1 / 22

Incorporating Valuation Concepts into the Accounting Curriculum

Agenda. Why we need to teach fair value conceptsNIU's thought processNIU's courseChallenges to teaching fair valueOther options for incorporating fair valueClosing reflectionsQuestions??. Accounting in the headlines???. FAS 157 Could Cause Huge Write-offs, 11/7/07, CFO.comThe Fair Value Blam

saxton
Download Presentation

Incorporating Valuation Concepts into the Accounting Curriculum

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

    1. Incorporating Valuation Concepts into the Accounting Curriculum Rebecca Shortridge Northern Illinois University

    2. Agenda Why we need to teach fair value concepts NIU’s thought process NIU’s course Challenges to teaching fair value Other options for incorporating fair value Closing reflections Questions??

    3. Accounting in the headlines??? FAS 157 Could Cause Huge Write-offs, 11/7/07, CFO.com The Fair Value Blame Game, 3/19/08, CFO.com Are Bean Counters to Blame?, 7/1/08, NY Times The Accounting Rules That Have Turned a Crisis Into a Disaster, 9/24/08, The Evening Standard (London) Mark to Mayhem?, 10/1/08, WSJ

    4. GAAP and Fair Value > 40 FASB pronouncements require/permit the use of fair values. Investments in equity securities, SFAS 115 Accounting for stock options, SFAS 123R Accounting for derivatives, SFAS 133 Business acquisitions, SFAS 141R Intangibles and goodwill (including impairments), SFAS 142

    5. Also important “outside” of financial reporting Taxes Succession planning Valuing estates Converting business forms (eg. S-Corp to C-Corp) Managerial Make-or-buy decision Economic value added Corporate performance evaluations

    6. CFA Institute Position “All assets and liabilities should be reported at fair values based upon market values for identical or similar assets or liabilities”

    7. Fair value in accounting Seems likely that it is here to stay SEC study supports continued use of fair value accounting Need to include this in curriculum! How? Where?

    8. NIU’s Approach Advisory board made the following recommendations MAS students need an opportunity to integrate finance and accounting topics Business valuations not covered in the curriculum A capstone class might provide an appropriate vehicle for synthesis and integration Implement a capstone class in the MAS program

    9. NIU’s Approach, Course Description “Study of the theoretical framework for financial statement analysis and business valuation. Students examine the use of financial statement ratios and other financial information in a valuation context to develop business strategies and make business decisions. Requires synthesis and integration of knowledge and skills learned throughout the MAS program.”

    10. Class Overview Class divided into three segments: Understand the company’s history Prepare forecasted financial information Estimate the value of the company

    11. I. Understand the company’s past Understand overall economic conditions Study macro economic conditions and understand how those conditions impact the industry and company Industry selling staples vs niche (jewelry) Research the company’s industry Utilize management techniques to understand industry Porter’ 5 Forces, Life Cycles, Capacity vs. Competitive Constraints

    12. I. Understand the company’s past Financial Statement Analysis Basic ratio analysis Dupont Model (ROE in three parts) Return on assets Asset turnover How can these help improve value? Leverage Financial Statement Quality Risk of manipulation Risk of bankruptcy Requires students to integrate economic, management, marketing, finance, and accounting information.

More Related