Group accounting and performance (2012/2013)

Learning outcomes

The main objective of this course is to develop participants’ skills in understanding and analyzing groups of companies, with specific reference to: i) the processes and the determinants of their creation; ii) their economic and financial equilibrium.
In particular, the class is structured into three parts. The first part aims at: i) explaining the main characteristics and ownership structures of Italian companies; ii) exploring the constitutive factors of groups and the reasons that inspire their creation; iii) understanding the purposes for which groups are created. The second part is devoted to the preparation of the consolidated financial statement, focusing on consolidation theories, the concept of control and fiscal features. The third part develops the ability to understand the economic and financial equilibrium of groups, and the most important techniques of analysis of groups performance.
During the course, two different and complementary methodologies will be used: lessons and discussions of case studies and/or research report selected to offer practical examples and insights of the examined topics.

First part –Group of companies: Genesis and morphology
1.1 Main characteristics, ownership structures and growth dynamics of Italian companies
1.2 Variety of cooperative forms
1.2.1 Non-equity aggregations
1.2.2 Equity aggregations
1.3 Group of companies definition
1.3.1 Constitutive factors
1.3.2 Creation processes
1.3.3 Determinants of groups creation
1.4 Group of companies classifications

Second part – Principles and practice of group accounts

2.1 Methodological basis
2.2 Introduction to consolidated financial statement
2.2.1 Logical and procedural steps in the preparation of consolidated financial statement
2.2.2 Informative content
2.3 Consolidation theories
2.3.1 Proprietary theory
2.3.2 Parent company theory
2.3.3 Modified parent company theory
2.3.4 Entity theory
2.4 Consolidation methods
2.4.1 Full consolidation
2.4.2 Proportional consolidation
2.4.3 Equity method of consolidation
2.5 Consolidated financial statement: Italian GAAP and IAS/IFRS
2.5.1 Entities required to prepare group accounts
2.5.2 Concept of control and scope of consolidated financial statement
2.5.3 Preliminary arrangements
2.5.4 Purchase price allocation and impairment test
2.5.5 Intragroup balances and transactions adjustments
2.5.6 Accounting for non-consolidated entities
2.6 Consolidated taxation and its perspective in Europe

Third part – Analysis of group performance

3.1 Concept of equilibrium for groups of companies
3.2 Economic equilibrium
3.2.1 Perception of the economic equilibrium according to different consolidation theories
3.2.2 Economic equilibrium worsening path
3.2.3 Analysis of group profitability
3.3 Financial equilibrium
3.3.1 Perception of the financial equilibrium
3.3.2 Share leverage
3.3.3 Debt leverage
3.3.4 Full leverage
3.4 Segment reporting
3.5 Reconciliation of income statement of parent company to consolidated financial statements

Studying Materials:
- Slides, case studies, research reports and all other teaching materials provided by the e-learning center
- Ditillo A., Caglio A., Controlling Collaboration Between Firms, CIMA Publishing, 2008 (only Chapter 1)
- Baker R.E., Lembke V.C., King T.E., Advanced Financial Accounting, McGraw-Hill International Edition, 2011 (only Chapters indicated in the e-learning center)
Optional reading:
Pierce A., Brennan N., Principles and Practice of Group Accounts: A European Perspective, Thomson Learning, 2003 (only Chapters 1-3, 6-7, 10-11)

PS: In the academic year 2013/2014 the course will be held in English.

The exam consists of a written test. Each student has the possibility to require an oral supplement test after being successful in the written test.