中南财经政法大学：《中级会计学 Intermediate Accounting》课程教学资源（课程授课教案）

information needs. Questions will be raised as to examples of external users and internal users and their different information needs. Then differences of financial accounting and managerial accounting will be discussed. Financial accounting is the information accumulation, processing, and communication system designed to satisfy the investment and credit decision-making information

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2. References A.《中级会计学》(会计类原版教材影印系列),中国财政经济出版社,2002年11月第1版 (Intermediate Accounting, 14E, by Earl Kay Stice, James D. Stice, K. Fred Skousen B Statements of Financial Accounting Standards, by FASB C International Accounting Standards /International Financial Reporting Standards D Chinese Accounting Standards for Enterprises 3. Related intenet web sites A.Fasbwww.fasborg B.IasBwww.iasb.org C.theNikolaiandbaZleyIntermediateAccountingwebsitehttp://niKolai.swcollege.com) Teaching Content Lesson 1: THE EN VIRONMENT OF FINANCIALREPORTINg Learning Objectives After careful study, students will be able to 1. Understand accounting information 2. Know what is included in financial reporting 3. Explain generally accepted accounting principles(GAAP)and the sources of GAAP in U.S.A 4. Identify the types of prc issued by the FAs 5. Understand how the Financial Accounting Standards Board ( FASB)operates 6. Describe the relationship between the Securities and Exchange Commission(SEC)and the FASB 7. Understand ethical dilemmas of Accountants 8. Know the difference of ng standards development between China and U.S.A Teaching hours Teaching contents This lesson will begin with some forewords about the course to let students know exactly the course ature, objectives, requirements etc. Then the five sections of this lesson will be discussed logically 1. Accounting information: users, uses, and GAAP in U.S.A. With the discussion of capital markets, accounting information will be induced. Accounting. s the process communicating economic information to permit informed judgments and decisions by users of information Accounting provides a link between the economic activities of a company and decision makers who are interested in the company. These decision makers who use accounting information can be divided into two major groups: external users(such as investors)and internal users(the company's management) Because of their different relationships to the company, the two groups have somewhat dissimilar

- 2 - 2. References A. 《中级会计学》（会计类原版教材影印系列），中国财政经济出版社，2002 年 11 月第 1 版 (Intermediate Accounting, 14E, by Earl Kay Stice, James D. Stice, K. Fred Skousen ) B. Statements of Financial Accounting Standards, by FASB C. International Accounting Standards / International Financial Reporting Standards D. Chinese Accounting Standards for Enterprises 3. Related intenet web sites A. FASB www.fasb.org B. IASB www.iasb.org C. the Nikolai and Bazley Intermediate Accounting web site http://Nikolai.swcollege.com ） Teaching Content Lesson 1: THE ENVIRONMENT OF FINANCIAL REPORTING Learning Objectives After careful study , students will be able to: 1. Understand accounting information. 2. Know what is included in financial reporting. 3. Explain generally accepted accounting principles (GAAP) and the sources of GAAP in U.S.A. 4. Identify the types of pronouncements issued by the FASB. 5. Understand how the Financial Accounting Standards Board (FASB) operates. 6. Describe the relationship between the Securities and Exchange Commission (SEC) and the FASB. 7. Understand ethical dilemmas of Accountants. 8. Know the difference of accounting standards development between China and U.S.A. Teaching Hours 3 hours Teaching contents This lesson will begin with some forewords about the course to let students know exactly the course nature, objectives, requirements etc. Then the five sections of this lesson will be discussed logically. 1. Accounting information: users, uses, and GAAP in U.S.A. With the discussion of capital markets, accounting information will be induced. Accounting, the "language of business," has been described as the process of identifying, measuring, recording, and communicating economic information to permit informed judgments and decisions by users of information. Accounting provides a link between the economic activities of a company and decision makers who are interested in the company. These decision makers who use accounting information can be divided into two major groups: external users (such as investors) and internal users (the company's management). Because of their different relationships to the company, the two groups have somewhat dissimilar

information needs. Questions will be raised as to examples of external users and internal users and their different information needs Then differences of financial accounting and managerial accounting will be discussed. Financial accounting is the information accumulation, processing, and communication sy stem designed to satisfy the investment and credit decision-making information needs of external users. Financial accounting information is presented in published financial statements. Managerial accounting is the information accumulation, processing, and communication system designed to meet the decision-making information eeds of internal users. The format for internal reports is determined by the company. The system is constrained by the need for information and the cost of providing that information After students got an overall impression about accounting and accounting information focus will be conducted to financial accounting and financial reporting Financial reporting is the process of communicating financial accounting information about a company to external users, primarily through the company's annual report The annual report includes three major financial statements: the balance sheet, income statement, and statement of cash flows, as well as notes to the financial statements. Many companies include the statement of changes in stockholders equity as a fourth major financial statement. Most financial statements are audited by an generally accepted accounting principles, of the financial statements and accompanying c ordance with independent certified public accountant, who expresses an opinion as to the fairness, in acc In its audited financial statements, a company must follow generally accepted accounting principl (GAAP), the guidelines, procedures, and practices required for recording and reporting accounting information. GaAP define accepted accounting practices and standards of reporting at a particular time They have evolved over many years, with the involvement of different policy-making bodies. Emphasis should be put to students that there is no single document including all of the standards for accounting although the FASB Financial Accounting Research System(FARS) includes most accounting standards in its electronic data base 2. The development of accounting standards in U.S.A a brief history introduction about the development of accounting standards in U.S.A. will give students a full impression about accounting standards in U.S.A. From 1938 to 1959 the Committee on Accounting Procedure(CAP)of the AICPA issued 51 Accounting Research Bulletins, which are still part of GAAP unless specifically superseded or amended. Because of criticism of the processes of formulating accounting principles, the AICPA replaced the CAP with the Accounting Principles Board in 1959. From 1959 to 1973 the APB issued 31 Accounting Principles Board Opinions, many based on Accounting Research Studies. Unless amended or rescinded, APB Opinions are also still part of GAAP. Development of accounting principles by the APB was criticized. The structure of the Financial Accounting Standards Board(FASB), which replaced the APB in 1973, was designed to meet these criticisms. The FASB issues several types of pronouncements, including Statements of Financial Accounting Standards, Interpretations, Technical Bulletins, and Statements of Financial Accounting Concepts. Before issuing a statement of concepts or standards, the Fasb usually completes a multistage process designed to develop accounting tandards efficiently and with due process, in a public forum. Because accounting policy decisions are complex and part of a broader social system, input from interested parties is important. Negotiation and compromise are often necessary during the development of fair, acceptable standards. Here, a question can be raised to discuss that why FASb adopts political and social involvement methods in its standards-settin

- 3 - information needs. Questions will be raised as to examples of external users and internal users and their different information needs. Then differences of financial accounting and managerial accounting will be discussed. Financial accounting is the information accumulation, processing, and communication system designed to satisfy the investment and credit decision-making information needs of external users. Financial accounting information is presented in published financial statements. Managerial accounting is the information accumulation, processing, and communication system designed to meet the decision-making information needs of internal users. The format for internal reports is determined by the company. The system is constrained by the need for information and the cost of providing that information. After students got an overall impression about accounting and accounting information, focus will be conducted to financial accounting and financial reporting. Financial reporting is the process of communicating financial accounting information about a company to external users, primarily through the company's annual report. The annual report includes three major financial statements: the balance sheet, income statement, and statement of cash flows, as well as notes to the financial statements. Many companies include the statement of changes in stockholders' equity as a fourth major financial statement. Most financial statements are audited by an independent certified public accountant, who expresses an opinion as to the fairness, in accordance with generally accepted accounting principles, of the financial statements and accompanying notes. In its audited financial statements, a company must follow generally accepted accounting principles (GAAP), the guidelines, procedures, and practices required for recording and reporting accounting information. GAAP define accepted accounting practices and standards of reporting at a particular time. They have evolved over many years, with the involvement of different policy-making bodies. Emphasis should be put to students that there is no single document including all of the standards for accounting, although the FASB Financial Accounting Research System (FARS) includes most accounting standards in its electronic data base. 2. The development of accounting standards in U.S.A. A brief history introduction about the development of accounting standards in U.S.A. will give students a full impression about accounting standards in U.S.A. From 1938 to 1959 the Committee on Accounting Procedure (CAP) of the AICPA issued 51 Accounting Research Bulletins, which are still part of GAAP unless specifically superseded or amended. Because of criticism of the processes of formulating accounting principles, the AICPA replaced the CAP with the Accounting Principles Board in 1959. From 1959 to 1973 the APB issued 31 Accounting Principles Board Opinions, many based on Accounting Research Studies. Unless amended or rescinded, APB Opinions are also still part of GAAP. Development of accounting principles by the APB was criticized. The structure of the Financial Accounting Standards Board (FASB), which replaced the APB in 1973, was designed to meet these criticisms. The FASB issues several types of pronouncements, including Statements of Financial Accounting Standards, Interpretations, Technical Bulletins, and Statements of Financial Accounting Concepts. Before issuing a statement of concepts or standards, the FASB usually completes a multistage process designed to develop accounting standards efficiently and with due process, in a public forum. Because accounting policy decisions are complex and part of a broader social system, input from interested parties is important. Negotiation and compromise are often necessary during the development of fair, acceptable standards. Here, a question can be raised to discuss that why FASB adopts political and social involvement methods in its standards-setting process

3. Other organizations currently influencing GAAP in U.S.A. Other organizations currently influencing GAAP in U.S.A. will be discussed then, including SEC, AICPA, EITF, CASB, IRS, AAA, IASB, GASB, G4+I and Several professional associations Emphasis will be given to the fact that the Securities and Exchange Commission has the legal authority to prescribe accounting principles and practices for usually all companies issuing publicly traded securities. To date, the SEC has usually allowed accounting principles to be formulated in the private sector, but has occasionally exerted pressure on the CAP, APB, and FASB. In addition, the SEC ministers the extensive disclosure requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934. Companies are required to file forms, such as Form 10-K, electronically with the SEC and these forms are located in the SEC's EDGAR. Enron case will be given as an example The American Institute of Certified Public Accountants is the professional organization for all certified public accountants in the U.S. The FASB Emerging Issues Task Force (EITF) identifies significant emerging accounting issues and develops consensus positions on accounting for these issues The Cost Accounting Standards Board(CaSB), a congressional agency, is charged with setting standards of accounting for negotiated federal contracts and subcontracts. The Internal Revenue Service (IrS) ministers the provisions of the Internal revenue Code. These provisions do not always reflect the goals of financial accounting. However, they do at times influence the choice of accounting methods and procedures. The American Accounting Association(AAA) is an organization comprised primarily of academicians and practicing accountants. The AAA attempts to influence the development of formal accounting pro ments through education and persuasion. The International Accounting Standards Board (IASB) has as its goals to develop and promote the use of global accounting standards, and to bring national accounting standards into agreement with international standards. The Governmental Accounting Standards Board(gasB)operates under the auspices of the Financial Accounting Foundation. The G4+ I is a group of standard-setting boards that strives to influence the development and harmonization of useful high quality accounting standards for international capital markets The instructor can also insert some new development situations based on update materials in the website of fASB and iasb etc 4. Ethics in the accounting environment Students will be remind of that accountants are often faced with ethical dilemmas(ethical conflicts)in their professional roles. Because of the important role of accounting in society, accountants must maintain high ethical standards The AlCPa Code of Professional Conduct(CPC) includes six basic principles: members should(a) exercise sensitive professional and moral judgments in carrying out their responsibilities;(b)serve the public interest, honor the public trust, and demonstrate commitment to professionalism;(c)perform professional responsibilities with the highest sense of integrity;(d)maintain objectivity, be free from conflicts of interest, and be independent in fact and appearance;(e)observe due care in practice, and(f) follow CPC principles in determining the scope and nature of services to be provided 5. Comparison of the development of accounting standards in China and in U.S.A. Students will be required to find materials about development of accounting standards in China. Then discussion based on the materials and knowledge learned in this lesson about development of accounting standards in U.S. will be induced in class. The case is intended for three purposes: first, with comparison

- 4 - 3. Other organizations currently influencing GAAP in U.S.A. Other organizations currently influencing GAAP in U.S.A. will be discussed then, including SEC, AICPA, EITF, CASB, IRS, AAA, IASB, GASB, G4+1 and Several professional associations. Emphasis will be given to the fact that the Securities and Exchange Commission has the legal authority to prescribe accounting principles and practices for usually all companies issuing publicly traded securities. To date, the SEC has usually allowed accounting principles to be formulated in the private sector, but has occasionally exerted pressure on the CAP, APB, and FASB. In addition, the SEC administers the extensive disclosure requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934. Companies are required to file forms, such as Form 10-K, electronically with the SEC and these forms are located in the SEC's EDGAR. Enron case will be given as an example. The American Institute of Certified Public Accountants is the professional organization for all certified public accountants in the U.S. The FASB Emerging Issues Task Force (EITF) identifies significant emerging accounting issues and develops consensus positions on accounting for these issues. The Cost Accounting Standards Board (CASB), a congressional agency, is charged with setting standards of accounting for negotiated federal contracts and subcontracts. The Internal Revenue Service (IRS) administers the provisions of the Internal Revenue Code. These provisions do not always reflect the goals of financial accounting. However, they do at times influence the choice of accounting methods and procedures. The American Accounting Association (AAA) is an organization comprised primarily of academicians and practicing accountants. The AAA attempts to influence the development of formal accounting pronouncements through education and persuasion. The International Accounting Standards Board (IASB) has as its goals to develop and promote the use of global accounting standards, and to bring national accounting standards into agreement with international standards. The Governmental Accounting Standards Board (GASB) operates under the auspices of the Financial Accounting Foundation. The G4 + 1 is a group of standard-setting boards that strives to influence the development and harmonization of useful high quality accounting standards for international capital markets. The instructor can also insert some new development situations based on update materials in the website of FASB and IASB etc. 4. Ethics in the accounting environment Students will be remind of that accountants are often faced with ethical dilemmas (ethical conflicts) in their professional roles. Because of the important role of accounting in society, accountants must maintain high ethical standards. The AICPA Code of Professional Conduct (CPC) includes six basic principles: members should (a) exercise sensitive professional and moral judgments in carrying out their responsibilities; (b) serve the public interest, honor the public trust, and demonstrate commitment to professionalism; (c) perform professional responsibilities with the highest sense of integrity; (d) maintain objectivity, be free from conflicts of interest, and be independent in fact and appearance; (e) observe due care in practice; and (f) follow CPC principles in determining the scope and nature of services to be provided. 5. Comparison of the development of accounting standards in China and in U.S.A. Students will be required to find materials about development of accounting standards in China. Then discussion based on the materials and knowledge learned in this lesson about development of accounting standards in U.S. will be induced in class. The case is intended for three purposes: first, with comparison

students will know the differences clearly and grasp new knowledge deeply. Second, student will learn how to find related materials and this ability is very crucial to future independent studies. Third, discussion in class will cultivate students'creative and critical thinking, which is very important in accounting Pedagogical Notes Since this course is the first time that students learn professional knowledge based on original English textbook and bilingual teaching, some students will feel hard to grasp all the knowledge, this lesson as the first lesson of the course should be taught carefully. And instructors should pay attention to the difficulties students might felt The last section of this lesson, which is a discussion part, instructors should try to cultivate student creative and critical thinking. Creative thinking involves the use of imagination and insight to solve problems by finding new relationships(ideas) among items of information. Critical thinking involves the logical analysis of issues, using inductive or deductive reasoning to test new relationships(ideas)to determine their effectiveness Lesson 2 FINANCIAL REPORTING: ItS coNcEPTUAL FraMeworK Learning Objectives After careful study, students will be able to Explain functions of conceptual framework. 2. Understand the relationship among the objectives of financial reporting 3. Identify the general objective of financial reporting 4. Describe the three specific objectives of financial reporting 5. Discuss the types of useful information for investment and credit decision mal 6. Explain the qualities of useful accounting information 7. Understand the accounting assumptions and conventions that influence GAAP 8. Define the elements of financial statements Teaching hours 5 hours Teaching contents This lesson will begin with emphasis about functions of theory basis in accounting 1. FASB conceptual framework a brief background introduction about FASB conceptual framework will be conducted. Students nould be remind of FASB's position in U.S.A., which is different from that of China The FASB has been charged with developing a conceptual framework of accounting theory and with establishing standards for financial accounting practice. The conceptual framework, which is intended to provide a theoretical foundation for consistent accounting standards, has been essentially completed, with even Statements of Financial Accounting Concepts issued. In the development process of these sever statements, FASB has divided the conceptual framework activities into several projects

- 5 - students will know the differences clearly and grasp new knowledge deeply. Second, student will learn how to find related materials and this ability is very crucial to future independent studies. Third, discussion in class will cultivate students’ creative and critical thinking , which is very important in accounting nowadays. Pedagogical Notes Since this course is the first time that students learn professional knowledge based on original English textbook and bilingual teaching, some students will feel hard to grasp all the knowledge, this lesson as the first lesson of the course should be taught carefully. And instructors should pay attention to the difficulties students might felt. The last section of this lesson, which is a discussion part, instructors should try to cultivate students’ creative and critical thinking. Creative thinking involves the use of imagination and insight to solve problems by finding new relationships (ideas) among items of information. Critical thinking involves the logical analysis of issues, using inductive or deductive reasoning to test new relationships (ideas) to determine their effectiveness. Lesson 2: FINANCIAL REPORTING:ITS CONCEPTUAL FRAMEWORK Learning Objectives After careful study , students will be able to: 1. Explain functions of conceptual framework. 2. Understand the relationship among the objectives of financial reporting. 3. Identify the general objective of financial reporting. 4. Describe the three specific objectives of financial reporting. 5. Discuss the types of useful information for investment and credit decision making. 6. Explain the qualities of useful accounting information. 7. Understand the accounting assumptions and conventions that influence GAAP. 8. Define the elements of financial statements. Teaching Hours 5 hours Teaching contents This lesson will begin with emphasis about functions of theory basis in accounting. 1. FASB conceptual framework A brief background introduction about FASB conceptual framework will be conducted. Students should be remind of FASB’s position in U.S.A., which is different from that of China. The FASB has been charged with developing a conceptual framework of accounting theory and with establishing standards for financial accounting practice. The conceptual framework, which is intended to provide a theoretical foundation for consistent accounting standards, has been essentially completed, with seven Statements of Financial Accounting Concepts issued. In the development process of these seven statements, FASB has divided the conceptual framework activities into several projects

2. Objectives of financial reporting FASB Statement of Financial Accounting Concepts No. 1 deals with the objectives of financial reporting. These objectives relate to general-purpose financial reporting of companies. That is, they are to meet the needs of a variety of external, rather than internal, users. This is a point should be emphasized Three broad objectives of financial reporting, which proceed from the more general to the more specific, are identified in the Statement: (a) The general objective is to provide information that is useful to present and potential investors, creditors, and other external users for decision-making;(b) Financial reporting should provide information that is understandable to one who has a reasonable knowledge of accounting and business and who is willing to study and analyze the information presented (c) While there are many potential users of financial reports, the objectives are directed primarily toward investors and creditors Additionally, three specific objectives are identified in FASB Statement of Financial Accounting Concepts No. 1: (a)To provide information about a company's economic resources and the claims to those resources, i.e., its economic resources, obligations, and owners equity;(b)To provide information about a company's comprehensive income and its components;(c)To provide information about a company's cash flows The FAsB has identified five types of information related to the financial reporting objective to help external users assess the amounts, timing, and uncertainty of the future net cash inflows of the company They are:(a) Investors expect a return on the capital they invest;(b)Risk is the uncertainty or unpredictability of a company's future results; (c) Financial flexibility is the ability of a company to espond to unexpected needs and opportunities by changing the amounts and timing of cash flows;(d) Liquidity relates to how quickly an asset can be converted into cash, or a liability paid; (e) any's operating capability is its ability to maintain a given physical level of opera 3. Qualitative characteristics of accounting information FASB Statement of Financial Accounting Concepts No. 2 specifies qualitative characteristics of accounting information that accounting information should possess in order to be most useful. Different from China, FASB has set hierarchy of qualitative characteristics The hierarchy shows two constraints to accounting information: (a)Cost-benefit: the benefit of information must be greater than its cost.(b)Materiality: the dollar amounts involved must be large enough to make a difference to decision makers. Since no quantitative guidelines were set by the FaSB, materiality must be determined by judgment However, the FASB suggested consideration of nature and relative size to separate material and immaterial items. Understandability is a link between decision makers and the accounting information Information should be understandable to broad classes of reasonably knowledgeable and diligent users Decision usefulness is the overall quality which accounting information must possess. The two primary qualities making accounting information useful are relevance and reliability. Accounting information that can make a difference to decision makers is relevant. To be relevant, infomation must kers in forecasting to decision makers in confirming or ddition, relevant information must be timely. Reliable information is reasonably free from error and bias and faithfully reports what it is intended to represent. To be reliable information must(a) be verifiable; (b) have representational faithfulness, and (c) be neutral. Information is verifiable(sometimes called objective) when it can be duplicated using the same measurement method. Verifiability is useful in 6

- 6 - 2. Objectives of financial reporting FASB Statement of Financial Accounting Concepts No. 1 deals with the objectives of financial reporting. These objectives relate to general-purpose financial reporting of companies. That is, they are to meet the needs of a variety of external, rather than internal, users. This is a point should be emphasized. Three broad objectives of financial reporting, which proceed from the more general to the more specific, are identified in the Statement: (a) The general objective is to provide information that is useful to present and potential investors, creditors, and other external users for decision-making; (b) Financial reporting should provide information that is understandable to one who has a reasonable knowledge of accounting and business and who is willing to study and analyze the information presented; (c) While there are many potential users of financial reports, the objectives are directed primarily toward investors and creditors. Additionally, three specific objectives are identified in FASB Statement of Financial Accounting Concepts No. 1: (a)To provide information about a company's economic resources and the claims to those resources, i.e., its economic resources, obligations, and owners' equity; (b)To provide information about a company's comprehensive income and its components; (c)To provide information about a company's cash flows. The FASB has identified five types of information related to the financial reporting objective to help external users assess the amounts, timing, and uncertainty of the future net cash inflows of the company. They are: (a) Investors expect a return on the capital they invest; (b) Risk is the uncertainty or unpredictability of a company's future results; (c) Financial flexibility is the ability of a company to respond to unexpected needs and opportunities by changing the amounts and timing of cash flows; (d) Liquidity relates to how quickly an asset can be converted into cash, or a liability paid; (e) A company's operating capability is its ability to maintain a given physical level of operations. 3. Qualitative characteristics of accounting information FASB Statement of Financial Accounting Concepts No. 2 specifies qualitative characteristics of accounting information that accounting information should possess in order to be most useful. Different from China, FASB has set hierarchy of qualitative characteristics. The hierarchy shows two constraints to accounting information: (a)Cost-benefit: the benefit of information must be greater than its cost. (b)Materiality: the dollar amounts involved must be large enough to make a difference to decision makers. Since no quantitative guidelines were set by the FASB, materiality must be determined by judgment. However, the FASB suggested consideration of nature and relative size to separate material and immaterial items. Understandability is a link between decision makers and the accounting information. Information should be understandable to broad classes of reasonably knowledgeable and diligent users. Decision usefulness is the overall quality which accounting information must possess. The two primary qualities making accounting information useful are relevance and reliability. Accounting information that can make a difference to decision makers is relevant. To be relevant, information must have (a) predictive value, or usefulness to decision makers in forecasting events more accurately; and/or (b) feedback value, or usefulness to decision makers in confirming or correcting prior expectations. In addition, relevant information must be timely. Reliable information is reasonably free from error and bias and faithfully reports what it is intended to represent. To be reliable information must (a) be verifiable; (b) have representational faithfulness; and (c) be neutral. Information is verifiable (sometimes called objective) when it can be duplicated using the same measurement method. Verifiability is useful in

reducing measurer bias. In auditing verifiability is a primary concern when the independent accountant eviews the published financial statements of a company, i.e., performs the attest function. Accounting information has representational faithfulness when there is valid correspondence to the economic resources, obligations, transactions, and events it represents. A high degree of representational faithfulness is useful in reducing measurement bias. Neutral information is complete and free from intentional bias Comparability is a secondary characteristic of accounting information Information is more useful if it can be compared with similar information from other companies(intercompany comparison)and with similar information from the same company over time (intracompany comparison). Comparability closely linked to consistency, the use of unchanged accounting policies and procedures from period to 4. Accounting assumptions and conventions Certain assumptions and conventions have influenced the development of generally accepted accounting principles. These are similar with those of China The entity assumption distinguishes each business organization from its owners. Following the continuity (or going-concern) assumption, it is assumed that a company will continue to operate in the near future, unless substantial evidence to the contrary exists. The period-of-time assumption enables a company to report the results of its activities after short time periods (primarily one year ) rather than at the end of the company's existence. Historically, the calendar year was used as a reporting period. However, any companies in U.S. now choose fiscal years based on their annual business cycles. This point should be emphasized as a small difference from that of China. Under the monetary-unit assumption accountants have traditionally treated the dollar, or other currency, as a stable unit of measure. However, values, as measured by a monetary unit, change over time for two reasons: (a)the real value of an item can change in relation to the real values of other goods and services, or(b) the purchasing power of the measuring unit (the dollar) can change. To enhance comparability, the FASB encourages companies to make supplemental disclosures relating to the impact of changing prices As to conventions: (a) an economic activity or resource is initially measured by the exchange price (historical cost)of a transaction; (b)Realization is the conversion of non-cash resources or rights into cash or rights to cash. Recognition is the process of formally recording and reporting an item in the financial statements;(c)The matching principle states that expenses involved in obtaining a period s revenues should be related to(matched against) the revenues recognized during the period; (d) conservatism states that when alternative accounting valuations are equally possible, the al ternative selected should be the one which is least likely to overstate assets and income in the current period 5. Elements of financial statements In the Conceptual Framework, the FASB identified four financial statements: the balance sheet, income statement, statement of cash flows, and statement of changes in equity. The elements of each statement are the broad classes of items comprising it The balance sheet(statement of financial position)summarizes the financial position of a company on a particular date. The three elements of the balance sheet are(a) assets, or economic resources; (b) liabilities, or economic obligations; and(c)equity, the owners' residual interest in a company's assets, after liabilities have been deducted The income statement summarizes the results of a company's operations for a period of time. The four elements of an income statement are(a)revenues, increases in assets and/or decreases in liabilities due

- 7 - reducing measurer bias. In auditing, verifiability is a primary concern when the independent accountant reviews the published financial statements of a company, i.e., performs the attest function. Accounting information has representational faithfulness when there is valid correspondence to the economic resources, obligations, transactions, and events it represents. A high degree of representational faithfulness is useful in reducing measurement bias. Neutral information is complete and free from intentional bias. Comparability is a secondary characteristic of accounting information. Information is more useful if it can be compared with similar information from other companies (intercompany comparison) and with similar information from the same company over time (intracompany comparison). Comparability is closely linked to consistency, the use of unchanged accounting policies and procedures from period to period. 4. Accounting assumptions and conventions Certain assumptions and conventions have influenced the development of generally accepted accounting principles. These are similar with those of China. The entity assumption distinguishes each business organization from its owners. Following the continuity (or going-concern) assumption, it is assumed that a company will continue to operate in the near future, unless substantial evidence to the contrary exists. The period-of-time assumption enables a company to report the results of its activities after short time periods (primarily one year), rather than at the end of the company's existence. Historically, the calendar year was used as a reporting period. However, many companies in U.S. now choose fiscal years based on their annual business cycles. This point should be emphasized as a small difference from that of China. Under the monetary-unit assumption accountants have traditionally treated the dollar, or other currency, as a stable unit of measure. However, values, as measured by a monetary unit, change over time for two reasons: (a) the real value of an item can change in relation to the real values of other goods and services, or (b) the purchasing power of the measuring unit (the dollar) can change. To enhance comparability, the FASB encourages companies to make supplemental disclosures relating to the impact of changing prices. As to conventions: (a) an economic activity or resource is initially measured by the exchange price (historical cost) of a transaction; (b) Realization is the conversion of non-cash resources or rights into cash or rights to cash. Recognition is the process of formally recording and reporting an item in the financial statements; (c) The matching principle states that expenses involved in obtaining a period's revenues should be related to (matched against) the revenues recognized during the period; (d) conservatism states that when alternative accounting valuations are equally possible, the alternative selected should be the one which is least likely to overstate assets and income in the current period. 5. Elements of financial statements In the Conceptual Framework, the FASB identified four financial statements: the balance sheet, income statement, statement of cash flows, and statement of changes in equity. The elements of each statement are the broad classes of items comprising it. The balance sheet (statement of financial position) summarizes the financial position of a company on a particular date. The three elements of the balance sheet are (a) assets, or economic resources; (b) liabilities, or economic obligations; and (c) equity, the owners' residual interest in a company's assets, after liabilities have been deducted. The income statement summarizes the results of a company's operations for a period of time. The four elements of an income statement are (a) revenues, increases in assets and/or decreases in liabilities due

to the company's ongoing primary operations;(b) expenses, decreases in assets and/or increases liabilities due to the company s ongoing primary operations;(c) gains, increases in the equity of the company not related to its primary operations or to investments by owners;(d) losses, decreases in the equity of the company not related to its primary operations or to distributions to owners The statement of cash flows summarizes a company s cash inflows and outflows for a and reconciles the company's beginning and ending cash balances as reported on the balance sheets. The three elements of the statement of cash flows are(a)operating cash flows, cash inflows and outflows from acquiring, selling, and delivering goods, and providing services; (b)investing cash flows, cash inflows and outflows from acquiring and selling investments, property, plant, and equipment, and intangibles, as well as from making and collecting on loans; and (c) financing cash flows, cash inflows and outflows from investments by and distributions to owners, as well as receipts from and distributions to creditors The statement of changes in equity(for a corporation generally called the statement of changes in stockholders equity) summarizes the changes in a company's equity for a period of time and reconciles the equity items a company reports on its beginning and ending balance sheets. Two key elements of the tatement of changes in equity are(a) investments by owners and(b)distributions to owners 6. Comparison of accounting concepts in China and in U.S.A.( Case) Students will be required to find materials about accounting concepts in China. Then discussion based on the materials and knowledge learned in this lesson will be induced in class the case is intended for four purposes: first, the discussion will enhance understanding about the important functions of accounting concepts no matter in U.S.A. or in China. Second, with comparison, students will know the differences clearly and grasp new knowledge deeply. Third, student will learn how to find related materials. Fourth, discussion in class will cultivate students' creative and critical thinking Pedagogical notes This lesson is an important lesson in the whole course as a theory basis. Instructors should try their best to let students grasp these accounting concepts deeply The last section of this lesson, which is a discussion part, instructors should try to cultivate students creative and critical thinking Lesson 3: THE BALANCE SHEET AND STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY Learning Objectives After careful study, students will be able to 1. Understand the purposes of the balance sheet 2. Explain how to measure the elements of a balance sheet 3. Classify the assets of a balance sheet 4. Classify the liabilities of a balance sheet 5. Report the stockholders' equity of a balance sheet 6. Understand the other disclosure issues for a balance sheet 7. Describe the SEC integrated disclosures 8. Explain the reporting techniques used in an annual report

- 8 - to the company's ongoing primary operations; (b) expenses, decreases in assets and/or increases in liabilities due to the company's ongoing primary operations; (c) gains, increases in the equity of the company not related to its primary operations or to investments by owners; (d) losses, decreases in the equity of the company not related to its primary operations or to distributions to owners. The statement of cash flows summarizes a company's cash inflows and outflows for a period of time, and reconciles the company's beginning and ending cash balances as reported on the balance sheets. The three elements of the statement of cash flows are (a) operating cash flows, cash inflows and outflows from acquiring, selling, and delivering goods, and providing services; (b) investing cash flows, cash inflows and outflows from acquiring and selling investments, property, plant, and equipment, and intangibles, as well as from making and collecting on loans; and (c) financing cash flows, cash inflows and outflows from investments by and distributions to owners, as well as receipts from and distributions to creditors. The statement of changes in equity (for a corporation generally called the statement of changes in stockholders' equity) summarizes the changes in a company's equity for a period of time and reconciles the equity items a company reports on its beginning and ending balance sheets. Two key elements of the statement of changes in equity are (a) investments by owners and (b) distributions to owners. 6. Comparison of accounting concepts in China and in U.S.A. (Case) Students will be required to find materials about accounting concepts in China. Then discussion based on the materials and knowledge learned in this lesson will be induced in class. The case is intended for four purposes: first, the discussion will enhance understanding about the important functions of accounting concepts no matter in U.S.A. or in China. Second, with comparison, students will know the differences clearly and grasp new knowledge deeply. Third, student will learn how to find related materials. Fourth, discussion in class will cultivate students’ creative and critical thinking. Pedagogical Notes This lesson is an important lesson in the whole course as a theory basis. Instructors should try their best to let students grasp these accounting concepts deeply. The last section of this lesson, which is a discussion part, instructors should try to cultivate students’ creative and critical thinking. Lesson 3: THE BALANCE SHEET AND STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Learning Objectives After careful study , students will be able to: 1. Understand the purposes of the balance sheet. 2. Explain how to measure the elements of a balance sheet. 3. Classify the assets of a balance sheet. 4. Classify the liabilities of a balance sheet. 5. Report the stockholders' equity of a balance sheet. 6. Understand the other disclosure issues for a balance sheet. 7. Describe the SEC integrated disclosures. 8. Explain the reporting techniques used in an annual report

9. Analyze a companys performance and financial position through the computation of financial ratios Teaching hours Teaching contents From this lesso ial statements will be discussed 1. Interrelationship of financial statements a question about the interrelationship of financial statements will be raised at first. Instructor should know the extent that students already have grasped based on their Chinese accounting knowledge, and then decide whether to discuss this in detail 2. Elements of the balance sheet First, students should be remind that for an item of information to be recognized as an element (i.e formally recorded and reported in the body of the financial statements), an item must(a)meet the definition of an element as specified in FASB Statement of Concepts No. 6,(b)be measurable,(c)be relevant, and(d) be reliable. Assets, liabilities, and stockholders equity are the elements of a corporation's balance sheet Assets are economic resources(a) acquired as a result of past transactions or events, (b) which will provide probable future economic benefit(service potential),(c)over which the company has control. Liabilities are(a) present economic obligations, (b) arising from past transactions or events,(c) which will be settled by probable future transfer of assets or performance of services. Stockholders' equity is the residual interest of the stockholders in the assets of the corporation after all liabilities have been settled(that is, company assets minus liabilities). Therefore, stockholders equity is determined by defining assets and liabilit 3. Measurement of the elements of the balance sheet Assets and liabilities must have a monetary value for balance sheet presentation. The FASB has dentified five alternative valuation methods(a) Historical cost is the exchange price of the asset at the time of the original transaction reduced by any recorded depreciation, amortization, or impairment to date This valuation method is the most commonly used because of its high degree of reliability. Equipment used in manufacturing operations is recorded at historical cost. (b) Current cost(or current replacement btain the same asset at the balance sheet date. when the market value of inventory is less than cost it is recorded at current cost. (c) Current market value(or current exit value)is the amount of cash that could be obtained at the balance sheet date from selling the asset in an orderly liquidation. The market value of short-term investments at the balance sheet date is an example of current exit value. (d) Net realizable value (or expected exit value) is the amount of cash that may be realized as a result of a future sale of an asset or realization of cash. Accounts receivable is an example of an asset recorded at its net realizable value. (e) Present value is the net realizable value discounted to the balance sheet date. ALeased Asset Under Capital Lease is recorded in this m 4. Reporting classifications on the balance sheet While classifications of items may vary from company to company, the common goal is to facilitate analysis and to improve the usefulness of the information in predicting the amounts, timing, and uncertainty of future cash flows. A representative classification scheme would include three major sections on the alance sheet, assets, liabilities and stockholders equity 4. 1 Asset and liability classifications Current assets are cash and other assets that are expected to be converted into cash, sold, or consumed

- 9 - 9. Analyze a company’s performance and financial position through the computation of financial ratios Teaching Hours 4 hours Teaching contents From this lesson, financial statements will be discussed. 1. Interrelationship of financial statements A question about the interrelationship of financial statements will be raised at first. Instructor should know the extent that students already have grasped based on their Chinese accounting knowledge, and then decide whether to discuss this in detail. 2. Elements of the balance sheet First, students should be remind that for an item of information to be recognized as an element (i.e. formally recorded and reported in the body of the financial statements), an item must (a) meet the definition of an element as specified in FASB Statement of Concepts No. 6, (b) be measurable, (c) be relevant, and (d) be reliable. Assets, liabilities, and stockholders' equity are the elements of a corporation's balance sheet. Assets are economic resources (a) acquired as a result of past transactions or events, (b) which will provide probable future economic benefit (service potential), (c) over which the company has control. Liabilities are (a) present economic obligations, (b) arising from past transactions or events, (c) which will be settled by probable future transfer of assets or performance of services. Stockholders' equity is the residual interest of the stockholders in the assets of the corporation after all liabilities have been settled (that is, company assets minus liabilities). Therefore, stockholders' equity is determined by defining assets and liabilities. 3. Measurement of the elements of the balance sheet Assets and liabilities must have a monetary value for balance sheet presentation. The FASB has identified five alternative valuation methods (a) Historical cost is the exchange price of the asset at the time of the original transaction reduced by any recorded depreciation, amortization, or impairment to date. This valuation method is the most commonly used because of its high degree of reliability. Equipment used in manufacturing operations is recorded at historical cost. (b) Current cost (or current replacement cost) is the amount of cash necessary to obtain the same asset at the balance sheet date. When the market value of inventory is less than cost it is recorded at current cost. (c) Current market value (or current exit value) is the amount of cash that could be obtained at the balance sheet date from selling the asset in an orderly liquidation. The market value of short-term investments at the balance sheet date is an example of current exit value. (d) Net realizable value (or expected exit value) is the amount of cash that may be realized as a result of a future sale of an asset or realization of cash. Accounts receivable is an example of an asset recorded at its net realizable value. (e) Present value is the net realizable value discounted to the balance sheet date. A Leased Asset Under Capital Lease is recorded in this manner. 4. Reporting classifications on the balance sheet While classifications of items may vary from company to company, the common goal is to facilitate analysis and to improve the usefulness of the information in predicting the amounts, timing, and uncertainty of future cash flows. A representative classification scheme would include three major sections on the balance sheet, assets, liabilities and stockholders' equity. 4. 1 Asset and liability classifications Current assets are cash and other assets that are expected to be converted into cash, sold, or consumed

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