Management • Judgment • Understanding • Planning • Control • Leadership

34. Review (continued) • Ethics & standards of behaviour • Confidentiality • Credibility • Integrity • Corporate Social Responsibility

35. Tutorial - Question • Practice • Factory Supervision $28,000? • Property Tax, Factory Building $2,000? • Sales Commission $97,000?

36. Case Study • Divide into groups • Select a public company of your choice and submit financial statements • Describe the company and explain why the company was selected; what kind of accounting systems might the company use? Write and present • Together, we will simplify the accounts for modeling purposes • Make your own assumptions and forecast/budget (I/S, B/S, C/F) for three years • Conduct ratio analysis and draw conclusions about the company • Each group is to present final results – Starting December 2nd • Each individual is to select a role (CEO, CFO, Sales, Production Manager, etc) and present 5 - 10 minutes of observations • Audience to prepare questions for presenters • Submit and present final results – BEFORE presentation

37. Case Study - Information • Select a company • Find and print most recent financial statements from annual report • Find and print stock price history of last three years