Target Audience

Financial & Managerial Accounting for MBAs is intended for use in full-time, part-time, executive, and evening MBA programs that include a combined financial and managerial accounting course as part of the curriculum, and one in which managerial decision making and analysis are emphasized. This book easily accommodates mini-courses lasting several days as well as extended courses lasting a full semester.

Innovative Approach

Financial & Managerial Accounting for MBAs is managerially oriented and focuses on the most salient aspects of accounting. It teaches MBA students how to read, analyze, and interpret accounting data to make informed business decisions. This textbook makes accounting engaging, relevant, and contemporary. To that end, it consistently incorporates real company data, both in the body of each module and throughout assignment material.

Flexible Structure

The MBA curricula, instructor preferences, and course lengths vary across colleges. Accordingly and to the extent possible, the 24 modules that make up Financial & Managerial Accounting for MBAs were designed independently of one another. This modular presentation enables each college and instructor to "customize" the book to best fit the needs of their students. Our introduction and discussion of financial statements constitute Modules 1, 2, and 3. Module 4 presents the analysis of financial statements with an emphasis on profitability analysis. Modules 5 through 10 highlight major financial accounting topics including assets, liabilities, equity, and off-balance-sheet financing. Module 11 explains forecasting financial statements and Module 12 introduces simple valuation models. Module 13 introduces managerial accounting and is followed by a discussion of cost behavior and cost estimation in Module 14. Module 15 explains cost-volume-profit analysis while Module 16 focuses on using relevant costs to make business decisions. Job and process costing are covered in a single module, Module 17, followed by activity-based costing in Module 18 and the assignment of indirect costs in Module 19. The remaining modules, 20 through 24, highlight managerial accounting topics ranging from operational budgets and variance analysis to segment reporting, product pricing, and capital budgeting. At the end of the book, we include several useful resources. Appendix A contains Compound interest tables. Appendix B details the process for preparing and analyzing the statement of Cash Flow. Appendix C is an illustrative case that applies the techniques described in the financial accounting modules (1–12) to an actual company, Kimberly-Clark. Appendix D is a chart of accounts used in the book.

Managerial Emphasis

As MBA instructors, we recognize that the core MBA accounting course is not directed toward accounting majors. Financial & Managerial Accounting for MBAs embraces this reality. This book highlights reporting, analysis, interpretation, and decision making. In the financial accounting modules, we incorporate the following financial statement effects template when relevant to train MBA students in understanding the economic ramifications of transactions and their impact on all key financial statements. This analytical tool is a great resource for MBA students in learning accounting and applying it to their future courses and careers. Each transaction is identified in the “Transaction” column. Then, the dollar amounts (positive or negative) of the financial statement effects are recorded in the appropriate balance sheet or income statement columns. The template also reflects the statement of cash flow effects (via the cash column) and the statement of stockholders’ equity effects (via the contributed capital and earned capital columns). The earned capital account is immediately updated to reflect any income or loss arising from each transaction (denoted by the arrow line from net income to earned capital). This template is instructive as it reveals the financial impacts of transactions, and it provides insights into the effects of accounting choices.

Innovative Pedegogy

Focus Companies for Each Module

In the financial accounting portion of the book, each module’s content is explained through the accounting and reporting activities of real companies. To that end, each module incorporates a “focus company” for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage MBA students in real analysis and interpretation. Focus companies were selected based on the industries that MBA students typically enter upon graduation. We apply a similar approach to the managerial accounting modules, but limited access to internal accounting information prevents us from illustrating all managerial accounting topics using real company data. We do, however, incorporate real world examples throughout each module. Each managerial accounting module is presented in context using real world scenarios from a variety of service, retail, and manufacturing companies. The following table lists focus companies by module.

Real Company Data Throughout

Market research and reviewer feedback tell us that one of instructors’ greatest frustrations with other MBA textbooks is their lack of real company data. We have gone to great lengths to incorporate real company data throughout each module to reinforce important concepts and engage MBA students. We engage nonaccounting MBA students specializing in finance, marketing, management, real estate, operations, and so forth, with companies and scenarios that are relevant to them. For representative examples, See pages 4-7, 5-15, and 6-10.

Decision Making Orientation

One primary goal of a MBA financial accounting course is to teach students the skills needed to apply their accounting knowledge to solving real business problems and making informed business decisions. With that goal in mind, Managerial Decision boxes in each module encourage students to apply the material presented to solving actual business scenarios. For representative examples, See pages 2-35, 4-14, 7-23, and 8-9.

Mid-Module and Module-End Reviews

Financial accounting can be challenging — especially for MBA students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each module and to ensure student comprehension, we include mid-module and module-end reviews that require students to recall and apply the financial accounting techniques and concepts described in each module. For representative examples, See pages 4-8, 7-11, 8-14, and 9-16.

Excellent, Class-Tested Assignment Materials

Excellent assignment material is a must-have component of any successful textbook (and class). In keeping with the rest of the book, we used real company data extensively. We also ensured that assignments reflect our belief that MBA students should be trained in analyzing accounting information to make business decisions, as opposed to working on mechanical bookkeeping tasks. Assignments encourage students to analyze accounting information, interpret it, and apply the knowledge gained to a business decision. For representative examples, See pages 4-37, 6-45, and 9-41.

Forth Edition Changes

Based on classroom use and reviewer feedback, a number of substantive changes have been made in this edition to further enhance the MBA students’ experiences:

Financial Accounting Modules (1-12)

• Updated Financial Data: We have updated all Focus Company financial statements and disclosures to reflect each company’s latest available filings. We have updated all assignments using real data to reflect each company’s latest available filings and we have added many new assignments that also utilize real financial data and footnotes.
• Updated Assignments:We have updated all assignments using real data to reflect each company’s latest available filings and have added many new assignments that also utilize real financial data and footnotes. We have expanded the IFRS Applications to include more companies from Canada and Australia.
• Ongoing Analysis Project:We have added a project component to each module. See the descriptionabove in Experiential Learning.
• Analyzing Cash Flows:To help students better understand cash flows, we have included new sections onthe analysis of cash flows in Appendix B, including a discussion of the cash flow cycle and interpretation of cash flow patterns.
• International Financial Reporting Standards (IFRS):We have updated the IFRS insight boxes and IFRS Alert boxes on the similarities and differences between U.S. GAAP and IFRS. Each module concludes with a Global Accounting section and an expanded IFRS assignments section, which brings inreports and disclosures from around the globe.
• New Focus Companies:We have changed a number of the focus companies: Module 4 now uses Walmart, Module 7 focuses on IBM, Module 10 uses Southwest Airlines, and Module 12 highlights Nike.
• Accounting Quality:We augmented the section on accounting quality in Module 5. It describes measures of accounting quality and factors that mitigate accounting quality. We also provide a check list of items in financial statements that should be reviewed when analyzing financial statements.
• Intercorporate Investments:Consistent with recent changes in accounting standards, we have revised Module 9 (formerly Module 7) to emphasize investors’ control of securities and deemphasize the percentage of ownership as the determining factor in selecting the method used for financial reporting.
• Credit Ratings:This edition expands discussion of credit ratings. This includes trends in credit ratings, current credit rating statistics, and rating procedures implemented by companies such as Moody’s and Standard and Poor’s.
• Noncontrolling Interest:We added expanded discussion of noncontrolling interest, how it is reported in financial statements, and the interpretation of its disclosure. The book distinguishes the ROE disaggregation with and without controlling interest and explains how to handle noncontrolling interest foranalysis, forecasting, and equity valuation. In Module 9, we also expand our discussion of consolidation to illustrate the allocation of consolidated net income to the noncontrolling interest and to the controlling(parent) interest.
• Revised Forecasting Module:We have expanded our discussion of the forecasting of revenues and expenses to distinguish between forecasting using publicly-available databases and forecasting with proprietary databases. For the latter, we continue to utilize analyst reports and spreadsheets provided to us by Morgan Stanley.
• Enhanced R&D Analysis:We have developed a new discussion of R&D costs in Module 5 focusing onthe analysis and interpretation of Rr&D.
• Expanded analysis of allowance accounts:We have developed a new appendix to Module 6 to illustrate the accounting for sales returns and analysis. We also present a discussion of the analysis of the allowance accounts in schedule ii (Valuation and Qualifying Accounts) of the 10-K or similar disclosures in othertypes of annual reports.
• Pension Accounting:We have expanded our discussion of analysis of pension disclosures, including the change that many companies now immediately recognize actuarial gains and losses in operating results.
• New Regulations:We highlight pending and proposed accounting standards and their likely effects, if passed. These include the proposed standard on revenue recognition. This edition also reflects all accounting standards in effect since our last edition, including the new business combination and consolidation standard and goodwill impairment testing.

Managerial Accounting Modules (13-24)

• Many new Business insight boxes have replaced older ones.
• several new research insight boxes have been incorporated.
• Dozens of new, real company examples have been integrated throughout the text.
• Over two-thirds of the exercises and problems have been revised.
• All 12 Opening Vignettes have been replaced.