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 25 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 details the process for preparing and analyzing the statement of cash flow. Module 12 explains forecasting financial statements, and Module 13 introduces simple valuation models. At the end of each financial accounting module (Modules 1 through 13), we present an ongoing analysis project that can be used as a guide for an independent project. Like the rest of the book, the project is independent across the various modules. Module 14 introduces managerial accounting and is followed by a discussion of cost behavior and cost estimation in Module 15. Module 16 explains cost-volume-profit analysis while Module 17 focuses on using relevant costs to make business decisions. Job and process costing are covered in a single module, Module 18, followed by activity-based costing in Module 19 and the assignment of indirect costs in Module 20. The remaining modules, 21 through 25, 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 and formulas. Appendix B is a chart of accounts used in the book. Appendix C is an illustrative case that applies the techniques described in Modules 1 through 13 to an actual company, Harley‑Davidson. Appendix C can be used as a guide, in conjunction with the module‑end project questions, by students required to prepare a company analysis.

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 Pedagogy

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 4‑23, 5‑3, 5‑19, 6‑23, 7‑16, 8‑5, 9‑20, 10‑6, 11‑25, and 12‑17.

Decision Making Orientation

One primary goal of a MBA 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 2‑14, 4‑28, 7‑25, 8‑11, 9‑14, and 10‑6.

Reviews for Each Learning Objective

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 reviews that require students to recall and apply the accounting techniques and concepts described in each module. For representative examples, SEE PAGES 4‑14, 7‑7, 8‑12, 9‑9, and 10‑23.

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 4‑43, 5‑36, 7‑41, 7‑45, and 9‑52.

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 (1-13)

• Table of Contents is reorganized to facilitate eLearning, with additional in‑module Reviews and Guided Example videos for all modules (each Learning Objective has a Review/Guided Example, as well as a corresponding eLecture). Content is also revised to be more streamlined and pointed.
• New regulations: This edition covers new standards on Revenue Recognition, Leases, Discontinued Operations, and Marketable Securities.
• DuPont Model:
  
  • Module 4 opens with DuPont Analysis (moved from an appendix) as a simple, yet powerful, analysis framework. For those instructors interested, a disaggregation of ROE that separates operating and nonoperating items is shown later in the module as a natural extension of DuPont analysis.
  • Analysis of financial performance in later modules relies on the DuPont model. However, text boxes include deeper discussion of analyses that gleaned from the operating / nonoperating distinction. Cash flows: Measures of cash flow are incorporated into the body of the book as new Module 11 (formerly Appendix B).
• Cash flow computations are simplified, and there is detailed explanation of how to use and analyze cash flow statements, including cash‑based ratios and life cycle notions.
• IFRS: Global Accounting sections are updated to include new developments.
• Revenue, Operating Expenses, and Receivables: Module 5 is reorganized and streamlined to reduce its length and focus its discussion on revenue, operating expenses, and receivables.
• Receivables and Payables: Module 5 now includes accounts receivable which are naturally paired with revenues. Accounts payable is moved to Module 6 and presented with inventories. A new section on days to collect receivables, days sales in inventory, days to pay accounts payable, and the cash conversion cycle is added.
• R&D Costs: Module 6 now includes R&D facilities along with restructuring as they are part of operations.
• Module 8 includes a complete rewrite of share‑based compensation with an initial overview of accounting for such compensation that simplifies this complex topic. There is a greater emphasis on restricted stock-type plans that are now more prevalent.
• Equity Carve‑Outs: Moved to Module 9 because carve‑outs can be viewed as a divestiture of a subsidiary investment, and set as a new appendix (to reflect their reduced occurrence).
• Revised forecasting module: Module 12 is shortened and rewritten for clarity. It begins with a concrete example of forecasting mechanics (as the opening section for those wishing to cover just the mechanics). Module 12 uses a new Procter & Gamble analyst report from Morgan Stanley and set as an appendix.
• Updated financial data and assignments: Data and financial statements are updated throughout the book to reflect each company’s latest available financial statement filings and disclosures for Verizon.
• Expanded analysis of allowances accounts: Added section in Module 6 on accounting for sales allowances, including accounting and analysis of Schedule II allowance disclosures (including effects on sales and adequacy of the allowance account).
• Pension accounting: Revised discussion of pension accounting, including a new section on fair valuation of pension obligations, the treatment of pension plans in bankruptcy, and an analysis of pension plans disclosures such as what is operating versus nonoperating (Module 10).
• Updated Comprehensive Case: Appendix C (available on the book’s website) shows a case analysis using Harley‑Davidson financial statements and notes.
• Foreign currency: New section on foreign currency effects for revenues, profit, and cash flow.
• Mechanics: Transaction analysis revised, streamlined, and covered entirely in Module 3.
• Derivatives: Revised derivatives discussion for simpler exposition with new illustrative examples. Added new section on analysis of derivatives to provide MBAs with a tangible take‑away.

Managerial Accounting Modules (14-25)

• Contemporary Topics and Examples: The authors have revised and added new Business Insight boxes throughout each module to bring the accounting to life for students using current, real‑world examples. Several new Research Insight boxes have been incorporated throughout the text to emphasize the important relationship between research and modern business.
• Real Company Examples: Dozens of new, real company examples have been integrated throughout the text.
• Added In‑Module Reviews for each Learning Objective with corresponding Guided Example videos to test students’ understanding of the topics covered.
• Learning Objectives have been refined and written at the granular level, in order to ensure coverage of all topics. Each Learning Objective now contains a Review and corresponding Guided Example video.
• Revised Assignments: Nearly two‑thirds of the assignments in each module have been revised and updated.
• Updated Design to enhance student understanding of topics, and enhanced several graphics for student comprehension.
• All 12 Opening Vignettes have been updated.