Accounting Theory Assignment
Answer any TWO question
1. Peabody Energy-
a. Part 1 Perform a trend analysis for Peabody Energy.
b. Part 2 Clearly explain Trend Analysis - including:
• A definition of trend analysis as it applies to analyzing financial performance
• Explain the many ways trend analysis can be used by managers to make decisions
• Explain the role of accounting information in trend analysis
c. Part 3 Assume you are the partner in charge of the audit, in a brief memo explain the difference between the audit opinion for the years ended December 2013, 2014 and December 2015
2. Designing a Compensation Plan using Benchmarks
a. Explain what is meant by Benchmarking as it pertains to designing executive compensation schemes. (feel free to examine the compensation scheme of the companies we used in class)
• Outline the variety of benchmarks used in executive compensation plans.
• How does the Balanced Scorecard enter into the development of a compensation scheme?
• Where do companies find benchmarks
b. Explain the role of Accounting Information in designing compensation schemes.
c. Find and evaluate an executive compensation plan with a variety of benchmarks.
d. Explain how a compensation plan can lead to suboptimal behavior - including financial fraud.
3. Find an international company that does not use IFRS nor GAAP.
a. Include the financial statement
b. Explain the differences between financial reporting for the company and GAAP
c. Detail any cultural, political, economic, demographic or other factors that impact the financial reporting standards used by the company/country.
4. Find the report (from 2013 or later) publically held company with an audit opinion that has an Adverse Opinion, a Disclaimer of Opinion or a Qualified Opinion related to a Going Concern Issue.
a. Explain the going concern audit opinion and the "qualified" audit opinion.
b. Explain how the opinions differ based upon IFRS and GAAP and the implications of SAS 126.
c. Include the audited financial statement
d. Highlight the opinion
e. Explain what happened to the company including:
• The stock price both before, during and after the report was issued
• What happened the following year
• Anything else interesting
5. Explain the changes to Revenue Recognition as it would apply to a specific industry that interests you where the impact is significant.
6. We looked at a variety of financial statements in the class. Develop a rubric for evaluating financial statements - getting back to our original topic of effectively telling the economic story of the company.
7. Prepare a "Comment" on a recent exposure draft out for comments - consult the Journal of Accountancy for a list outstanding drafts.
8. What role does accounting theory play in the development of GAAP. In your analysis,
a. note specific pronouncements to support your answer
b. relate your analysis to the theme of the course
c. tie your answer to a particular financial statement.
9. Compare and contrast a 10K from a year prior to 2001 with a 10K for a year ending after July 31, 2016. Explain the differences in GAAP between the years and how they impact the differences. Be sure to indicate the implication for "telling" a better story. Be specific.
10. Explain "Benford's Law." Explain how Benford's law can be useful to accountants and auditors. How can you use Benford's Law with excel to detect issues of concern to auditors?
11. Explain what happened recently to the accountant at Cargill. What did she do? How was she able to make that happen? What specific items could have prevented it?
12. To help finance the Model 3, Tesla issued common stock and convertible bonds. Explain what happened. How will this impact their balance sheet? What specific financial ratios will be impacted?
13. As they relate to Fair Value Measurements, explain the new Performance Framework and the related Application of the Framework. For whom is the framework mandatory? Encouraged?
14. I have often said that I expect you to me useful members of nonprofit organization - and to participate actively on the boards and finance committees of these organizations. As such, you will find yourself looking at GAAP for nonprofit organizations. Explain the recent reporting requirement changes.
a. Outline in detail the changes from ASU No.2016-14)
i. How will the changes of ASU No.2016-14 impact the usefulness of the financial statements?
ii. What common ratios used to evaluate nonprofit organizations will be impacted - and how?
b. Explain the purpose and impact of
i. ASU No. 2014-15
ii. ASU No. 2015-11
iii. ASU No. 2015-07.