business with confidenceicaew.com © icaew 2014 lynne woolley, fcca, cta reed business school...

BUSINESS WITH CONFIDENCE icaew.com© ICAEW 2014

Lynne Woolley, FCCA, CTA

Reed Business School

Financial Accounting and Reporting


The Exam

• Three hours!

• 1.8 minutes per mark

• Four or five questions

• 55% pass mark

• Dec 13 exam - 123.5 marks available


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)


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


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


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



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



4. Mixed or single topic questions requiring extracts and/or calculations– Mix of topics in one question

– Single company and/or consolidated



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


Also tested…

• Conceptual framework (six marks in December 2013)

• UK GAAP differences (approx. four - six marks)

• Ethics (approx. four – six marks)


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


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


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


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


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


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


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


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


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!)


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


Question type five

• Statement of cash flows

• Single co – tested in Accounting

• Extracts

• Or full consolidated

• Perhaps with an acquisition or disposal


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


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


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


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!)


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


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


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


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


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!


More information

• Access exam resources from your dashboard at icaew.com/dashboard

• If you have a question about your studies, please post it at icaew.com/studentcommunity

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business with confidenceicaew.com © icaew 2014 lynne woolley, fcca, cta reed business school...

Documents

marks slide

reporting slide

answerxxx slide

associate slide

marks available slide

question types

written question

year balance cf slide