Based on classroom use and reviewer feedback, a number of substantive changes have been made in the fifth edition to further enhance the MBA students’ experiences:
- Updated Financial Data: We have updated all Focus Company financial statements and disclosures to reflect each company’s latest available filings. We also explain the SEC’s EDGAR financial statement retrieval software and the user’s ability to download excel spreadsheets of the financial statements from 10-K filings.
- Updated Assignments: We have updated all assignments using real data to reflect each company’s latest available filings and have added many new assignments that also utilize real financial data and footnotes.
- International Financial Reporting Standards (IFRS): We have updated the IFRS Insight boxes and IFRS Alert boxes throughout the text to introduce students to the similarities and differences between U.S. GAAP and IFRS. We conclude each module with a summary of notable differences between IFRS and U.S. GAAP. We also added a new category of assignments, IFRS Applications, that require students to apply IFRS.
- New Focus Companies: We now utilize Target as the focus company of Module 4, and AON Corporation as the focus company of Module 9.
- Treatment of cash. We treat cash and cash equivalents as a nonoperating asset to reflect its increased use in a manner similar to short-term marketable securities. This change reflects changes in practice.
- Accounting Quality. We added a new section on accounting quality in Module 5. It describes measures of accounting quality and factors that mitigate accounting quality. We also provide a check list of items in financial statements that should be reviewed when analyzing financial statements.
- Simplified treatment of income taxes: We simplified the treatment of the income tax rate in Module 4; this carries through the ROE disaggregation analysis and in many other sections of the book.
- Intercorporate Investments: Consistent with recent changes in accounting standards, we have revised Module 7 to emphasize investors’ control of securities and deemphasize the percentage of ownership as the determining factor in selecting the method used for financial reporting.
- Equity Investments. We expanded our coverage of equity investments with additional examples and explanation.
- Credit Ratings: We have expanded the section on Credit Ratings in Module 8 to add a discussion on trends in credit ratings. We have also updated the credit rating statistics to reflect the latest publication of Moody’s Financial Metrics.
- Noncontrolling Interest. We added expanded discussion of noncontrolling interest, including accounting for noncontrolling interest, how its reported in the balance sheet and income statement, and the interpretation of related disclosures.
- Revised Forecasting Module: We have rewritten Module 11 on forecasting financial statements to help students understand the forecasting process; the revised module uses an actual analyst report on Procter & Gamble, together with the analysts’ spreadsheets (from Morgan Stanley) to show how forecasting is performed in practice.
- New Case Analysis. New Appendix C illustrates a case analysis of the financial reporting, forecasting, and valuation of Kimberly-Clark Corporation.
- New Regulations. We highlight pending and proposed accounting standards and their likely effects, if passed. These include pending standards on financial statement presentation and leasing. This edition also reflects all accounting standards in effect since our last edition, including the new business combination and consolidation standard and goodwill impairment testing.