Based on classroom use and reviewer feedback, a number of substantive changes have been made in the third edition to further enhance the MBA students’ experiences:
General Revisions Made to Each Module
- All Focus Company financial statements are new or have been updated to reflect each company’s latest available filings
- New Case section added to the end of each module’s assignments
- Expanded financial statement effects template to include T-accounts and journal entries in margin
- Revised financial statement effects template makes the relation between the Income Statement and Balance Sheet more transparent to students
- Added many new assignments requiring comparisons across competing companies
- Appendix B on the statement of cash flows is now included in the book
Module 1—Financial Accounting for MBAs
- Updated focus company—Berkshire Hathaway
- Reorganized module
- Moved the demand and supply of information section to the beginning of the module
- Moved planning, financing, investing and operating activities discussions to the relevant
financial statement sections
- Simplified ROE and RNOA disaggregation section
- Streamlined competitive analysis/environment section
- Provided motivation to financial reporting issues with probing questions
- Simplified financial statements and linkages by removing advanced accounts
- Added new appendix on accessing financial information using EDGAR
Module 2—Introducing Financial Statements and Transaction Analysis
- New focus company—Apple
- Expanded statement of cash flows discussion to include intuition for adjustments
- Expanded the financial statement effects template discussion with additional transactions
- Linked the financial statement effects template to financial statement preparation
- Added new section on non-financial sources of information, including 10-K and analyst reports
- New assignments address cash flow issues, including comparisons across competitors
Module 3—Constructing Financial Statements and Analyzing Transactions
- New focus company (links with Module 2)—Apple
- New, OPTIONAL module covers journalizing transactions, accounting adjustments and the
accounting cycle
- Added illustrations using the template for the following range of transactions:
- capital contributions
- purchase and sale of inventories
- capital distributions
- accounting adjustments
- dividend payments
- depreciation
- revenue recognition
- closing process
- Additional assignments include those requiring journal entries and adjustments
Module 4—Analyzing and Interpreting Financial Statements
- New focus company—Home Depot
- Streamlined module and simplified layout
- ROE disaggregation focuses on RNOA; details of the nonoperating return moved to
Appendix 4A
- Tied liquidity and solvency analysis to an intuitive explanation of leverage
- Analyzed Lowes in the module reviews to offer competitive comparisons
- New Appendix 4B has in-depth discussion of nonoperating return, including computations
Module 5—Reporting and Analyzing Operating Income
- New focus company—Pfizer
- Revised layout to systematically walk-through Pfizer’s income statement and to frame the discussion
- New focus on operating and nonoperating components
- Streamlined foreign exchange discussion to focus on income statement effects; explanation of
balance sheet effects moved to Module 9
- Expanded discussion and illustration of income taxes
- Added new explanation and example for unearned revenues
- Moved EPS explanation to the body of the text
Module 6—Reporting and Analyzing Operating Assets
- New focus company—Cisco Systems
- Expanded sections on analysis implications for receivables, inventories and PPE
- Added expanded ratio analysis and interpretation of operating assets
- New mid-module reviews using Cisco’s competitors: Lucent, Avaya, and Hewlett-Packard
Module 7—Reporting and Analyzing Intercorporate Investment
- New focus company—Google
- Streamlined explanation of equity method investments using Abbott Labs investment in TAP
Pharmaceuticals
- New mid-module reviews using Google’s competitor: Yahoo!
- Revised subsidiary IPO section
- Added new section on discontinued operations
- Revised derivative discussion (in Appendix 7C) using Southwest Airlines
Module 8—Reporting and Analyzing Nonowner Financing
- Updated focus company—Verizon Communications
- Added new discussion on accounts payable and warranties
- Added new illustration and explanation on Verizon’s redemption
- Revised discussions on credit ratings and cost of debt sections
Module 9—Reporting and Analyzing Owner Financing
- New focus company—Accenture
- Added new comprehensive income section, including foreign currency translations
- Added new section on restricted stock compensation
- Revised stock option discussion to reflect new accounting standards
- Revised section on equity carve-outs and convertible securities
Module 10—Reporting and Analyzing Off-Balance-Sheet Financing
- New focus company—Southwest Airlines
- Revised sections on both leasing and pensions
- New section on special purpose entities (SPEs) and the consolidation of those entities under FIN 46(R)
Module 11—Adjusting and Forecasting Financial Statements
- Updated focus company—Procter & Gamble
- Revised presentation of parsimonious forecasting and added new illustration
Module 12—Analyzing and Valuing Equity Securities
- Updated focus company—Johnson & Johnson
- Revised mid-module reviews and explanations
Module 13—Comprehensive Case
- Updated focus company—Kimberly-Clark
- Revised all illustrations using current data and companies
- Expanded several analyses and interpretations to enhance its use as a ‘capstone’ module