advanced financial management (afm)

Advanced Financial Management (AFM)

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AdvancedFinancialManagement(AFM)

Syllabus and study guide

September 2020 to June 2021

Designed to help with planning study and to providedetailed information on what could be assessed in anyexamination session



Summary of content

Introduction1. Intellectual levels2. Learning hours and educational recognition3. The structure of the ACCA Qualification4. Guide to ACCA examination structure and

delivery mode5. Guide to ACCA examination assessment

Advanced Financial Managementsyllabus

6. Relational diagram linking AdvancedFinancial Management with other exams

7. Approach to examining the syllabus8. Introduction to the syllabus9. Main capabilities10. The syllabus

Advanced Financial Managementstudy guide

11. Detailed study guide12. Summary of changes to Advanced Financial

Management (AFM)



1.Intellectual levels

The syllabus is designed to progressivelybroaden and deepen the knowledge, skillsand professional values demonstrated bythe student on their way through thequalification.

The specific capabilities within the detailedsyllabuses and study guides are assessed atone of three intellectual or cognitive levels:

Level 1: Knowledge andcomprehension

Level 2: Application and analysisLevel 3: Synthesis and evaluation

Very broadly, these intellectual levels relateto the three cognitive levels at which theApplied Knowledge, the Applied Skills andthe Strategic Professional exams areassessed.

Each subject area in the detailed studyguide included in this document is given a 1,2, or 3 superscript, denoting intellectuallevel, marked at the end of each relevantlearning outcome. This gives an indication ofthe intellectual depth at which an area couldbe assessed within the examination.However, while level 1 broadly equates withApplied Knowledge, level 2 equates toApplied Skills and level 3 to StrategicProfessional, some lower level skills cancontinue to be assessed as the studentprogresses through each level. This reflectsthat at each stage of study there will be arequirement to broaden, as well as deepencapabilities. It is also possible thatoccasionally some higher level capabilitiesmay be assessed at lower levels.

2.Learning hours andeducation recognition

The ACCA qualification does not prescribeor recommend any particular number oflearning hours for examinations becausestudy and learning patterns and styles varygreatly between people and organisations.This also recognises the wide diversity ofpersonal, professional and educationalcircumstances in which ACCA students findthemselves.

As a member of the International Federationof Accountants, ACCA seeks to enhance theeducation recognition of its qualification onboth national and international educationframeworks, and with educational authoritiesand partners globally. In doing so, ACCAaims to ensure that its qualification isrecognised and valued by governments,regulatory authorities and employers acrossall sectors. To this end, ACCA qualificationis currently recognised on the educationframeworks in several countries. Pleaserefer to your national education frameworkregulator for further information.

Each syllabus is organised into main subjectarea headings which are further brokendown to provide greater detail on each area.



3.The structure of ACCA qualification



4.Guide to ACCAexamination structureand delivery mode

The structure and delivery mode ofexaminations varies.

Applied KnowledgeThe Applied Knowledge examinationscontain 100% compulsory questions toencourage candidates to study across thebreadth of each syllabus. These areassessed by a two-hour computer basedexamination.

Applied SkillsThe Corporate and Business Law exam is atwo-hour computer-based objective testexamination for English and Global. For theformat and structure of the Corporate andBusiness Law or Taxation variant exams,refer to the ‘Approach to examining thesyllabus’ in section 9 of the relevant syllabusand study guide. For the format andstructure of the variant exams, refer to the‘Approach to examining the syllabus’ sectionbelow.

The other Applied Skills examinations (PM,TX-UK, FR, AA, and FM) contain a mix ofobjective and longer type questions with aduration of three hours for 100 marks. Theseare assessed by a three hour computer-based exam. Prior to the start of each examthere will be time allocated for students to beinformed of the exam instructions.

The longer (constructed response) questiontypes used in the Applied Skills exams(excluding Corporate and Business Law)require students to effectively mimic whatthey do in the workplace. Students will needto use a range of digital skills anddemonstrate their ability to use spreadsheets and word processing tools inproducing their answers, just as they woulduse these tools in the workplace. Theseassessment methods allow ACCA to focuson testing students’ technical and applicationskills, rather than, for example, their ability toperform simple calculations.

Strategic ProfessionalStrategic Business Leader is ACCA’s casestudy examination at Strategic Professionaland is examined as a closed book exam offour hours, including reading, planning andreflection time which can be used flexiblywithin the examination. There is no pre-seeninformation and all exam related material,including case information and exhibits areavailable within the examination. StrategicBusiness Leader is an exam based on onemain business scenario which involvescandidates completing several tasks withinwhich additional material may be introduced.All questions are compulsory and eachexamination will contain a total of 80technical marks and 20 Professional Skillsmarks.

The other Strategic Professional exams areall of three hours and 15 minutes duration.All contain two sections and all questionsare compulsory. These exams all containfour professional marks.

From March 2020, Strategic Professionalexams will become available by computerbased examination. More detail regardingwhat is available in your market will be onthe ACCA global website.

With Applied Knowledge and Applied Skillsexams now assessed by computer basedexam, ACCA is committed to continuing onits journey to assess all exams within theACCA Qualification using this delivery mode.

The question types used at StrategicProfessional again require students toeffectively mimic what they would do in theworkplace and, with the move to CBE, theseexams again offer ACCA the opportunity tofocus on the application of knowledge toscenarios, using a range of tools – spreadsheets, word processing and presentations -not only enabling students to demonstratetheir technical and professional skills butalso their use of the technology available totoday’s accountants.

ACCA encourages students to take time toread questions carefully and to plan answersbut once the exam time has started, thereare no additional restrictions as to when



candidates may start producing theiranswer.

Time should be taken to ensure that all theinformation and exam requirements areproperly read and understood.

The pass mark for all ACCA Qualificationexaminations is 50%.



5.Guide to ACCAexaminationassessment

ACCA reserves the right to examineanything contained within the study guide atany examination session. This includesknowledge, techniques, principles, theories,and concepts as specified. For the financialaccounting, audit and assurance, law andtax exams except where indicatedotherwise, ACCA will publish examinabledocuments once a year to indicate exactlywhat regulations and legislation couldpotentially be assessed within identifiedexamination sessions.

For examinations, regulation issued orlegislation passed on or before 31 Augustannually, will be examinable from 1September of the following year to 31August of the year after that. Please refer tothe examinable documents for the exam(where relevant) for further information.

Regulation issued or legislation passed inaccordance with the above dates may beexaminable even if the effective date is inthe future.

The term issued or passed relates to whenregulation or legislation has been formallyapproved.

The term effective relates to when regulationor legislation must be applied to an entitytransactions and business practices.

The study guide offers more detailedguidance on the depth and level at which theexaminable documents will be examined.The study guide should therefore be read inconjunction with the examinable documentslist.



6.Relational diagram linking Advanced FinancialManagement (AFM) with other exams

This diagram shows links between this exam and other exams preceding or following it.Some exams are directly underpinned by other exams such as Advanced FinancialManagement with Financial Management. This diagram indicates where students areexpected to have underpinning knowledge and where it would be useful to review previouslearning before undertaking study.

7.Approach to examining the syllabus

The Advanced Financial Management exam builds upon the skills and knowledge examinedin the Financial Management exam. At this stage candidates will be expected todemonstrate an integrated knowledge of the subject and an ability to relate their technicalunderstanding of the subject to issues of strategic importance to the organisation. The studyguide specifies the wide range of contextual understanding that is required to achieve asatisfactory standard at this level.

Examination Structure

The syllabus is assessed by a three-hour 15 minutes examination.

Section A

Section A will always be a single 50 mark case study, which will contain four professionalmarks in which candidates are required produce a business document such as a report or abriefing paper for the board of directors.

Candidates should understand that they will be expected to undertake calculations, drawcomparison against relevant information where appropriate, analyse the results and offerrecommendations or conclusions as required.

Financial managers are required to look across a range of issues which affect anorganisation and its finances, so candidates should expect to see the case study focus on arange of issues from at least two syllabus sections from A - E. These will vary depending onthe business context of the case study.



Section B

Section B will consist of two compulsory 25 mark questions. All section B questions will bescenario based and contain a combination of calculation and narrative marks. There will notbe any wholly narrative questions.

All topics and syllabus sections will be examinable in either section A or section B of theexam, but every exam will have question(s) which have a focus on syllabus sections B andE.

Total 100 marks

8.Introduction to the syllabus

The aim of the syllabus is to apply relevant knowledge, skills and exercise professionaljudgement as expected of a senior financial executive or advisor, in taking or recommendingdecisions relating to the financial management of an organisation in private and publicsectors.

This syllabus develops upon the core financial management knowledge and skills covered inthe Financial Management syllabus and prepares candidates to advise management and/orclients on complex strategic financial management issues facing an organisation.

The syllabus starts by exploring the role and responsibility of a senior executive or advisor inmeeting competing needs of stakeholders within the business environment of multinationals.The syllabus then re-examines investment and financing decisions, with the emphasismoving towards the strategic consequences of making such decisions in a domestic, as wellas international, context. Candidates are then expected to develop further advisory skills inplanning strategic acquisitions and mergers and corporate re-organisations.

The next part of the syllabus re-examines, in the broadest sense, the existence of risks inbusiness and the sophisticated strategies which are employed in order to manage suchrisks. It builds on what candidates would have covered in the Financial Managementsyllabus.



9.Main capabilities

On successful completion of this exam, candidates should be able to:

A Explain and evaluate the role and responsibility of the senior financial executive oradvisor in meeting conflicting needs of stakeholders and recognise the role ofinternational financial institutions in the financial management of multinationals

B Evaluate potential investment decisions and assessing their financial and strategicconsequences, both domestically and internationally

C Assess and plan acquisitions and mergers as an alternative growth strategy

D Evaluate and advise on alternative corporate re-organisation strategies

E Apply and evaluate alternative advanced treasury and risk managementTechniques

This diagram illustrates the flows and links between the main capabilities of the syllabus andshould be used as an aid to planning teaching and learning in a structured way.



10.The syllabus

A Role of senior financial adviser in themultinational organisation

1. The role and responsibility of seniorfinancial executive/advisor

2. Financial strategy formulation

3. Ethical and governance issues

4. Management of international trade andfinance

5. Strategic business and financial planningfor multinational organisations

6. Dividend policy in multinationals andtransfer pricing

B Advanced investment appraisal

1. Discounted cash flow techniques

2. Application of option pricing theory ininvestment decisions

3. Impact of financing on investmentdecisions and adjusted present values

4. Valuation and the use of free cash flows

5. International investment and financingdecisions

C Acquisitions and mergers

1. Acquisitions and mergers versus othergrowth strategies

2. Valuation for acquisitions and mergers

3. Regulatory framework and processes

4. Financing acquisitions and mergers

D Corporate reconstruction and re-organisation

1. Financial reconstruction

2. Business re-organisation

E Treasury and advanced riskmanagement techniques

1. The role of the treasury function inmultinationals

2. The use of financial derivatives to hedgeagainst forex risk

3. The use of financial derivatives to hedgeagainst interest rate risk



11.Detailed study guide

A Role of the senior financialadviser in the multinationalorganisation

1. The role and responsibility of seniorfinancial executive/advisor

a) Develop strategies for the achievementof the organisational goals in line with itsagreed policy framework.[3]

b) Recommend strategies for themanagement of the financial resourcesof the organisation such that they areutilised in an efficient, effective andtransparent way.[3]

c) Advise the board of directors ormanagement of the organisation insetting the financial goals of thebusiness and in its financial policydevelopment with particular referenceto:[3]

i) Investment selection and capitalresource allocation

ii) Minimising the cost of capitaliii) Distribution and retention policyiv) Communicating financial policy

and corporate goals to internaland external stakeholders

v) Financial planning and controlvi) The management of risk.

2. Financial strategy formulation

a) Assess organisational performanceusing methods such as ratios andtrends.[3]

b) Recommend the optimum capital mixand structure within a specified businesscontext and capital asset structure.[3]

c) Recommend appropriate distribution andretention policy.[3]

d) Explain the theoretical and practicalrationale for the management ofrisk.[3]

e) Assess the organisation’s exposure tobusiness and financial risk includingoperational, reputational, political,economic, regulatory and fiscal risk.[3]

f) Develop a framework for riskmanagement, comparing and contrastingrisk mitigation, hedging anddiversification strategies.[3]

g) Establish capital investment monitoringand risk management systems.[3]

h) Advise on the impact of behaviouralfinance on financial strategies /securities prices and why they may notfollow the conventional financialtheories.[3]

3. Ethical and governance issues

a) Assess the ethical dimension withinbusiness issues and decisions andadvise on best practice in the financialmanagement of the organisation.[3]

b) Demonstrate an understanding of theinterconnectedness of the ethics of goodbusiness practice between all of thefunctional areas of the organisation.[2]

c) Recommend, within specified problemdomains, appropriate strategies for theresolution of stakeholder conflict andadvise on alternative approaches thatmay be adopted.[3]

d) Recommend an ethical framework forthe development of an organisation’sfinancial policies and a system for theassessment of its ethical impact uponthe financial management of theorganisation.[3]

e) Explore the areas within the ethicalframework of the organisation which maybe undermined by agency effects and/orstakeholder conflicts and establishstrategies for dealing with them.[3]

f) Establish an ethical financial policy forthe financial management of theorganisation which is grounded in goodgovernance, the highest standards of



probity and is fully aligned with theethical principles of the Association.[3]

g) Assess the impact on sustainability andenvironmental issues arising fromalternative organisational business andfinancial decisions.[3]

h) Assess and advise on the impact ofinvestment and financing strategies anddecisions on the organisation’sstakeholders, from an integratedreporting and governance perspective.[2]

4. Management of international tradeand finance

a) Advise on the theory and practice of freetrade and the management of barriers totrade.[3]

b) Demonstrate an up to dateunderstanding of the major tradeagreements and common markets and,on the basis of contemporarycircumstances, advise on their policiesand strategic implications for a givenbusiness.[3]

c) Discuss how the actions of the WorldTrade Organisation, the InternationalMonetary Fund, The World Bank andCentral Banks can affect a multinationalorganisation.[2]

d) Discuss the role of international financialinstitutions within the context of aglobalised economy, with particularattention to (the Fed, Bank of England,European Central Bank and the Bank ofJapan).[2]

e) Discuss the role of the internationalfinancial markets with respect to themanagement of global debt, the financialdevelopment of the emerging economiesand the maintenance of global financialstability.[2]

f) Discuss the significance to theorganisation, of latest developments inthe world financial markets such as thecauses and impact of the recent financialcrisis; growth and impact of dark pooltrading systems; the removal of barriers

to the free movement of capital; and theinternational regulations on moneylaundering.[2]

g) Demonstrate an awareness of newdevelopments in the macroeconomicenvironment, assessing their impactupon the organisation, and advising onthe appropriate response to thosedevelopments both internally andexternally.[2]

5. Strategic business and financialplanning for multinationals

a) Advise on the development of a financialplanning framework for a multinationalorganisation taking into account:[3]

i) Compliance with national regulatoryrequirements (for example the London

Stock Exchange admissionrequirements)

ii) The mobility of capital across bordersand national limitations on remittancesand transfer pricing

iii) The pattern of economic and other risk

exposures in the different nationalmarkets

iv) Agency issues in the centralcoordination of overseas operations and

the balancing of local financialautonomy with effective centralcontrol.

6. Dividend policy in multinationals andtransfer pricing

a) Determine a corporation’s dividendcapacity and its policy given:

[3]

i) The corporation’s short- and long-term reinvestment strategy

ii) The impact of capital reconstructionprogrammes such as sharerepurchase agreements and newcapital issues on free cash flow toequity.

iii) The availability and timing of centralremittances

iv) The corporate tax regime withinthe host jurisdiction.

b) Advise, in the context of a specifiedcapital investment programme, on anorganisation’s current and projecteddividend capacity.[3]



c) Develop organisational policy on thetransfer pricing of goods and servicesacross international borders and be ableto determine the most appropriatetransfer pricing strategy in a givensituation reflecting local regulations andtax regimes.[3]

B Advanced investmentappraisal

1. Discounted cash flow techniques

a) Evaluate the potential value added to anorganisation arising from a specifiedcapital investment project or portfoliousing the net present value (NPV)model.[3]

Project modelling should include explicittreatment and discussion of:i) Inflation and specific price

variationii) Taxation including tax allowable

depreciation and tax exhaustioniii) Single period and multi-period

capital rationing. Multi-period capitalrationing to include theformulation of programmingmethods and the interpretation oftheir output

iv) Probability analysis andsensitivity analysis whenadjusting for risk and uncertaintyin investment appraisal

v) Risk adjusted discount ratesvi) Project duration as a measure of

risk.

b) Outline the application of Monte Carlosimulation to investment appraisal.[2]

Candidates will not be expected toundertake simulations in an examinationcontext but will be expected todemonstrate an understanding of:i) The significance of the

simulation output and theassessment of the likelihood ofproject success

ii) The measurement andinterpretation of project value atrisk.

c) Establish the potential economic return(using internal rate of return (IRR) and

modified internal rate of return) andadvise on a project’s return margin.Discuss the relative merits of NPV andIRR.[3]

2. Application of option pricing theory ininvestment decisions

a) Apply the Black-Scholes Option Pricing(BSOP) model to financial productvaluation and to asset valuation:[3]

i) Determine and discuss, usingpublished data, the five principaldrivers of option value (value ofthe underlying, exercise price,time to expiry, volatility and therisk-free rate)

ii) Discuss the underlyingassumptions, structure,application and limitations of theBSOP model.

b) Evaluate embedded real options within aproject, classifying them into one of thereal option archetypes.[3]

c) Assess, calculate and advise on thevalue of options to delay, expand,redeploy and withdraw using the BSOPmodel.[3]

3. Impact of financing on investmentdecisions and adjusted presentvalues

a) Identify and assess the appropriatenessof the range of sources of financeavailable to an organisation includingequity, debt, hybrids, lease finance,venture capital, business angel finance,private equity, asset securitisation andsale, Islamic finance and initial coinofferings. Including assessment on thefinancial position, financial risk and thevalue of an organisation.[3]

b) Discuss the role of, and developmentsin, Islamic financing as a growingsource of finance for organisations;explaining the rationale for its use, andidentifying its benefits anddeficiencies.[2]



c) Calculate the cost of capital of anorganisation, including the cost of equityand cost of debt, based on the range ofequity and debt sources of finance.Discuss the appropriateness of usingthe cost of capital to establish projectand organisational value, and discussits relationship to such value.[3]

d) Calculate and evaluate project specificcost of equity and cost of capital,including their impact on the overall costof capital of an organisation.Demonstrate detailed knowledge ofbusiness and financial risk, the capitalasset pricing model and the relationshipbetween equity and asset betas.[3]

e) Assess an organisation’s debt exposureto interest rate changes using thesimple Macaulay duration and modifiedduration methods.[3]

f) Discuss the benefits and limitations ofduration including the impact ofconvexity.[3]

g) Assess the organisation’s exposure tocredit risk, including:[3]

v) Explain the role of, and the riskassessment models used by theprincipal rating agencies

vi) Estimate the likely credit spread overrisk free

vii)Estimate the organisation’s currentcost of debt capital using theappropriate term structure of interestrates and the credit spread.

h) Assess the impact of financing andcapital structure upon the organisationwith respect to:[3]

i) Modigliani and Miller propositions,before and after tax

ii) Static trade-off theoryiii) Pecking order propositionsiv) Agency effects.

i) Apply the adjusted present valuetechnique to the appraisal of investmentdecisions that entail significantalterations in the financial structure ofthe organisation, including their fiscaland transactions cost implications.[3]

j) Assess the impact of a significant capitalinvestment project upon the reportedfinancial position and performance ofthe organisation taking into accountalternative financing strategies.[3]

4. Valuation and the use of free cashflows

a) Apply asset based, income based andcash flow based models to value equity.Apply appropriate models, including termstructure of interest rates, the yield curveand credit spreads, to value corporatedebt.[3]

b) Forecast an organisation’s free cash flowand its free cash flow to equity (pre andpost capital reinvestment).[3]

c) Advise on the value of an organisationusing its free cash flow and free cashflow to equity under alternative horizonand growth assumptions.[3]

d) Explain the use of the BSOP model toestimate the value of equity of anorganisation and discuss the implicationsof the model for a change in the value ofequity.[2]

e) Explain the role of BSOP model in theassessment of default risk, the value ofdebt and its potential recoverability. [2]

5. International investment andfinancing decisions

a) Assess the impact upon the value of aproject of alternative exchange rateassumptions.[3]

b) Forecast project or organisation freecash flows in any specified currency anddetermine the project’s net present valueor organisation value under differingexchange rate, fiscal and transactioncost assumptions.[2]

c) Evaluate the significance of exchangecontrols for a given investment decisionand strategies for dealing with restrictedremittance.[3]



d) Assess the impact of a project upon anorganisation’s exposure to translation,transaction and economic risk.[3]

e) Assess and advise on the costs andbenefits of alternative sources of financeavailable within the international equityand bond markets.[3]

C Acquisitions and mergers

1. Acquisitions and mergers versusother growth strategies

a) Discuss the arguments for and againstthe use of acquisitions and mergers as amethod of corporate expansion.[2]

b) Evaluate the corporate and competitivenature of a given acquisition proposal.[3]

c) Advise upon the criteria for choosing anappropriate target for acquisition.[3]

d) Compare the various explanations forthe high failure rate of acquisitions inenhancing shareholder value.[3]

e) Evaluate, from a given context, thepotential for synergy separatelyclassified as:[3]

i) Revenue synergyii) Cost synergyiii) Financial synergy.

f) Evaluate the use of the reverse takeoveras a method of acquisition and as a wayof obtaining a stock market listing:[3]

2. Valuation for acquisitions andmergers

a) Discuss the problem of overvaluation.[2]

b) Estimate the potential near-term andcontinuing growth levels of acorporation’s earnings using bothinternal and external measures.[3]

c) Discuss, assess and advise on the valuecreated from an acquisition or merger ofboth quoted and unquoted entities usingmodels such as:[3]

i) ’Book value-plus’ models

ii) Market based modelsiii) Cash flow models, including free

cash flows.Taking into account the changes in therisk profile and risk exposure of theacquirer and the target entities

d) Apply appropriate methods, such as:risk-adjusted cost of capital, adjusted netpresent values and changing price-earnings multipliers resulting from theacquisition or merger, to the valuationprocess where appropriate.[3]

e) Demonstrate an understanding of theprocedure for valuing high growth start-ups.[2]

3. Regulatory framework and processes

a) Demonstrate an understanding of theprincipal factors influencing thedevelopment of the regulatory frameworkfor mergers and acquisitions globallyand, in particular, be able to compareand contrast the shareholder versus thestakeholder models of regulation.[2]

b) Identify the main regulatory issues whichare likely to arise in the context of agiven offer andi) assess whether the offer is likely

to be in the shareholders’ bestinterests

ii) advise the directors of a targetentity on the most appropriatedefence if a specific offer is to betreated as hostile.[3]

4. Financing acquisitions and mergers

a) Compare the various sources offinancing available for a proposed cash-based acquisition.[3]

b) Evaluate the advantages anddisadvantages of a financial offer for agiven acquisition proposal using pure ormixed mode financing and recommendthe most appropriate offer to be made.[3]

c) Assess the impact of a given financialoffer on the reported financial positionand performance of the acquirer.[3]



D Corporate reconstruction andre-organisation

1. Financial reconstruction

a) Assess an organisational situationand determine whether a financialreconstruction is an appropriatestrategy for a given businesssituation.[3]

b) Assess the likely response of thecapital market and/or individualsuppliers of capital to anyreconstruction scheme and the impacttheir response is likely to have upon thevalue of the organisation.[3]

2. Business re-organisation

a) Recommend, with reasons, strategies forunbundling parts of a quoted company.[3]

b) Evaluate the likely financial and otherbenefits of unbundling.[3]

c) Advise on the financial issues relating toa management buy-out and buy-in.[3]

E Treasury and advanced riskmanagement techniques

1. The role of the treasury function inmultinationals

a) Discuss the role of the treasurymanagement function within:[3]

i) The short term management ofthe organisation’s financialresources

ii) The longer term maximisation ofcorporate value

iii) The management of riskexposure.

b) Discuss the operations of the derivativesmarket, including:[3]

i) The relative advantages anddisadvantages of exchange tradedversus OTC agreements

ii) Key features, such as standardcontracts, tick sizes, marginrequirements and margin trading

iii) The source of basis risk and howit can be minimised.

iv) Risks such as delta, gamma, vega,rho and theta, and how these can bemanaged.

2. The use of financial derivatives tohedge against forex risk

a) Assess the impact on an organisation toexposure in translation, transaction andeconomic risks and how these can bemanaged.[3]

b) Evaluate, for a given hedgingrequirement, which of the following is themost appropriate strategy, given thenature of the underlying position and therisk exposure:[3]

i) The use of the forward exchangemarket and the creation of a moneymarket hedge

ii) Synthetic foreign exchangeagreements (SAFEs)

iii) Exchange-traded currency futurescontracts

iv) Currency swapsv) FOREX swapsvi) Currency options.

c) Advise on the use of bilateral andmultilateral netting and matching as toolsfor minimising FOREX transactions costsand the management of market barriersto the free movement of capital andother remittances.[3]

3. The use of financial derivatives tohedge against interest rate risk

a) Evaluate, for a given hedgingrequirement, which of the following is themost appropriate given the nature of theunderlying position and the riskexposure:[3]

i) Forward Rate Agreements (FRAs)ii) Interest rate futuresiii) Interest rate swapsiv) Interest rate options (including

collars).



12.Summary of changes to Advanced FinancialManagement (AFM)

ACCA periodically reviews its qualification syllabuses so that they fully meet the needs ofstakeholders such as employers, students, regulatory and advisory bodies and learningproviders.

There have been no amendments to the AFM study guide from the 2019 – 2020 study guide.

advanced financial management (afm)

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