ACCT90013 Engagement Assignment SM2 2023-4

ENGAGEMENT ASSIGNMENTS ACCT90013 Financial Accounting Theory & Practice Semester 2, 2023

1 Engagement Assignments These assignments fulfil the purposes of getting you to engage with the materials, of applying the concepts to current practice and real-world developments, and of learning how to update your professional knowledge independently by reading high-quality business news. You are allocated four lecture weeks with corresponding due dates in the following weeks before the corresponding seminars . Lecture Week and Topic Due Friday 11.59PM Week 4: Debt Contracting 18 August Week 6: Standard Setting 1 September Week 8: Recognition 15 September Week 11: Disclosure 13 October To complete the assignment, you should follow the following process: 1. Go through the readings and watch the lecture recording. 2. Pick one specific idea/observation/argument that was discussed in the lecture that you want to explore further. Use a specific idea/observation/argument and not one that is broad or generic (see further guidance below). 3. Find a high-quality business press article online from the past 3 years (1 January 2020-now). As a student at the University of Melbourne you have free-of-charge access to a wide range of resources. Notable newspapers and news outlets include but are not limited to the (Australian) Financial Review, Bloomberg, Thomson Reuters, New York Times, Forbes, Financial Times, The Economist, Wall Street Journal, Fortune etc. For information and instructions on how to access shielded sources as an accounting student at the University of Melbourne please see https://unimelb.libguides.com/accounting . In addition to the article that you have selected, you may perform further research to fully understand the issue at hand in the selected article. 4. Write a summary of at most 300-word length with the following structure: a short summary of the idea/observation/argument you selected under 2 in the first paragraph , a summary about the issue in the selected article under 3 in the second paragraph , and a statement on how the case or information from the article relates to the selected idea/observation/argument in the third paragraph . Please also provide the public link to the article you are referring to in your essay and a reference (including: author name, date and year of publication, title, and news media outlet). Note that the reference is not part of the word count of 500 words. 5. Save your summary as a pdf. 6. Submit pdf via LMS Canvas before the due date. In the corresponding seminar, the instructor will present and discuss the best articles you have found. Note that if your article is presented, this does not automatically imply a high mark as marks are based on a number of criteria (see Marking Guide below).

2 Sample Essay Preface (not part of the essay) : An example for an engagement assignment summary for our session on Income is below. During the Income session we take a deep dive into the practice of so-called non-GAAP reporting. Non-GAAP reporting is the voluntary provision of financial information in addition to GAAP reporting. It uses alternative accounting measurement rules that deviate from the rules prescribed by accounting standards, where GAAP is an abbreviation for Generally Accepted Accounting Principles and is synonymous for accounting standards (the most important of which are IFRS and U.S. GAAP). Sample essay : "Firms choose accounting measurement policies in their voluntary non-GAAP reporting for opportunistic reasons to mislead investors about their true fundamentals. One example is the case of Tesla, Inc., an electric vehicle manufacturer with headquarter in Palo Alto, USA. Tesla was accused and later convicted of trying to mislead investors about its liquidity and underlying financial performance. Tesla applied an accelerated revenue recognition process which leads to a boost in revenues that are too uncertain to be recognised. The issue at hand concerns guarantees Tesla gave on vehicle leases through banking partners which effectively guaranteed a predetermined end-of-lease vehicle sales price for which, under US GAAP, firms must recognise a liability from deferred revenue. However, in its non-GAAP reporting Tesla excluded these liabilities, boosting its gross revenues. The SEC found that this practice was misleading about the true revenues of Tesla and levied a penalty on Tesla as punishment. The case of Tesla is a good example of opportunistic non-GAAP reporting. The company was under great pressure from investors to become profitable as its financial health was a precondition for another funding round that was necessary to support its aggressive expansion strategy. Yet accounting standards (in this case U.S. GAAP) prescribed more conservative accounting for revenue recognition under which the company was unable to report a profit. However, due to the perceived leeway in complementary non-GAAP reporting, the company applied a more aggressive revenue recognition policy which enabled Tesla to report a non- GAAP profit. It further emphasized the non-GAAP profit over the GAAP loss in all its disclosures, potentially confusing and misleading investors about its true profitability. As this violates securities regulation, Tesla was disciplined." References Shen, L., 2016. The SEC Calls Out Tesla for "Individually Tailored" Earnings Figures. Fortune 30 November 2016, URL: https://fortune.com/2016/11/30/sec-tesla-earnings- cooking-the-books-resale/ ."

3 Marking Guide You will be marked based on (i) the quality and conciseness with which you outline the selected idea/observation/argument, (ii) whether the article you have selected properly reflects the idea/observation/argument, (iii) the conciseness of the summary of the selected article, and (iv) the quality of reflection and argumentation you establish to link the article to the selected idea/observation/argument. In general, steer clear from being generic in your assignments. For instance, the idea/observation/argument in the above sample essay is that "Firms choose accounting measurement policies in their voluntary non-GAAP reporting for opportunistic reasons." Deductions will be made if your statement features a generic idea/observation/argument such as "firms disclose additional financial information" or "firms provide information for opportunistic reasons" as this would be too generic. A rule of thumb is that if it can fit in most accounting classes you attended it is likely not specific enough. In addition, deductions will be made for superficial reflections such as "The case of Tesla is a good example of opportunistic non-GAAP reporting." without providing a proper explanation for why this is the case. Also note that deductions will be made for unclear, confusing, or misleading writing as well as noncompliance with the guidance provided. For example, marks are deducted if you select an academic research study (often published in outlets that start with "Journal of" or "Review of") instead of a business press article. Deductions will also be made if the article was not published in the prescribed time frame. For instance, the sample article is intentionally chosen to be well out of the prescribed time range (2016 and not after early 2020), and a deduction would be made. Further as mentioned above, properly reference the sources you use and provide a public link to the possibly shielded online sources, instead of a link that leads to the library platform through which you might access the article. For instance, the sample article includes a link to the original source Fortune instead of a ProQuest, Business Source Complete, or Factiva link. The reason behind this point is to facilitate the marking of your assignments. A Note on Late Submissions Should you submit your engagement assignments late, the standard deductions are made (10% per day). However, note that you are not allowed to choose and summarize an article that was already discussed in the corresponding seminar. In this case, a full deduction of the marks related to article selection is invoked in excess of the late submission penalty.