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AC.F301: Financial Accounting I


Department: Accounting and Finance NCF Level: FHEQ/QCF/NQF6//RQF6
Study Level: Part II (final year) Credit Points: 15.0
Start Date: 09-10-2017 End Date: 25-05-2018
Available for Online Enrolment?: Y Enrolment Restriction: Fully available to all students
Module Convenor: Mr PA Taylor

Syllabus Rules and Pre-requisites

  • The student must take 1 modules from the following group:

CMod description

    • This module deals with accounting for complex entities, addressing concepts, issues and techniques. It examines accounting for business combinations, goodwill and strategic investments, and other aspects of consolidation, foreign currency translation, segment reporting, and accounting for financial instruments, all within the context of modern accounting theory.

Curriculum Design: Outline Syllabus

  • Note that some topics will take one lecture, and others a series of lectures. The length of topics will beindicated as the course proceeds. 

    1                     Introduction

    The development of group accounting - a comparison of divisional and group structures - objectives of group accounts - format of group accounts – impact of IASB and International Accounting Standards – Criteria for consolidation: control, power, variable returns.               

     * Taylor Chapter 1

    *   Walton P and Aerts W (2013), Chapter 12 Group Financial Statements, in Global Financial Accounting and Reportings, 3rd edition, Cengage Learning, pp 306-336

    2                     Accounting for business combinations : overview

    Intuitive alternatives for accounting for business combinations (acquisition, merger and fresh start) -  techniques - defining a merger -  should merger accounting have been abolished? – economic context

    *   Taylor Chapter 3

    *  Johnson LT and Petrone, “Tale of Two Standards”, Accountancy, November 2001, pp 100-101

    *   Paterson R, “Merger Accounting”, Accountancy, June 2001, p 98

    *   Deegan C and Ward AM (2013), Financial Accounting and Reporting – An International Approach, McGraw Hill 2013, Chapter 20, pp 557-563  

    3                     Accounting for business combinations : acquisition accounting

     Goodwill and non-controlling interests - acquisition accounting and IFRS 3 – IFRS 3 options for measuring non-controlling interests under the proportionate net assets and the adjusted fair value approaches.

    *   Taylor Chapter 4

    *   Lopes, A, Lourenco I, Soliman, M (2013), Do alternative methods of reporting non-controlling interests really matter?, Australian Journal of Management, Vol 38 No 1, pp 7-30 

    4                     Accounting for strategic investments – subsidiaries, associates and joint ventures

    Spectrum of accounting approaches – non-controlling interests measurement options - equity approach, proportional, parent and full goodwill consolidation - non-controlling interests - associates, joint ventures – IFRS’s 10, 11, 12, 13, IAS’s 27, 28 - subsequent accounting for goodwill - usefulness of consolidated financial statements

    *    Taylor Chapter 5

    *    Davies, A (2011), “A weighty subject”, Accountancy, November 2011, pp 61

    *    Elliott B and Elliott J (2013), “IFRS 10 provisions”, in Financial Accounting and Reporting, 15th Edition, Pearson 2011, pp 579-584.

    *    Bauman, M P (2003), “The impact and valuation of off-balance-sheet activities concealed by equity method accounting”, Accounting Horizons, Vol 17(4), p 303-314

    5,            Fair values and goodwill

    Alignment issues framework - techniques of fair value adjustments - conceptual and practical issues – IFRS’s 3, 13  - recognition and measurement issues in accounting for goodwill – IAS’s 36, 38 - economic context of the debate

    *   Taylor Chapter 6 

    *   Massoud MF and Raiborn CA (2003), “Accounting for Goodwill: Are we better off?”, Review of Business, Spring, pp 26-32

    *   Jones S (2012), “Goodwill Hunting”, Accountancy, January 2012, pp 50-52 

    *   Gore, P, Taib, F and Taylor, P, “Does Goodwill Accounting Matter?”, Accountancy, March 1996, pp 124-5

    6             Intra group transactions and distributions

    Alignment problems -inter company balances – pre-acquisition dividends - profits on intra-group transactions - intuitive balance sheet computations - usefulness of group concepts

    * Taylor Chapter 7            

    7              Foreign Currency Translation

    Basic concepts - approaches to translating financial statements - techniques – accounting exposure and statement translation – IAS 21 – IAS 39 net investment hedging – theoretical  debates

    *  Taylor Chapter 11, and Chapter 12 pp 1-14, and 37-39

    *  Taylor P (1996), “The translation debate”, Chapter 11, in Consolidated Financial Reporting, Paul Chapman Publishing, pp 324-329

    8              Consolidated performance statements: the consolidated statement of comprehensive income and consolidated statement of changes in equity

    Basic technique - the consolidated income statement / comprehensive income worksheet - non-controlling interests – associates and subsidiaries - alignment adjustments – the consolidated statement of changes in equity linking balance sheets and comprehensive income statements – part way through the year acquisitions and disposals – discontinued operations

    * Taylor Chapter 9

    * Rees. L L and Shane, P B (2012) Academic Research and Standard-Setting: The Case of Other Comprehensive Income. Accounting Horizons  Vol. 26 (4)  pp. 789-815.

    9              Acquisitions in stages – criteria for consolidation

    The nature of the group, step acquisitions and reverse acquisitions.

    *     Taylor Chapter 8 pp 11-18 (not 1-10)

    10        Accounting for financial instruments and hedging: foreign currency aspects 

    Recognition, measurement and classification of financial instruments -  accounting for financial instruments which are hedged or used to hedge other financial instruments, financial commitments or anticipated transactions - Potential future directions

    *      Taylor Chapter 12, pp 14-36

    *      Walton, P (2012), “Atlantic Face-Off”, Accountancy, September 2012, pp 68-69

    *      Kawaller, G (2004), “What Analysts need to know about Accounting for Derivatives”, Financial Analysts Journal, March/April 2004, pp 24-30

    11           A final look at group financial reporting – the contribution of segment reporting

    Segmental reporting concepts -  usefulness of segmental information -  IFRS 8 – effects of adoption of IFRS’s on UK – Usefulness of consolidated reporting – Other contemporary consolidation issues

    * Nichols, Nancy B, Street, Donna L, and Tarca Anne (2013) The Impact of Segment Reporting under IFRS 8 and SFAS 131 Manaqgement Approach: A Research Review, Journal of International Fianancial Management & Accounting, Vol 24 No. 3, pp 261-312

    *   Taylor, Chapter 2 Part I, and Chapter 4, pp 52-56

    *   Davies, A (2011), “A weighty subject”, Accountancy, November 2011, pp 61

     

     

  • 75% Exam
  • 25% Coursework

Educational Aims: Subject Specific: Knowledge, Understanding and Skills

  • After completing the course, students should understand the concepts underpinning the main areas in group financial reporting and accounting for financial instruments. Have an overview of the relevant UK and international accounting standards and legal framework relating to the area, and an overall perspective of developments in and changes caused by international standards. Be able to carry out basic technical procedures relating to acquisition and merger accounting and equity accounting, including accounting for fair value adjustments, goodwill, and foreign currency translation. Whilst the main focus is on consolidated statements of financial position, students should also be able to prepare simpler consolidated comprehensive income statements and consolidated statements of changes in equity.  Be able to interpret the meaning and composition of accounting numbers in consolidated financial statements and analyse the effects of changes in underlying data on them. Be able to discuss in written form some of the major academic areas of debate and empirical work relating to consolidated financial reporting and accounting for financial instruments. Understand how underlying financial and business objectives can affect accounting choices in group accounting.

Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills

  • After completing the course, students should:

      • Understand the concepts underpinning the main areas in group financial reporting and accounting for financial instruments
      • Have an overview of the relevant UK and international accounting standards and legal framework relating to the area, and an overall perspective of developments in and changes caused by international standards.
      • Be able to carry out basic technical procedures relating to acquisition and merger accounting and equity accounting, including accounting for fair value adjustments, goodwill, and foreign currency translation. Whilst the main focus is on consolidated statements of financial position, students should also be able to prepare simpler consolidated comprehensive income statements and consolidated statements of changes in equity.
      • Be able to interpret the meaning and composition of accounting numbers in consolidated financial statements and and analyse the effects of changes in underlying data on them.
      • Be able to discuss in written form some of the major academic areas of debate and empirical work relating to consolidated financial reporting and accounting for financial instruments.
      • Understand how underlying financial and business objectives can affect accounting choices in group accounting.

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