Finance and Accounting and Govemenace Theory

Finance, Accounting & Governance Theory & Practice

OBJECTIVES

• Specify the exact nature and scope of corporate financial reporting
• Identify and criticize specific concepts, rules, and procedures are in place for corporate financial reporting
• Understand multiple interpretations of financial statements via ifrs, fas, sec, etc
• Integrate risk management and corporate governance
• Understand the content of and relationships between financial statements (income statement, balance sheet, and statement of cash flows)
• Understand how to use financial statements to evaluate the financial performance of an organization
• Understand discounted cash flow (dcf) techniques and their application to financial decision making
• Understand the budgeting process, including performance evaluation
• Understand cost behavior and its impact on management decisions
• Learn how to communicate and to question financial information effectively

WHO SHOULD ATTEND?

Attendees are expected to be intellectually curious with a commitment to learning that requires significant personal effort.  The nature of the course and of the materials dictate that interaction, commitment, and debate are the core components of the learning process.  While no particular level of prior knowledge is needed, there is an assumption that the attendees are committed to immersing themselves in a learning situation.

COURSE OUTLINE 

The Challenge of Corporate Financial Reporting

• The Value Creating Company
• The Practice of Corporate Financial Reporting
• The Concepts from IASB, FASB, SEC, OECD, ad infinitum
• Dynamic Perspective of Business Financial Statements
• The Nature of Financial Statements
• The Context of Financial Reporting – roles played
• A Dynamic Perspective of Business
• Organizational planning framework
• Investor Relations roles
• Investment analysts roles
• The product / information / decision support cycle
• Strategic, tactical, and operational forecasts
• The strategic approach to business planning
• Various strategic and tactical approaches to business planning
• The Nature of Budgeted Financial Statements

Assessment of Corporate Financial Reporting

• Management’s perspective
• Owners’ perspective
• Lenders’ perspective
• Private Equity’s view
• The flow of money in business
• Funding business operations
• Developing the business plan
• Identification of key value drivers
• Short-term versus long-term market issues
• Some Special Issues

The Case for Corporate Governance

• Pro Forma Financial Statements and their use internally and externally
• Cash Budgets – why analysts are so interested
• Strategic intent – why are analysts so interested
• Sensitivity Analysis for risk management in governance
• Principal-Agent theory and applications
• The Enron, Ahold, and Parmalat effects
• Stakeholder perspectives when governments are involved directly
• Independence in fact versus appearance
• What alternatives are available

Risk Management as an integral part of Corporate Financial Reporting and of Corporate Governance

• Understanding uncertainty and risk/opportunity
• Identifying strategic financial risks
• Identifying operational risks
• Identifying functional financial risks
• Assessing financial risks in each perspective
• Finding our personal risk profile (appetite for risk)
• Clarifying desired outcomes, expected outcomes, and actual outcomes
• Performance measures – the need for FRM/ERM
• Quantitative and qualitative risks
• Developing FRM/ERM strategy – do we need a CRO?

Value-Based Management as the Integration Process

• Definitions of Value – do they trust our plans?
• Value to the Investor Community – different investment profiles with different expectations
• Business Valuation from multiple perspectives
• Managing for Shareholder Value
• Shareholder Value Creation in Perspective
• Evolution of Value-Based Methodologies
• Creating Value in Restructuring and Combinations beyond planning and reporting- the case for real change!
• Value to the Investor, Lenders, Employees, Customers, Stakeholders
• Governing for Shareholder Value
• Evolution of Finance, Risk Management, and Corporate Governance
• Why Net Present Value is the decision criterion

The Challenge of Profits versus Cash

• Who is interested in profit?
• Finance is a numbers game
• Definition and importance of profit
• The profit and loss account analysed
• A closer look at costs and expenses
• Profit calculations
• Increasing profit opportunities
• Summarising profit statements and extracting the key figures
• Decision scenarios explored
• Managing the working capital cycle
• Funding business operations
• The difference between profit and cash
• Accruals principles
• Cash flow forecasting and improvement
• Funding alternatives
• Cash v profit calculations

Financial Statements, Accounting Policies, and Reporting Standards

• Assets employed in business
• Capital employed and business funding
• Asset valuations
• Summarising the main assets employed in a business
• Summarising how businesses have financed their growth
• Analysing and comparing capital employed in businesses
• Financial accounting and management accounting compared
• Fundamental accounting concepts that underpin financial accounts
• Accounting policies chosen by companies
• Accounting standards
• Some Special Issues

Making and Communicating Decisions using Business Based Budgets

• Problems of forecasting
• Using historical data to help predict the future
• Forecasting
• Sales volume
• Pro Forma Financial Statements
• Cash Budgets
• Interrelationship of Financial Projections
• Financial Modeling
• Sensitivity Analysis
• Dynamics and Growth of the Business System
• Leverage and Financial Growth Plans
• What is accounting? Is budgeting broken?
• Management accounting and financial accounting: differences and similarities
• Cost terminology: variable, fixed, controllable, non-controllable, incremental, sunk, opportunity, and relevant
• Cost behaviors in Cost-Volume-Profit scenarios: contribution margin and fixed costs
• Breakeven and targeted net income scenarios
• Business cases with master budgets
• Benefit-cost analysis

CAPEX -Analysis of Investment Decisions with What-if Risks

• Cash Flows and the Time Value of Money
• Discuss the capital project evaluation process
• Ideas for the future with a multiple time periods horizon
• Estimating cash flows within the business system
• Net present value and IRR as superior methods to payback and accounting rate of return
• Defining the approval criteria and review process
• Post-implementation audits of capital projects
• Sensitivity analysis and uncertainty
• Using Monte Carlo simulation techniques in budgeting
• Components of Analysis
• Methods of Analysis
• Applying Time-Adjusted Measures
• Strategic Perspective
• Decisional Framework ARR, IRR, NPV, alternatives?
• Refinements of Investment Analysis
• Dealing with Risk and Changing Circumstances – how do we explain?
• Cost of Capital and Return Standards

Ultimatum Goal of Planning — Valuation and Business Performance

• Definitions of Value – do they trust our plans?
• The budgeting process as a communications process
• Nature and purpose of budgets for planning and control
• Constructing “good” budgets that are integrated via the master budget to the strategy
• Budgetary control and variance analysis
• Price and volume effects within variance analysis: state of the art
• Responsibility centers: cost, profit, and investment
• Measuring responsibility center performance
• Segment reporting internally and externally
• Business Valuation from multiple perspectives
• Managing for Shareholder Value
• Shareholder Value Creation in Perspective
• Evolution of Value-Based Methodologies in planning and budgeting
• Creating Value in Restructuring and Combinations beyond planning and reporting- the case for real change!
• The search for the ‘right number’ — will EVA be that number?