A Day in the Life: Learning Accounting Through Darden's Case Study Method

the MGM grand case is the case that we use in the first year accounting course to introduce students to the topic of accounts receivable issues around companies trying to collect payment from their customers and how to account for that in the financial statements and the company is estimated the extent to which it doesn't think it's going to collect some payment from some of its customers and we're asking the students to evaluate those estimates and it's a really nice way for them to start to be exposed to the notion that there's judgement and estimates in the financial statements rather than things being really cut and dried and exact according to rule I'm originally from New York and went to college in Manhattan and was working in Manhattan for about five years for a data and analytics company when I visited Darden as a prospective students i sat it on a class and that's when I really realized that Darden was where I wanted to pursue my MBA I thought the class was very engaging and interesting and that was the finance class where material can be a little bit more technical in nature but the class was very interesting and really enjoyed it what I'm hoping to get from today's Learning Team is kind of a better understanding of the material that we'll be covering in class tomorrow and we'll be reviewing MGM Mirage which is one of the world's largest gaming companies they do a great job here of matching up with people who have different backgrounds so that really works to enrich the conversation so we've got folks from from all over I've got sort of a finance background so any of the cases that are accounting or finance oriented hopefully I'm bringing some good perspective there so I don't come from an incredibly quantitatively heavy backgrounds learning team's been really helpful for me particularly when building something like a spreadsheet model I can't always get from point A to point C on my own but I can bring what I've done to learning team and we can kind of get there along the way I learned team has helped me better understand how to set up some of the journal entries and T accounts with respect to allowances and collections for accounts receivables but I'm still looking to class to kind of get a bit more practice with it and also reconcile information from the balance sheet and income statement and kind of how it all fits in together how many of you have been to a casino oh my gosh the day before we had talked about how to estimate bad debt expense and why we're doing it on a matching principle and today what we were talking about is how to use the figures of accounts receivable and estimated bad debt expense that we get in a financial statement and then back into the information that we would have put in there from the day before the actual things that actually go on behind the scenes write-offs recovery collections let's take a look at the financial statements for MGM Monica can you help us understand what numbers are relevant to us here sure so here towards the bottom of the exhibit will have the casino accounts receivable so what they expect I think knowing there's a chance that I'll be cold called in class really motivates me to prepare well for class up in class with the same 60 students for four terms so I want to stay engaged participate and really learn while it can be intimidating at times I think that it's a very important aspect to the case method and Darden overall and really helps prepare us for the real world so I'm confused a negative expense am I the only one that's confused Lee are you confused I was before the CPM I learned you've explained probably the CPA explained it you know I often times find it's the student that doesn't have the background in accounting that asks the most powerful questions in the classroom and if I can find that student and get that question out of that student that generally starts and very powerful conversation in the classroom I'll look for students to respond to that question I'll look for their enthusiasm and responding in that question that they signal with a raise of their hand I'll go to someone who wants to help out with that question and that oftentimes results in a conversation in the classroom where you can just see the learning build and build and build and then the more people we can involve in that particular conversation about that particular issue the greater the learning becomes okay all right so I am way out of my comfort zone on this one but is there like what if they sold their dead are we through the year no Henry that was just I mean you just sell them for cash so it would decrease your confidence you have all you basically or sell any come perceivable one of the things that you know I really take advantage of is being able to ask other individuals in the class how things are done so we had someone in the class who had actually done auditing had audited a casino so to be able to hear what he had to say about markers another individual who worked in retail and could talk about accounts receivable so I mean I learned the technical side but also to be able to hear other people's experience was all new for me she's saying can we just sell some of these if we don't want to deal with anymore right and what we know about when we sell an asset what you sell an asset what do we do Katie – yep we sell the asset we get cash so we take the asset off the books we increase our cash and what do we do for the difference we have to either report a gain or a loss yeah recorded gain or loss for the difference and so that's Henry's example a hundred dollars and receivable you sell 490 so your cash goes up by 90 receivables down by a hundred and you record a loss for ten so here here here we are trying to hypothesize what might be causing this as a user of the financial statements do we care why this is neck Jennifer I would say we care because if it is the cookie jar reason we'd absolutely care because that's cooking their books and they're trying to you know pump up their net income and therefore pump up their earnings per share I mean if it's right beef you know analysts are watching that and so I think you would definitely care okay we talked about this cookies or reserved very negatively but in reality they're very transparent about it and so are the banks for that matter I don't I don't I think we're a little a little too negative on it I mean I would hope that casinos and banks would have higher allowances when the economy's bad and I'd hope I'd rather than overestimate than underestimate and I think that's what we're seeing here in 2001-2002 look at what we saw with the banks in 2008 2002 I mean but analysts see this and they know so it's not like they're trying to fool anybody understand your logic but to extend if they were to overestimate as a matter of practice then what you could do is get into a situation where if you're going to have a great year pump yourself up you could write off you could overestimate what your not be able to collect on write yourself down to a lower tax rate per chance and then if you can have a bad year okay now let me read so coming in to Darden I had no accounting background whatsoever I was more coming from like a policy standpoint so I think I'm always learning so much from my classmates who are coming from an accounting background who have CPAs so today I took away a lot of information about kind of this cookie jar concept that sometimes firms can inflate their are overestimate a certain amount of money that's going to be uncollectible to kind of distort their books one way or the other so there's a really interesting discussion that happened between overestimating or underestimated and kind of whether that can be done with the best of intentions of the worst of intentions so it's kind of great to hear that back and forth between Tony and Kenny today in class um the CFA on my team oldest oldest know that this is one of the one of the areas that commonly come up as like a negotiation point between auditors and companies at the end of class if we've had a class where many students contribute to the conversation we've had one or two or three students that have been willing to get out there put it on the line and struggle publicly in front of sixty five of their peers by sharing their most intimate intellectual thinking and putting it on the line for other people to criticize it and to help build it up if we've had a class like that and we can work together to understand the content and come to closure where everybody's understanding of the content is enhanced then I go home at the end of the day thinking that we've really done our job so today's class helped me confirm that the approach we used in learning team for calculating sales on account write-offs collections and accounts receivable was accurate and towards the end of class we looked at the bigger picture which really helped put all of the numbers into perspective for me and then we also considered questions that would be important for an investor to ask the CEO or CFO of a company about the business really to get more detail and insight into the numbers reported within the company's annual report when I came in here accounting was one of the first I think where is our third class in the first day and I came in expecting the worst you know it's accounting is dry I had a tendency to sleep through my dryer class in high school in college and Luanne came in and just blew us away and there wasn't a moment where I wasn't just fully engrossed and fully engaged and that's held true now for term three there hasn't been an accounting class that haven't been excited to go to I think that's kind of unbelievable when you have people that and this I know it's not just me I mean it's everybody in my session that just gets up every day and is rarely discussed by the finance be accounting it econ and they're excited to be there and that permeates the whole discussion and it really fundamentally changes the classroom dynamic when you have everyone there is a hundred percent engage they really want to be there and they really want to contribute so here at Darden we discuss about 500 cases in two years and I think that gives students a lot of opportunity to understand core aspects of business from different lenses and really see how different parts of an organization fit together and I think this allows students to also post Darden join any organization or profession and be a leader alright we're done we'll start with inventory tomorrow good work you you

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