Principles Of Accounting And Financial Management
Basa Benejan
When accounting principles allow a choice among multiple methods, a company should apply the same accounting method over time or disclose the change in its accounting method in the footnotes of the financial statements.
Various bodies are responsible for setting accounting standards. In the United States, generally accepted accounting principles (GAAP) are regulated by the Financial Accounting Standards Board (FASB). In Europe and elsewhere, International Financial Reporting Standards (IFRS) are established by the International Accounting Standards Board (IASB).
IFRS is a standards-based approach that is used internationally, while GAAP is a rules-based system used primarily in the U.S. IFRS is seen as a more dynamic platform that is regularly being revised in response to an ever-changing financial environment, while GAAP is more static.
Several methodological differences exist between the two systems. For instance, GAAP allows companies to use either first in, first out (FIFO) or last in, first out (LIFO) as an inventory cost method. LIFO, however, is banned under IFRS.
Some scholars have argued that the advent of double-entry accounting practices during that time provided a springboard for the rise of commerce and capitalism. What would become the American Institute of Certified Public Accountants (AICPA) and the New York Stock Exchange (NYSE) attempted to launch the first accounting standards to be used by firms in the United States in the 1930s.
Critics of principles-based accounting systems say they can give companies far too much freedom and do not prescribe transparency. They believe because companies do not have to follow specific rules that have been set out, their reporting may provide an inaccurate picture of their financial health.
In the case of rules-based methods like GAAP, complex rules can cause unnecessary complications in the preparation of financial statements. These critics claim having strict rules means that companies must spend an unfair amount of their resources to comply with industry standards.
Nonprofit entities and government agencies use similar financial statements; however, their financial statements are more specific to their entity types and will vary from the statements listed above.
Careers in financial accounting can include preparing financial statements, analyzing financial statements, auditing financial statements, and supporting the technology/systems that produce financial statements.
Public companies are required to perform financial accounting as part of the preparation of their financial statement reporting. Small or private companies may also use financial accounting, but they often operate with different reporting requirements. Financial statements generated through financial accounting are used by many parties outside of a company, including lenders, government agencies, auditors, insurance agencies, and investors.
Principles and decisions to be considered in overall communications and promotion strategy for traditional channels and emerging social networks. Decisions on promotional mix, ad design, implementation and evaluation for establishing brand equity, measure brand performance and sustaining brand equity. Prerequisites: MGT 100 or MGT 103.
Overview of financial accounting reporting, with a primary focus on the analysis of economic events and their effect on the major financial statements (balance sheet, income statement, and statement of cash flows). Learn the nature and purpose of accounting methods. Letter grades only. Students may not receive credit for both MGTF 401 and MGT 404. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Introduces quantitative methods for analyzing the pricing and return behavior of assets such as stocks, bonds, and derivatives; and develops methods for implementing modern portfolio theory in practice. The most influential financial models are derived; their practical applications are discussed. Letter grades only. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Introduces ways to identify, measure, estimate, and control risks in the context of risk management as applied in fixed income, foreign exchange, and equity markets. Reviews the pricing and hedging applications of derivatives, such as futures, options, and CDSs. Letter grades only. Prerequisites: restricted to master of finance program, MBA program, or by consent of instructor and department stamp.
Bridging the gap between theoretical financial models and the real world. Covering the major accomplishments of empirical finance. Empirical exercises and analysis of real financial data will help students to truly appreciate the content of the course. Letter grades only. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Introduction to state-of-the-art forecasting methods in finance. Students will learn to estimate forecasting models based on past values of the predicted variable(s), surveys, market information, and other economic data. Participants will become critical consumers of forecasts reported in the media. Letter grades only. Prerequisites: restricted to master of finance students, MBA students, or by consent of instructor.
Covering the fundamentals of corporate finance and their application to valuation (including the WACC approach, APV approach, multiples, and real option valuation). We focus on important areas of corporate finance, including capital structure, real options, and financial distress and bankruptcy. Letter grades only. Prerequisites: MGTF 402; restricted to master of finance students, MBA students, or by consent of instructor.
Focuses on the financing of new ventures and technological innovation. Includes perspectives of both the entrepreneur and the investor, investigating the venture capital process, and methods of financial valuation useful in the venture capital industry and for other technology investments. Letter grades only. Students may not receive credit for both MGTF 410 and MGT 280. Prerequisites: restricted to master of finance students, MBA students, or by consent of instructor.
Many closed-form analytic results in finance are obtained in the continuous-time setting. This course covers portfolio choice, derivative pricing, and term structure modeling in continuous time setting. The objective is to understand important topics and master techniques of continuous-time models. Letter grades only. Students may not receive credit for both MGTF 411 and MGT 286. These are course duplicates. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Develop a deeper familiarity with financial accounting and assumptions underlying measurements reported in financial statements. Understanding of economic and regulatory forces underlying corporate disclosure of financial statements. Knowledge of data sources and analytical tools to extract and evaluate this data. Letter grades only. Prerequisites: restricted to master of finance students, MBA students, or by consent of instructor.
This course introduces students to a variety of mathematical methods as applied in finance, including Monte Carlo simulation, optimization methods, and numerical solution to PDEs. Letter grades only. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
Teaches students how to obtain and process data in order to answer empirical questions in finance. The data can be numerical or textual, and structured or unstructured. Specific data sources may include CRSP, Compustat, Thomson Reuters, and Bloomberg. Some programming. Letter grades only. Prerequisites: restricted to master of finance program or by consent of instructor and department stamp.
This project-based course explores and develops applied communication skills needed for analytical professions to make the business case. Students work individually and in teams to develop persuasive messaging to communicate complex technical information and business insights to, and between, technical experts and business decision-makers. Prerequisites: MGTA 451, MGTA 452, MGTA 453, and restricted to MS in business analytics students or with department and instructor approval.
Generally accepted accounting principles (GAAP) comprise a set of accounting rules and procedures used in standardized financial reporting practices. By following GAAP guidelines, compliant organizations ensure the accuracy, consistency, and transparency of their financial disclosures.
Publicly traded companies, businesses operating in regulated industries, registered nonprofit groups, government agencies, and organizations that receive federal funding awards from the U.S. government are required to follow GAAP. Other businesses may also adopt the standards on a voluntary basis.
Many reputable accounting degree programs teach generally accepted accounting principles as part of their curricula. This guide for accounting students explores GAAP standards and how they continue to evolve in a changing economy.
These 10 guidelines separate an organization's transactions from the personal transactions of its owners, standardize currency units used in reports, and explicitly disclose the time periods covered by specific reports. They also draw on established best practices governing cost, disclosure, matching, revenue recognition, professional judgment, and conservatism.
Without regulatory standards, companies would be free to present financial information in whichever format best suits their needs. With the ability to portray a company's fiscal standing in a favorable light, investors could be easily misled.
The Great Depression in 1929, a financial catastrophe that caused years of hardship for millions of Americans, was primarily attributed to faulty and manipulative reporting practices among businesses. In response, the federal government, along with professional accounting groups, set out to create standards for the ethical and accurate reporting of financial information.
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