business with confidenceicaew.com © icaew 2014 lynne woolley, fcca, cta reed business school...
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BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014
Lynne Woolley, FCCA, CTA
Reed Business School
Financial Accounting and Reporting
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The Exam
• Three hours!
• 1.8 minutes per mark
• Four or five questions
• 55% pass mark
• Dec 13 exam - 123.5 marks available
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Pass rates for December 2013
• ICAEW – First attempt – 869 sat– 693 passed– 79.7% pass rate
• Reed Business School– First attempts– 49 sat– 48 passed– 98% pass rate (and a first place global Prizewinner)
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FAR specifications grid
• Syllabus area Weighting (%)
• 1 Accounting and reporting concepts and ethics 10
• 2 Single entity financial statements 60
• 3 Consolidated financial statements 30
100
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Question types
1. Preparation of single entity financial statements from trial balance or draft financial statements:– Statement of profit or loss (SOPL)
– Statement of comprehensive income (SOCI)
– Statement of financial position (SOFP)
– Statement of changes in equity (SOCIE)
– Notes/extracts
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Question types continued…
2. Preparation of consolidated financial statements from single company financial statements or draft consolidated financial statements – CSOPL
– CSOCI
– CSOFP
– CSOCIE
– Calculation of single figures eg goodwill, non controlling interest
– Journals
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Question types continued…
3. Written question explaining the application of IFRS to specific scenarios– Full narrative explanations
– Redrafting of figures from draft financial statements
– Calculations eg EPS, distributable profits
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Question types continued…
4. Mixed or single topic questions requiring extracts and/or calculations– Mix of topics in one question
– Single company and/or consolidated
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Question types continued…
5. Statement of cash flows – single company or consolidated– Single company – likely to be a redraft as preparation tested in
accounting
– Consolidated – could include an acquisition or a disposal
– Extracts of single company or consolidated
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Also tested…
• Conceptual framework (six marks in December 2013)
• UK GAAP differences (approx. four - six marks)
• Ethics (approx. four – six marks)
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How to tackle question type one
• TB or redraft – same approach
• Read the requirement – SOPL, SOFP, SOCIE
• Set up your answer pages
SOPL SOCIE SOFP SOFP ctd Workings
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The statement of profit or loss
X PLC statement of profit or loss for the year ended 31 March 2014
£Revenue Cost of sales (w1)
Gross profit
Distribution costs (w1)Operating expenses (w1)
Finance costs
Taxation
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The SOCIE
X Plc statement of changes in equity for year ended 31 March 2014
Share Share Revaluation Retained capital premium surplus earnings
Balance b/fPrior period Adjusted balance b/fShare issueDividendsTotal comprehensive Income for the yearBalance c/f
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The statement of financial position
X Plc statement of financial positionas at 31 March 2014
£AssetsNon Current Assets
Current Assets
X Plc Statement of financial Positionas at 31 March 2014 ctd
£Equity and LiabilitiesEquity
Non Current Liabilities
Current Liabilities
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Workings
(W1) Expenses matrix
COS Dist’n Op’g
Per TB/draft acs xxx xxx xxx
Depn x x x
Inventory adj’t x
etc
Totals to answer XXX XXX XXX
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Your next step
• Take all the figures from the trial balance or the draft accounts and put them on one of the pages you have already set up:– SOPL
– SOCIE
– SOFP
– Workings
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Finally the adjustments
• You do not have to do them in order!• Choose the nice ones first, such as:– Taxation– Closing inventory etc
• Remember: do try and attempt them all• Once you are happy you have dealt with everything – tidy up
and total up your statements
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Question type two
• The consolidation question– Similar approach to accounts prep
– Pro formas
– Easy numbers in brackets on face of your answer (parent and sub)
– Workings– Group structure
– Net assets
– Goodwill
– NCI
– Retained earnings
– Investment in associate
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Question type three
• Written question explaining the application of IFRS to specific scenarios
• Usually three - five different topics
• Don’t just write down the answer – explain how you got there– Brief description of the relevant IFRS
– How the item should be treated
– How it has been treated (if applicable)
– What the effect on the financial statements will be
• Dec 13 Q3 26 marks max (available 36!)
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Question type four
• Extracts
• Students do not like these questions
• Usually lots of presentation marks
• Write everything in full eg, non current assets
• Set up your extracts page(s)
• Start workings on the next page
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Question type five
• Statement of cash flows
• Single co – tested in Accounting
• Extracts
• Or full consolidated
• Perhaps with an acquisition or disposal
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Set up your pro forma
X PlcConsolidated statement of cash flows for the year ended 31 March 2013
£ £Operating activities
Investing activities
Financing activities
Net ….. in cash and cash equivalents XCash & cash equivalents b/f XCash & cash equivalents c/f X
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Set up a page for the notes
• Reconciliation of operating profit to net cash from operating activities (indirect method)– Starts with PBT (leave half a page)
• Cash and cash equivalents– A note showing where your answer came from
– Cash and cash equivalents – bank overdraft for current year and prior year
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Workings
• Finally set up a page for your workings• T accounts• Common accounts required:– PPE– Tax paid– Dividends paid– Interest paid– Retained earnings– Share capital and share premium
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UK GAAP differences
• Four - six marks• Usually tagged onto the end of a longer question• Always in the exam• Answer first if possible (especially if it is at the end of a large
computation question)
• Preparation:– Leave these bits until revision– Do a one page summary of each IAS/IFRS and then add a few
lines on the differences at the bottom and try to learn as many as possible (some are easier than others!)
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Ethics
• Four – six marks in every paper• Usually tagged onto the end of a longer question• Answer first if possible• Usually scenario-based – formulate an approach– Relevant facts– Relevant parties– Ethical issues involved– Fundamental principles related to the matter– Established internal procedures– Alternative courses of action
• Don’t forget to apply professional scepticism
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Revision
• Question practice is key – to time!
• One page summary of each IAS/IFRS including UK differences
• Tab your open book– Key pro formas
– Illustrative examples
– Specific criteria eg, held for sale, development expenditure etc
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In the exam
• Stick to time• Scribble on the exam paper • Go with your instinct• Write all your workings down and reference them• Use the open book• If you make a mistake and it is too time consuming to change
– write a note to the examiner
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In the exam: keep the examiner happy!
• Clear/easy to follow workings
• Workings referenced in the main answer
• Neat answers
• No scribbling out – cross it out
• Leave lots of space
• Answer the question asked
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Finally…
• Big syllabus so start your revision in good time
• Practice different styles of questions so that you can hone your technique
• Practice key pro formas and workings so you get quicker at them
• Remember – there are more marks available than you can score – especially in the written areas! Dec 13 had a total of 123.5 marks
• Be confident and trust your instinct
Good Luck!
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