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 2-6, 4-16, 6-23, 7-3, 8-4, 9-10, 10-4, 11-6, and 12-17.

Decision Making Orientation

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.

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.

New 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 (1-13)

• Digital delivery enhanced    To serve the expanding delivery modes of MBA education, we updated our in-chapter Reviews and Guided Example videos for all chapters (each Learning Objective has a Review/Guided Example, as well as a corresponding eLecture).
• Data visualization and analytics   Companies are increasingly using data visualization (charts, pictures, and graphs) to more effectively convey financial information. To support student learning, each module opens with a data dashboard and includes end-of-chapter assignments that present data graphically and require students to analyze and interpret the data visualizations. We provide students with online access (via MBC) to author-created PowerBI dashboards where they can interact with the data and learn how to create their own data visualizations.
• Content reflects new standards    This edition covers new standards on Revenue Recognition, Leases, and Marketable Securities. It also includes in-depth discussion of the Tax Cuts and Jobs Act and how new tax law impacts financial analysis.
  
• Revenue, Operating Expenses, and Receivables    We expanded the discussion of revenue recognition following the new standard and included an illustration and analysis of Microsoft’s revenue recognition. We also discuss sales returns and allowances and the effects of foreign currency exchange rates. Our operating expenses discussion introduces the effects of the Tax Cuts and Jobs Act, with a deeper discussion in Module 10.
• Inventories    Our discussion of cash conversion cycle includes an illustration of management actions under- taken by Home Depot to streamline its supply chain to reduce days inventory outstanding.
• Bond rating    A new section in Module 7 discusses Credit Analysis, including how bond ratings are determined. We provide an example of S&P Global’s ratings for Verizon, following its purchase of Vodafone’s interest in Verizon Wireless. We also simplify our discussion of bond pricing.
• Share-based compensation    Module 8 includes an expanded discussion of share-based compensation, and Tesla’s use of convertible debt.
• Investments    We include a deeper discussion of the determination of fair value, including an expanded discussion of Level 3 inputs to value securities with limited markets and the accounting for those securities. Module 6 includes a new, expanded discussion of the new goodwill impairment standard.
• Derivatives   We markedly revised our discussion of derivatives to simplify the exposition while maintaining the analysis coverage.
• Equity Carve-Outs    The discussion of equity carve-outs is simplified and we provide examples of the ac- counting for Sell-offs, IPOs, Spin-offs, and Split-offs. We also discuss the deconsolidation of a subsidiary.
• Leasing    Module 10 reflects the new lease standard including the analysis of right-of-use assets and differences between operating and financial leases. We discuss retrospective and prospective adoption, using Microsoft and Delta Airlines.
• Pension disclosures    We markedly revised our discussion of pension accounting with a detailed illustration of the pension footnote disclosures. We include a section on fair valuation of pension obligations and the accounting for plan settlements.
• Taxes    We provide an in-depth, completely revised, discussion of income tax expense, including the effects of the Tax Cuts and Jobs Act and the analysis implications during the transition period.
• Updated Assignments    We updated all data and financial statements throughout the book to reflect each company’s latest available financial statement filings and disclosures. Assignments include current financial statement excerpts and reflect new standards for Revenue Recognition, Leases, and Marketable Securities and the Tax Cuts and Jobs Act.

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.
• Revised Assignments    Nearly two-thirds of the assignments in each module have been revised and updated.