Advanced Accounting for BS/MS in Accounting

This course [ACCT-GB.6326.C1] is offered only once in the summer to BS/MS in Accounting students.

Overview

• Accounting for debt securities and other comprehensive income [ASC 320]
• Accounting for equity securities and investments [ASC 321 and 323]
• Accounting for income taxes [ASC 740]
• Accounting for business combinations [ASC 805]
• Accounting for consolidations [ASC 810]
• Accounting for foreign operations [ASC 830]
• Accounting for share-based compensation [ASC 718]
• Advanced accounting for cash flows [ASC 230]

Exams and Grading

• Please read about the penalty for missing classes above.
• 25%: Almaris assignments described below.
• 25%: Review write-ups to be submitted on Brightspace.
• 50%: Final exam

Penalty for missing classes and unapproved use of devices in class

Paper and pencil

Please bring paper and pen/pencil to take notes in class.

Unapproved device usage

Most of us are now addicted to devices, which impedes learning. You are allowed to use devices only when I ask you to use your computer in class. Otherwise, ALL device use is strictly prohibited, unless you have a qualified disability which allows you to use devices in class. Students using devices when not approved will be asked to leave the classroom. Each time you are asked to leave the class, you will be marked absent. This is very painful, awkward, and disruptive, and I hope I never have to do this, but I will not hesitate to enforce this policy.

Reasons for requiring attendance

Attendance is required for several reasons. First, you incorrectly assume you can catch up on a missed class by watching a recording (if available). Videos do not engage your brain as much as a live class. Second, less than 20% of you watch the recording (if available). You are then lost in class, which provides the wrong signals to me as an instructor. Third, your absence hurts class discussions. Fourth, you miss out on feedback if you do not work through the questions I pose in class. Fifth, I lose the feedback since there are fewer questions.

Attendance policy enforced after the add/drop period

The attendance policy below will be in effect only after the add/drop period.

Attendance sheet

After entering the class, please mark yourself present on the OneDrive sheet within the first 20 minutes (link posted on Brightspace after the add/drop period). You will be marked absent if you are more than 20 minutes late, unless it is due to factors beyond your control (traffic, subway delays, or interviews running late). You will also be marked absent if you leave the class early unless you have my permission or get it afterward. You will get an F in the course if you are caught cheating on the attendance sheet.

Mark yourself excused on the attendance sheet for excused absences

Without mandatory attendance, attendance is often below 50%. Therefore, though I dislike doing this, I penalize absences. If you anticipate being absent for good reasons, please email me well in advance. Please enter Excused on the attendance sheet described below to avoid the penalty if approved. You must update it; I will not mark you excused. If you miss a class due to emergencies and cannot tell me in advance, do not panic. Take care of the emergency first, and then email me. I will permit you to change the Absent to Excused. But if you miss a class without a valid reason, there is a penalty, as stated below.

Penalty for missing classes

For sections meeting in 150-190 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY missed session unless you were explicitly excused via email. Thus, if you miss two class sessions, you will lose two grades, and so on.

For sections meeting in 75-80 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY TWO missed sessions unless you were explicitly excused via email. Thus, if you miss four class sessions, you will lose two grades, and so on.

Seating and name tags

Please sit in the same seat in every class and display your name tags. For Zoom classes, you must keep your video on AT ALL TIMES. You must also have a good working headset or mic, as it is extremely rude to be inaudible and force me to ask you to repeat yourself.

Almaris Assignments

• When and how to access the tests: After the first week of class, you can view the online assignments at https://www.almaris.com/assess/ using your official NYU email (no aliases) and the most recent password emailed to you by Almaris. The Almaris password is different from NYU or Stern passwords.
• Support: Almaris staff will reply to your emails only if they pertain to technical issues with the Almaris system, not deadline extensions. Please contact Stern IT for technical issues with your network.
• Password retrieval: To retrieve the password, use your full email with the domain name as it appears in Brightspace. The domain name could be @nyu.edu for some of you, while it could be @stern.nyu.edu for others. I do not control this mess.
• Length: Some assignments are short; others are long. Please manage your time.
• Deadlines: Almaris tests list the deadlines. I may update the deadlines as the course progresses.
• NO EXTENSIONS will be granted for any reason except medical or family emergencies. If you have religious or personal conflicts, please submit the assignments early. The related materials are covered well in advance of the assignments. Please do not email me to request extensions unless you have a medical or family emergency.
• Late: Assignments are marked LATE if you do not meet or exceed the passing score described below before the deadline. There is no additional penalty for lateness other than a low score.
• Passing score: Assignments have a passing score of 100% or less.
  • Passing score 100%: I set the passing score to 100% on an assignment if I want you to ace it. In reality, there is no passing score. Whatever score you get on your last attempt is your final score. You are graded on accuracy but not the number of attempts. There is a difference between passing a test and getting full credit. If you get 80/100 on your final attempt, you pass, but you do not score 100.
  • Passing score less than 100%: I set the passing score to less than 100% on an assignment if I do not require you to ace it. Any score above that score is rounded up to 100%. For example, if the passing score is 90%, and you get 93%, your score is rounded up to 100%. I do the rounding up in a separate spreadsheet. You will see only the raw score online.
• Free to you and NYU: Almaris is not affiliated with Stern in any way. It is offering these tests to Stern at no charge.
• Data privacy and no marketing: Your data is not shared with any third party. It is not used for any promotion or marketing.
• No data retention: Your data is not retained. It is deleted in approximately two weeks after the end of the course.

Almaris Exams

• Please log in to Almaris as soon as you receive these instructions via email. You will see inactive links to your exams and instructions.
• Unless communicated to you differently in class, the midterm exam covers topics covered until the midterm, and the final exam covers the entire course.
• The instructions at the top of the login screen will tell you how many parts the exam has and their weights.
• Please report any problems such as wrong deadlines or missing parts of the exam to me immediately.
• Log in to Almaris right before your exam. Refresh your screen to see active links for the exam.
• Your final score on each part of the exam will be max(score1, score2 - 7, score3 - 14, score4 - 21, score5 - 28).
• You must answer all questions without help from another student or anyone else. Any such communication will be construed as cheating. If the exam is online, email your questions to the TA AND me. Whichever one of us reads the message first will respond. If the exam is held in class, you can ask the proctor.
• If the exam is online, please keep your email open during the exam and check it periodically. Any updates/corrections will be sent via email.
• Manage your time. Extra time will NOT be allowed.
• If you want us to grade your incomplete or incorrect spreadsheet manually, submit it within FIVE MINUTES of the end of the exam. Do not email it; look for Assignment on NYU Brightspace. If you submit the spreadsheet for manual grading, you will be considered to have used up your five attempts. Therefore, your maximum score on that spreadsheet can only be 72/100 due to the penalty for multiple attempts.

Important computer tips for the final

• DO NOT WORK ON A SPREADSHEET WITHIN A BROWSER. Save the spreadsheet to your computer, work on it, and save it periodically. If you navigate away from the spreadsheet in a browser, ALL YOUR WORK WILL BE LOST.
• Organize your computer files and designate a directory to save your exam files.
• Restart your computer before the exam to minimize problems.
• Bring an external mouse with a scroll wheel to speed up test-taking. Do not waste time using the trackpad or the internal mouse.
• Maximize screen space by hiding the Excel ribbon and browser menus. The more the screen you see, the faster and more accurate you are.
• Bring a computer with as big a screen as possible.
• Do not use an unfamiliar computer.

NYU Stern Policies

Please read the NYU Stern Policies for this course.

Help and Office

• Me: dgode@stern.nyu.edu, 212-998-0021, Office: KMC 10-86.
• Teaching assistant: Please check NYU Brightspace.

Administrative and System Requirements

Videotaping

Classes are normally not videotaped, except for EMBA classes. If the class is videotaped, the link is posted to Brightspace by NYU Stern IT within a day.

Registered Students Only

Only registered students can attend classes. I cannot override this NYU Stern rule. We do not allow unregistered students to "audit" a class.

Albert and NYU Brightspace

You must be in Albert and NYU Brightspace before starting the first class. If you register late, there might be a delay of a day before you appear in these systems. If you cannot access these systems after a day, please contact the relevant REGISTRAR. I cannot add you to these systems regardless of what someone in IT tells you.

Computer Requirements

You need to bring a computer to every class. If you have any technical questions, please contact Stern IT at (212-998-0180) or servicedesk@stern.nyu.edu, or NYU IT at +1 (212) 998-3333 or askit@nyu.edu. I cannot help you with your computer issues.

Excel 365 Desktop Version Required

The desktop version of Excel 365 is required. Excel Online and Google Sheets are NOT OK. Read this page regarding Excel 365 Desktop access for NYU students.

Materials

• I use my materials. Therefore, no textbook is required, and you need not purchase anything.

Schedule

• There is no midterm. There will be no in-class graded quizzes.
• A detailed document is provided in the course materials. It lists the sequence of topics, related pages from the materials, related spreadsheets, and related assignments. The outline below is a summary.

1. Deferred taxes: An introduction

We will skip this part if you are already comfortable with it based on the coverage in prior classes.

Permanent versus temporary differences

• Book income versus taxable income
• Book basis versus tax basis
• Tax paid, tax bill, current tax expense, deferred tax expense, total tax expense
• Taxes payable, uncertain tax benefit liabilities, deferred tax liabilities
• Tax refunds receivable

2. Deferred taxes: Four key examples

Taxable and deductible temporary differences

• When book revenues precede taxable revenues: Book basis versus tax basis of receivables
• When book revenues follow taxable revenues: Book basis versus tax basis of deferred revenues
• When book expenses precede tax deductions: Book basis versus tax basis of accrued expenses
• When book expenses follow tax deductions: Book basis versus tax basis of deferred expenses
• When future enacted tax rates are different

3. Deferred taxes: Intermediate issues

Accumulated other comprehensive income

• Other comprehensive income arising from available-for-sale securities
• Introduction to intra-period tax allocations

Tax credit carryforwards and tax loss carrybacks and carryforwards

• R&D credit carryforwards
• AMT credit carryforwards
• NOL carryback
• NOL carryforwards

Valuation allowance

• More-likely-than-not criterion
• Positive evidence
• Negative evidence

4. Investments

Debt securities

• Trading securities
• Available-for-sale securities
• Held-to-maturity securities

Equity securities: When there is no consolidation

• Trading securities at fair value
• Measurement alternative ("Modified cost-method investments")
• Equity-method investments

Introduction to consolidation

• Voting interest entities versus variable interest entities
• A peek at variable interest entities

5. Acquisitions: An example to illustrate the overall process

On the acquisition date

• Identify the acquirer
• Determine the acquisition date
• Compute consideration paid
• Measure the fair value of assets acquired and liabilities assumed: Step-ups
• Determine if push-down or top-side accounting applies
• Compute Deferred taxes
• Derive goodwill

After acquisition date

• Increased depreciation and amortization
• Unwinding of deferred tax assets and liabilities
• Impairments

6. Acquisitions: Scope and Consideration paid

Scope of ASC 805

• Acquiring assets versus acquiring a business
• Definition of a business
• Joint ventures
• Transactions between entities under common control
• Veto rights

Consideration paid

• Components of purchase consideration
  • Cash paid
  • Debt assumed
  • Equity issued
  • Contingent consideration: Equity-classified and liability-classified earnouts
  • Replacement stock awards issued to employees
  • Off-market contracts
• Items that are excluded from purchase consideration
  • Preexisting relationships
  • Share-based payments allocated to post-acquisition services
  • Transaction costs
• Premium paid
  • Understanding premium over book value versus premium over market value
  • Understanding control premium

7. Acquisitions: Acquired assets and liabilities

Acquired assets

• Trading, available-for-sale, and held-to-maturity securities: Difficulty of valuing Level III securities
• Receivables and allowances: Misleading days sales and allowance ratios after an acquisition
• Raw materials, work-in-process, and finished goods inventories: Misleading gross margin and days of inventory ratios after an acquisition
• PP&E: Distorted accumulated depreciation to gross PP&E ratios after an acquisition; distorted PP&E turnover after an acquisition
• Favorable leases and contracts
• Intangible assets
  • Brands and trademarks
  • Customer relationships
• Deferred tax assets are covered in the next section

Acquired pre-tax liabilities

• Accounts payable and accrued expenses: Misleading days payable after an acquisition
• Asset retirement obligations
• Deferred revenues: Understated future revenues, misleading days of deferred revenues
• Unfavorable leases and contracts

Deferred tax liabilities and assets

• Book basis versus tax basis in acquisitions and resulting deferred tax assets and liabilities

Goodwill

• What goodwill represents

8. Acquisitions: Post-acquisition date accounting

Amortization

• Finite life assets
• Indefinite life assets other than goodwill

Impairment

• Finite life assets
• Indefinite life assets other than goodwill
• Goodwill

9. Acquisitions: Non-controlling interest

When the parent retains control

• Profits and losses
• Other comprehensive income
• Dividends
• Increases or decreases in ownership stake while still maintaining control

When the parent acquires or relinquishes control

• Acquire control: Marking the existing investments to fair value and computing the fair value of remaining non-controlling interest
• Relinquish control: De-consolidation and marking the remaining investment to fair value

10. Foreign Operations

Overview of the process

• Identify the reporting entity and its reporting currency
• Identify distinct and separable operations within the reporting entity
• Determine the functional currency of each operation
• Remeasure amounts not in functional currency to functional currency
• Translate functional currency amounts to reporting currency

Remeasurements

• Monetary assets
• Non-monetary assets
• How remeasurements affect financial ratios

Translations

• Cumulative translation adjustment
• How translations affect indirect cash flow adjustments

11. Intercompany transactions

Purchase and sale of inventory and long-lived assets

• Sale of inventory
• Sale of PP&E and intangibles

Intercompany debt

• Finite duration
• Indefinite duration

12. Introduction to derivatives

Institutional knowledge

• What are derivatives? Why are they useful?
• Forward versus futures contracts

Commonly used derivatives

• Commodity derivatives
• Foreign currency derivatives
• Interest rate derivatives

13. Hedge accounting

The five possibilities

• Forward sale agreements
• Financial instruments at fair value but not accounted for as hedges
• Fair value hedge
• Cash flow hedge
• Hedge of net investment in a foreign operation