OK, the issue of how to incorporate IFRS into American accounting classes has been raised.
I think that Americans could learn from the Internationals here. However, (1) textbook publishers will not permit a financial accounting textbook based on IFRS to be shipped to anyone in the U.S., (2) internationals aren’t sharing their approaches, and (3) educational environments differ from country to country because culture is such a dominant factor in educating a given society’s citizens.
So, I’ll make up my own syllabus. Here is what my course would look like incorporating IFRS.
Creating Significant Learnign Experiences, by L. Dee Fink
First of all, all of my courses are based on the guiding principle that students should be able to do something with whatever it is that they know. Knowledge by itself is useless. Knowing how to apply that knowledge is the secret to an educated life.
Dee Fink (University of Oklahoma professor) is the guru of this learning centered approach. His seminal work, Creating Significant Learning Experiences. (Jossey-Bass, 2003) is the instruction manual I use for every course.
I think that teaching strategic financial reporting planning (as opposed to how to crunch specific accounting numbers) should be effective and a valid application of the learning centered approach. In a recent blog post, I related how Denny Beresford recommends that Intermediate Accounting be taught. This is pretty much how I’ve been teaching it, and GAAP. I would be easy to incorporate IFRS.
For me, Intermediate Accounting 2 is all about issues affecting the right side of the balance sheet (with income statement and cash flow ramifications), whether they be accounting, finance, business or economic issues. After touching on three types of current liabilities, I start with the accounting for loans (interest-bearing, non-interest bearing, installment), then move to bonds (as a type of interest bearing loan), then move to leases for lessees (a type of installment loan), then on to leases for lessors (a type of investment) then move to investments in general and fair value accounting (as well as OCI, as well as held-to-maturity treatments), then back to liabilities again for application of fair value.
Then I move to contingencies, error analysis and correction, and earnings management. Then I conclude either with derivatives or pensions depending on the time remaining.
In accounting for loans, liabilities, lease payables, start with
- why companies seek different types of financing (portfolio management)
- capital structure issues (less debt for intellectual property companies, more debt for companies with either legally protected assets (banks/financials) or tangible assets)
- benefits of leverage
- risks of leverage
- cost of capital, what it is, how to compute
- affective issues related to debt, debt servicing, defaults, credit issues, credit ratings, types of personal and corporate bankruptcy
- decreasing importance of debt covenants, replaced with ???
- role of rating agencies
- differing characteristics/functions of bankers, investment bankers, leasing professionals
- accounting for loans and bonds–showing impact on all four financial statements, journal entries, amortization tables, parsing liabilities between current and long-term
- two types of accounting for leases contrasted
- how leases impact the four financial statements, journal entries, amortization tables
- how to classify under GAAP
- how IFRS is different–European companies seek to manage earnings through lease classification, lease classification criteria, three types of accounting for lessee (operating, capital, hybrid), role of change in estimates
I’ve been doing 1-13, or at least evolving toward it. This semester I’m touching on #14 for the first time, will emphasize it more in the future. In terms of time, 1-9 go very quickly, only a couple of weeks. Loans/bonds take 3 weeks, leases take 2,
If you adopt this finance/business/economic/accounting approach for teaching financial accounting, be aware that there are no instructional materials out there. I write my own chapters and homework problems.
At least, this is the way I try to do it.
Over and out – - David Albrecht
