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Accounting for Decision

Making

For: IBA Academic Committee

By: Rustom Kavasji


Chairman, Accounting & Law, IBA, Karachi
Course Objectives
To provide an senior executive perspective of
advanced financial and management
accounting

To learn techniques for analysis of financial


information and improved decision making and
value creation and measurement.

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Grading
• Class Participation / Assignments (30%)
– Qualitative
– Interactive

• Two written Case Analysis / Reports (20%)

• Home Assignments (10%)

• Mid Term (20%)


– Combination of case analysis and short questions

• Final Exam (20%)


– Combination of case analysis and short questions
– Comprehensive

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Course Outline & Calendar
Session Detail
1 Introduction
2 Understanding Costs, Expenses, & Financial Management
3 Understanding Financial Statements and Role of Revenue
4 Cost - Volume - Profit Analysis
5 Tactical Decision Making & Relevant Costing
6-7 Capital Budgeting – I & II
8 Transfer Pricing & Responsibility Accounting
9 Fiscal Planning, Budgeting, Control & Variance Analysis
10 Internal Control & Internal Auditing
11 Performance Measures & The Balanced Scorecard
12 Accounting Conventions regarding IAS, IFRS, GAAP, and Compliance
13 Activity Based Costing
14 Service Department Cost Allocations
15 - 28 Cases
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Ammar Textiles
The Transfer Pricing Problem

Highlights transfer pricing as a key factor


in competitiveness of textile exports and
why calculation and determination of an
accurate transfer price between the
Pakistani manufacturing operation and
Muscat is critical for Ammar’s successful
entry into new markets

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Zulsham Engineering
Cost Volume Profit Analysis

Shows the usefulness of CVP as a


[planning and decision making tool for
Zulsham and an illustration of the nature
of costs in the real world. Highlights key
issues in CVP’s link to product pricing.

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Dell Computers
Working Capital Management

Shows the effectiveness of good working


capital and cash management in
organizational growth. The case
highlights good operational WC
management as key in Dell’s success
while also indicating some pitfalls along
the way.

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The Dublin Shirt Company
Cost Allocations and Pricing

An excellent case study that illustrates


the peril of poor management due to
incorrect cost allocations and hidden
costs, buried within lumped cost
structures, in turn leading to poor
product pricing and ineffective customer
profitability analysis.

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The IBETO Group
Accounting & ERP Systems

Illustrates the necessity for ERP and


builds a case for an E-Enterprise. Shows
the transformation of a conglomerate’s
redundant information systems to the
adoption of a state-of-the-art ERP
system and the issues and challenges
along the way in selection of a system.

9
The Chase Manhattan Bank
Accounting & Compliance

Illustrates the real world, real life


challenges that face a team of banking
executives as they are confronted
between trade-offs and hard choices
between sustaining profitability and
remaining compliant with statutes and
directives issued by the State Bank of
Pakistan.
10
Kincaid Manufacturing
Supply Chain Cost Management

Illustrates critical issues that inflate costs


due to weakness and inefficiencies
within the supply chain function of
Kincaid and highlights the critical
importance of the procurement function
in good supply chain management.

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Analysis of Financial
Statements
For: IBA Academic Committee

By: Rustom Kavasji


Chairman, Accounting & Law, IBA, Karachi
Course Objectives
To provide an overview of accounting and
understanding of accounting flow for non
accountants.

To enhance reading ability and understanding


of financial information.

To learn techniques for analysis of financial


statements for purposes of determining and
selecting superior investment opportunities
among large public sector corporations.

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Course Content
Overview of Financial Statement Analysis
 Review and understanding of Financial Statements
 Objectives of Financial Statement Analysis
Sources of Financial Information
 Sources of Financial Statements; Role of IFRS & GAAP
 Detailed class practice of financial statement preparation
 Challenges in Interpreting financial statements
 Assessing quality of Financial Statements, Red Flags & Warnings
Annual Report Analysis
 What are Annual Reports
 Annual Report diagnosis; Regulatory framework; Chairman’s review
 Auditor Report, Director’s report, Measurement, Notes to Accounts
Income Statement Analysis
 IS - Revenue recognition, income taxes, deferred taxes,
 IS - Extraordinary items, effect of change in accounting principles
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Course Content (Continued)
Balance Sheet Analysis
 BS - Consolidated statements, Reserves, commitments
 BS - Contingencies, Changes in equity
Statement of Cash Flows
 SCF - Review of Cash Flows and importance of Cash Flows
 SCF - Detailed Analysis of Statement of Cash Flows
Analysis of Liquidity, Solvency, Profitability & Growth
 Liquidity, Profitability, Solvency & Growth
 Investor, Institutional Investors & Government
Presentations and Analysis of Financial Statements
 Student presentations of financial statements of Pakistani Corporations
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Grading
• Class Participation / Assignments (30%)
– Qualitative
– Interactive

• Term Project (30%)


– Class Presentation (15%)
– Written Term Report (15%)

• Mid Term (15%)


– Combination of case analysis and short questions

• Final Exam (25%)


– Combination of case analysis and short questions
– Comprehensive

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Class Participation & Term Project
The Presenter / Group Class

• Corporate Executive
1 seeking funding Investors

• Investment Advisor Or
2 approaching Client

• Equity Financial Analyst Clients


3 working for agency

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Class Participation & Term Project
C
L
A
Attack Them!
S
S 1. Select Annual Report of any public (i.e. shares traded on
I KSE) company during FY’s 2010 – 2011
P N 2. Prepare a detailed analysis of the company for presentation
A V in class. You must pick a company that you would invest in
R E and prepare an overall analysis of why you would invest in
T S that corporation for a minimum of 3 – 5 years.
I T
C 3. Multidimensional Analysis
O • Industry Analysis
I R
P S
• Potential for future growth and success
A • Liquidity
T • Risk & Reward
I • Competitor Analysis
O 4. If possible interview top management or executives of that
N
corporation (optional but likely to enhance your score)
5. Present & defend conclusions in class + written term report
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Class Participation & Term Project

Company • First Come First Serve. Initial proposal to


be submitted by the 5th session of the
Selection course.

• From session 16 onwards. The class and myself


must be provided a photocopy of the annual
Presentations report of your selected company, at least one
session before your presentation

Written • All written reports to be submitted by


Report the 25th session of the semester

All written submissions relating to term project must be printed not


hand written 19