ACCOUNTANCY 560 INFORMATION IN VALUE CREATION SUMMER 2011

Instructor
John S. Chandler Associate Professor of Accountancy 4006 BIF 217-333-4539 chandlej@illinois.edu

Teaching Assistant

Communications TA
Irena Kola PhD Educational Policy Studies kola@illinois.edu Andrew Moss PhD English

apmoss@illinois.edu

Course Website
Illinois Compass: https://compass.illinois.edu

Course Overview & Objectives

This course is for students who have not experienced the Project Discovery curriculum of the UIUC accountancy undergraduate program. This course introduces students to the role of information in processes employed by organizations to create value in market settings and to communicate such value creation to its stakeholders. This objective leads to introducing students to the primary theories underlying the Project Discovery curriculum strategic management, economics of organization, and systems theory and the relevance of such theories to the concepts and practices of accounting and auditing. This course also develops many of the professional skills and attitudes integrated within the Project Discovery curriculum.

Learning (Teaching) Philosophy

Learning is a process of construction. That is, knowledge is a state of understanding in the mind of the individual knower that each individual must construct through iterative processes of experimentation/application and reflection on the outcomes of such experimentation/application. Thus, learning is a process involving interaction among students and between students and the instructor. Accordingly, you have the right to expect the following from your course instructors:
1. 2. 3. 4. 1. 2. 3. 4. 5. 6. Personal concern for your education and development as a professional, Fairness and honesty, Openness to your ideas and opinions, and Personal commitment to excellence in scholarship. Thorough preparation of assignments (both reading and written) for each class, Class attendance and active class participation, Active participation in and contribution to group projects, Fairness and honesty, Openness to the ideas and opinions of others, and Personal commitment to excellence in scholarship.

Correspondingly, the instructors expect the following from you as their student:

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Course Materials
1. Custom text with select chapters from Brickley, Smith & Zimmerman, Managerial Economics and Organizational Architecture, 5th edition, 2009 (purchase from a campus bookstore such as Illini Union Bookstore or TIS); 2. Readings packet published by XanEdu (purchase from campus bookstore); 3. Other readings & cases downloadable from (or linked in) course Compass website. 4. Department communications website with policies, procedures and downloadable guides to communications for all Accountancy courses, including an ESL Handbook: http://www.business.illinois.edu/accountancy/programs/communications/index.html

Class Procedures
The course format is a mixture of case preparation, class presentation and discussion, and group projects. The instructor may begin classes with a brief presentation, but the dynamics of class discussion is such that the instructors role becomes more one of keeping the class focused and individual students become discussion leaders. A primary objective of cases and projects such as those utilized in this course are to stimulate inductive reasoning the reflective reasoning from observations and particulars to statements and theory that one can utilize more generally. That is, knowledge that one can use in situations other than the specific problem or case in which it arises. The inductive risk, however, is that such knowledge is only probable and thus, contains an element of falsity. The key to successful problem- and case-based learning is PAPA: preparation, attendance, participation, and attitude (see the PAPA handout for more details).

Course Assignments & Grading

Class participation Assignment write-ups1 Communications lab assignments Term project
1 2

Grade Weight 20% 40% 15% 25%

Approximately four over the term; for each 75% of grade weight is on content, 25% on communications; 2 The term project includes two components: Written report 2/3rd of project weight (75% of which is content, 25% is communications) Class presentation 1/3rd of project weight (100% communications)

Course Grading Scale

% Points Earned 100.00% to 96.67% 96.66% to 93.33% 93.32% to 90.00% Course Grade % Points Earned 89.99% to 86.67% A+ A 86.66% to 83.33% A 83.32% to 80.00% and so forth Course Grade B+ B B

ACCY 560 SUMMER 2011 Class Preparation and Participation

The course instructor will establish teams of three or four students each. The instructor recommends that students utilize their assigned teams in preparing for class. Obviously, students individually should read the assigned readings. However, students may discuss cases/projects in developing an understanding of and responses to these assignments. The instructor will assign teams, on a rotating basis, particular responsibility for elements of the class assignments (labeled team-based class presentation assignments in the cases). In such instances, the instructor will call on the team to inform the class as to its thoughts about the assignment element. Depending on the particular assignment/element, such thinking might include identification of relevant issues, suggested solution(s), and justifications of such solution(s) using the concepts presented in the current and prior readings and prior class discussions. Teams should e-mail their PowerPoint presentation slides to the course e-mail account no later than 7AM on the day of presentation. PowerPoint slides should be in a style consistent with the Hallmarks of Good Writing and should include, where appropriate, source references at the foot of the slide presenting the source information. E-mail your PowerPoint slides to accy560c@business.illinois.edu. Both e-mail subject line and the PowerPoint file label should follow the heuristic: Assignment name Your team name.

The instructor expects active class participation from all students, not just teams with assigned responsibilities. Participation involves contribution to class discussion. Contribution has both quality and quantity attributes quality takes precedence over quantity. While the instructor expects all students to be steady contributors over the term, contribution may fluctuate over classes. Assignment Write-Ups After each class, the instructor will select a number of students. Each selected student will develop a write-up for the individual written assignment of that classs case. The instructors will grade these write-ups for both content (75% of grade weight) and English writing (25% of grade weight). Students should expect to submit FOUR such write-ups over the term. Students selected should submit their write-up no later than 5PM on the SECOND day after the class meeting 1 in which the class discusses the assignment. Assignment write-ups should be typewritten in a style consistent with the Hallmarks of Good Writing and the guides on the Department Communications website. Specific assignment guidelines include: o A text length of no more than four pages, excluding bibliography and any tables and graphs; o Attach readability statistics (see the Hallmarks of Good Writing) on a final page (also not part of the four-page limit); o All textual pages should be, double-spaced with 1" margins on all sides, and in type and font similar to 12-point Times New Roman; o The write-up should be a single Word document integrate into your Word document any materials, such as tables, created in another application (i.e., Excel).

An assignment covered in class on Monday is due on Wednesday, covered on Tuesday is due on Thursday, covered on Wednesday is due on Friday, and covered on Thursday is due on Saturday.

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E-mail your write-up to accy560c@business.illinois.edu. Both the e-mail subject line and the write-up Word document label should follow the heuristic: Assignment name Your last name Your first name. You may select up to two written assignments to revise for purposes of the communications grade (not content). Those electing this option should e-mail their revision no later than two days following the return of the original graded assignment. Follow the same labeling heuristic, except the assignment name should be Assignment name Revision Communications Labs

Depending upon the specific week, communications labs generally meet on Wednesdays. Only students who are non-native English speaking attend the ESL 1 and 2 labs. All students should attend the other labs. Term Project The instructor will assign a company to each group to evaluate. Consult the Team Project handout for more guidance on the research and analysis. Based on your research and analysis, each group will prepare a class presentation and written report. Consult the Team Project Guidelines section at the end of this syllabus for more guidance on the class presentations and the written report.

Potential Course Problems

Academic Integrity The Business Faculty at the University of Illinois at Urbana-Champaign expects students who are preparing to enter the business profession to exhibit the same qualities of honesty, integrity, responsibility, and respect for others that society demands from members of the business profession. The primary responsibility for complying with the standards of academic integrity rests with each individual student and with the student body as a whole. By your enrollment in a College graduate program, you pledge on your honor that: 1. You will neither give nor receive unauthorized assistance on any academic or related professional assignment or activity. 2. You agree that all provisions of the UIUC Student Code 2 related to student conduct and academic integrity bind all students matriculating to the University of Illinois at UrbanaChampaign. 3. You acknowledge that you have the obligation to report apparent violations of academic integrity and the UIUC Student Code in a non-anonymous manner to the course instructor or the Head of the Department of Accountancy. Failing to Turn In Assignments Assignments are due on the scheduled date and time. Thus, the only acceptable reasons for failing to turn in an assignment are sickness and other extenuating circumstances. You must provide the instructor with adequate documentation of your reason for failing to turn in an assignment. There are no make-ups for failing to turn in an assignment. When the failure is for an acceptable reason, the instructor will re-weight the remaining assignments, proportionately, for the weight of the missing grade. Otherwise, the instructor will record a grade of zero for the missed assignment.
2

http://www.admin.uiuc.edu/policy/code/

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COURSE OUTLINE
DATE M T W TH 13-Jun 14-Jun 15-Jun 16-Jun TOPIC Introduction Lab 1 - Groups & group work Lab 2 - Writing cases & memos Markets, organizations & role of information BSZ: Chapter 3 Markets, Organizations & the Role of Knowledge COMP: Sunder, Chapter 1 Intro to Theory of Accounting & Control COMP: Sunder, Chapter 2 Accounting & Contract Model of the Firm XAN: Buttonwood, In praise of volatility The Land of Nirvana COMP: Teams & Team Building READING ASSIGNMENT CASE ASSIGNMENT

M T W TH M T W TH M T W TH M T W TH

20-Jun 21-Jun 22-Jun 23-Jun 27-Jun 28-Jun 29-Jun 30-Jun 4-Jul 5-Jul 6-Jul 7-Jul 11-Jul 12-Jul 13-Jul 14-Jul

Economics of accounting Contracting Economics of accounting Earnings quality Lab 3 - ESL I Risk & risk assessment Measurement theory Intellectual capital Lab 4 - Presentations & class discussion Measurement of intangibles Independence Day Break Performance measurement: Markets Lab 5 - ESL II Strategy & strategic management Strategy & strategic management Organizational architecture Lab 6 - Writing research reports Organizational architecture

Eli Lilly & Co. (A) Eli Lilly & Co. (A)

XAN: Yates & Stone, The Risk Construct XAN: Brown, An Accountant's Measurement Primer XAN: Stewart, Pillars of the Knowledge Economy; XAN: Lev, Chapter 2 Economics of Intangibles XAN: Lev, Chapter 5 What Then Must We Do?; XAN: Siegel & Borgia, The Measurement & Recognition of Intangible Assets XAN: Palepu & Healy, Chapter 5 Financial Analysis (missing pages in Compass) COMP: IMA Statement, Value Chain Analysis XAN: Porter, What is Strategy?

Eli Lilly & Co. (B) Slingsby Brewery Intellectual Capital at Eli Lilly & Safeway

Eli Lilly & Co. (C)

Performance Measurement: Starbucks & Peet's Coffee & Tea Starbucks Corp (A) Q1 Starbucks Corp (A) Q2 No class - prepare Marriott International, Inc

BSZ: Chapter 11 Organizational Architecture

Marriott International, Inc.

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DATE M T W TH M T W TH M T W TH 18-Jul 19-Jul 20-Jul 21-Jul 25-Jul 26-Jul 27-Jul 28-Jul 1-Aug 2-Aug 3-Aug 4-Aug TOPIC Control in business processes Control in business processes Lab 7 - Research report presentations Performance measurement: Organizations Ethics and organizational architecture Corporate governance Corporate governance Regulation of accounting & auditing Regulation of accounting & auditing Project presentations Project presentations Project presentations (if needed) BSZ: Chapter 18 Corporate Governance; COMP: TIAA-CREF, Policy Statement on Corporate Governance BSZ: Chapter 21, The Economics of Regulation; XAN: Sunder, Political Economy of Atg. Standards COMP: SEC, Commission Statement in Support of Convergence and Global Accounting XAN: Kaplan & Norton, Transforming the Balanced Scorecard BSZ: Chapter 22 Ethics & Organizational Architecture Starbucks Corp (B) Sears Auto Centers No class - prepare Corporate Governance Corporate Governance in the Restaurant & Bar Industry Segment Regulation of Auditing in the United States Term Project report due Regulation of Accounting Standards in the United States READING ASSIGNMENT XAN: Canadian Inst. Chartered Accountants, Guidance on Control; XAN: Simons, Control in the Age of Empowerment CASE ASSIGNMENT Tricon Global Restaurants Q1 & Q2 Tricon Global Restaurants Q3

NOTES: BSZ is the custom-published text from McGraw-Hill/Irwin chapters from Brickley, Smith & Zimmerman, Managerial Economics and Organizational Architecture, 5th edition, 2009 XAN is the readings packet published by XanEdu COMP is a readings folder on the desktop of the course Illinois Compass site All case assignments are in the Assignment folder on the desktop of the course Illinois Compass site

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Term Project Guidelines

The instructor will assign a company and a specific reporting period to each group to evaluate. You should download the companys annual reports from its website. In addition, groups should use other reports and information disclosed by the company and/or other entities (e.g., SEC, industry associations, and reporting services) in conducting its research of the company. As you begin to work on the project in your assigned team, you may organize your team as you choose. You may consult with the course instructors at any time during the project. In aggregate, you should allocate the work among team members equally. This does not mean, however, that every team member should do the same tasks. The instructor will ask team members to evaluate each individual's contribution to the project and will consider these evaluations in assigning individual project grades. Based on your research and analysis, each group should prepare a class presentation (presentations occur during the last three classes of the term) and a written report (due on July 29). Table 1 presents the overall relationships between information and the role (function or purpose) of information explored by this course. You should use this table as a general guideline in organizing your term project presentations and your final written report. Below are specific research and analysis guidelines. Research & Analysis Guidelines 1. Characterize your companys environment (including any regulation), its competitive strategies (i.e., how it creates economic value), the source and nature of the economic resources (capital) that it uses in pursuing its strategies, and the manner in which the company organizes itself. 2. Select some important attributes of your companys value strategy and associated business processes/economic resources. Identify factors (phenomena) you believe critical for the company to achieve success with respect to such attributes. Discuss risks to achieving success and identify measures (both financial and non-financial) appropriate for evaluating the companys performance in achieving these critical success factors. For several of these measures, identify the relationship with attributes reported in the companys financial statements and associated notes. 3 3. Select one accounting measure/disclosure issue that you consider critical to the companys strategic success and discuss: a. The accounting policy and method the company uses in making the measurement/ disclosure, the policies and methods used by other companies in the same industry, and an assessment of whether the choice of method has a material effect on the measurement/disclosure the reported item; b. The relevance of the accounting measure/disclosure for its associated critical success factor(s) and how investors/creditors might utilize the accounting measure/disclosure when making investment/credit decisions (e.g., ROA and ROE analysis);

Depending upon your companys value strategy and its associated resources and business processes, appropriate accounting measures/disclosures might include the recognition and valuation of attributes such as revenues, inventories, tangible fixed assets, intangible assets, and liabilities.

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c. Discuss the estimation qualities (bias, efficiency and consistency) of the accounting measure/disclosure, including the extent of subjectivity in the estimation process. TABLE 1: ROLE OF INFORMATION IN ORGANIZATIONS Objectives, goals and strategies that the company pursues to compete and to gain competitive advantage within its industry

Organizational architecture and critical business processes the company utilizes to achieve strategic and operational success and thereby achieve long-run financial success

Systems the company uses to control its business operations, financial reporting, and compliance with laws, rules and regulations

Information important in establishing, operating and monitoring the companys business processes, control systems and performance t

Accounting Information Project Written Report Guidelines 1. Your written report should be a Word document that does not exceed eight pages, excluding any embedded tables, graphs, exhibits and appendices. You should use 12-point Times New Roman font, with double spacing and one-inch margins on all sides. Number your pages starting with the first page of text. 2. Your written report should include the following components: a. A cover page indicating the report title and its authors, group name/number, and class section (not counted as part of the eight-page limit); b. An introduction that identifies the subject of the report and the reports primary objectives; c. The body of the report, divided into sections, and possibly subsections, each with an appropriate heading (see the Hallmarks of Good Writing). You should begin each section with a statement that summarizes the sections main topic. You should also

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use a system of internal citation that discloses the source of any direct quotes and ideas/information presented in the report. You should use the internal citation system described in the Hallmarks of Good Writing; d. A conclusion that summarizes the report, referring back to the reports main topic(s) and objectives stated in the introduction. The conclusion also may include any recommendations made by the authors; e. A list of references that you use/quote in your report (the reference list does not count as part of the eight-page limit). You should use the reference formatting system described in the Hallmarks of Good Writing. f. As the final page of your report (not part of the eight-page limit), include the copy of your Readability Statistics dialog box and a copy of your Assignment Writing Report (see Hallmarks of Good Writing). 3. E-mail the report to the course e-mail account no later than 5PM on its due date (the e-mail header and Word document label should use the heuristic Your company name Your team name). Project Class Presentation Guidelines 1. Your group presentation should not exceed 30 minutes. You should reserve the final several minutes of your presentation for audience questions. 2. Each group member should contribute to the class presentation. 3. You should use PowerPoint slides to aid your presentation, but remember that PowerPoint is not effective for highly detailed information. E-mail your PPT slides to the course e-mail account at least 24 hours prior to your presentation (the e-mail header and Word document label should use the heuristic Your company name Your team name). 4. It is each group's responsibility to ensure in advance that its presentation works properly on the class computer and projection equipment. 5. The basis of the group's presentation grade is the effectiveness and efficiency of its presentation (see the Presentation Guidelines on the course website and the PowerPoint Presentation Slides section in the Hallmarks of Good Writing for additional guidance). 6. The scope of your research likely is too large for everything to fit within the time allowed for the presentation. Consequently, you must be judicious in allocating presentation time to topics, in both terms of which topics to present and the depth to which you present a specific topic. An objective of the presentation time constraint is to force choice and the appropriateness of your choices will affect the quality of your presentation. 7. Audience members have the responsibility to be attentive and responsive to the presentations of their colleagues. Failure to do so reflects poorly on both the presenting team and the audience as a whole.