executive MBA subject 05

International Accounting

Year 1, term A. 5.0 ECTS, about 125 hours, 6 parts. Part 1 is free.

task, condition, standard

What you will be able to do

Task, condition and standard

Task

Analyse two firms' annual accounts and write a one-page comparison of their performance and position.

Condition

Given two sets of summarised statements prepared under international standards.

Standard

Ratios are correct, differences in accounting choices are noted, and the conclusion follows from the numbers.

Who it is for: Managers who must read, compare and question accounts from different countries.

how this subject works

Free entry, voice and your learning style

Part 1 is free to try. Read it, listen to it and answer it before you decide. Join the programme, or this subject on its own, to open the other parts.

Listen. Every part has a Listen button that reads it aloud.
Speak or type. Answer each part by talking (press Speak) or by typing. Your answers stay on this device only.
Learn your way. Every part has a See, Hear, Do and Read-and-write route. Not sure which suits you? Take the eight-question learning-style check.

6 parts

The parts, with worked examples

Part 1 Financial statements under IFRS 21 hUnderstand: read

Three statements tell one story: the income statement shows profit, the balance sheet shows what is owned and owed, and the cash flow statement shows where cash went.

Assets = liabilities + equity
Profit is not cash
Notes explain the choices behind the numbers

Worked example: Worked-example figures, in your currency. Sales 500, costs 420, profit 80. But customers owe 60 more than last year, so cash from operations is about 80 - 60 = 20. Profit looks healthy; cash is tight.

Activity: Take one firm's summary statements and explain in five lines why profit and cash differ.

Standard: The main reasons are named and one figure is reconciled correctly.

Learn your way

See. Sketch "financial statements under ifrs" as a picture: boxes, arrows and the key number.
Hear. Press Listen, or explain the worked example aloud to someone.
Do. Do the activity with your own work or a practice case.
Read and write. Write the idea in three lines in your own words below.

Your answer. Take one firm's summary statements and explain in five lines why profit and cash differ.

Part 2 Revenue, assets and liabilities 21 hApply: recognise

Revenue is recorded when the promise to the customer is met, not when cash arrives. Assets and liabilities follow similar rules.

Revenue when the goods or service are delivered
A three-year contract paid up front is earned over three years
Provisions record likely future costs

Worked example: Worked-example figures, in your currency. A client pays 36,000 up front for a 3-year service. Revenue this year = 12,000; the other 24,000 is a liability (deferred revenue) until earned.

Activity: Work out revenue and deferred revenue for three sample contracts.

Standard: All revenue and liability figures correct.

Learn your way

See. Sketch "revenue, assets and liabilities" as a picture: boxes, arrows and the key number.
Hear. Press Listen, or explain the worked example aloud to someone.
Do. Do the activity with your own work or a practice case.
Read and write. Write the idea in three lines in your own words below.

Your answer. Work out revenue and deferred revenue for three sample contracts.

Part 3 Group accounts and consolidation 21 hApply: combine

When a firm controls others, it reports them as one group. Sales between group members are removed so the group does not count them twice.

Control usually means more than half the votes
Add all assets, liabilities, income and costs
Remove internal sales and balances

Worked example: Worked-example figures, in your currency. Parent sales 800, subsidiary 300, of which 100 were sold to the parent. Group sales = 800 + 300 - 100 = 1,000.

Activity: Consolidate the sales and costs of a parent and two subsidiaries.

Standard: Internal sales removed and group totals correct.

Learn your way

See. Sketch "group accounts and consolidation" as a picture: boxes, arrows and the key number.
Hear. Press Listen, or explain the worked example aloud to someone.
Do. Do the activity with your own work or a practice case.
Read and write. Write the idea in three lines in your own words below.

Your answer. Consolidate the sales and costs of a parent and two subsidiaries.

Part 4 Financial analysis and ratios 21 hAnalyse: compare

Ratios turn statements into comparable signals: profitability, liquidity, efficiency and gearing.

Net margin = profit / sales
Current ratio = current assets / current liabilities
Debt to equity = debt / equity

Worked example: Worked-example figures, in your currency. Firm A: profit 50 on sales 500, margin 10%. Firm B: profit 45 on sales 300, margin 15%. B is smaller but more profitable per sale.

Activity: Calculate four ratios for two firms and say which is stronger on each.

Standard: Eight correct ratios and a one-line judgement for each pair.

Learn your way

See. Sketch "financial analysis and ratios" as a picture: boxes, arrows and the key number.
Hear. Press Listen, or explain the worked example aloud to someone.
Do. Do the activity with your own work or a practice case.
Read and write. Write the idea in three lines in your own words below.

Your answer. Calculate four ratios for two firms and say which is stronger on each.

Part 5 Managerial and cost accounting 21 hApply: cost and decide

Inside the firm, managers need costs per product and per decision. Fixed and variable costs behave differently when volume changes.

Contribution = price - variable cost
Break-even units = fixed costs / contribution per unit
Only costs that change are relevant to a decision

Worked example: Worked-example figures, in your currency. Price 50, variable cost 30, contribution 20. Fixed costs 40,000. Break-even = 40,000 / 20 = 2,000 units.

Activity: Calculate break-even for two products and recommend which to push.

Standard: Both break-evens correct and the recommendation uses contribution.

Learn your way

See. Sketch "managerial and cost accounting" as a picture: boxes, arrows and the key number.
Hear. Press Listen, or explain the worked example aloud to someone.
Do. Do the activity with your own work or a practice case.
Read and write. Write the idea in three lines in your own words below.

Your answer. Calculate break-even for two products and recommend which to push.

Part 6 IFRS, US GAAP and sustainability reporting 21 hEvaluate: compare standards

Different rule books can give different numbers for the same firm. Sustainability reports add measures such as emissions alongside money.

Some stock and development cost rules differ between standards
Always read the notes before comparing firms
Sustainability data should be measured, checked and comparable

Worked example: Worked-example figures, in your currency. Two firms each spend 10m on development. One capitalises 6m as an asset and expenses 4m; the other expenses all 10m. Reported profit differs by 6m for the same activity.

Activity: List three accounting choices that make two firms hard to compare.

Standard: Three real choices, each with its effect on profit or assets.

Learn your way

See. Sketch "ifrs, us gaap and sustainability reporting" as a picture: boxes, arrows and the key number.
Hear. Press Listen, or explain the worked example aloud to someone.
Do. Do the activity with your own work or a practice case.
Read and write. Write the idea in three lines in your own words below.

Your answer. List three accounting choices that make two firms hard to compare.

ten checks

Check yourself

Say or write your answer first, then read the model answer.

Q1. Write the accounting equation.
Model answer: Assets = liabilities + equity. (Covered in part 1: Financial statements under IFRS.)
Q2. Why can a profitable firm run short of cash?
Model answer: Profit is recorded before customers pay, or cash goes into stock. (Covered in part 1: Financial statements under IFRS.)
Q3. 36,000 paid up front for 3 years. Revenue in year 1?
Model answer: 12,000. (Covered in part 2: Revenue, assets and liabilities.)
Q4. What is deferred revenue?
Model answer: Cash received for work not yet done; a liability. (Covered in part 2: Revenue, assets and liabilities.)
Q5. Parent sales 800, subsidiary 300, internal sales 100. Group sales?
Model answer: 1,000. (Covered in part 3: Group accounts and consolidation.)
Q6. Why remove internal sales?
Model answer: So the group does not count the same sale twice. (Covered in part 3: Group accounts and consolidation.)
Q7. Profit 45 on sales 300. Net margin?
Model answer: 15%. (Covered in part 4: Financial analysis and ratios.)
Q8. Contribution 20, fixed costs 40,000. Break-even units?
Model answer: 2,000. (Covered in part 5: Managerial and cost accounting.)
Q9. Which costs matter for a decision?
Model answer: Only those that change because of the decision. (Covered in part 5: Managerial and cost accounting.)
Q10. Why read the notes before comparing two firms?
Model answer: They show accounting choices that change the numbers. (Covered in part 6: IFRS, US GAAP and sustainability reporting.)

slides L1 to L7

The seven-level ladder, slide by slide

Slide 1: L1 Three statements. Profit, position and cash. Speaker note: Say: put "three statements" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.
Slide 2: L2 Profit versus cash. Why they differ. Speaker note: Say: put "profit versus cash" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.
Slide 3: L3 Recognition. When revenue and liabilities are recorded. Speaker note: Say: put "recognition" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.
Slide 4: L4 Groups. Add up and remove internal trade. Speaker note: Say: put "groups" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.
Slide 5: L5 Ratios. Margin, liquidity, gearing. Speaker note: Say: put "ratios" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.
Slide 6: L6 Costing. Contribution and break-even. Speaker note: Say: put "costing" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.
Slide 7: L7 Comparing across standards. Adjust for choices; add sustainability data. Speaker note: Say: put "comparing across standards" in one sentence and give one example from work. Check: ask one learner to say it back in their own words. Mistake: moving on before the numbers are clear.

how it is judged

Marking rubric

Marking rubric (Not yet, Meets, Exceeds)
Criterion	Not yet	Meets	Exceeds
Accuracy	Several figures or facts are wrong.	Main figures are correct and the working is shown.	Figures are correct and checked a second way.
Use of international accounting tools	Tools are named but not used.	The right tools are used for each step.	Tools are adapted to the case and their limits are stated.
Recommendation	No clear answer.	A clear answer backed by the analysis.	A clear answer that also says what would change it.
Communication	Hard to follow.	Answer first, clear and short.	Clear, short and persuasive under questions.

jobs this leads to

Where this takes you

Financial analyst. Reads and compares accounts.
Finance business partner. Explains numbers to managers.
Internal auditor. Checks that accounts are reliable.

language

Choose your language

This subject is in English first. Choose any language and the page is translated for you by machine, with the English kept as the official text.

Keep going

All subjects Previous: Global Management Next: Financial Management

Draft for review. Not live. Credit values are aligned with the European credit system for orientation only and are not an accreditation.