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OCTOBER 2011

EXAM ADVICE AND GUIDANCE INCLUDING EXAMINERS FEEDBACK AND EXAMINABLE DOCUMENTS
RELEVANT TO PAPERS F4 TO F9

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STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011

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EDITORS CHOICE
Welcome to this special issue of Student Accountant Essential Guide. This issue is completely focused on exam-related information that you, as Fundamentals level students, require. It contains a range of tailored advice and information to help you get prepared for the December 2011 session. We include examiner feedback from the Fundamentals level exams taken in June 2011. This advice looks at overall performance in Papers F4 to F9, outlining areas where candidates obtained both high and low marks. Reading the examiner feedback together with the past exam questions and answers from the latest exam session can help you identify where students have gone wrong in the past, and how to develop your answers to achieve the best marks possible it is one of the key resources to use in exam preparation. As well as examiner feedback, this issue contains examinable standards and information relevant to Papers F4, F6 (UK), F7 and F8. Use this information to guide your exam preparation and take note of the areas that you could be examined on. We include essential information on making the most of reading and planning time which is included in all three-hour exams. We also help you understand the intellectual levels of Fundamentals level exams and how to take note of the verbs used in questions. The Noticeboard section includes the exam timetable for December 2011 and exam rules and regulations. Weve produced this magazine to be as helpful to you as possible in the lead up to the December 2011 exams. We have also produced two other tailored magazines for students taking Professional level exams and Foundations in Accountancy/Paper F1, F2 and F3 students. These can be accessed at www2.accaglobal.com/SA I hope that you nd this magazine useful in helping you prepare fully for Papers F4 to F9 in December 2011. CE K AN BAC UID EED S Email me at studentaccountant@ D G RS F ENT S N T E A INE CUM EXAM ADVICE ND CE REAND ] ckGUIDANCE S eEXAMINABLE o VIC AM DO S mC m INCLUDING DOCUMENTS aE E S AD G EX BLE accaglobal.com with your feedback on n C r E M A C r IN A Su S H [ U s T EX CLUD AMIN r pe bu ape CK X IN D EX aM this issue. yllA AN NLO SE p [Paame]ss
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04 CONTENTS

KEY DATES FOR THE DECEMBER 2011 EXAM SESSION


Exams start 5 December 2011 For a full list of the exam dates, go to page 61 of this issue

ACCA CAREERS On ACCACareers.com you will be able to upload your CV, access global career opportunities and nd advice on careers in accountancy and nance

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Welcome to the STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011


Please email studentaccountant@accaglobal.com with your feedback on this issue

ESSENTIAL GUIDE
06 A CLOSE LOOK AT QUESTION VERBS 08 IMPROVE YOUR EXAM TECHNIQUE 12 PREPARING FOR EXAM DAY EXAMINERS FEEDBACK 16 Paper F4 18 Paper F5 19 Paper F6 (UK) 21 Paper F7 24 Paper F8 28 Paper F9 32 EXAM SUPPORT ON THE ACCA WEBSITE PROGRESSING THROUGH THE PAPERS 34 Stepping up from Paper F2 to F5 36 Progressing through the nancial reporting papers 40 A closer look at Papers F8 and P7 44 MAKING THE MOST OF READING AND PLANNING TIME 46 PRACTICAL EXPERIENCE REQUIREMENT FOR MEMBERSHIP 48 ACCA CAREERS CAREERS ADVICE AND FIND A JOB 49 EXAMINABLE DOCUMENTS Relevant to the nancial reporting, audit and tax papers for the December 2011 exam sitting 58 PROFESSIONAL ETHICS STUDENT ACCOUNTANT TECHNICAL ARTICLE ARCHIVE All technical content from Student Accountant is on ACCAs website at www2.accaglobal.com/students/student_accountant/archive Answers to frequently-asked questions about ACCAs qualifications can be found at www2.accaglobal.com/learningproviders/tuition_provider/faq
EDITORIAL TEAM Victoria Morgan Editor Glen Patterson Deputy editor Jackie Dollar Art editor Richard Gooding Designer Eleni Perry Rhian Stephens Editorial executives WWW.ACCAGLOBAL.COM Jamie Ambler Digital editor 29 Lincolns Inn Fields London WC2A 3EE United Kingdom tel: +44 (0)20 7059 5700 email: info@accaglobal.com www.accaglobal.com PUBLISHING AND ADVERTISING Adam Williams Head of publishing Anthony Kay Production manager

RESOURCES
NOTICEBOARD ESSENTIAL INFORMATION TO HELP WITH YOUR EXAM ADMINISTRATION 60 ACCA Connect contact details and the latest subscription and exam fees 61 Detailed timetable for the December 2011 exam session to help with your diary planning 62 Exam rules for students planning on taking exams in December 2011 63 Exam entry is changing; choosing your study options 64 Frequently asked questions: exam day 65 Oxford Brookes BSc degree information

For all advertising-related matters please contact Nick Willmer tel: +44 (0)20 7902 1673 email: nick@educate-direct.com Published by the Certied Accountants Educational Trust in cooperation with ACCA. The Council of ACCA and the publishers do not guarantee the accuracy of statements made by contributors or advertisers, or accept any responsibility for any statement which they may make in this publication. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without prior written permission of the publishers. CAET 2011 ISSN 1473-0979

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issue of Student Accountant every two weeks. Make sure youre keeping up to date with the latest issue at www2.accaglobal.com/sa

STUDENT ACCOUNTANT In addition to this twice-yearly printed issue, we also email an alert to a new

06

TECHNIQUE TIPS

EXAM TECHNIQUE
INTELLECTUAL LEVELS AND QUESTION VERBS
We take a look at the intellectual levels for the ACCA Qualification papers, which should help you know how to answer questions that you might be asked to do in an exam. It is particularly important to consider INTELLECTUAL LEVELS Knowledge and comprehension Papers F1F3 retention and recall of knowledge understanding of major accounting and business ideas, techniques and theories use of knowledge and techniques in new but familiar situations recognition of fundamental cause and effect in accounting. the question requirements carefully to make sure you understand exactly what is being asked, and whether each question part has to be answered in the context of the scenario or is more general. You also need to be sure that you understand all the tasks that the question is asking you to perform. The different levels of the ACCA Qualification each address different intellectual levels. See table below for further information. Application and analysis Papers F4F9 analysis of unfamiliar situations to prepare reports and solve problems using relevant concepts and theories recognition of subtle or hidden information patterns and trends within financial and other information, and the ability to interpret these the ability to infer from given information and draw conclusions. Key tips Clearly explain the resemblances or differences. Conclusion Intellectual level 2 ,3 Actual meaning The result or outcome of an act or process or event, final arrangement or settlement Key tips End your answer well, with a clear decision. Criticise Intellectual level 3 Actual meaning Present the weaknesses/ problems; evaluate comparative worth Dont explain the situation. Instead, analyse it Key tips Criticism often involves analysis. Define Intellectual level 1 Actual meaning Give the meaning; usually a meaning specific to the course or subject Key tips Explain the exact meaning because usually definitions are short. Describe Intellectual level 1, 2 Actual meaning Give a detailed account or key features. List characteristics, qualities and parts Key tips Make a picture with words; identification is not sufficient. Discuss Intellectual level 3 Actual meaning Consider and debate/argue about the pros and cons of an issue. Examine in-detail by using arguments in favour or against Key tips Write about any conflict, compare and contrast. Evaluate Intellectual level 3 Actual meaning Determine the scenario in the light of the arguments for and against Key tips Mention evidence/case/point/ issue to support evaluation. Explain Intellectual level 1, 2 Actual meaning Make an idea clear. Show logically how a concept is developed. Evaluation and synthesis Papers P1P7 generalisation, comparison and discrimination using complex and unstructured information assessment and evaluation of complex information use of reasoned argument to infer and make judgments presentation and justification of valid recommendations. Give the reason for an event Key tips Dont just provide a list of points, add in some explanation of the points youre discussing. Illustrate Intellectual level 2 Actual meaning Give concrete examples. Explain clearly by using comparisons or examples Key tips Add in some description. Interpret Intellectual level 3 Actual meaning Comment on, give examples, describe relationships Key tips Include explanation and evaluation. List Intellectual level 1 Actual meaning List several ideas, aspects, events, things, qualities, reasons, etc Key tips Dont discuss, just make a list. Outline Intellectual level 2 Actual meaning Describe main ideas, characteristics, or events Key tips Briefly explain the highlighted points. Recommend Intellectual level 3 Actual meaning Advise the appropriate actions to pursue in terms the recipient will understand Key tips Give advice or counsel. Relate Intellectual level 2, 3 Actual meaning Show the connections between ideas or events Key tips Relate to real time examples. State Intellectual level 2 Actual meaning Explain precisely Key tips Focus on the exact point. Summarise Intellectual level 2 Actual meaning Give a brief, condensed account Include conclusions. Avoid unnecessary details Key tips Remember to conclude your explanation.

ACCA examiners have highlighted the lack of understanding of the requirements of question verbs as the most serious weakness in many candidates scripts. Given below are some common question verbs used in exams. QUESTION VERBS Analyse Intellectual level 2, 3 Actual meaning Break into separate parts and discuss, examine, or interpret each part Key tips Give reasons for the current situation or what has happened. Apply Intellectual level 2 Actual meaning To put into action pertinently and/or relevantly Key tips Properly apply the scenario/case. Assess Intellectual level 3 Actual meaning To judge the worth, importance, evaluate or estimate the nature, quality, ability, extent, or significance Key tips Determine the strengths/weaknesses/importance/ significance/ability to contribute. Calculate Intellectual level 2, 3 Actual meaning To ascertain by computation, to make an estimate of; evaluate, to perform a mathematical process Key tips Provide description along with numerical calculations. Comment Intellectual level 3 Actual meaning To remark or express an opinion Key tips Your answer should include an explanation, illustration or criticism. Compare Intellectual level 2 Actual meaning Examine two or more things to identify similarities and differences

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08

EXAM GUIDANCE

IMPROVING EXAM PERFORMANCE


Our twice-yearly examiner reports include not only technical guidance on how to answer specific questions, but also a wealth of advice on exam preparation and technique. Summarised here, this advice can be used to help improve your performance in future exam sessions. USING RESOURCES It is very important to only use the most up to date study materials. Older materials, perhaps borrowed from a friend or bought second hand, often refer to old rules, or to rates which are no longer examinable. This is particularly relevant to papers dealing with taxation, financial reporting, law and auditing. Revise the entire syllabus, using the Study Guide to help you monitor progress. Dont focus your revision on favourite subjects, or core topics, as this strategy rarely gives you the chance to earn enough marks to pass. By covering the entire syllabus, not only are you fully prepared for the exam, but you are also taking a mature approach, worthy of a professional accountant. Practise using as many past papers as possible. For papers where legislation and standards are regularly updated, it is important to purchase revision or exam kits produced by the Approved Learning Partners content who will have updated the original ACCA questions and answers for all such changes. Also review suggested answers, absorb examiners comments in the examiners reports on previous candidates performances, available for each past paper, and read related articles in Student Accountant. In particular, look at the Pilot Paper, which is the best guide to question style and shows the split between numerical and non-numerical questions. REVISION STRATEGIES Dont question spot by analysing past papers. In a previous session, for example, many candidates clearly assumed a specific theory wouldnt come up because it had been examined the session before. This assumption was wrong, and so those candidates lost the opportunity to gain marks. When reviewing past papers, dont memorise model answers in the hope of using them in the exam. As every paper is different, repeating old answers can never be appropriate and markers will quickly spot when they are being used. Dont question guess. Some candidates consider the technical articles in Student Accountant, and the examiners reports, as a guide to the questions that will appear in the next exam session. They are not. Technical articles do cover future exam topics, but also deal with subjects less well covered in approved study texts, or provide an update to study material in the light of recent events. Success requires extensive study and practice. Question spotting and short, intensive revision sessions are unlikely to be successful. Dont rely on numerical ability alone, especially in the more advanced papers. At this level candidates must always demonstrate analytical and evaluative skills, shown by linking their theoretical learning to a specific case study. EXAM TECHNIQUE GENERAL ADVICE In the exam centre, good technique can make a difference between a marginal pass and fail. Use past papers to practise your exam technique, as well as your technical skills, and pay particular attention to the appropriate exam style for each paper. For example, where a question is worth four marks, brief succinct answers are all that are required. Good time management is crucial, so use the mark scheme to guide your timing. Apportion the time you have available to the mark allocation for each section, each question, and each question part. This will give you a minute by minute breakdown of your ideal exam progress. Good time management is especially important when scenarios are rich in detail. Such scenarios always include more points which could be made than the marks on offer, so a careful review of material is required, tailored to the mark allocation, along with a disciplined approach to time management. Dont answer more questions than the paper asks you to this is a waste of time and does not gain any more marks. In discursive papers, be prepared to explain and discuss. Unless specifically asked for, simple statements in a list, for example, will rarely be enough to gain full marks. Dont use the points raised by one question to answer another. Its very unlikely that separate exam questions are linked, but candidates often repeat points across questions as if there were a deliberate connection. PRESENTATION When writing in your answer booklet, put the relevant question number at the top of each page used to write the answer. Although candidates may answer exam questions in any order on the answer booklet they are strongly recommended to complete each part of a question in order and to keep all answers to parts of questions together in the booklet. This makes marking more manageable and reduces the scope for error or omission. Dont use the same page in the answer booklet to answer several different questions start the answer to each new question on a fresh page. Different parts to the same question can be continued on the same page. Although possibly a sign of poor planning, it is acceptable to start a question, move on to another, and then

REVISE THE ENTIRE SYLLABUS, USING THE STUDY GUIDE TO HELP YOU MONITOR PROGRESS. BY COVERING THE ENTIRE SYLLABUS, YOU ARE FULLY PREPARED FOR THE EXAM, AND TAKING A MATURE APPROACH, WORTHY OF A PROFESSIONAL ACCOUNTANT.

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CPE Registration No: 201008079c, Period : 07 March 2011 - 06 *The LSBF ACCA+MBA and ACCA+MSc programmes and scholarships are only available to students in London, Birmingham and Manchester. The LSBF ACCA+MBA and LSBF ACCA+MSc programmes are dual programmes comprising of LSBF ACCA tuition, which is approved by ACCA under the Approved Learning Partner - Gold scheme, and the LSBF MBA/MSc programme which is fully outside the scope of ACCA approval. As such, the LSBF MBA/MSc programme is quality-assured and accredited by the University of Wales and LSBFs institutional accreditations (including the BAC), and is not approved or endorsed by ACCA. Full funding of tuition fees is oered courtesy of Oracle Capital, exam and assessment fees are payable separately. Limited spaces available; visit www.lsbf.org.uk for full details. iPad is a trademark of Apple inc., registered in the US and other countries. London and Birmingham campuses only are ALP approved. T&Cs apply, while stocks last, call for details. E&OE.

10

EXAM GUIDANCE

GOOD TIME MANAGEMENT IS CRUCIAL, SO USE THE MARK SCHEME TO GUIDE YOUR TIMING. APPORTION THE TIME YOU HAVE AVAILABLE TO THE MARK ALLOCATION FOR EACH SECTION, EACH QUESTION, AND EACH QUESTION PART. THIS WILL GIVE YOU A MINUTE BY MINUTE BREAKDOWN OF YOUR IDEAL EXAM PROGRESS.
return to the first question later just make sure that each answer is clearly labelled and starts on a new page. Illegible handwriting can result in missed marks if a correct answer cannot be understood. As handwriting is rarely used now in business, you need to practise this skill so that your answers remain legible throughout the exam. Dont write out the question at the start of your answer; this wastes valuable time and gains no marks. Likewise, do not restate the scenario or facts from the question. When writing an answer, avoid using elaborate headings (in different colours or text styles, for example), which take time to create. Clear headings are important, but simple underlining is enough. Take care with the presentation of short as well as long answers, paying attention to use of language and general structure. QUESTION BY QUESTION Read the question carefully and think before you write. Questions are often answered poorly or incorrectly because key words or instructions are ignored or misunderstood. For example, dont provide general lists when specific examples, perhaps related to a case study, are required. Always apply your knowledge to the facts by reference to the requirement. Answer the question on the paper, not the one you want to see this can often happen with questions on subjects which appear regularly, and which candidates have practised many times before. Read the whole question before you begin your answer. Many candidates answer one part before realising that some of the points made were more relevant to other question parts. This results in wasted time, as information is repeated. Questions are worded very carefully, so note the command words or verbs used, the precise issues to be addressed, and guidance on the answer approach. By paying attention to all these aspects, you have a much better chance of giving the right information in your answer, in the correct format, and written in the appropriate style. Dont focus on one word; pay attention to the wider requirements and make sure your answer reflects these. When asked to provide a specific number of points, dont make similar points just to reach the target number. Rephrasing an earlier answer (such as writing both an inability to make profits and making of losses) will only gain one mark. Dont provide general explanations or long introductions these are a waste of time.

ADDITIONAL ADVICE FOR RE-SIT CANDIDATES Identify those areas of the syllabus where you were weakest work to improve your knowledge of these areas. Review your time management and see if it can be improved.

Think carefully when asked to criticise you are being asked to show your knowledge of expectation or best practice (against which to measure the given example) and show that you have carefully analysed the case study or scenario used. Pause before preparing calculations: consider any advice given in the question, review the requirement, and think about how to solve the problem before putting pen to paper. When performing calculations, judge carefully when to detail workings. For minor calculations, pages of unhelpful workings are time consuming to produce and difficult to mark. More complex calculations do require referenced workings, however, and marks can be lost if an incorrect figure is provided but no method shown, as a correct method can earn partial credit. Read specific exam feedback from the examiners for Papers F4 to F9 from page 15.

PRACTISE USING AS MANY PAST PAPERS AS POSSIBLE. FOR PAPERS WHERE LEGISLATION AND STANDARDS ARE REGULARLY UPDATED, IT IS IMPORTANT TO PURCHASE REVISION OR EXAM KITS PRODUCED BY THE APPROVED LEARNING PARTNERS CONTENT WHO WILL HAVE UPDATED THE ORIGINAL ACCA QUESTIONS AND ANSWERS.

12

EXAM GUIDANCE

EXAM DAY PREPARATION

GARETH OWEN, QUALIFICATIONS DEVELOPMENT MANAGER AT ACCA, PROVIDES GUIDANCE ON GETTING READY TO SIT YOUR EXAMS, HOW TO MAXIMISE OPPORTUNITIES FOR EARNING MARKS, AND HOW TO ORGANISE EXAM ANSWERS
The Examination Attendance Docket also details important exam regulations and guidelines that you must abide by during the exams; read these carefully, and make sure you only take permitted equipment into the exam. The exam rules and regulations appear regularly in the Noticeboard section of Student Accountant. Duplicate Examination Attendance Dockets can be downloaded via myACCA. Also remember to take your Student Registration Card to each exam, as this will be checked in order to verify your identity. WHEN YOU ARRIVE AT YOUR EXAM DESK On your exam desk will be: a Candidate Answer Booklet the Examination Question Paper. Check that you have the booklet, and the correct version of the exam paper, before the exam begins. If you have any queries, raise your hand and an invigilator will come to you. EXAM REGULATIONS Before your exam starts, the supervisor will make any announcements and go through the exam regulations. If you have any queries once the exam starts for example, if you want additional booklets or need to go to the bathroom raise your hand. An invigilator will attend to you. For security reasons, because ACCA holds exams worldwide, you must remain in the exam hall until the end of the exam. All papers including your Question Paper and Candidate Answer Booklets will be collected before you are allowed to leave. READING AND PLANNING TIME In a three-hour exam, candidates have 15-minutes reading and planning time in addition to the three-hours writing time. This time should be used to: read requirements carefully gain a better understanding of verbal and numerical data make notes

Examination Attendance Dockets are dispatched three weeks before your first exam. The Examination Attendance Docket includes a timetable of all the exams you are entered for, and details the desk assigned to you for each paper. Importantly, it also gives the address of your exam centre. If you are not sure where the centre is, how to get there, or how long the journey may take, check out your route before the exam. Make allowances for rush hour traffic or other possible delays if your exam starts at a busy time of day. Try to arrive at the exam centre about 30 minutes before

the exam is due to start. This will give you time to relax and prepare yourself. Bring your Examination Attendance Docket to your exam as it will be used to verify your attendance. You must sit at the desk shown on your docket. The supervisor will collect your Examination Attendance Docket during the exam, so please keep it available on your desk. If you have any other exams during the session, the Examination Attendance Docket will be returned to you. If it is your last (or only) exam, the supervisor will keep the Examination Attendance Docket for ACCAs records.

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14

EXAM GUIDANCE

carry out preliminary calculations decide on exam strategy. See page 44 for more on reading and planning time. HOW TO MAKE POINTS AND PRESENT ANSWERS It seems obvious, but answers must be appropriate to the requirement in terms of form, length and depth. Ideally, answer questions using clear and relatively short sentences, although answer length does depend on the instructional verbs used in the requirement. For example, for requirements asking for a list, or a brief description, bullet points or brief points will be adequate. If explanation is required, then fuller answers should be given; each valid point will normally attract a mark, depending on the mark allocation. If a requirement asks for analysis or evaluation, then develop points logically, relevantly, and coherently, thereby gaining the additional marks available. Set out answers so that the marker can clearly see the points being made. ACCA does not penalise candidates for poor grammar or style, especially in the Foundations in Accountancy and Fundamentals level exams, as long as points can be understood by the marker. However, by making points succinctly you can also earn marks more quickly and efficiently. Avoid numbering the points made within an answer, unless the numbering relates to that used in the question (see above). Additional numbering can be very confusing for markers. If a diagram, figure or table is needed to illustrate an answer (such as Porters five forces, for example) then support it with a full explanation. This tells the marker that you understand the model, theory or concept being illustrated. TIME MANAGEMENT In an exam, effective time management is vital. If a candidate runs out of time, then some questions (or parts) will be left unfinished and marks lost. The key to good time management is to divide the time allowed between the marks available. For example, in a three-hour exam allow 1.8 minutes per mark, and in a two-hour exam allow 1.33 minutes per mark. This allocation gives a rough guide as to how long to spend on a question or part. Candidates often waste time by: working on a requirement for longer than necessary because they wish to correct a mistake and amend all related follow-on figures feeling they have so much to say

THE GLOBAL PASS RATE FOR ANY EXAM IS VERY SENSITIVE TO THE PERFORMANCE OF MARGINAL CANDIDATES. IF THESE CANDIDATES GAIN AN EXTRA MARK, THEN NOT ONLY WILL THEY PASS, BUT THE GLOBAL PASS RATE WOULD BE HIGHER.
about a certain requirement that they dump all their knowledge in the Candidate Answer Booklet persevering for too long with a question even though they are struggling. Candidates can avoid these problems as follows: If you discover an error in a calculation or on a financial statement, only correct the initial error. Dont waste time making all the follow-through corrections. By leaving the original error uncorrected, the only mark(s) lost are those associated with that particular entry or calculation as ACCA uses a method or own figure marking policy. If the method adopted is correct, credit will always be given, despite incorrect numbers being used. Only make as many points as there are marks available. For example, if five marks are available for discussing a theory, only make five (or possibly six) separate points. If the total mark available is a round number, then the examiner usually awards one mark per relevant point made. So, in this situation, even making 10 relevant points will earn no more than the maximum five marks available, and so writing those additional points wastes time. If you are struggling to get to grips with a requirement, move on to the next requirement, or even question, leaving enough blank pages in your Candidate Answer Booklet to complete it later. CONCLUSION The global pass rate for any exam is very sensitive to the performance of marginal candidates. If these candidates gain an extra mark or two, then not only will they pass, but the global pass rate would be significantly higher. The guidance in this article can really make a difference, so remember the following: find out where your exam centre is, and how to get there, leaving yourself plenty of time turn up to the exam on time and bring your Examination Attendance Docket with you bring the right equipment, including an appropriate calculator and pens with black ink complete the Candidate Answer Booklet properly use reading and planning time effectively keep all answers relating to question requirements together and in order and start each question on a new page start the answer to a new requirement in a new paragraph start each answer point on a new line write points concisely and clearly relate the length and depth of answers to the instructional verbs used correct only the original error in calculations or financial statements make only the number of points required for the marks available move on to another requirement if you are stuck.

FEEDBACK
EXAMINERS FEEDBACK
From the June 2011 exam session Examiners feedback provides guidance on past ACCA exam performance and suggests ways in which students can achieve higher exam results

16 PAPER F4 (GLO), CORPORATE AND BUSINESS LAW 18 PAPER F5, PERFORMANCE MANAGEMENT 19 PAPER F6 (UK), TAXATION

21 PAPER F7, FINANCIAL REPORTING 24 PAPER F8, AUDIT AND ASSURANCE 28 PAPER F9, FINANCIAL MANAGEMENT

EXAM RESOURCES Available at www.accaglobal.com/students/

TECHNICAL ARCHIVE ON THE ACCA WEBSITE

Access the technical article archive at www2.accaglobal.com/ students/student_accountant/archive/ Find Syllabus and Study Guides, past exam papers, examinable documents and examiner interviews at www2.accaglobal.com/students/pass/

HOW TO PASS

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EXAM FEEDBACK
PAPER F4 (GLO) CORPORATE AND BUSINESS LAW
The performance in this paper was above satisfactory. While many candidates performed very well, it still has to be recognised that a significant number of candidates were less well prepared, and, unfortunately, did not meet the required standard to pass the exam. As has been stated repeatedly, it is an unfortunate fact that reports such as this one tend to focus on what went wrong, but we should initially congratulate those who did so well in passing the exam and the substantial number who performed exceptionally well. The structure of the paper, as usual, consisted of 10 compulsory questions, each carrying 10 marks. Apart from the first question, each of the first seven questions was subdivided into smaller subsections and it is thought that this may have helped candidates to structure their answers. Although this structure may have had the consequence that candidates wrote more than necessary to gain the marks available it is felt, nonetheless, that the structure was advantageous on the whole. These first seven questions were essentially knowledge based, while the latter three were problem-based scenarios requiring both legal analysis and application of the appropriate law. The number of candidates who did not attempt all of the questions remains lower than when the current syllabus and structure were initially introduced. This would appear to support the conclusion that candidates and tutors are coming to terms with the width of the syllabus. Where candidates failed to attempt all of the questions, this appeared to be as a result of a general lack of knowledge in relation to particular questions, rather than based on any time pressure or structural difficulties in the questions. That being said it is still a fact that the last three problem scenario-based questions continue to provide grounds for concern. Too many candidates were let down by their performance in those questions, which continues to suggest a general lack of analysis and application skills, if not general knowledge. It also still remains the case that that some candidates are engaging in question spotting and as a result produce prepared, but inappropriate, answers to some questions. SPECIFIC COMMENTS QUESTION 1 This question was not actually split into two parts but was effectively so divided. The initial task required candidates to explain the difference between criminal and civil law and to demonstrate their understanding by providing examples of each category. Although this topic had never been examined previously, it was done particularly well, with a significant number of candidates scoring full marks. Some candidates did struggle with the need for statutory examples, but were awarded marks where they outlined the types of cases brought civilly compared to those which were criminal. Where candidates did not perform well this tended to be because they engaged in irrelevant discussion on the difference between common law and statute and/or the rules of legal interpretation. The second element in the question required candidates to identify the courts that deal with civil law and criminal law. Again this was extremely well answered, with only a small number of candidates making mistakes. QUESTION 2 This question required candidates to consider aspects of the UNCITRAL Model Law on International Commercial Arbitration relating to the way in which members of an arbitration panel are appointed and the way in which they reach their decisions. It was divided into three parts in an endeavour to structure candidates responses and the performance in this aspect of the syllabus has improved. That being said it was noticeable that Part (a) relating to the procedures for appointing the members of an arbitration panel, and carrying four marks, was better done than the other two elements of the question. QUESTION 3 This question, based on the United Nations Convention for the International Sale of Goods (UNCISG), was split into two parts, each carrying five marks. Part (a) required candidates to explain the law relating to the making of binding contractual offers and Part (b) to the circumstances under which such offers may be terminated. Both elements of the question were equally well done with many candidates gaining full marks. Clearly candidates and learning providers are confident in their knowledge of UNCISG. There were many fewer candidates attempting to answer the question through the misapplication of incompatible English law principles than have done previously. QUESTION 4 This question was once again divided into two parts, each carrying five marks. Part (a) required candidates to explain the law relating to company promoters. Although not examined particularly frequently, it is a topic that seems to appeal to candidates and, on the whole, it was done fairly well, although perhaps not as well as it might have been done. While most candidates recognised that a promoter was a person who takes steps to form a company, some candidates wrote at great length about a promoter having a duty to promote a company in terms of the marketing, advertising and generating of revenue, which demonstrated a misunderstanding of the question and terminology. Most candidates stated that a promoter had a duty to submit Form 10, the articles and memorandum of association, but a number failed to acknowledge promoters fiduciary duties and the consequences of breaching those duties. Some answers gained their marks from their general knowledge of the procedure for registering companies, rather than any detailed awareness of the rules relating specifically to promoters, which again indicates a dangerous reliance on topic spotting. One related point worth making in relation to this part of Question 4 was the number of candidates who wrote about pre-incorporation contracts, which was the topic specifically of Part (b). This would indicate that candidates had either not read the full question, or were regurgitating prepared answers. This meant that on many occasions candidates repeated what they had written in Part (a) in Part (b), a waste of time that a closer reading of the question, or a more confident knowledge of the topic, would have avoided.

WHERE CANDIDATES FAILED TO ATTEMPT ALL OF THE QUESTIONS, THIS APPEARED TO BE AS A RESULT OF A GENERAL LACK OF KNOWLEDGE IN RELATION TO PARTICULAR QUESTIONS, RATHER THAN BASED ON ANY TIME PRESSURE OR STRUCTURAL DIFFICULTIES IN THE QUESTIONS.

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In Part (b) most candidates were able to recognise that a pre-incorporation contract was one which was entered into prior to the formation of the company, almost but not quite a given. Some answers went a step further and explained the circumstances of such contracts, liability on them and how personal liability could be avoided. This was generally well done. QUESTION 5 This question required candidates to consider the procedures relating to the issuing of shares to the public and the rules relating to the payment for shares issued. Part (a) related to payment at a premium and carried five marks, as did Part (b) which related to payments at a discount. Before considering each part in detail it should be noted that, although the question specifically located the issues in the context of the doctrine of capital maintenance, very few candidates referred to that issue, which could have been addressed in either element of the question. Invariably those who did consider capital maintenance gained very high, if not full, marks. Part (a) was an accountancy focused question and it was expected that candidates would score quite highly. However, answers tended to be brief and merely too state that a share was an interest in a company, a premium was the difference between market value and nominal value, and did not go any further. Where, as was required, candidates gave examples of a share premium and explained the function of the share premium account and the fact that it was an undistributable reserve, marks were awarded. In Part (b) most candidates explained that shares were issues at a discount if they were issues at less than market value. In many instances, detailed explanations of the difference between bonus issues and rights issues and the rights of existing shareholders then ensued. This was not relevant and showed a lack of understanding in this area around the terminology and the impact of issuing shares at a discount overall. In addition, it is an example of an ongoing problem that has been referred to in previous exam reports, namely the use of previous exam questions/answers as templates for immediately current exam questions. In this instance, the December 2010 exam had contained a question about share issues, focusing on rights and bonus issues. Clearly some candidates

for the June 2011 exam used the model answer for the December 2010 exam as the basis for their answer this question, totally erroneously. QUESTION 6 This question required candidates to explain three specific aspects of corporate governance Part (a), for three marks, required an explanation of what was actually meant by the term corporate governance. Answers were mixed. Most candidates scored at least one mark by stating that corporate governance was a set of rules and regulations, which advised how companies should operate. Some answers explained the need for rules relating to corporate governance in the context of recent corporate scandals and crises. Some mentioned the various committees that led to the current code, which showed a sound understanding of the history of the corporate governance rules. Part (b), also for three marks, required some substantive knowledge of the current code of corporate governance. Quite a few candidates omitted this part of the question. For those who did attempt it, answers were either accurate and very well informed or guessed at what the governance code was designed to do, often repeating the rules and regulations point from Part (a). Part (c), for four marks, required a consideration of the role of non-executive directors (NED) in the context of corporate governance. On the whole it tended to be very well done, with most candidates able to explain the role of the NED. However, some candidates chose to interpret this question as being about the different types of directors and their duties. It would once again seem that candidates had prepared for a question that had appeared in a previous exam paper and consequently a lot of time was wasted making irrelevant points for those candidates who adopted this approach. QUESTION 7 This question relating to the transport documentation required candidates to explain specific aspects of bills of lading with particular regard to their role in the passage of risk in relation to goods under carriage. Both parts carried five marks. The first part of required candidates to discuss generally the meaning of the term bill of lading. The second part required a consideration of the function of bills of lading in the passage of risk for goods.

On the whole the question was dealt with in an adequate way, but with the general aspect being better done that the second part. QUESTION 8 This was the first of the three analysis/ application questions. It required an understanding of, and an ability to apply, the rules relating to early delivery and delivery of excess goods under Article 52 of the UN Convention for the International Sale of Goods (UNCISG). By and large the question was dealt with well, and even those candidates who did not have a detailed grasp of the provisions on UNCISG were able to garner marks from an almost common sense working out of first principles from the market context of the question. Those candidates who actually were aware of the precise provision of the Convention scored very highly in this question. QUESTION 9 This question focused on directors authority and whether the informal chief executive had the authority to enter into a contract. It required knowledge of, and application of, the rules relating to the powers of agents generally and the powers of directors as agents, specifically. The better answers made reference to the foregoing and in particular cited the authority of Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd in support of their analysis. The very best also cited Hely-Hutchinson v Brayhead Ltd. While some quality answers were produced, a significant number of candidates thought that the scenario involved a pre-incorporation contract and that Hope was a promoter even though the question was extremely clear that the company had been formed some 12 months ago. The adoption of such an approach is an instance of a technical weakness that has been commented in previous exam reports; the use of topics which appear in the first seven questions to answer the problems in the final three scenario questions. It is extremely unlikely that there will be any significant overlap between the two sections of the paper and candidates should be aware of this. Some candidates also interpreted the question to be about directors duties in general and so a lot of time was wasted describing the statutory duties which a director has. However, once again, this area is clearly what those candidates

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had prepared for on the basis of recent past papers. QUESTION 10 This question focused on limited liability of shareholders and the payments due in winding up of a company. While the majority of candidates recognised this, there were a lot of answers which discussed the procedure for winding up, the difference between a voluntary and compulsory winding up and the fact that this was a partnership and not a limited liability company. Some candidates also went down the route of wrongful and fraudulent trading and lifting the veil of incorporation. This question did cause a few problems but as in other questions within this exam, candidates often chose to write about what they wanted, rather than the actual question set. Some quality answers were produced though, which recognised the differences in priority between fixed and floating charges and the impact of a personal guarantee.

WHILE THERE WERE A NOTABLE AMOUNT OF REALLY HIGH MARKS (IN THE 70S AND 80S) FOR PAPER F5, THERE WAS ALSO A SIGNIFICANT AMOUNT OF REALLY LOW MARKS (MANY LESS THAN 20%). IT LOOKED LIKE SOME CANDIDATES YET AGAIN HAD NOT REVISED SOME OF THE KEY AREAS.
of work in order to pass it. It relies on learning/revising a substantial number of management accounting techniques and then also being able to explain them and understand the impact of their results on the business. If you want to pass it, put some work in and use all of the resources available to you past exam papers, Student Accountant technical articles, past examiners reports etc, all of which are available on the ACCAs website. SPECIFIC COMMENTS QUESTION 1 This question covered decision making under conditions of uncertainty. Part (a) required the construction of a pay-off table. This should have been easy but only about 5% of candidates got this completely correct. A vast number of candidates applied the probabilities to the profit figures before including the amounts in the table. Many tables were not clearly labelled and few candidates grasped the fact that any unsold bags of cement produces a loss of $4.50 in total ($4 buy in cost and $0.50 disposal cost). Part (b)(i) and (ii) were fairly well attempted (identifying the level of production using maximin and maximax) but even then, most correct answers were not justified as requested and only therefore scored half marks. It didnt matter whether justification had been given by either words or numbers but usually, there was neither. The requirement to calculate the expected value in Part (b)(iii) was worth the most marks and it was really surprising to see that 90% of candidates could not do this. They seemed to think that the expected value could be calculated by working out the expected demand level (by applying the probabilities to the three demand levels) and then applying this to an expected profit figure. They were confusing the scenario given, where a decision has to be about how much of a product to supply given three alternative levels of supply, to a scenario where there is only supply level available (eg a one off event) but there are two sets of uncertainties (eg different demand levels and different profit levels.) In the latter situation, the expected value can be calculated by working out the expected demand and the expected profit, but where there are three potential supply levels, there will be three expected values to calculate, with the highest then being selected. Candidates are clearly confused in this area and need to study it further. The discursive part of this question was answered well in relation to maximin and poorly in relation to expected value, again because of the fundamental misunderstanding described above. QUESTION 2 This question covered pricing and learning curves. The requirement to calculate the optimum price and quantity in Part (a) was new to the syllabus in June 2011 and about half of candidates seemed not to have revised it and could not attempt it. Many candidates managed to score one or two marks for establishing the demand function. It was pleasing to see some good attempts at Part (a)(ii) which tested the ability to adjust the labour cost for the learning effect. Quite a few answers were perfect. The most common mistake was including the fixed cost in the cost of the air conditioning unit when it was the marginal cost which was being tested. At this level it is expected that candidates will have a good understanding of what marginal means Part (b) was really well answered, with most candidates being able to describe both pricing strategies and suggest a suitable one. A good, logical approach was adopted by most: explain market skimming, explain penetration pricing and then explain which one would be most appropriate for Heat Co. QUESTION 3 Part (a) required the preparation of a fairly simple flexed budget. Many candidates answered this well and easily scored nine out of the 12 marks available, tripping up only on the staff wages and energy costs calculations. There were some candidates who had no idea what a flexed budget was but these

PAPER F5 PERFORMANCE MANAGEMENT

This was my second paper as the examiner and the first paper after the minor syllabus changes. The structure of the paper remained the same as in previous sittings five questions worth 20 marks each. While this paper did not include a purely written question, Question 4 included a purely narrative requirement worth 10 marks. The paper was 57% computational and 43% narrative. The pass rate on this paper was slightly lower than the previous sitting. It was clear from marking that Question 1 seemed to pose a particular problem for candidates, with the majority being unable to construct an accurate payoff table. Similarly, while many candidates were able to produce the flexed budget required for Question 3, most were not able to tackle the discursive elements of this question. On the whole, Question 2 was the best answered, although few candidates were able to calculate an optimum price and quantity for the product in this question. While there were a notable amount of really high marks (in the 70s and 80s) but there was also a significant amount of really low marks (many less than 20%). It looked like some candidates yet again had not revised some of the key areas. Paper F5, by its nature, is a fairly challenging paper. It is a paper that requires a significant level

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were definitely in the minority. When you prepare a flexed budget, its format should replicate the original budget that it relates to. So, for example, if the original budget totals up variable costs, so should the flexed budget. This makes it easier to compare like with like. Some candidates did not do this but again, they were in the minority and, on the whole, the answers were good. In Part (b) candidates were provided with the sales mix contribution variance and the sales quantity contribution variance and asked to describe each of them and identify why they had arisen. Many candidates confused the sales mix with the materials mix and talked about the latter. Also, many candidates could not describe the quantity variance or identify why it had arisen. There is clearly a lack of understanding about variances, with candidates perhaps learning formulae in order to churn out calculations but not really understanding what the variances mean to a business. This area needs more work by the majority of students. Part (c) contained the higher skill marks on the paper. Only a few candidates were able to show that planning and operational variances needed to be calculated so that the manager would only be assessed on results that were within his control. QUESTION 4 Part (a) was a purely written requirement asking candidates to describe the balanced scorecard approach to performance management. Although it was asked in the context of a company, Brace Co, the question was generic in nature. There were some good answers to this, although the structure of answers could have been better. It is really hard to mark a question like this where candidates answers are just a sea of words, ie one or two sides of tightly written text with no headings and often not even any paragraphs. Given that there are four perspectives contained within the balanced scorecard approach, it was appropriate to give a short introduction and then say a little bit about each perspective under its heading. By this stage, candidates need to start writing more professionally, otherwise they are going to be ill-prepared for the Professional level papers, where marks will be specifically allocated for professional writing and well-formatted answers. Although professional marks are not available at this level, candidates should realise that

its far easier to earn more marks where the candidate clearly separates out the points he or she is making. Part (b) asked for calculations of residual income and return on investment and commentary on the results. About half of candidates scored full marks on the calculations but some had no idea had to calculate ROI/RI. As for the commentary, most answers were poor, illustrating that there is little understanding of what these figures actually mean. QUESTION 5 Finally, throughput accounting. In this question, throughput was tested in a service centre context rather than the usual traditional manufacturing context. While I accept that this may have unnerved some candidates, we all need to learn to move with the times and be capable of using management accounting techniques in environments other than traditional manufacturing ones. The service sector is of critical importance in many countries and throughput accounting is used in it, hence the question. Candidates were told that hospital costs were comparable to factory costs in a manufacturing environment in order to help them. Answers to Part (a) were very mixed. There were quite a few totally correct ones and most candidates managed to score some of the six marks. More problematic was Part (b). Calculating the optimum product mix is simple key factor analysis, regardless of whether the calculations are based on maximising throughput, as in this case, or maximising contribution. It is a technique which all trainee accountants should be familiar with. Clearly, not much revision of this area had taken place because answers were fairly poor. Part (c) was more about a common sense approach to numbers than anything else and most candidates scored two or three marks. It was necessary to identify the fact that there was enough spare capacity for all staff except the surgeon to perform the additional 696 procedures. Then, a basic calculation showing the extra throughput less the extra costs needed to be performed. No complex calculations were needed and most candidates managed a basic one. It was reassuring to see a degree of common sense in answers, although few identified that the recovery specialists surplus hours needed to be worked out in order to be sure that enough

spare capacity was available for this staff member.

PAPER F6 (UK) TAXATION

Candidates performed very well at this session, and it was pleasing to see how well the first Paper F6 inheritance tax question was answered. One particular problem at this sitting was that candidates wasted quite a bit of time where something should have been obvious without having to produce detailed calculations, and also where more calculations were done than was necessary because the requirements were not read properly. This is where the reading time should be put to good use. SPECIFIC COMMENTS QUESTION 1 In Part (a)(i) candidates had to calculate a taxpayers tax adjusted trading profit. Then in Part (a)(ii) they had to calculate the income tax payable by the taxpayer for the tax year 201011. The taxpayer had received directors remuneration (including two bonuses), dividends, interest on the maturity of a savings certificate issued by National Savings & Investments, and interest from government stocks (gilts). Her income was sufficiently high to lose any entitlement to the personal allowance. In Part (a)(iii) candidates had to calculate the amount of income tax that would be due for payment by the taxpayer on 31 January 2012, and advise her of the consequences if this amount was not paid until 31 August 2012. Part (b) was concerned with introducing a new person into the taxpayers business either as an employee or as a partner. On the assumption that the new person was taken on as an employee, in Part (b)(i) candidates had to calculate the total amount of National Insurance Contributions (NIC) that would be paid by the taxpayer and the new person. Then on the assumption that the new person was taken on as a partner, in Part (b)(ii) candidates had to firstly calculate his trading income assessments for the tax years 201011 and 201112, and then calculate the total amount of NIC that would be paid by the taxpayer and the new person, if any, in respect of his trading income assessment for the tax year 201011. Parts (a)(i), (a)(ii) and (b)(i) were generally well answered, but candidates had more difficultly with the other sections. In Part (a)(i) the only consistent problem was the revenue

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received in respect of a previously written off impairment loss. Most candidates did not appreciate that no adjustment was necessary. In Part (a)(ii) it was often not appreciated that one of the bonuses was treated as being received in the previous tax year, and often bonuses were included or excluded without any explanation as to why. It should have been obvious that with income of over 250,000 no personal allowance was available, yet many candidates wasted time by showing a calculation for this. Many candidates simply ignored Part (a)(iii), and very few appreciated that both the balancing payment for 201011 and the first payment on account for 201112 were due on 31 January 2012. In Part (b)(i) it was pleasing to see several candidates correctly restricted NIC to the four months of employment. Although there were also many good answers to Part (b)(ii), there were also a lot of candidates who wasted time by doing NIC calculations for both the taxpayer and the new person, or NIC calculations for both years, instead of just the one required. QUESTION 2 In Part (a) candidates had to calculate a companys corporation tax liability. This involved the computation of loan stock interest payable, capital allowances (based on items debited to a capital expenditure account), industrial buildings allowance, a property business profit, interest income and a chargeable gain. Part (b) required candidates to calculate the final quarterly instalment payment that would have to be made by the company, and to state when this would be due. This question was generally well answered, and there were many very good answers. In Part (a), there was no need to have separate computations for the trading profit and for taxable total profits, since it was quite straightforward to combine everything into one computation. The accruals

for the interest payable and interest income often caused problems, and many candidates did not appreciate that no adjustment to the trading profit was necessary in respect of any of the items debited to the capital expenditure account. The writing down allowance for a motor car with private use was often restricted, despite such an adjustment only being relevant for an unincorporated business. The calculations for industrial buildings allowance, the property business profit and the chargeable gain were often made much more difficult than they actually were. Although most candidates correctly calculated the final quarterly instalment in Part (b), the due date was generally not known. QUESTION 3 This question was concerned with four shareholders of an unquoted trading company that was taken over. Under the terms of the takeover the shareholders either received a cash payment or shares in the acquirer company. In Part (a), candidates were required to state why three of the shareholders did not meet the qualifying conditions for entrepreneurs relief. In Part (b), candidates were required to calculate the capital gains tax liabilities of each of the four shareholders. The first shareholder took the cash alternative, qualified for entrepreneurs relief, and had also made a chargeable gain from an investment property. The second shareholder took the share alternative and then subsequently made a gift of part of the new shareholding. The third shareholder took the cash alternative, had part of their basic rate tax band available, and had made a contribution into a personal pension scheme. The fourth shareholder took the share alternative, subsequently sold part of the new shareholding, with the remaining shares being bequeathed on the shareholders death. Answers to this question either tended to be very good or quite poor, with many

candidates making the calculations far more complicated than they actually were. In Part (a), many candidates simply reproduced the qualifying conditions for entrepreneurs relief, without relating them to the information given for each of the three shareholders. In Part (b), a number of candidates included taxable income as part of their calculations, and the annual exempt amount was often omitted. For the fourth shareholder, it should have been obvious that with sales proceeds of just 6,600 there would be no capital gains tax liability, yet the vast majority of candidates wasted time attempting to calculate a liability. Similarly, there was little awareness that the transfer on death was an exempt disposal. QUESTION 4 Part (a) required candidates to explain from what date a business was required to be registered for VAT based on the historical test. In Part (b), candidates were required to state the four additional pieces of information that the business would have to show on its sales invoices in order for them to be valid for VAT purposes. Part (c) required candidates to explain when and how the business should account for VAT in respect of the supply of services received from VAT registered businesses situated elsewhere within the European Union. In Part (d), candidates had to advise the business as to the maximum amount of penalty that would likely be charged by HM Revenue & Customs in respect of the underpayment of VAT, and by how much this penalty would be reduced as a result of a subsequent unprompted disclosure. The underpayment arose as a result of incorrectly treating a standard rated supply as zero-rated. In Part (e)(i), candidates had to advise the business as to how and when it would have to submit VAT returns and pay the related VAT if using the normal quarterly basis. Then in Part (e)(ii) they had advise the business as to when it would have to pay VAT and submit its VAT return if using the annual accounting scheme. With the exception of Part (b), this question was generally answered quite poorly. In Part (a), most candidates did not appreciate that the zero-rated supplies had to be included when calculating taxable supplies for registration purposes. Part (b) was well answered, although many candidates wasted time by stating more than four additional pieces of information. For example, common sense should mean

ONE PARTICULAR PROBLEM AT THE PAPER F6 (UK) SITTING WAS THAT CANDIDATES WASTED QUITE A BIT OF TIME WHERE SOMETHING SHOULD HAVE BEEN OBVIOUS WITHOUT HAVING TO PRODUCE DETAILED CALCULATIONS, AND ALSO WHERE MORE CALCULATIONS WERE DONE THAN WAS NECESSARY BECAUSE THE REQUIREMENTS WERE NOT READ PROPERLY.

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THERE ARE STILL SOME EXAM TECHNIQUE ISSUES THAT NEED TO BE IMPROVED WHICH, ON THEIR OWN, I FEEL CONFIDENT WOULD HAVE LIFTED MANY MARGINAL FAILS INTO THE PASS CATEGORY. WHAT IS IMPORTANT ABOUT THIS STATEMENT IS THAT MANY CANDIDATES ARE FAILING BECAUSE OF TECHNIQUE RATHER THAN KNOWLEDGE OR ABILITY.
that the business could not possibly state the VAT registration number of the customer. Many candidates simply ignored Part (c), but marks were awarded for any sensible answer such as input VAT and output VAT would contra out. In Part (d), too many candidates simply reproduced the penalty table without relating it to the facts given. Again, marks were awarded for any sensible conclusion. There was little of knowledge of the new online filing requirement for quarterly returns in Part (e), although the annual accounting scheme aspects were answered much better. QUESTION 5 In Part (a), candidates had to explain why it is important to differentiate between potentially exempt transfers and chargeable lifetime transfers for inheritance tax purposes. Part (b) required candidates to calculate the amount of inheritance tax that was payable as a result of the taxpayers death. The taxpayer had made a potentially example transfer and chargeable lifetime transfer within seven years of death. Then in Part (c), candidates had to state by when the personal representatives would have to pay the inheritance tax due in respect of the taxpayers estate. This question was extremely well answered, with a high number of perfect answers. In Part (a), a number of candidates wrote far too much for what should have been a short answer. In Part (b) the only consistent problem was that the gross figure for the chargeable lifetime transfer was often taken as the tax plus the chargeable portion of the transfer, rather than the tax plus the total net transfer. In Part (c), many candidates stated that tax had to be paid within six months of death rather than six months after the end of the month of death. the June 2011 session have reversed significantly. The main cause of the decline seems to be a return of the bad habit of candidates trying to pass on the first three questions. Once again, Questions 4 and 5 were not attempted by a large number of candidates. The topics of these two questions were far from being on the periphery of the syllabus. Question 4 was on the IASBs Framework, discontinued operations and earnings per share (EPS), which have all been examined many times in past papers, as too has the subject matter of Question 5, construction contracts. I am at a loss to explain why these topics are answered so poorly, or not at all. Most commentators believed this to be a fair paper for which a well-prepared candidate could readily attain a pass mark within the time constraints of the exam. True to past performances, the best-answered questions were the consolidation in Question 1 and financial statements preparation in Question 2. Answers to Question 3 were also generally good, particularly the statement of cash flows and ratio calculations. There are still some exam technique issues that need to be improved which, on their own, I feel confident would have lifted many marginal fails into the pass category. What is important about this statement is that many candidates are failing because of technique rather than knowledge or ability. I find it difficult to believe that a candidate who achieves scores of around 18 to 20 out of 25 in both Questions 1 and 2 does not have the ability to pass the paper; this happens all too frequently. A common theme of poor technique was wasting time. This is caused by number of factors: Giving an answer to a question that was not asked. Question 1 specifically stated that consolidated goodwill should NOT be calculated. Amazingly a significant number of candidates did calculate goodwill; it was often the very first thing they did. Conversely, not answering a question that was asked. Question 4 required candidates to explain the predictive role of financial statements within the aspect of relevance of the IASBs Framework. Many candidates wrote everything they knew about relevance (and reliability and the other qualitative characteristics) without any reference to a predictive role. More minor aspects of technique were: unnecessary and very detailed workings, repetition and writing down the definitions of ratios which was not asked for. Some candidates who did this did not even calculate the ratios. Other technique aspects were a lack of workings for some (complex) figures. Please be aware that markers cannot allocate any marks to an incorrect figure unless they can see how the figure has been arrived at. Poor handwriting and an inability to clearly express oneself continue to be particular problem for discussion answers. The composition and topics of the questions was such that on this diet there was very little difference between the International paper (the primary paper) and all other variant papers, so these comments generally apply to all streams. SPECIFIC COMMENTS QUESTION 1 This required the preparation of a consolidated statement of comprehensive income in Part (a)(i) and the equity section of the statement of financial position in Part (a)(ii). This was followed by a short written section on the effect on goodwill (and its impairment) of the alternative ways of calculating non-controlling interests. Part (a)(i) included a fair value adjustment for a revaluation of the subsidiarys property, and eliminating intra-group sales together with unrealised profits on plant and inventory. Pleasingly, the majority of candidates showed a good knowledge of consolidation techniques which led to many good scores. However,

PAPER F7 FINANCIAL REPORTING

The I am disappointed to report that, after a much improved performance in December 2010, the pass rates for

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for low-scoring candidates the main problem areas were: Many candidates eliminated the cost ($30m) of the intra-group sales from cost of sales; it should be the selling price ($40m) that is eliminated as this is the cost of the purchases to the subsidiary. A failure to adjust (correctly) for the additional depreciation to the plant caused by it being transferred at a value above its cost and the unrealised profit on the transfer. Although most candidates did calculate the non-controlling interest (NCI) in the profit for the year, few carried on this principle to calculate the NCI in the total comprehensive income. There was also some confusion between the principle of the NCI calculation in the income statement and in the statement of financial position (part of the equity in Part (a)(ii)). A surprising number of candidates did not adjust for the share exchange when calculating the share capital and share premium (share capital only in SGP paper). Very few candidates correctly calculated the other equity reserve. In most cases, candidates just added together the figures for this reserve at 1 April 2010 (the beginning of the year). This meant two errors; the pre-acquisition balance on the subsidiarys reserve should not appear at all in the consolidated reserve (it would be part of the goodwill calculation if it had been required) and the groups share of current years movement in the reserve (as shown in the comprehensive income statement) was completely ignored. Similar errors were made in calculations for the land revaluation reserve. As already mentioned, many candidates unnecessarily calculated consolidated goodwill, no marks were awarded for this as it was specifically stated as not being required. Also when calculating the NCI in the equity section of the statement of financial position, many candidates worked this by calculating the NCIs share of capital and reserves, often getting hopelessly lost. A much simpler method, as this was the year in which the controlling interest had been acquired, was to add the fair value of the NCI at the date of acquisition ($100m as given in the question) to the NCI in the statement of comprehensive income (which should have already been calculated in Part (a)(i)). Poorly prepared candidates failed

to time apportion (for six months) the subsidiarys results and a lesser number proportionally consolidated (at 75%) the subsidiarys results. The written section of Part (b) was very disappointing. About half of the candidates gave no answer at all and of those who did, a lot missed point of the question. Instead of explaining the effect the two treatments (of valuing NCI) have on goodwill and its impairment, many candidates simply described what the two treatments were (rather than their effect). UK and IRL papers had an alternative section on the requirement to produce group financial statements which was generally well answered where attempted, but again it was often ignored. QUESTION 2 This question was a traditional preparation of financial statements (including a statement of changes in equity) from a trial balance, combined with several adjustments including: the issue of a convertible loan note, a revaluation of land and buildings, an inventory adjustment calculation, factored receivables and accounting for current and deferred taxation. This was the best scoring question on the paper and attempted by nearly all candidates. Most candidates are well practised in knowing the format of the financial statements and as usual the problem areas were with the required adjustments. Even where candidates did not get all the adjustments fully correct, many marks were still earned for the method of their workings. The frequent problem areas were: STATEMENT OF COMPREHENSIVE INCOME The question required an adjustment to the given value of closing inventory because it was counted several days after the year end. A number of candidates got the movement of these adjustments the wrong way round and reduced the year end inventory rather than increasing it. Surprisingly many candidates adjusted the sales revenue for one of the inventory adjustments despite the question clearly indicating this was not necessary. Some candidates incorrectly stated that this was an event after the reporting date and so no adjustments were required The administrative expenses required the reversal of financing/ administration costs of factored debtors because the risk of collection had not been transferred to the factor. Many

candidates correctly recognised this, but failed to realise that they then had to recognise a receivables allowance (doubtful debt provision). Many candidates had difficulty with the finance cost of the convertible loan, common errors were: using a discount rate of 8% instead of the effective rate of 10%, double counting the finance costs by adding the effective finance cost to the finance cost that had been paid or just taking the interest paid as the finance cost with no reference to the nature of the financial instrument. The gain on the revaluation of the property to be included in other comprehensive income was generally well done (although many candidates just included the land element). However, most candidates included the deferred tax on this gain as part of years income tax expense rather than as part of other comprehensive income. STATEMENT OF CHANGES IN EQUITY (SOCIE) When attempted this was generally very well done with many candidates gaining full marks. Where errors did occur they were mainly not including the equity component of the convertible loan and not adjusting the opening retained earnings for the dividend that had been paid during the year. As a point of reassurance, if a candidate makes an error in an earlier calculation (say of the dividend or the revaluation surplus) then they are not penalised again in the SOCIE; an incorrect figure will be marked as correct under the principle of method marking (or own figure rule). STATEMENT OF FINANCIAL POSITION (SOFP) This was again generally well done with most errors being due to the knock-on effect of errors made in the statement of comprehensive income which were also not penalised under method marking, this particularly applied to non-current assets, inventory, receivables and the convertible loan note. There is still some confusion over the deferred and current tax figures that should appear in the SOFP . A very common error was not including the liability to the factor (Easyfinance) as a current liability and a careless, but common, error was the inclusion of the bank overdraft as a current asset. QUESTION 3 This question was an integrated statement of cash flows and interpretation question with candidates

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being directed to addressing an issue raised by a shareholder concerning an increase in revenue not being matched by an increase in profit. As usual the statement of cash flows proved popular and was well answered by most candidates, the only recurring errors were: failure to take account of an asset held-for-sale when calculating the cash flow for non-current asset expenditure and, very frequently, omitting to calculate the dividend paid by investigating the movement of retained earnings. Answers to the interpretation were more mixed. Five marks were available for calculating relevant ratios (which gives some measure of how many should have been calculated) and again many candidates scored well on these (often the maximum). The assessment of the performance of the company was less well answered. Weaker candidates did not attempt to explain why the revenue had gone up by 48% whereas profit for the year had increased by only 20%. Surprisingly, some candidates correctly calculated that the gross profit margin had increased (by 2%) and then said this partly explained the anomaly; obviously not realising that an increase in gross margin would have led to a proportionate increase in profit rather than the decrease actually reported. The operating margin was down very slightly, but did not account for the relative decline in profit. The real explanation of why the profit had decreased was due to higher finance costs (due to a new loan) and a much higher rate of taxation. Other aspects of performance were attempted reasonably well, many candidates observed the increase in tangible and intangible non-current assets suggesting acquisition/expansion and that this had been financed by additional borrowings which had increased gearing. Comments on the current and quick ratios were common, but few recognised the impact that the non-current asset held-for-sale had on the liquidity. In this type of question many candidates become obsessed with calculating ratios for inventory, receivables and payables. In some cases these were the only ratios calculated although in this scenario they were not particularly important issues to support an answer to the question. Overall, many candidates made intelligent comments about what the ratios they had calculated might indicate. However, there were too many candidates who merely reported that a ratio had gone up or down, which

does not amount to an assessment of performance. QUESTION 4 The introductory section (Part (a)) of this question was related to the Frameworks characteristic of relevance and how the predictive role of financial statements enhances relevance. Candidates were asked to give examples of how the presentation of historical financial statements can assist users to assess future performance (the predictive role). The majority of candidates did not attempt this section and those who did had very little idea of what the question was about. Many of the answers gave the impression that the candidate thought it was a discussion of historical cost accounts (which is not the same as historical reporting). Also, most candidates missed the clue of Part (b); simply mentioning the two examples in Part (b) (discontinued operations and diluted EPS) would have gained two marks alone. Some other relevant disclosures would be: Non-current assets held-for-sale (these will not generate future profits). Separately disclosed material (sometimes called extraordinary) items; these are basically unusual often one-off or non-recurring gains or losses. Comparative results; these establish past trends of performance which may be used to predict future performance. Part (b)(i) was a short section requiring candidates to estimate the next years profit of a company based on its current years results, which included discontinued operations. Most candidates scored well, the main mistake was not pro-rating the currents years newly acquired operations (of eight months) for a full year. Part (b)(ii) required a diluted EPS calculation on continuing operations allowing for convertible loan stock and directors share options for the current and comparative year. A surprisingly common mistake was for candidates to use the figures they had calculated in Part (b)(i), which were a prediction of 2012s earnings, as the basis of the EPS calculation of 2011. That aside, many good candidates did correctly allow for the interest adjustment (net of tax) for the convertibles and correctly calculated the number of shares on conversion. The treatment of the share options was less well understood; many candidates

just used the number of shares covered by the options, without reducing it by the number of shares that the proceeds of the option would theoretically buy, and very few weighted the option for the six months that it had been granted. Many candidates prepared a basic EPS calculation for both years and others got very confused in their determination to include the effects on EPS of a rights issue at below market price; neither were part of the question. The most disappointing aspect of the question was the large number of candidates who did not attempt it (especially Part (a)). QUESTION 5 This question focused on the regularly examined area of construction contracts. It was a fairly standard question requiring candidates to produce extracts from the financial statements on the second years progress of the contract; the first years results were given in the question. Candidates who gave this question serious attention scored quite well. In the income statement most candidates calculated the total estimated profit and percentage of completion correctly, but did not take into account the previous years results when reporting the current years results, in other words they produced an accumulated income statement (for 2011 plus 2010). Many also tried to calculate a cost of sales when it should have simply been a balancing figure (of revenue less profit). Some candidates chose to calculate the percentage of completion based on a cost formula rather than work completed/contract price as specified in the question. Common errors in the statement of financial position were not including amounts for the contact plant or contract receivables and then, in the note of the amounts due from customers, candidates often deducted the progress payments received rather than the progress billings. CONCLUSION Overall this was a disappointing performance after December 2010s very good pass rate. However, it was encouraging to see the solid performance on Questions 1 and 2 and a good understanding of cash flows. It seems to be the recurring problem of a lack of syllabus coverage that is preventing many marginal candidates from achieving a pass. As usual, many of the above

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comments on the individual questions focus on where candidates made errors. This is intended to guide candidates in their future studies and to highlight poor techniques with a view to improving future performance. This may appear to give an overly pessimistic view of candidates performance. This is not the intention and should not detract from the efforts of many candidates who performed well.

THE VAST MAJORITY OF CANDIDATES ATTEMPTED ALL FIVE QUESTIONS IN PAPER F8, AND THERE WAS LITTLE EVIDENCE OF TIME PRESSURE. WHERE QUESTIONS WERE LEFT UNANSWERED BY CANDIDATES, THIS APPEARED TO BE DUE TO A LACK OF KNOWLEDGE OR POOR EXAM TECHNIQUE, AS OPPOSED TO TIME PRESSURE.
Providing more than the required number of points. Illegible handwriting and poor layout of answers. SPECIFIC COMMENTS QUESTION 1 This 30-mark question was based on a toy manufacturer, Tinkerbell Toys Co (Tinkerbell), and tested candidates knowledge of tests of controls, substantive procedures for receivables and revenue and fraud. Part (a) for 12 marks required candidates to recommend six tests of controls for the sales cycle of Tinkerbell as well as the objective for each test. Most candidates performed inadequately on this part of the question. The main problems encountered were that candidates struggled to differentiate between tests of control and substantive tests and hence often provided long lists of substantive procedures, which scored no marks. In addition a significant minority of candidates did not read the question carefully, and instead of providing tests of controls, gave control procedures management should adopt. This scored no marks. The approach candidates should have taken was to first identify from the scenario the controls present for Tinkerbell, they then should have considered how these controls could be confirmed by the auditor. In addition candidates explanations of tests were vague such as check that credit limits are set for all new customers. This procedure does not explain how the auditor would actually confirm that the control for new customer credit limits operates effectively. Tests that start with check are unlikely to score many marks as they do not explain how the auditor would actually check the control. Future candidates should practise generating tests; both substantive and tests of controls, which do not start with the word check. The second part of this requirement was to explain the objective of the test of control provided. Again, this was not answered well. A common answer was to state that the objective was to ensure that the control is operating effectively. This was far too vague. All tests of controls are looking to verify that controls are operating effectively. Instead, candidates should have considered the aim of the specific control being tested. Therefore, the objective of a test over credit limits is to ensure that orders are not accepted for poor credit risks. As noted in previous examiners reports candidates are often confused with the differences between tests of controls and substantive tests. Both are methods for obtaining evidence and are key elements of the Paper F8 syllabus. Future candidates must ensure that they understand when tests of controls are required and when substantive procedures are needed. They need to learn the difference between them and should practise questions requiring the generation of both types of procedures. In addition, the question asked for six tests of controls and objectives, however many candidates provided much more than the required six points. It was not uncommon to see answers which had eight to 10 points. While it is understandable that candidates wish to ensure that they gain credit for six relevant points, this approach can lead to time pressure and subsequent questions can suffer. A significant number of candidates presented their answers in a columnar format and this seemed to help them to produce concise and relevant answers. Part (b) for eight marks required substantive procedures the auditor should perform on year-end receivables. This was answered well by many candidates. Candidates were able to provide variety in their procedures including both tests of detail and analytical review tests. The most common mistakes made by some candidates were: Providing tests of control rather than substantive procedures.

PAPER F8 AUDIT AND ASSURANCE

The vast majority of candidates attempted all five questions in the paper, and there was little evidence of time pressure. Where questions were left unanswered by candidates, this appeared to be due to a lack of knowledge or poor exam technique, as opposed to time pressure. As in previous exam sessions, a small minority of candidates answered Question 1 last and their answers were often incomplete. As Question 1 is the case study and represents 30 of the available marks, leaving this question until last can be a risky strategy, as many answers presented were incomplete or appeared rushed. Candidates performed particularly well on Questions 1b, 1c, 2b, 3a, 4b, 4c and 5b. The questions candidates found most challenging were Questions 1a, 1d, 2a, 3b, 5a and 5c. This is mainly due to candidates not understanding core syllabus areas well enough, a lack of technical knowledge and also due to a failure to read question requirements carefully. Question 5a on misstatements tested knowledge of ISA 450, Evaluation of Misstatements Identified During the Audit. This was one of the new ISAs issued as part of the Clarity Project and has been in the Paper F8 Study Guide since 2010; and hence as a new topic area should have been prioritised by candidates. A number of common issues arose in candidates answers: Failing to read the question requirement clearly and, therefore, providing irrelevant answers which scored few if any marks. Poor time management between questions, some candidates wrote far too much for some questions and this put them under time pressure to finish remaining questions. Not learning lessons from earlier examiners reports and hence making the same mistakes, especially in relation to audit risk.

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Providing substantive procedures for revenue rather than receivables. Not generating enough tests for eight marks; it is one mark per valid procedure. Describing the process for a receivables circularisation at length. This was not part of the question requirement. The requirement verb was to describe so sufficient detail was required to score the one mark available per test. Candidates are reminded that substantive procedures is a core topic area and they must be able to produce relevant detailed procedures. Answers such as confirm credit notes are recorded in the correct period are far too vague as it does not explain how to gain comfort that credit notes are recorded correctly. In addition answers such as ensure cut-off of receivables is correct are objectives rather than substantive procedures. Part (c) for six marks required an identification and explanation of controls that Tinkerbell should adopt to reduce the risk of fraud occurring again, as well as an explanation of how this control would mitigate the fraud risk. This question was answered well by most candidates, with some scoring full marks. The scenario provided details of a teeming and lading fraud which had occurred during the year and candidates needed to think practically about how Tinkerbell could reduce the risk of this occurring again. Candidates were able to use the scenario to generate practical controls such as review of bank reconciliations and segregation of duties between the roles of processing cash receipts and preparation of bank reconciliations. However, candidates performance on the second requirement to describe how the control would mitigate the risk of fraud occurring again was mixed. The main problem was that answers were not specific enough, frequently vague answers such as this will reduce the

risk of fraud and error occurring were given. This did not score any marks as it does not explain how the control will actually reduce the risk. For example, the review of bank reconciliations will reduce the risk as any unreconciled balances, even if small, will be identified and investigated. A small minority of candidates failed to read the question properly and so provided weaknesses and then controls to address these, rather than controls and explanations of how these reduce risk. Many candidates presented their answers in a columnar format and again this seemed to help them to produce clear and concise answers which covered both parts of the requirement. Part (d) for four marks required substantive procedures the auditor should perform on Tinkerbells revenue. This requirement was not answered well. Some candidates confused this requirement with that of Part (b), which required receivables tests, and so provided the same tests again. In addition, a significant number of candidates provided procedures to confirm bank and cash rather than revenue. Perhaps they confused cash receipts with revenue and so thought that if they confirmed cash receipts this would confirm revenue. Those candidates who performed well were able to provide a good mixture of analytical procedures such as compare revenue to prior year or to budget and review monthly sales against prior year and also detailed tests such as confirming cut-off of sales. QUESTION 2 This 10-mark question covered the topics of narrative notes, internal control questionnaires and engagement letters. Part (a), for six marks, required candidates to describe the advantages and disadvantages of narrative notes and internal control questionnaires (ICQs) as methods for documenting the system. Candidates performance

was unsatisfactory on this question, with a number of candidates not even attempting it. A significant minority of candidates did not understand the question requirement fully, and so instead of providing advantages and disadvantages for notes and then for ICQs, they provided answers which were of a general nature and just covered advantages and disadvantages of documenting the internal control system. It is possible that these candidates did not carefully read the scenario paragraph preceding the requirement. This paragraph laid out that there were various methods available for documenting internal controls and it identified notes and ICQs, the requirement then followed on with the advantages and disadvantages of these two methods. Candidates must take the time to read and understand any scenario paragraphs; these are intended to help candidates understand the question requirements. Those candidates who understood the requirement often made the following mistakes: Lack of detail, the requirement was to describe and often candidates provided bullet point notes. This is not a sufficient level of detail to be awarded the one mark available per point. Some candidates were confused as to who prepared the systems documentation, thinking that ICQs were produced by management, and so identified irrelevant advantages and disadvantages. Providing definitions and explanations of what notes and ICQs are, rather than answering the question requirement. Definitions will not score marks unless they are a specific part of the question requirement. Listing points in relation to internal control evaluation questionnaires (ICEQs) rather than ICQs. This is another method for documenting systems but was not part of the question requirement and hence scored no marks. Part (b)(i), for one mark, required the purpose of an engagement letter and Part (b)(ii), for three marks, required six matters that should be included in an audit engagement letter. This question was answered well by most candidates with many scoring full marks. In addition the verbs of state for Part (b)(i) and list in Part (b)(ii) were addressed by most candidates and answers were generally succinct.

PAPER F8 CANDIDATES ARE REMINDED THAT SUBSTANTIVE PROCEDURES IS A CORE TOPIC AREA AND THEY MUST BE ABLE TO PRODUCE RELEVANT DETAILED PROCEDURES. ANSWERS SUCH AS CONFIRM CREDIT NOTES ARE RECORDED IN THE CORRECT PERIOD ARE FAR TOO VAGUE AS IT DOES NOT EXPLAIN HOW TO GAIN COMFORT THAT CREDIT NOTES ARE RECORDED CORRECTLY.

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Where candidates did not score full marks this tended to be because in Part (b)(i) they repeated points from Part (b)(ii) or simply stated that the engagement letter is a contract and in Part (b)(ii) they gave irrelevant points such as date, signature of auditor and companys year end. QUESTION 3 This 20-mark question was based on Donald Co, which operated an airline business. The question tested the areas of risk identification and procedures for obtaining evidence. Part (a)(i), for five marks, required five procedures, other than external confirmation, for obtaining evidence and then Part (a)(ii), for five marks, required an example of each procedure relevant to the audit of purchases and expenses. This question was unrelated to the scenario and was knowledge-based, and candidates performed satisfactorily. Where candidates did not score full marks this was because they failed to read the question properly. The scenario clearly excluded the procedure of external confirmation, however, a significant minority of candidates gave confirmations as a procedure, which scored no marks. Some saw the word confirmation and then proceeded to provide a lengthy answer only relating to this procedure. Candidates must read the question carefully. In addition, some candidates confused procedures for obtaining evidence with financial statement assertions and so gave answers which focused on completeness, valuation and existence. A number of candidates provided example procedures which were not related to purchases and expenses, but instead focused on inventory, payables or non-current assets. Again this was due to a failure to read the question requirement. Part (b), for 10 marks, required a description of the audit risks and responses for Donald Co. Many candidates performed inadequately on this part of the question. As stated in previous examiners reports, audit risk is a key element of the Paper F8 syllabus and candidates must understand it. This is the third session in a row where audit risk has been tested and where most candidates performance has been unsatisfactory. A number of candidates wasted valuable time by describing the audit risk model along with definitions of audit risk, inherent risk, control and detection risk. This generated no marks

as it was not part of the requirement. Candidates are reminded that they must answer the question asked as opposed to the one they wish had been asked. The main area where candidates continue to lose marks is that they do not actually understand what audit risk relates to. They provided answers which considered the risks the business would face or business risks, which are outside the scope of the syllabus. Audit risks must be related to the risk arising in the audit of the financial statements and should include the financial statement assertion impacted. If candidates did not do this then they would have struggled to pass this part of the question as there were no marks available for business risks. For those candidates who were able to identify audit risks, they mainly focused on going concern and the risk of bad debts arising from irrecoverable receivables. However, the scenario did contain a number of other audit risks, such as existence of the planes at the year end and the capital v revenue treatment of the $15m spent on refurbishment. Not many candidates identified other risks, which was unsatisfactory. The issue of the call centre closing and hence the workforce being made redundant was misunderstood by many. These candidates felt that this must mean that the company was having going concern issues, but there was no indication of this in the scenario. The risk related to the completeness of the redundancy provision. Even if the audit risks were explained many candidates failed to provide a relevant response to the audit risk, most chose to give a response that management would adopt rather than the auditor. For example, in relation to the risk of valuation of receivables, as Donald Co had a number of receivables who were struggling to pay, many candidates suggested that management needed to chase these outstanding customers. This is not a response that the auditor would adopt, as they would be focused on testing valuation through after date cash receipts or reviewing the aged receivables ledger. In addition some responses were impractical, such as asking the bank to confirm to the auditors whether they would grant Donald the $25m loan. The bank is not going to provide this type of information to the auditor especially if they have not yet told Donald. Also, some responses were too vague such as increase substantive testing without making it

clear how, or in what area, this would be addressed. Future candidates must take note audit risk is and will continue to be an important element of the syllabus and must be understood, and they would do well to practise audit risk questions. QUESTION 4 This 20-mark question was based on the audit firm NAB & Co (NAB) and its clients Goofy Co and Mickey Co and tested candidates knowledge of managing conflicts of interest, outsourcing internal audit and ethical threats. Part (a), for four marks, required an explanation of the safeguards NAB should implement to manage the potential conflict of interest between their two competing clients. Candidates performed satisfactorily on this part of the question. Most candidates were able to identify safeguards such as separate audit teams and informing both parties and, therefore, scored half of the available marks. However, many candidates then provided procedures which were a repeat of separate teams, such as separate engagement partners. In addition, some candidates listed general ethical safeguards rather than focusing on the specific requirement of conflicts of interest. Part (b), for 10 marks, required the advantages and disadvantages to both NAB and Goofy Co of outsourcing their internal audit department. Candidates performed well on this question. Most candidates structured their answers to consider advantages and disadvantages for each of the two entities separately and this helped to generate a sufficient number of points. It was pleasing to see that many candidates used the small scenario provided to make their answers relevant, as this was not a general requirement, but one applied to Goofy Co and NAB. Where candidates did not score as well, this was mainly due to a failure to provide sufficient depth to their answers. A common advantage given was outsourcing saves costs. This does not discuss with enough detail how Goofy Co would save costs and as such would not score the one mark available. Often candidates then went on to have as a disadvantage outsourcing costs more money again with little explanation of how this can occur. A discuss requirement is relatively detailed and an answer of just a few words will not be sufficient. Part (c) for six marks required an

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explanation of the ethical threats with respect to the audit of Goofy Co and how these threats may be reduced. This question was answered well by most candidates, and many scored full marks. Candidates were able to clearly identify from the scenario the ethical issues impacting the audit of Goofy Co. Some candidates did not explain the threats in sufficient detail, sometimes just identifying the issue and not explaining how this was an ethical threat. For example, many identified the issue of the engagement partner having been in place for six years, however if they did not then go on to explain that this was a familiarity threat, or they gave an incorrect threat such as self interest, they would have only gained half a mark rather than one mark. The second part of this question required methods for reducing the threats. Candidates performance was generally satisfactory although some answers tended to be quite brief. In addition, some candidates confused the issue of contingent fees with undue fee dependence and so focused on ways to reduce the proportion of fees from Goofy Co. In addition many candidates provided more points than were necessary. The requirement was for six marks and had two elements to it: the marking guide awarded one mark per threat and one mark per method for reducing risk, so three threats and methods were required for full marks. Yet some candidates listed up to five threats and methods, this then put them under time pressure and led to later questions being impacted. QUESTION 5 This 20-mark question was based on Minnie Co and tested candidates knowledge of misstatements, placing reliance on the work of an expert and audit reports. Part (a), for four marks, required an explanation of the term misstatement and a description of the auditors responsibility in relation to misstatements. This question was unrelated to the scenario, and was not answered well by many candidates. Most candidates were able to gain one mark by explaining that a misstatement was an error, however they could not then explain the auditors responsibility. ISA 450, Evaluation of Misstatements Identified During the Audit provides guidance on this area. This is a relatively new ISA and was issued as part of the Clarity Project. As this ISA had

not yet been tested this is an area which should have been prioritised by candidates. However, many candidates clearly had not studied this area at all. They therefore provided answers which focused on the auditors responsibilities to provide an opinion on the truth and fairness of the financial statements or to detect material misstatements. In addition, a minority of candidates produced answers which focused on materiality. Part (b) for four marks required a description of the factors that should be considered when placing reliance on the work of the independent valuer. Candidates performed well on this question. Many were able to score over half marks by identifying points such as professional qualifications, experience and independence. The requirement verb was to describe and sufficient detail was required to score the one mark available per test; some answers were a little brief. Candidates are reminded to look carefully at the verb at the beginning of the question requirement, as this should help them to understand the level of detail required for their answers. Part (c) for 12 marks required a discussion of three issues in the scenario as well as a description of the impact on the audit report if these issues remain unresolved. Candidates performance was unsatisfactory on this question. Each of the three issues had a maximum of four marks available and in order to score well candidates needed to consider the following in their answer: A description of the audit issue; such as incorrectly depreciating land, or lack of evidence to support wages or contingent liability disclosure. A calculation of whether the issue was material or not, using the financial information provided in the scenario. An explanation of the type of audit report required. A description of the impact on the audit report. A significant minority of candidates stated that it was acceptable to depreciate land, and the issue was that it should have been charged for the prior year as well. This demonstrates a fundamental lack of accounting knowledge. In relation to the materiality calculation, some candidates stated the issue was material but without using the financial information provided. What was required was a calculation,

for example, the land depreciation was $0.7m and so represented 7% of profit before tax, and then an explanation of whether this was material or not. The benchmark from ISA 320, Materiality in Planning and Performing an Audit of 5% of profit before tax was taken as being material. With regards to the type of audit report required, many candidates provided a scattergun approach of suggesting every possible audit report option. Candidates often hedge their bets by saying if management will make an amendment then we will give an unmodified opinion, however, if they do not make the adjustment then we will give a qualified except for opinion. Giving every possible audit report option will not allow candidates to score well. Many candidates used terms such as except for, modified or qualified but the accompanying sentences demonstrated that candidates did not actually understand what these terms meant. In addition, a significant proportion of candidates do not understand when an emphasis of matter paragraph is relevant, and seemed to think that it was an alternative to an except for qualification. Candidates are also reminded that since the clarified ISAs have been issued the old terminology of disagreement is no longer relevant and instead should refer to material misstatement. In relation to the impact on the audit report, many candidates were unable to describe how the opinion paragraph would change and that a basis for qualified opinion paragraph was necessary for issues (i) and (ii). In addition, a significant proportion of candidates provided procedures the auditor would undertake in order to understand or resolve the issues. For example, alternative procedures for verifying wages were given, or the steps to take in contacting lawyers in relation to the lawsuit. While valid procedures, they did not score any marks as they were not part of the question requirement. Once again, candidates must answer the question asked and not the one they wish had been asked. Future candidates are once again reminded that audit reports are the only output of a statutory audit and, as such, an understanding of how an audit report can be modified and in which circumstances is considered very important for this exam.

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EXAMS

PAPER F9 FINANCIAL MANAGEMENT

This paper tested many areas of the syllabus and a consideration of performance on a question by question basis is given below. Successful candidates answered all four compulsory questions and had prepared well for the exam. Candidates who were not successful tended to have omitted answers to some parts of the questions, and showed in their answers that there were some parts of the Paper F9 syllabus that they needed to study further. Since many areas of the syllabus are covered in each exam paper, concentrating on one or two parts of the syllabus and not giving much attention to other parts will decrease the likelihood of success. SPECIFIC COMMENTS QUESTION 1 In general, candidates tended to gain good marks in Part (a), while doing less well in Parts (b) and (c). Part (a) asked candidates to calculate the net present value (NPV) of a new confectionary line using a nominal terms approach, allowing for inflation and taxation. Some candidates said that, because the same rate of inflation was applied to selling price, variable cost and fixed cost, inflation could be ignored and their answers used a real terms approach. This ignores the stated requirement to use a nominal terms approach and is also not correct in this case, as profit tax was payable in arrears. A nominal terms approach discounts nominal (inflated) cash flows with a nominal cost of capital, which was given in the question. Some answers made the mistake of either inflating or deflating the provided nominal cost of capital. Some answers did not defer the tax liabilities, or the tax benefits on the capital allowances available on the cost of equipment, or both, although the question required this. A small number of candidates calculated capital allowances and tax benefits on the initial investment in working capital, instead of on the initial investment in machinery, but working capital investment does not

attract capital allowances. Although the question said that a balancing allowance would be claimed in the fourth year of production, some candidates did not calculate this. When including working capital effects in investment appraisal, there are three key elements to consider: initial investment; incremental investment; and recovery of investment. Most answers included the initial investment, although a small number of answers incorrectly chose to inflate this by one year, or to locate it incorrectly in year 1 rather than in year 0. Many answers included incremental investment, although in some cases this was not incremental, but cumulative, or calculated incorrectly. The recovery of the investment was sometimes omitted, or included but not inflated, even though incremental investment had been included prior to recovery. Almost all answers correctly located the discount factors from the tables provided in the exam paper, although as mentioned earlier a few answers used a discount rate that was different from the one provided in the question. In a very small number of answers, annuity factors were used instead of discount factors. Almost all answers calculated a net present value. Although the question required that the candidate advise on the financial acceptability of the proposed investment, some answers did not do this, or made a casual comment that did not gain full marks. Part (b) asked candidates to comment on the proposed use of a four-year time-horizon, and to discuss a value that could be placed on cash flows arising after this period, using a perpetuity approach. The question stated that the new confectionery line would be popular for many years, that sales would continue after the fourth year and that a four-year time-horizon was proposed because cash flows after the fourth year were too uncertain. Candidates were expected to comment that limiting the NPV analysis to four years meant that cash flows after the fourth year had not been included in the analysis, so the

NPV would be understated. Candidates were also expected to comment that including in the NPV analysis cash flows expected to occur after the fourth year, such as the balancing allowance and working capital recovery, would overstate the NPV. Using a limited time-horizon could therefore lead to sub-optimal investment decisions if these decisions were based on the calculated NPV. Many answers showed a lack of awareness of these points. While it is true that cash flows after the fourth year were uncertain, an estimate of their value could still have been included using a perpetuity approach, which is what candidates were asked to consider. Previous examiner reports have commented that many candidates struggle to use a perpetuity approach correctly and answers to this question showed that this continues to be true. Please study the suggested answer for a fuller discussion of the value that could be placed on the cash flows after the fourth year. In Part (c), candidates were required to discuss three ways of incorporating risk into the investment appraisal process. Many candidates lost marks by not reading the question correctly and discussing the nature of different kinds of risk, rather than how risk could be incorporated in the investment appraisal process. Better answers discussed ways of incorporating risk into investment appraisal that were covered in the syllabus, such as sensitivity analysis, probability analysis, and the capital asset pricing model. QUESTION 2 In general, as with Question 1, candidates tended to gain good marks in Part (a), while doing less well in Parts (b) and (c). Part (a) asked for the calculation of the market value after-tax weighted average cost of capital (WACC) before and after a new issue of bonds. Many candidates gained full marks for the two WACC calculations and most students were able to gain some credit by some of the subsidiary calculations.

SUCCESSFUL PAPER F9 CANDIDATES ANSWERED ALL FOUR COMPULSORY QUESTIONS AND HAD PREPARED WELL FOR THE EXAM. CANDIDATES WHO WERE NOT SUCCESSFUL TENDED TO HAVE OMITTED ANSWERS TO SOME PARTS OF THE QUESTIONS, AND SHOWED IN THEIR ANSWERS THAT THERE WERE SOME PARTS OF THE SYLLABUS THAT THEY NEEDED TO STUDY FURTHER.

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EXAMS

Some students ignored the market value of existing bonds given in the question and calculated a market value based on the present value of future interest payments and redemption at par (nominal value). This was not actually possible, since the question provided neither the interest rate nor the maturity of the existing bonds. Some answers ignored the after-tax cost of debt given in the question and calculated a new (incorrect) after-tax cost of debt. For example, some answers treated existing bonds as irredeemable and used the after-tax cost of debt provided as a before-tax interest rate. This implies learning a WACC calculation method without understanding the underlying principles, leading to an attempt to make the information provided fit the calculation method learned. A surprising number of candidates could not calculate the dividend growth rate, whether on a geometric or an arithmetic basis. Both methods were acceptable. There were also a significant number of errors in calculating the cost of equity using the dividend growth model. Alarm bells should sound if the calculated cost of equity is less than the cost of debt, or if the calculated cost of equity is quite large. A glance through past exam papers will show that a realistic approach has been used, with the cost of equity lying between say 5% and 15%. Alarm bells should also sound if the calculated WACC is greater than the highest cost of capital being averaged, or less than the lowest cost of capital being averaged, since logically an average value must lie between the highest and lowest values being averaged. The cost of debt of the new bond issue could be found through linear interpolation. The correct way to treat taxation here is to use the after-tax interest payment in the interpolation calculation, with the redemption value being unaffected by profit tax. Many candidates were able to use linear interpolation correctly. Following the calculation of the revised WACC, some comment was required on findings. If the calculations had been similar to those in the suggested answer, a decrease in WACC had been found. Better answers noted that this decrease rested on assumptions such as that the cost of equity had not increased, despite the rise in financial risk, and that the share price had not changed. In Part (b), candidates were asked to identify and discuss briefly the

factors that influence the market price of bonds. Some of these factors are the interest rate, how often interest is paid, the number of years to redemption, the redemption value and the cost of debt. These factors are all considered by the bond valuation model, which was used earlier to find the after-tax cost of debt by linear interpolation. Once again, as with the WACC calculation method mentioned above, many candidates showed that they did not understand the principles underlying a calculation method, in this case the bond valuation model, and did not discuss these factors. Instead, candidates discussed factors relating to the risk of the issuing company (which would affect the cost of debt), such as level of financial risk, profitability and credit rating, and general market factors (which would affect the cost of debt), such as liquidity, economic outlook and market efficiency. Answers could also gain credit by looking at factors such as convertibility and theories relating to the term structure of interest rates. Given that marks could have been gained in so many different ways, it was surprising that some candidates chose not answer this question at all. Part (c) asked for a discussion of the suggestion that issuing bonds will decrease WACC and increase the market value of a company. Better answers to this question looked at capital structure theory, including the traditional view, the views of Miller and Modigliani, the market imperfections view and pecking order theory. Other answers gained credit by using a practical perspective, noting that issuing debt without having an investment purpose was poor financial management and that the shareholder response to increased financial risk could not be ignored. Weaker answers struggled to discuss the relationship between WACC, company market value, the cost of equity, the cost of debt and taxation, perhaps discussing instead the different ways of valuing a company, which was not required by the question. QUESTION 3 In general, as with Question 1, candidates tended to gain good marks in Part (a), while doing less well in Parts (b) and (c). Part (a) required candidates to analyse and discuss the recent financial performance and current financial position of a company, to comment on the achievement of the

objective of maximising shareholder wealth, on proposals to pay or not to pay a dividend, and on a proposal to raise debt finance. The order of these requirements gave a structure to the expected answer that was adopted by almost all answers. The first part of the requirement refers to analysis and better answers started from this point, analysing the financial information provided and calculating a range of appropriate accounting ratios. The recent financial performance and current financial position were certainly poor, and many answers gained credit for showing this, for example by making comparisons with the average sector information provided. Appropriate accounting ratios for looking at shareholder wealth maximisation would be dividend yield and total share holder return. Although shareholder wealth had decreased demonstrably in the period under consideration, it was not clear whether there had been a failure to meet the objective of maximising shareholder wealth. It was possible that the managers had done an excellent job in difficult conditions. Many answers discussed shareholder expectations as a way of choosing whether to pay the same dividend as in the previous year or to pay no dividend at all. Very few answers recognised that, given the current share price and provided cost of equity, shareholders appeared to be expecting the same dividend as in the previous year. Better answers recognised the decrease in retained earnings that would arise if the same dividend were paid, with potential liquidity and financing problems as a result. Some candidates brought dividend theory into their discussion, commenting on the dividend relevance and irrelevance perspectives, and gained some credit for this. Some candidates failed to see the statement that the company wanted to raise $50m in order to support existing business, as they suggested that the cash had to be invested in a new project to increase profitability and shareholder wealth. The fact that the company wanted to raise an amount of cash equal to twice the current profit before interest and tax was recognised by better answers, which looked at gearing, interest cover, and the increasing overdraft of the company in order to conclude that raising debt finance was unlikely to be possible. In Part (b), candidates were asked

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011

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to discuss equity, and sale and leaseback as ways to meet the funding requirement of a company. Discussions of equity finance were often quite sketchy, with little understanding being shown of the different ways in which $50m of equity could be raised. Some answers mistakenly said that the $50m of equity finance could be taken from the $88.5m of retained earnings, but this suggestion fails to recognise that retained earnings are not cash. Better answers referred to rights issue, public offer or placing, noting that the companys recent financial performance and current financial position suggested that it was unlikely that equity finance would be available. Answers that discussed sale and leaseback as a source of finance were often limited to explaining that this involved the sale of a non-current asset (usually a building) to a third party, coupled with leasing the asset back for a long period of time. Better answers were able to indicate some of the significant drawbacks that might arise from using this source of finance, such as the loss of non-current assets to offer as security for debt finance and commitment to a long-term lease with regular reviews of lease payments. Part (c) required an explanation of the nature of a scrip (share) dividend, and its advantages and disadvantages to a company. Many candidates gained few marks on this question because they did not understand the nature of a scrip dividend. Most study texts explain that it is a share dividend that is offered as an alternative to a cash dividend. This means that shareholders choose whether to accept the offered shares or take a cash dividend. Many answers were based on the incorrect belief that if a scrip dividend were offered, a cash dividend was not available. Many answers were also based on the incorrect belief that a scrip dividend was the same as a bonus issue. Another reason why many answers gained few marks on this question was that they discussed advantages and disadvantages of a scrip dividend to the shareholder, whereas the question asked for advantages and disadvantages to the company. QUESTION 4 Many candidates gained full marks in answering Part (a)(ii), reasonable marks on Parts (b)(i) and (ii), but in many cases gave weak answers to Part (a)(i).

Part (a)(i) asked for a brief explanation of the relationship between exchange rates and interest rates, and between exchange rates and inflation rates. If a candidate was not aware of interest rate parity (IRP) and purchasing power parity (PPP), the answer offered was often very general in nature, discussing exchange rates, interest rates and exchange rates from a macroeconomic perspective. Some answers lost valuable time by explaining what an exchange rate was, what an interest rate was and what an inflation rate was, but this was not required. Better answers showed familiarity with the IRP and PPP formulae in the formula sheet and discussed correctly how the forward rate could be in equilibrium with the spot rate (IRP), and how the expected future spot rate could be in equilibrium with the current spot rate (PPP). A number of candidates offered numerical examples to illustrate their discussion, but these used up valuable time and were not required by the question. Part (a)(ii) required candidates to evaluate a forward market hedge compared to a money market hedge. Many answers gained full marks here, providing the calculations required by the question that are given in the suggested answer. Where mistakes were made, they usually related to selecting the wrong forward rate, or to using incorrect interest rates in the money market hedge because of mistakenly hedging an expected future cost (the peso interest payment) with a dollar deposit. The peso cost needed hedging with a peso deposit in order to remove exchange rate risk. A small number of answers incorrectly treated the 5m peso interest payment as a capital amount and calculated an interest payment using one of the borrowing rates provided in the question. In Part (b)(i), candidates were asked to discuss the factors that influence the formation of working capital policy. The answers to this question offered a wide range in terms of quality and in terms of relating the answer to the question asked. Some candidates, in response to the word policy, spent a long time describing working capital financing policy, the nature of permanent and fluctuating current assets, the relative costs of short- and long-term financing and so on, while failing to discuss working capital investment policy. Other candidates

focused on the phrase working capital and explained the meaning of inventory, receivables and payables, without explaining how these elements of the working capital cycle influenced working capital policy. Better answers discussed factors such as the nature of the business, the constraint imposed by the terms of trade of competitors, the attitude to risk of the managers of the company, and so on. Part (b)(ii) required candidates to calculate the financial acceptability of an early settlement discount and a bulk purchase discount. A number of students lost valuable time here with economic order quantity calculations, which were not required by the question and which were completely unnecessary. The two offered discounts needed to be compared with the current costs of the company. Better answers compared the benefit of the early settlement discount with the cost of paying 60 days earlier. These two values could be calculated directly from the information provided. Alternatively, the early settlement discount equivalent annual interest rate could be calculated and shown to be less than the companys cost of short-term borrowing. Weaker answers tried to evaluate the benefit and cost on a monthly basis, or on an order basis, and became confused as a result of trying to change annual data provided to the alternative basis being used. That said, some candidates did successfully use an order basis of evaluation. Some answers made the mistake of basing the cost of the early settlement discount on the revised level of trade payables, rather than on the difference between the current and revised levels of trade receivables, ie the cost related to paying 60 days earlier than currently. One way to evaluate the financial benefit of the bulk purchase discount was to calculate the cost of the current ordering policy and compare it with the cost of the revised ordering policy, an approach used by the suggested answer and by many candidates attempting this question. An alternative approach that was equally effective was to calculate and net off the increase in holding cost, the saving in ordering cost and the saving in material cost. One error made by some candidates was to calculate the annual holding cost from annual demand, rather than from average inventory.

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EXAM GUIDANCE

EXAM SUPPORT
ACCA is committed to providing support to all its students. As part of this support, a range of materials in a variety of media to reach as many students as possible is available specifically to address the ACCA Qualification exams. Information from ACCAs examiners including examiner reports, examiner interviews and a wide variety of technical articles are available in a range of different media on the ACCA website. The two sets of examiner interviews are available on www.accaglobal.com and are extremely valuable resources. Each set of interviews can help you prepare for your exams in different ways and, when used in conjunction with the paper resources available, they can make a big difference to your studies. EXAMINERS APPROACH INTERVIEWS The examiners approach interviews are very useful when you are undertaking a particular paper for the first time, giving you a real insight into what examiners are looking for in terms of exam performance. They cover the main themes of each paper and give information on the style of the exams and how they are structured. They also advise on exam technique, with tips on how to succeed and potential pitfalls to avoid. The examiners approach interviews complement the examiners approach articles, which were written to give guidance on how to tackle each exam paper. These resources contain similar information but the difference in delivery method can be a useful advantage when studying and may give you a better chance of absorbing the examiners advice. The examiners approach interviews also contain useful links to other relevant resources for your exam.

EXAMINERS APPROACH AND EXAMINERS ANALYSIS INTERVIEWS


ACCA IS COMMITTED TO PROVIDING SUPPORT TO ALL ITS STUDENTS. EXAMINER REPORTS, EXAMINER INTERVIEWS, EXAM NOTES (WHICH PROVIDE GUIDANCE ON EXAMINABLE MATERIAL INCLUDING RELEVANT ACCOUNTING AND AUDITING DOCUMENTS AND A WIDE VARIETY OF TECHNICAL ARTICLES ARE AVAILABLE IN A RANGE OF DIFFERENT MEDIA ON THE ACCA WEBSITE AT WWW.ACCAGLOBAL.COM/ STUDENTS/ACCA/EXAMS
EXAMINERS ANALYSIS INTERVIEWS The examiners analysis interviews build on the examiners approach interviews. They highlight where students are performing well, where students are performing less well, and give advice on how students can improve performance in problem areas. Its never too soon to start listening to the examiners analysis interviews, but they would probably be most useful once you have covered the syllabus and are starting to think about the detail of a paper and how to apply what you have learned in the exam. They are designed to give guidance around which areas of the syllabus students have been struggling with in recent exam sittings and how students can tackle the difficulties others have been having. The analysis interviews are closely related to the examiners reports, which are published after each exam session. They bring together the examiners reports from the first three sessions of the ACCA Qualification, illustrating that some mistakes are being repeated consistently and highlighting critical areas of the syllabus to focus on. Remember, this does not mean one of those areas will necessarily be examinable in the next session. The ACCA website features examiner interviews recently at this years Learning Providers Conference. It is still very important to make use of the individual examiners reports available in this issue of the Essential Guide and on the ACCA website, as well as listening to the analysis interviews. After you have worked through a practice question, refer to the relevant examiners report and you will find an analysis of that question, what the examiner is looking for in a good answer, typical answers given by students, why they might not be relevant and so on. All of these resources and others such as the Syllabus and Study Guide, past papers, examinable documents and technical articles can be accessed at www2.accaglobal.com/students/acca/ exams/

EACH SET OF EXAMINER INTERVIEWS CAN HELP YOU PREPARE FOR YOUR EXAMS IN DIFFERENT WAYS AND, WHEN USED IN CONJUNCTION WITH THE PAPER RESOURCES AVAILABLE, THEY CAN MAKE A BIG DIFFERENCE TO YOUR STUDIES.

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34

TECHNICAL

STEPPING UP
The syllabus for Paper F5, Performance Management builds on the knowledge gained at Paper F2, Management Accounting. The objective of this article is to highlight those areas of Paper F2 that you should have mastered before starting to study Paper F5. This is particularly important for candidates who may have taken advantage of exemptions, and will be taking Paper F5 without having studied Paper F2. It is also important for candidates who took Paper F2 a while ago and might need to brush up on areas that they may feel a little rusty. HIGHER SKILLS REQUIRED Before discussing the syllabus, it is important to consider the difference between what is expected at Paper F5 compared to Paper F2. In Paper F2, the emphasis is on learning how to do things: how to calculate variances for example, or how to calculate the cost per unit of a product. There is very little discussion in Paper F2. If you know how to apply the techniques, you should pass. At Paper F5 there is much more emphasis on discussion. In a typical Paper F5 exam, around 50% of the marks are for discussion, meaning that only 50% are for calculations. In the words of the examiner, candidates need to be able to understand what their numbers mean and why they are being calculated in the first place. So candidates who have taken Paper F2 need to be aware of this difference while studying for Paper F5.

MOVING UP FROM PAPER F2 TO PAPER F5: UNDERPINNING KNOWLEDGE FOR PERFORMANCE MANAGEMENT

THE EXAMINER FOR PAPER F5 ASSUMES THAT ALL CANDIDATES HAVE A GOOD KNOWLEDGE OF THE PAPER F2 SYLLABUS. THIS ARTICLE REVIEWS THE SYLLABUS FOR PAPER F5, AND FOR EACH AREA, EXPLAINS WHAT KNOWLEDGE FROM PAPER F2 IS REQUIRED AS A STARTING POINT. THIS ARTICLE IS BASED ON THE SYLLABUSES FROM DECEMBER 2011.
KEY AREAS OF THE SYLLABUS The examiner for Paper F5 assumes that all candidates have a good knowledge of the Paper F2 syllabus. This section reviews the syllabus for Paper F5, and for each area, explains what knowledge from Paper F2 is required as a starting point. This article is based on the syllabuses from December 2011. Section A: Specialist cost and management accounting techniques This area introduces some modern management accounting techniques: activity-based costing, lifecycle costing, target costing and throughput accounting. It also introduces environmental management accounting, which is mainly a discussion area. It is important to have a good knowledge of Section B, Cost accounting techniques from the Paper F2 syllabus before studying Section A of the Paper F5 syllabus. Costing forms the foundation for activity-based costing. It is also relevant to many other parts of the Paper F5 syllabus such as pricing and transfer pricing. All of Section B from the Paper F2 syllabus should be mastered except for process costing (Section 3b) which does not really feed into any particular areas of the Paper F5 syllabus. Section B: Decision-making techniques This part of the syllabus looks at the information that management accountants provide to management to support decision making. It includes relevant costing, limiting factors, linear programming, pricing and decision making under risk. These areas are no longer in the syllabus for Paper F2 so are all new to Paper F5 candidates. One concept which underpins all of these is the idea of contribution, covered in Section B of the Paper F2 syllabus. Cost classification and behaviour, which is Section A3 of the Paper F2 syllabus, is also required knowledge, since decision making requires an understanding of how costs behave in relation to output. Section C: Budgeting Budgeting is introduced in Paper F2, and further developed in Paper F5. In Paper F5 there is more discussion of the different types of budgeting, and the impact that these have on the performance of the organisation. Section C of the syllabus of Paper F2 provides a useful introduction to budgeting, and many of the statistical techniques covered in Section C2 are repeated again in Paper F5. It should be noted that the section on capital budgeting in the Paper F2 syllabus (Section C5) has no relevance to the Paper F5 syllabus. This area is relevant to the financial management papers (Papers F9 and P4).

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011

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Section D: Standard costing and variance analysis The variances covered in Paper F2 are referred to as basic variances in Paper F5. They may not feel very basic to the Paper F2 student struggling to learn variances for the first time, but by the time you tackle a Paper F5 variance question, they should be second nature to you. The good news is that marks are often awarded for basic variances in the Paper F5 exam, so you get a good return on all that time you invested while studying for Paper F2. Paper F5 introduces some new variances the most important of which are materials mix and yield variances, sales mix and yield variances and planning variances. A major difference in Paper F5 is that there is far more emphasis on interpreting the variances. Often the examiner will provide you with pre-calculated variances and expect you to be able to assess the performance of the responsible managers based on these. This is an area where candidates are weak, according to the examiner. Variance analysis is covered in Section D of the syllabus for Paper F2. However, many of the learning outcomes in the Paper F2 syllabus are included in substance in the syllabus for Paper F5, so should be included in Paper F5 study materials too. Section E: Performance measurement Performance measurement has been identified by the Paper F5 examiner as a key area in this paper. Performance measurement is now introduced in Paper F2. At Paper F2 the emphasis is more likely to be on knowing the basics. At Paper F5 performance measurement questions require a lot more discussion. In the December 2010 Paper F5 exam, for example, there was a 20-mark question with only one requirement: Assess the performance of the business using both financial performance indicators calculated from the above information and the non-financial performance indicators provided.

As you can probably imagine, answering such a question requires you to demonstrate the ability to decide for yourself what particular calculations are relevant, do the calculations, and then interpret them, and discuss what they say about the performance of the organisation. This is a large step up from Paper F2. Knowing the basic ratios from Paper F2 is important when tackling such questions. However, it will also become clear that such ratios are tools that can be used if required at Paper F5, rather than being the main objective of a question. QUESTION TYPES The emphasis of Paper F2 questions is to demonstrate knowledge. This usually means calculating things. The Paper F5 exam consists of scenario-based questions: five in total, each worth 20 marks. This is a major step up from the Paper F2 exam. This means you must prepare yourself to be able to read and understand scenarios. You must also learn to communicate clearly by structuring your answers well, showing your workings logically and discussing issues sensibly. Finally, you may need to explain or justify any calculations you have made.

Candidates whose first language is not English often worry about such questions. The examiner has said that she is sympathetic to such students, and candidates will not be penalised for poor grammar. Provided that what they write is understandable, they will gain full credit. EXAM TIMING Because it is computer-based, you can take the Paper F2 exam when you feel you are ready. For Paper F5 you have only two days a year to take the exam, in June and December respectively. This means you have to plan your study well so that you are ready by those dates otherwise you may find yourself going into the exam totally unprepared. CONCLUSION You can see from the above that Paper F2 is linked closely with Paper F5. If you have missed any of the introductory knowledge from Paper F2, or been exempted from this paper, it is advisable to go back and revise particularly the sections on cost behaviour and costing before you attempt more complex issues in Paper F5. Nick Ryan is a tutor for ATC International

IF YOU HAVE MISSED ANY OF THE INTRODUCTORY KNOWLEDGE FROM PAPER F2, OR BEEN EXEMPTED FROM THIS PAPER, IT IS ADVISABLE TO GO BACK AND REVISE PARTICULARLY THE SECTIONS ON COST BEHAVIOUR AND COSTING BEFORE YOU ATTEMPT MORE COMPLEX ISSUES IN PAPER F5.

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F3 TO F7 TO P2
CLIMBING THE FINANCIAL ACCOUNTING AND REPORTING EXAM LADDER RELEVANT TO ACCA QUALIFICATION PAPERS F3, F7 AND P2
This article looks at what candidates need to do in order to progress successfully from Paper F3 to Paper F7 to Paper P2. As such, the article explains the difference in syllabus, exam and the approach that candidates should take to each of these exams. PROGRESSION OF SYLLABUS It should be noted that Paper F3 is changing from December 2011 onwards and the differences are explained with reference to the Paper F3 syllabus from December 2011. Double entry, accounting treatments and preparation of nancial statements The Paper F3 syllabus has been designed to provide a solid grounding in double entry. From this basis, candidates will be expected to appreciate and be able to prepare financial statements, or extracts of these, from a trial balance focusing on the standard year end adjustments including depreciation, closing inventory, irrecoverable debts, accruals, prepayments and areas related to the standards listed within examinable documents. An accounting treatment can also be tested and regularly is in isolation so not in the context of producing the final financial statements. There are only a limited number of accounting standards that are examinable within Paper F3 (see Table 1). In most cases, the accounting standard is not examinable in its entirety and is examinable at a relatively superficial level. Full details as to what is examinable can be found within the Study Guide and examinable documents listed on ACCAs website and on page 49. Candidates should always check the latest Study Guide and examinable documents relevant to their exam session to ensure that nothing has changed and, as such, that the learning that they are about to embark on is up to date. TABLE 1: ACCOUNTING STANDARDS EXAMINABLE WITHIN PAPER F3 IAS 1 IAS 2 IAS 7 IAS 10 IAS 16 IAS 18 IAS 27 IAS 28 IAS 37 IAS 38 IFRS 3 Presentation of Financial Statements Inventories Statement of Cash Flows Events after the Reporting Period Property, Plant and Equipment Revenue Consolidated and Separate Financial Statements Investments in Associates Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Business Combinations*

* Relevant for exams between December 2011 and January 2013 The Paper F7 syllabus builds on knowledge of double entry, accounts preparation and accounting standards by requiring candidates to apply this to almost all of the accounting standards in issue. The level of detail is much greater than Paper F3. Candidates are required to define, compute, discuss, explain and apply their knowledge of the accounting standards. This means that a good working knowledge and understanding of the accounting treatment is required at this level. The Paper P2 syllabus does not require candidates to prepare financial statements for individual business entities but does require a detailed understanding of almost all of the accounting standards listed as examinable within Paper F7 plus some selected exposure drafts identified as examinable within the examinable documents list. Candidates are expected to appraise the accounting treatments proposed within scenarios, apply the detail of accounting standards and advise on what the correct accounting treatment should be. Further, candidates are expected to be able to critique accounting standards and discuss proposed developments. Group accounting The Paper F3 syllabus introduces the concept of group accounting and covers the core techniques, issues and principles of accounting for subsidiaries, this includes basic calculation of goodwill with only simple consideration of shares and cash, fair value of non-depreciable assets, basic intercompany trading. Group accounting ends with syllabus addressing the issue of what an associate is, how they are accounted for within the group accounts but does not require candidates to apply the techniques to a numerical scenario. Paper F7 continues the theme of group accounting by looking at the same areas of subsidiaries but in more depth, for example being able to understand and apply knowledge of how to account for a variety of different forms of consideration. Candidates are also required to apply knowledge of associates. The Paper P2 syllabus focuses on the more complex areas of group accounting, including issues with regard to acquisition date valuation, changes in group, complex group structures (eg vertical groups), and foreign subsidiaries. Interpretation of nancial statements The Paper F3 syllabus concludes with the interpretation of single company financial statements where the learning outcomes are focused on understanding the need for ratios and interpretation. Candidates should have the ability to conduct basic interpretation, and should focus on the movement of financial statement items, eg revenue, cost of sales, and operating expenses.

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The Paper F7 syllabus expands the level of skill required in the area of interpretation as candidates are required to be able to interpret the main financial statements and/or a selection of ratios, usually in the context of a industry scenario or for a particular stakeholder in mind. While Paper P2 candidates are not required to interpret financial statements in a similar manner as Paper F7, there is an expectation that candidates will be able to appreciate and explain the implication of an accounting treatment on the financial statements and, therefore, consider how this will impact stakeholder understanding. Current issues The Paper P2 syllabus has a whole question dedicated to current issues including revisions of accounting standards. The examinable documents list any exposure drafts or discussion papers that are potentially examinable within a given exam period. In order to have an appreciation of the current issues it is important to read widely including following the accounting press, IAS plus or IFRS Foundation releases, Student Accountant and Accountant in Business articles. EXAMINATION STYLE AND FORMAT The Paper F3 exam is offered in both paper and computer-based exam (CBE) format. It is two hours long and from December 2011 will initially have 50 two-mark objective test questions which for the paper version will be multiple choice only but within the CBE format also includes number entry, multiple response, and multiple response matching question types. In the future, the exam format will move to comprise 35 two-mark objective test questions plus two longer 15-mark questions. The first of the long questions will be on group accounting and the second on accounts preparation (with some questions including a small element of interpretation of no more than five marks). Pilots for both these exam paper formats are available on the ACCA website.

Paper F7 and P2 exams are currently offered in paper format only and are three hours with an additional 15 minutes of reading and planning time (RAPT). Read page 44 for how to use the RAPT appropriately. All of the questions within the Paper F3 and F7 exams are compulsory. The Paper P2 exam comprises one Section A compulsory question and then candidates need to select two questions from three within Section B. Both the Paper F7 and P2 exams have questions dedicated to particular question types or areas of the syllabus (see Table 2). The Paper F7 and P2 examiners do not state a specific allocation of numerical calculation versus narrative balance within their papers. However, in practice, Paper F7 is weighted towards numerical calculation approximately 60 to 70% and Paper P2, 55 to 65% towards narrative explanations. As such in both papers the ability of candidates to be able to explain their treatments and opinions is vital. It is important to note that this does not mean that candidates need to have perfect grammar or spelling; it means that they need to make themselves understood. The Paper P2 exam has marks across the paper awarded for professionalism. In order to score well, candidates need to ensure that they have attempted to focus their written answer on what was asked within the requirement, attempt all parts of the question, and adopt a logical flow and clear presentation to their answer.

Approach to exam Many candidates feel that objective test questions are easier to pass than longer-form questions. This is not true as objective test questions can and, do test, exactly the same detail and skill, and in many respects precise points of detail are even more important. Irrespective of whether a candidate is preparing for Paper F3, F7 or P2, there are a number of stages that they need to go through in order to be successful. The approach to be taken is as follows: Acquiring the knowledge and obtain a solid understanding of the subject area. At all levels within the financial accounting and reporting stream a good understanding of double entry, the principles of accounting and the conceptual framework is vital to both a successful exam result and a career within accountancy. Knowledge can be acquired using a range of different options, and it is best to select the method that is appropriate to you.

MANY CANDIDATES FEEL THAT OBJECTIVE TEST QUESTIONS ARE EASIER TO PASS THAN LONGER-FORM QUESTIONS. THIS IS NOT TRUE AS OBJECTIVE TEST QUESTIONS CAN AND, DO TEST, EXACTLY THE SAME DETAIL AND SKILL, AND IN MANY RESPECTS PRECISE POINTS OF DETAIL ARE EVEN MORE IMPORTANT.

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TABLE 2: DEDICATED QUESTIONS IN PAPERS F7 AND P2 Question 1 2 3 4 5 Paper F7 Group accounting Accounts preparation Cash ow and/ or interpretation Accounting standards Accounting standards Marks 25 25 25 15 10 Paper P2 Group accounting with accounting standards, plus ethical issues Accounting standards Accounting standards in an industry context Current issues Marks 50 25 25 25

However you choose to acquire the relevant knowledge, you should also use the support resources available on the ACCA website (technical articles, Study Guides, examinable documents, examiner reports, examiner interviews being just some of the available resources). These resources are there to support you as an additional source of information and learning. Consolidate understanding by practising questions that focus on specific topic areas. In order to have a good understanding it is vital to attempt questions that are focused on the topic. For example, within Paper F3 the treatment of depreciation or revaluation is just one of many areas where this is required. These questions assist understanding of the basic approach to the topic but do not necessarily provide a grasp of exam technique. To improve your exam technique and approach, practise exam standard questions written by both Approved Learning Partners content (ALPc) and ACCA past exam questions. All of ACCAs exams require candidates to apply their knowledge at an appropriate level for the stage of exam. Candidates who attempt exams without practising exam standard questions are unlikely to pass as they are unlikely to have mastered the required exam technique or technical understanding. ACCAs website includes past exam questions and answers for all papers going back a number of years.

These past exams are based on the regulations, accounting standards and legislation that were in force and were therefore examinable at the time of the exam session. This can mean that for some subjects the content of the question or answer is out of date. ALPc are allowed to use these past exam questions in varying degrees depending on whether they are Platinum or Gold. They adapt the question or answer so that the content is relevant for the exam session(s) that the material (study text or revision bank) relates. ALPc also tend to write their own exam standard questions which may look at areas that have not yet been examined. Very few examiners address the same topic in exactly the same way as they did in previous exam sessions.

When practising exam standard questions it is vital to spend time reviewing your answer against the model answer to learn what was done well and where mistakes were made so as not to repeat these errors. It should be noted that the model answer for written questions normally contains more than a candidate needs to write in order to achiever a good pass. When attempting a past exam question it is worth also taking time to review the examiner report for that question to see what the common mistakes were, what was done well and how candidates can improve performance. READ THE REQUIREMENTS Finally, when actually attempting the real exam whether by paper or CBE, it is important to follow the instructions of the exam and answer all the questions required. So if all questions are compulsory answer all of them, if there are some questions that are optional (eg two from three questions) answer the required number of these option questions (so two questions) and not more or less. This way you are ensuring you have the best possible chance of passing by attempting the 100 marks available for the exam in the time available for those marks. If you do not answer all of the exam questions that you are required to answer, you are reducing your chance of passing as you will not be marked out of 100 marks but only the maximum marks attributed to the questions or question parts that you have attempted. Sharon Machado is ACCA qualifications content manager and has responsibility for the financial reporting exams

WHEN ACTUALLY ATTEMPTING THE REAL EXAM WHETHER BY PAPER OR CBE, IT IS IMPORTANT TO FOLLOW THE INSTRUCTIONS OF THE EXAM AND ANSWER ALL THE QUESTIONS REQUIRED.

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011 STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011 STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 04/2011 STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 04/2011

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F8 TO P7
This article explores the similarities and differences between Paper F8 and P7 and identifies how best to prepare for the step up to the Professional level. It comes as no great surprise that the audit papers are among the hardest ACCA exams to pass. Although there are many different reasons for this perhaps the most fundamental is that there is a lack of scope for repetition of pre-learnt knowledge in audit. Candidates like to learn tables, formulae, definitions, laws, standards and, put simply, audit doesnt work like that. Of course, there are things that need to be learnt but audit is more concerned with how that knowledge is applied in practice. Audit is, after all, a very practical aspect of the profession. It is concerned with gathering and presenting evidence, analysing that evidence and using it to inform a single but very important decision: are the financial statements free from material misstatement? You cant simply perform the same procedures on every audit as each client is different and even recurring clients change continuously. Audit is therefore about understanding the specific circumstances of those clients, selecting procedures to reflect this and interpreting the specific results obtained. It rarely involves standard formulae or repetition of laws or standards. So why would the exam? SIMILARITIES BETWEEN PAPER F8 AND PAPER P7 Paper F8 underpins Paper P7. The key topics in Paper F8 (the audit framework, planning and risk assessment, control assessment, audit evidence, review and reporting) are all fundamental elements of performing an audit and are therefore assumed knowledge for Paper P7 as well. In fact the Paper P7 examiner identified planning, risk assessment, obtaining evidence, and reporting as topics that are likely to feature in every Paper P7 exam in her examiners approach article (January 2007).

TAKING THE STEP UP FROM PAPER F8 TO P7 RELEVANT TO ACCA QUALIFICATION PAPERS F8 AND P7

There are further similarities: the opening questions are usually based on lengthy scenarios that commonly focus on elements of planning, risk assessment and audit procedures; both contain three questions based on shorter scenarios that focus on a range of topics that commonly include ethics, specific aspects of auditing and reporting. The latter topic typically forms the basis of Question 5. Candidates need to make sure they are comfortable will these similarities to ensure the transition from Paper F8 to Paper P7 is as smooth as possible. However, Paper P7 is different. Put simply it is harder: it has more advanced syllabus requirements; it has a larger syllabus and is based on more complex financial reporting standards, and the question requirements are largely applied in nature, meaning that few, if any, marks are awarded for rote-learning. SYLLABUS DIFFERENCES BETWEEN PAPER F8 AND PAPER P7 The most obvious difference between Paper F8 and Paper P7 is the additional topics in the latters syllabus. These include: Professional issues, such as money laundering, professional liability and practice management including advertising, publicity, obtaining professional work and fees, quality control (ISA 220 and ISQC 1), and tendering. Auditing groups (ISA 600). Business risk. Non-audit assignments, including due diligence, prospective financial information reviews, and forensic audit (ISAE 3400 and 3042, ISR 4400, ISRE 2400 and 2410). Current issues and developments. The accounting concepts developed in Paper P2 (including related parties ISA 550). In addition, the UK and Irish adapted papers include auditing aspects of insolvency in the syllabus. Some knowledge accumulation will, therefore, be required. For candidates who have reached Paper P7; many of the principles will have been covered in some way in previous studies. It should also be remembered that the professional component requires commercial judgment and common sense.

EXAM FORMAT, STYLE AND REQUIREMENTS The fundamental difference between Paper F8 and Paper P7 is the way in which they are examined. Candidates should be aware that there are three intellectual levels relevant to the exams: level 1, knowledge and comprehension; level 2, application and analysis; and level 3, synthesis and evaluation. Paper F8 focuses purely on levels 1 and 2, while Paper P7 is primarily focused on levels 2 and 3. This is emphasised in the examiners approach articles for each paper. In the Paper F8 version (March 2010), the examiner states that the aim of Paper F8 is that it can be passed by a candidate who understands the underlying theory of auditing and can apply that theory to relatively basic audit situations. The emphasis on application is also apparent in the Paper P7 examiners approach article (January 2007) but the examiner also stresses that candidates need to be able to display: an independent opinion backed by reasoned argument,an appreciation of commercial factors which influence practice management and an appreciation of the fast-moving developments in audit and assurance practices. It is of vital importance that candidates understand the practical implications of these conceptual differences. Few people would take the same approach to a multiple-choice style exam as they would to a discursive one; they require different techniques and thought processes. For the reasons explained above the same should be true of Papers F8 and P7. The easiest way to appreciate these differences is to compare the exam papers. The June 2011 papers can be downloaded from the ACCA website and even a quick scan will reveal some obvious differences. Please note that the analysis below is based on the international versions, however the principles discussed are equally valid for all papers.

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First, in the Paper F8 exam there are 24 marks available for basic knowledge that requires no application. The same can be said for only six or seven marks in the Paper P7 exam. In both cases it should be clear that students cannot pass either exam simply with pre-learnt knowledge. Second, the language of the requirements is different. Paper F8 favours explain, describe, state, and list, with recommend used sparingly. Paper P7 also uses explain a lot but there is a significant emphasis on recommend requirements with a number of discuss and critically evaluate type questions as well. Finally, the wording of the scenarios and the complexity of the questions are more advanced in the Paper P7. This is perhaps best illustrated with some examples. The first uses the topic of audit risk, which is common to both Paper F8 and Paper P7. In Question 3, Donald Co, of the June 2011 Paper F8 exam, candidates are presented with a scenario based on an airline. The scenario states that Donald Co offer a 90-day credit period to travel agents but due to the economic environment a number of receivables are struggling to pay. There is a clear risk of non-collection of receivables and therefore an increased risk that receivables may be overstated. In Question 1, Bill Co, of the June 2011 Paper P7 exam, candidates are asked to perform a financial statements risk assessment (a component of audit risk) of two specific issues; one being the re-assessment of the profitability of a construction contract, and the second being the discontinuance of a specialist division of Bill Co. Most people would agree that receivables accounting is a relatively more straightforward topic that requires little more than knowledge gained during Paper F3. The topics encountered in Paper P7 can include much more complex financial accounting matters, such as: group accounting, financial instruments, pensions accounting, leases, share options, and deferred tax.

The differences continue beyond the topics. In the Paper F8 question Donald candidates are asked to describe five audit risks... in planning the audit of Donald Co. In the Paper P7 equivalent candidates are requested to prepare briefing notes for my (the audit partners) use, in which you explain the matters that should be considered in relation to the treatment of these two issues in the financial statements, and also explain the financial statements risks relating to them. The Paper P7 version is much more open-ended. The matters in this question include anything that affects the planning and conduct of the audit and the way in which the financial statements are prepared. Candidates are also required to present their responses in a professional manner and marks are awarded accordingly for this. Another good example is the way in which substantive audit procedures are tested. In Paper F8 the items to be audited are identified in the syllabus and they are all basic elements of the financial statements studied in Paper F3. In Question 1, Tinkerbell Toys Co, of the June 2011 Paper F8 exam, candidates are asked to describe substantive procedures the auditor should perform to confirm Tinkerbells year-end receivables balance. Although some application is required, a well-prepared candidate would be able to suggest sufficient pre-learned audit procedures to pass this question.

This is not possible in Paper P7; candidates could be asked what substantive procedures they would perform on any element of the financial statements. In addition, they may not just be asked how they would audit an asset or liability, they may be asked how they audit a specific element of the calculation or a specific assertion. Examples include the audit procedures to be performed on: The classification of non-controlling investments (June 2010). The training costs capitalised in respect of new machinery (Dec 2009). The recoverability of a deferred tax asset (Dec 2008). It is not possible to pre-learn audit procedures for these; they are too narrowly defined and it is impossible to second guess which elements of the accounts are going to be scrutinised. The only way to approach questions of this nature is to thoroughly understand the basic principles of planning and performing audit procedures and then to learn how to apply them to never seen before requirements. Candidates need to learn the process of answering these questions and not focus on trying to learn the answers.

PAPER P7 IS ABOUT SELECTING THE RIGHT TOOLS AND APPLYING THEM TO THE OFTEN NARROWLY DEFINED AND SITUATION SPECIFIC QUESTION BEING ASKED. IF CANDIDATES CAN LEARN HOW TO DO THIS THEN THEY SHOULD BE ABLE TO DO WELL IN PAPER P7.

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HOW TO APPROACH THE STEP UP TO PAPER P7 In some ways Paper F8 is perhaps more challenging than Paper P7: it is unfamiliar to most; there is a lot of new material to learn; and it is one of the first application style papers that candidates come across. However, many candidates, having mastered Paper F8 wrongly think that they can apply the same principles to studying Paper P7. Usually this means learning diagrams of how control systems operate, lists of controls tests, lists of tests for sales, receivables, purchases, payroll, etc, lists of advantages and disadvantages of internal auditing and computer-assisted auditing. Practice of applying this knowledge to past exam questions is often left until the latter stages of study (this is not an approach I would advocate). Paper P7 is about process; you are placed in unique, never seen before, real world situations with a set of tools at your disposal and you are asked what do you need to do now?. Would someone take exactly the same approach to building a factory in two different countries? The answer must surely be no. The basic principles of construction will be the same but you need to consider what resources (land, labour, materials) you have available, what the differences in pricing will be in the two locations, local building laws, interest rates and exchange rates.

This is Paper P7: the tools and the processes are the same but the environments and circumstances are always different. You cant bludgeon a pre-learnt response into a question where it simply does not fit, in exactly the same way as you cannot force one countrys building principles on the rest of the world. There is only one way to learn how to apply these tools: practice! The sharp intakes of breath are unmistakable but it is the painful truth of Paper P7; it cannot be learned from reading alone. Junior auditors spend years learning how to audit by doing it; they start with the audit of non-current tangible assets and cash because they are the simplest things to audit. Only with years of practise can they move on to the audit of subsidiary accounts, pensions and complex financial instruments. If you seriously wish to pass Paper P7 do as many past paper exam questions as possible. In fact, do them all.

CONCLUSIONS The problem with professional studies is that all too often people and not just candidates are too concerned with learning the right or wrong answer. In all honesty I doubt that anyone ever writes a response to a Paper P7 question that matches the examiners answer, not like it would for a tax or financial reporting question anyway. Paper P7 is about selecting the right tools and applying them to the, often narrowly defined and situation specific, question being asked. If candidates can learn how to do this then they should be able to do well in Paper P7. Unfortunately this is not a skill that is easily or quickly gained. This process begins on day one of study and, for those who continue their auditing careers, it never ends. Simon Finley is a content manager for Kaplan Publishing and an audit tutor

THIS IS PAPER P7: THE TOOLS AND THE PROCESSES ARE THE SAME BUT THE ENVIRONMENTS AND CIRCUMSTANCES ARE ALWAYS DIFFERENT. YOU CANT BLUDGEON A PRE-LEARNT RESPONSE INTO A QUESTION WHERE IT SIMPLY DOES NOT FIT, IN EXACTLY THE SAME WAY AS YOU CANNOT FORCE ONE COUNTRYS BUILDING PRINCIPLES ON THE REST OF THE WORLD.

44

EXAM GUIDANCE

READING AND PLANNING TIME


RAPT IS AN ADDITIONAL 15 MINUTES WHICH IS TO BE SPENT AT THE BEGINNING OF EACH THREE-HOUR EXAM ALLOWS YOU TO FAMILIARISE YOURSELF WITH, AND TO NAVIGATE AROUND, THE EXAM PAPER.
Reading and planning time (RAPT) is a 15-minute time allowance given to all students taking three-hour exam papers. WHAT CAN YOU DO IN RAPT? This additional time, to be spent at the beginning of each three-hour exam allows you to familiarise yourself with, and to navigate around, the exam paper. During RAPT you can read and understand the questions on the paper and begin to plan your answers before you start writing in your answer books. You can also use calculators to make some preliminary numerical calculations. RAPT begins when instruction is received from your centre supervisor. You must not open your question paper until advised to do so, and during RAPT you may only write or make notes on your question paper. You must not write anything in your answer booklets until advised to do so by the supervisor. HOW CAN YOU MAKE THE BEST USE OF RAPT? RAPT gives you the opportunity to make sure you are clear about what the examiner is assessing. It also allows you valuable extra time for thinking and planning. To use this additional 15 minutes most effectively: carefully read and understand all question requirements, making an informed choice about which optional questions to attempt where applicable read through and highlight relevant information and financial data, noting why it is included take note of the marks awarded for each question and the allocation of marks between different requirements within a question start to plan your answers, particularly for discursive questions think about the order in which to attempt questions make preliminary calculations. Reading the question requirements You should use some of the RAPT to carefully read through the main requirements in each question. This is particularly important in exams where you need to decide which questions to answer. Even where there is no choice of question, it is still important to read the question carefully so that you understand what the examiner is asking you to do. All too often, examiners reports contain references to students who have answered questions they wanted to answer rather than the ones the examiner was asking. The best way to avoid this is to use RAPT to ensure that you fully understand the verbs used by examiners. For example, if the examiner has asked you to compare and contrast two theories or techniques, they are not looking for a full description or explanation of each, but an explanation of the similarities or differences. Read and highlight relevant information and nancial data, noting why it is included RAPT allows you to have a first read through of all the information contained in each question. Having already carefully read the question requirements, you can now highlight any relevant information or data which you feel are of most relevance with reference to each question requirement. You can use calculators during RAPT, which allows you to make quick calculations of key financial or quantitative data contained within the exam paper. Reading through the paper will allow you to familiarise yourself with and find your way around the exam paper. As a result, when you come to writing in your answer book, you will already have a good idea what is relevant information, where it is located, and possibly how to use it. In case study or scenario questions, RAPT is a particularly good opportunity to familiarise yourself with the facts and data contained within the case study and to decide what information may be the most relevant. RAPT also allows you to gain an initial understanding of the main facts of a case study. This means that when you come to read it again during the exam, things will become much clearer, and more points will become apparent, as happens when watching a film or reading a book for the second time. As would be expected, most ACCA exam questions contain financial data and information that must be considered and analysed. During RAPT it is useful to think about why such information is included, with reference to the question requirements, and to consider which of this information or data is of particular relevance and how it might be needed to answer the questions.

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Take note of the mark allocation between different requirements within questions You should also use RAPT to help you plan your approach to answering the questions. This is particularly important when you are deciding which questions to attempt at the Professional level of the ACCA Qualification. When you are first reading the question requirements, you should undertake a personal exam SWOT analysis matching your own strengths and weaknesses to the opportunities available and thereby identify any potential threats to your performance within the exam paper. Where you have a choice, you should identify those question requirements (and their specific parts) which offer you the best opportunity to earn marks. It is particularly important that your choice of questions enables you to give your best performance in the exam. When making your question choices you need to be aware of the mark allocation. A question could look very attractive if you see one or two requirements in areas you have studied and revised. However, if these requirements only attract a few marks and the main requirement, which attracts the most marks, is one which you feel unprepared for it may be advisable to attempt another question. By doing this you will make a more informed choice of question, where choice exists. Even where there is no choice, it is still important to assess which parts of which question requirements attract most marks and where you need to focus your attention. Start to plan answers particularly for discursive questions If time allows, after reading the paper, it is worth planning answers to certain

questions, particularly to longer-form discursive questions. Start by trying to identify the relevant main themes within a question; normally relevant points can be classified under a few broad headings. There is usually insufficient time to identify specific points during RAPT, but it is very useful to identify the main headings under which to put these points. Identifying these headings or themes also acts as a way for you to structure your answers logically, for which some professional marks are available at the Professional level of the ACCA Qualification. It will also help to remind you about the types of points you should be making under each heading so that you can maximise the marks you can earn. For example, a Paper P1 exam question could contain the following requirement: Explain four roles of a non-executive director and how cross-directorships could undermine these roles. During RAPT, you could identify the four roles that you would need to explain, and quickly write these down as an aide-memoire. For example, you could identify the following roles: strategy scrutiny risk people. When you answer this question in the exam you can develop these roles and expand on them before you go on to identify how cross-directorships could undermine these roles. Think about the order in which you should attempt the questions You can answer questions in the order they are presented in the exam paper,

but there may be good reasons why you shouldnt do this. For example: There is a question you believe you can answer well, that you have revised for thoroughly and therefore, by answering it first, you get yourself off to a good, confident start. There is a question which, if you dont answer it first, could worry and distract you during the exam, and may be more difficult to answer later on when you become more tired. You want to tackle the question with the highest mark allocation while you are at your freshest and most disciplined, both to ensure that you perform well and that you leave enough time to attempt all other questions. You prefer to start with a shorter question and leave a longer case study question until you have settled into the exam. There may be other reasons why you might want to tackle a paper in a particular order, so RAPT is the ideal time to make that decision and to decide on your exam strategy. It is important that you always answer every part of a question before moving on to the next question clearly labelling all parts of your answer. Ideally, you should answer all parts of a question in order, and there are two main reasons for this. First, there may well be a logical and progressive structure to the requirements of a question, and so answering these in the wrong order could put you at a disadvantage. Second, if your mind is engaged with the information contained within a particular question, and you leave it part way through to move on to another, you will need time to get to grips with that information again when you return to that question later. This is not a good idea. SUMMARY Making the best use of RAPT, rather than rushing ahead to write down as much as you can in the time allowed, will help you develop a better and more effective exam strategy. It will also help you develop a more relaxed, positive, and controlled approach.

46

PRACTICAL EXPERIENCE

PER: PATHWAY TO MEMBERSHIP


ACCA TRAINEES CAN WORK IN ANY SECTOR AND SIZE OF ORGANISATION. WHATS IMPORTANT IS TO LOOK FOR THE OPPORTUNITIES TO HELP YOU MEET YOUR PER AND TO OBTAIN A TOTAL OF 36-MONTHS EXPERIENCE IN A RELEVANT ROLE OR ROLES.
Becoming an ACCA-qualified accountant does not just involve passing your exams and the Professional Ethics module, you also need to complete the practical experience requirement (PER). It is not just accountants who must gain relevant practical experience, many other professions, such as doctors and lawyers, also have to gain experience to show that they are fit to practice. You can gain your practical experience before, during or after you complete the exams. WHAT IS PER? PER provides a structure for you to follow by setting you a range of performance objectives. The performance objectives ensure you gain the experience to demonstrate that you have the abilities required to become an ACCA member. Completing the performance objectives will allow you to: apply in practice the knowledge and techniques gained through your studies towards the ACCA exams observe and be involved in real-life work situations that help you to develop the skills, attitudes and behaviours you will need as a qualified accountant develop your judgment, encouraging you to reflect on the quality of your work and how you could improve your work performance in the future. The performance objectives are closely linked to the exam syllabus and many students try to coordinate their studies and practical experience achievement to gain the most from both. WHAT DO I HAVE TO DO? To begin achieving your PER, you need to be working in an accounting or finance-related role. You will need to: find a workplace mentor complete 36 months employment in an accounting or finance-related role(s) achieve 13 performance objectives record your progress using the trainee development matrix (TDM) make a PER return each year. If you think the opportunities to achieve your PER in your current role are limited, consider other options available to you before you choose to find alternative employment. Aim to get your employers support to help you gain your PER; consider work shadowing, secondment or an internship; and work closely with your workplace mentor. ARE YOU A FULL-TIME STUDENT? If you are a full-time student or you are not working in a relevant role, start thinking about what steps you will need to take in the future to gain the practical experience you need in order to become a member. For a more information on the practical experience requirement, read our PER Guide for Trainees available at www2.accaglobal.com/students/acca/ per/support. 36-MONTHS PRACTICAL EXPERIENCE It doesnt matter what sector or organisation you work in or choose to work in. ACCA trainees can work in any sector and size of organisation. Whats important is to look for the opportunities to help you meet your PER and to obtain a total of 36-months experience in a relevant role or roles. Ideally, this means that you have a job where the majority of your time is spent on activities and tasks that are accounting, finance, audit and assurance related, or in other related technical areas such as taxation, insolvency and forensics. Even if your job includes only a small amount of accountancy and finance work, it can count as long as you pro rata the time you spend on these activities. For example, if only a quarter of your working time (equivalent to three months) during the year is spent in an accounting capacity, you may only claim three months as relevant time in your PER return. This may mean that it will take you more than three years to achieve the relevant experience because some of your experience is not relevant and will not count. Your experience doesnt have to be gained in a single role or one continuous period and relevant experience gained before you joined ACCA may be counted, providing it can be verified by a workplace mentor. PERFORMANCE OBJECTIVES Performance objectives are ACCAs indicators of effective performance and set the minimum standard of work that you are expected to achieve and demonstrate in the workplace. They describe the kind of work activities you may carry out and the values and attitudes you are expected to possess and demonstrate as a trainee accountant. If you have ever taken part in a performance management or appraisal process at work, you may find ACCAs performance objectives are similar in structure to those work-related objectives and expectations agreed by you and your manager. Performance objectives are divided into key areas of knowledge which are closely linked to the exam syllabus reinforcing that any knowledge developed through the exams will have a clear application in the workplace. You will demonstrate your achievement of the performance objectives to your workplace mentor by answering three unique challenge questions for each performance objective.

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CHALLENGE QUESTIONS For each performance objective you complete you will need to answer three challenge questions which are then submitted to your workplace mentor for review and sign off. The challenge questions help you summarise your work activity so your workplace mentor can evaluate whether you have achieved the standard required for that performance objective. This is the only way you can achieve a performance objective. For more information on challenge questions, read ACCAs guide on answering challenge questions available at www2.accaglobal.com/ students/acca/per/support. You are required to achieve 13 performance objectives in total: all nine Essentials performance objectives one to nine, and any four Options performance objectives 10 to 20.

Professionalism, ethics and governance 1 Demonstrate the application of professional ethics, values and judgment 2 Contribute to the effective governance of an organisation 3 Raise awareness of non-financial risk Personal effectiveness 4 Manage self 5 Communicate effectively 6 Use information and communications technology Business management 7 Manage on-going activities in your area of responsibility 8 Improve departmental performance 9 Manage an assignment Financial accounting and reporting 10 Prepare financial statements for external purposes 11 Interpret financial transactions and financial statements

Performance measurement and management accounting 12 Prepare financial information for management 13 Contribute to budget planning and production 14 Monitor and control budgets Finance and nancial management 15 Evaluate potential business/ investment opportunities and the required finance options 16 Manage cash using active cash management and treasury systems Audit and assurance 17 Prepare for and collect evidence for audit 18 Evaluate and report on audit Taxation 19 Evaluate and compute taxes payable 20 Assist with tax planning

PER MEMBERSHIP

48

ACCACAREERS.COM

MAKING THE MOST OF ACCAS CAREERS PORTAL


ACCA Careers allows you to browse and apply for jobs all on one platform and has a host of other features to boost your prospects. ACCA Careers is open to all students studying for an ACCA qualification. On ACCA Careers you can create and upload your CV, access global career opportunities and find comprehensive guidance, insight and tips around careers in accountancy and finance. Use your student registration number to join the site and apply for jobs.
KEY FEATURES Expert careers content (news, videos, articles, advice and information). Includes advice on how to research and apply for schemes with major companies that support employees through to ACCA membership. Prepares you for the selection process. Find out about the recruitment market in a destination of your choice. Search vacancies by job title, skills required and region. Sign up to receive tailored email alerts when relevant jobs are posted. Upload and store your CV. Apply for jobs with one click. CAREERS CLINIC This includes features to help you make your next move, wherever you are in your career and whatever your level of experience for example: interview preparation checklist writing a new-generation CV career advice column

ACCA CAREERS ALLOWS YOU TO BROWSE AND APPLY ONLINE, AND HAS A HOST OF OTHER FEATURES TO BOOST YOUR PROSPECTS
DO WANT T BOOS O T YOU R JOB P ROSPE CTS? REGIS T NOW ER A ACCA T WWW. CARE TO GE E T A HE RS.COM AD ST ART

WORKING INTERNATIONALLY We talk candidates through the benefits that working in a different environment brings to you and your CV, as well as country profiles and details of business culture and the job market for finance professionals in your chosen destination.

THINK TANK Articles and videos designed to help you develop your non-technical skills, as well as a forum for professionals across the globe to discuss the latest hot topics explore the art of negotiation, time management or the role managers can play in developing talent.

EXAM NOTES
EXAMINABLE DOCUMENTS
Relevant to the December 2011 exam session Exam notes provide guidance on ACCA examinable material, including any relevant accounting and auditing documents. Use them in conjunction with your studies and revision

50 PAPER F4 51 PAPER F6 (UK)

52 PAPER F7 56 PAPER F8

To access Syllabus, Study Guides, past papers, examiner feedback, and examiner resources, visit the links below:

PAPER F4 www2.accaglobal.com/students/ acca/exams/f4 PAPER F5 www2.accaglobal.com/students/ acca/exams/f5 PAPER F6 www2.accaglobal.com/students/ acca/exams/f6 PAPER F7 www2.accaglobal.com/students/ acca/exams/f7 PAPER F8 www2.accaglobal.com/students/ acca/exams/f8 PAPER F9 www2.accaglobal.com/students/ acca/exams/f9

50

EXAM NOTES

EXAM NOTES WHAT YOU NEED TO KNOW


PAPER F4, CORPORATE AND BUSINESS LAW Knowledge of new examinable regulations and legislation issued by 30 September will be examinable in examination sessions being held in the following calendar year. Documents may be examinable even if the effective date is in the future. This means that all regulations and legislation issued by 30 September 2010 will be examinable in the December 2011 exams. The Study Guide offers more detailed guidance on the depth and level at which the examinable documents will be examined. The Study Guide should be read in conjunction with the examinable documents list. Note on case law Candidates should support their answers with analysis referring to cases or examples. There is no need to detail the facts of the case. Remember, it is the point of law that the case establishes that is important, although knowing the facts of cases can be helpful as sometimes questions include scenarios based on well-known cases. PAPER F4 (ENG) AND PAPER F4 (SCT) English Legal System Knowledge of the Human Rights Act 1998 and the Constitutional Reform Act 2005 is required. The Law of Obligations Knowledge of the Unfair Contract Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations Act 1999, and the Contracts (Rights of Third Parties) Act 1999 is required. Employment Law Knowledge of the Employment Rights Act 1996 and the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 is required. Partnership Law Knowledge will be required of the Partnership Act 1890, the Limited Partnerships Act 1907, the Limited Liability Partnerships Act 2000, and the Civil Liability Act 1978. Company Law Knowledge of the Companies Act 2006 is required. Knowledge is also required of the Business Names Act 1985, the Company Directors Disqualification Act 1986, the Insolvency Act 1986, and the Financial Services and Markets Act 2000. Governance and Ethical Issues Knowledge of the UK Corporate Governance Code is required. Knowledge of the Criminal Justice Act 1993 in relation to insider dealing, and the Proceeds of Crime Act 2002, and the Money Laundering Regulations 2007 in relation to money laundering, is required. PAPER F4 (MYS) The examinable legislation for Paper F4 (MYS) consists of the following: Companies Act 1965 (including the Companies (Amendment) Act 2007) Capital Markets and Services Act 2007 Securities Commission Act 1993 Contracts Act 1950 Partnership Act 1961 Registration of Businesses Act 1956 Employment Act 1955 Industrial Relations Act 1967 Malaysian Code on Corporate Governance. Candidates are advised to take note of the Companies (Amendment) Act 2007 came into effect on 15 August 2007. It implements a number of the recommendations made by the High Level Finance Committee Report on Corporate Governance, 1999. Although no questions relating to the amendments have been set until the December 2008 paper, candidates can expect questions encompassing the amendments from June 2009 onwards. In particular, candidates should have knowledge of the amendments affecting directors duties. Candidates are also advised to read the technical article on the amendments. Further, it must be noted that the Securities Industry Act 1983 has been repealed and replaced by the Capital Markets and Services Act 2007. Candidates are also reminded to refer to the latest updated Study Guide to be able to focus on examinable areas. PAPER F4 (RUS) Candidates will be expected to have a broad knowledge of the Russian legal system and the main elements of the Civil Code relating to civil rights, obligations and representation. The corporate law sections focus on the main types of partnership and company, but do not require a detailed understanding of other types of business. There are further sections of the syllabus on employment law and corporate governance. The company law sections include formation and constitution, management and administration, capital and financing and corporate (but not personal) insolvency. Questions may relate to partnerships, limited liability companies and joint-stock companies (companies limited by shares). Employment law focuses on the relationship between the employer and the employee, including the legal nature of the relationship, the respective rights and obligations of the parties to a labour contract and how the relationship may be brought to an end. Corporate governance is concerned with how businesses are directed and controlled. Candidates will be expected to understand the nature and scope of corporate governance, why it is important and the consequences of having deficient standards of corporate governance, as well as knowing how the law promotes appropriate standards. Candidates should note that the Paper F4 syllabus excludes Unitary enterprises and cooperatives. The section on employment law focuses on legal principles governing employment relationships. Candidates do not have to study the law relating to movable and immovable property, though it should be noted that such assets may be the subjects of pledge or mortgage. Means of securing obligations are examinable. The final section of the syllabus requires candidates to be familiar with laws specific to insider dealing and money laundering. The examinable legislation for Paper F4 (RUS) consists of the following: The Civil Code of the Russian Federation The Federal Law on Joint Stock Companies (Companies Limited by Shares) The Federal Law on Limited Liability Companies The Federal Law on Insolvency (Bankruptcy) The Labour Code of the Russian Federation. The Federal Law on Securities Market (in relation to transactions that destabilise markets only).

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TAX
PAPER F4 (SGP) Candidates should note that the Partnership Act, Limited Liability Partnerships Act 2005, the Limited Partnerships Act 2008, and the Companies (Amendment) Act 2005 are examinable. In relation to the Partnership Act, candidates should understand the nature of a partnership, the relation of partners to each other and liability of partners. The Limited Liability Partnerships Act 2005 (LLP Act) commenced operation on 11 April 2005. The limited liability partnership is a new form of business vehicle available in Singapore modeled on similar business structures found in the UK and the US. It combines features of both a partnership and a company. Only the general framework of the limited liability partnership will be examined. The corresponding changes in the Companies Act should also be noted. Candidates should refer to the website of the Accounting and Corporate Regulatory Authority, Singapore (ACRA) for the latest legislative development. In particular, candidates can refer to the May 2005, Issue No. 8 of the ACRA Legal Digest for a brief overview of the LLP Act. In particular, the nature of limited liability partnership in Part II and First Schedule of Limited Liability Partnership Act should be carefully considered. In relation to the Limited Partnerships Act 2008, the candidates should understand the nature of a limited partnership, which rules of general partnership apply to limited partnerships, the nature of limited partners and general partners. In relation to the Companies Act, candidates should note that all relevant rules pertaining to topics set out in the study guide are examinable. In particular, recent amendments to the Companies Act, as set out in Companies (Amendment) Act 2005, Companies (Amendment) Act 2004 and Companies (Amendment) Act 2003, have to be considered. PAPER F6 (UK), TAXATION The following notes refer to Paper F6 (UK) only. Guidance for other variant papers where available is published on the ACCA website. Legislation which received Royal Assent on or before 30 September annually will be assessed in the exam sessions being held in the following calendar year. Therefore, exams in June 2011 and December 2011 will be assessed on legislation which received Royal Assent on or before 30 September 2010. FINANCE ACT The latest Finance Acts which will be examined in Paper F6 (UK) at the December 2011 session are the Finance (No 1) Act 2010 and the Finance (No 2) Act 2010. With regard to prospective legislation when, for example, provisions included in the Finance Act will only take effect at some date in the future, such legislation will not normally be examined until such time as it actually takes effect. The same rule applies to the effective date of the provisions of an Act introduced by statutory instrument. SUPPLEMENTARY INSTRUCTIONS AND TAX RATES AND ALLOWANCES The following supplementary instructions and tax rates and allowances will be reproduced in the exam paper in the December 2011 exam and are examinable in Paper F6 (UK). In addition, other specific information necessary for candidates to answer individual questions will be given as part of the question. Calculations and workings need only be made to the nearest . All apportionments should be made to the nearest month. All workings should be shown. Income tax Normal rates % 20 40 50 Dividend rates % 10 32.5 42.5

Basic rate Higher rate Additional rate

137,400 37,401 150,000 150,001 and over

A starting rate of 10% applies to savings income where it falls within the first 2,440 of taxable income. Personal allowances Personal allowance Standard 6574 75 and over 6,475 9,490 9,640 22,900 100,000

Income limit for age related allowances Income limit for standard personal allowance

Car benet percentage The base level of CO2 emissions is 130 grams per kilometre (g/km). Petrol cars with CO2 emissions of 75 g/km or less Petrol cars with CO2 emissions between 76 and 120 g/km Car fuel benet The base figure for calculating the car fuel benefit is 18,000.

% 5 10

Pension scheme limits Annual allowance 255,000 Lifetime allowance 1,800,000 The maximum contribution that can qualify for tax relief without evidence of earnings 3,600 Authorised mileage allowances: cars Up to 10,000 miles 40p Over 10,000 miles 25p CAPITAL ALLOWANCES: RATES OF ALLOWANCE Plant and machinery Main pool Special rate pool Motor cars (purchases since 6 April 2009 (1 April 2009 for limited companies)) CO2 emissions up to 110 grams per kilometre CO2 emissions between 111 and 160 grams per kilometre CO2 emissions over 160 grams per kilometre

% 20 10

100 20 10

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EXAM NOTES

Annual investment allowance First 100,000 of expenditure Industrial buildings allowance Writing-down allowance Corporation tax Financial year Small companies rate Main rate Lower limit Upper limit Standard fraction 2008 21% 28% 300,000 1,500,000 7/400 2009 21% 28% 300,000 1,500,000 7/400

100 1 2010 21% 28% 300,000 1,500,000 7/400

Rates of interest (assumed) Official rate of interest Rate of interest on underpaid tax Rate of interest on overpaid tax

4% 3% 0.5%

FINANCIAL REPORTING INTERNATIONAL AND UK

Marginal relief Standard fraction x (UA) x N/A Value added tax Standard rate up to 3 January 2011 Standard rate from 4 January 2011 onwards Registration limit Deregistration limit Inheritance tax: tax rates 1325,000 Excess Excess Death rate Lifetime rate 17.5% 20% 70,000 68,000 % Nil 40 20 Percentage reduction 20 40 60 80 % 18 28 10,100 5,000,000 10% % Nil 11.0 1.0 Nil 12.8 12.8

PAPER F7, FINANCIAL REPORTING Knowledge of new examinable regulations issued by 30 September will be required in examination sessions being held in the following calendar year. Documents may be examinable even if the effective date is in the future. The documents listed as being examinable are the latest that were issued prior to 30 September 2010 and will be examinable in June and December 2011 exam sessions. The Study Guide offers more detailed guidance on the depth and level at which the examinable documents will be examined. The Study Guide should be read in conjunction with the examinable documents list. International Accounting Standards (IASs)/International Financial Reporting Standards (IFRSs) IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 7 Statement of Cash Flows IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 Events after the Reporting Period IAS 11 Construction Contracts IAS 12 Income Taxes IAS 16 Property, Plant and Equipment IAS 17 Leases IAS 18 Revenue IAS 20 Accounting for Government Grants and Disclosure of Government Assistance IAS 23 Borrowing Costs IAS 27 Consolidated and Separate Financial Statements IAS 28 Investments in Associates IAS 31 Interests in Joint Ventures IAS 32 Financial Instruments: Presentation IAS 33 Earnings per Share IAS 34 Interim Financial Reporting IAS 36 Impairment of Assets IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property IFRS 3 Business Combinations (revised) IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures IFRS 9 Financial Instruments Other Statements Framework for the Preparation and Presentation of Financial Statements* Note: * The Conceptual Framework was issued 28 September 2010. Given the proximity to the cut off ACCA has made the decision that in the interests of all stakeholders this revised document will not be examined and any questions relating to the framework will be based on the documents listed in the above table.

Inheritance tax: taper relief Years before death: More than 3 but less than More than 4 but less than More than 5 but less than More than 6 but less than Capital gains tax Rate of tax

4 5 6 7

years years years years

Lower rate Higher rate

Annual exemption Entrepreneurs relief Lifetime limit Rate of tax

National Insurance contributions (not contracted out rates) Class 1 Employee Class 1 Employer Class 1A Class 2 Class 4 15,715 per year 5,71643,875 per year 43,876 and above per year 15,715 per year 5,716 and above per year 2.40 per week Small earnings exception limit 5,075 15,715 per year 5,71643,875 per year 43,876 and above per year

Nil 8.0 1.0

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ADDITIONALLY EXAMINABLE FOR UK AND IRISH PAPERS ONLY Indicated below are the main areas of difference between IFRS and UK standards/legislation. Some differences are examinable in Paper F7 (UK). International Standard IAS 1 UK Standard Co Act FRS 3 FRS 3 IAS 2 IAS 7 IAS 8 IAS 10 IAS 11 FRS 18 SSAP 9 FRS FRS FRS FRS 1 1 1 3 UK difference Difference in in terminology Disclosure of certain exceptional items on face of income statement not specified by IAS 1 although some picked up by IFRS5 Separate presentation of STRGL and income statement whereas International combines statements Less extensive disclosure requirements for estimation techniques Slight wording differences which mean that LIFO could be allowable whereas this doesnt appear within International Format more detailed Cash and cash equivalents more strictly defined Exemptions available from preparing cash flow Fundamental errors vs Internationals material errors although broadly similar No examinable differences Services fall within scope whereas International this is addressed by IAS18, although in principle broadly the same Disclosure of year end balance split into recoverable on contracts and long-term contract balances Timing differences rather than temporary differences Permits discounting Revaluation less likely to create deferred tax balance Revaluation frequency specified by time (every five years) whereas International solely based on material changes in fair value as frequency indicator Different methods of revaluation dependent on the asset type Treatment of revaluation gains and losses especially with reference to clear consumption of economic benefit 90% test included as part of guidance in lease classification No requirement to consider land and buildings separately although this has recently been relaxed under International Sale and finance leaseback requires asset to be disposed with new finance lease created and disposal profit to be deferred over lease term. Additionally UK rules allow funds to be treated as a secured loan per FRS5 Operating lease incentives to be spread over shorter of lease term and period of next rent review. International spreads over lease term In principle similar Restricted scope as only covers retirement benefits whereas International covers various short-term and long-term employee benefits No deferral method as per IAS19 Deferred tax balances netted off net pension asset/liability, whereas shown separately under International Cannot net off grant against non-current asset to which it relates (although CoAct disallows not the standard) No examinable differences Choice as to whether capitalise borrowing costs Materiality considered from perspective of company and related party Requires disclosure of names of related party where transaction has occurred Wholly owned UK subs exempt from disclosing in their own accounts transactions with parent No UK equivalent Disposals not resulting in a loss of control, gain or loss to be shown in income statement whereas under International this is shown in equity as an owners transaction Partial disposals resulting in loss of control, remaining shareholding not required to be valued at fair value Difference examinable in Paper F7? No Yes No No No Yes Yes No No No No Yes Yes Yes Yes Yes Yes Yes Yes No

FRS 21 SSAP 9 SSAP 9

IAS 12 IAS 16

FRS FRS FRS FRS

19 19 19 15

FRS 15 FRS 15 IAS 17 SSAP 21 SSAP 21 SSAP 21

No No No No No No No No Yes No No No No No No

SSAP 21 IAS 18 IAS 19 FRS 5 FRS 17 FRS 17 FRS 17 IAS 20 IAS 21 IAS 23 IAS 24 SSAP 4 FRS FRS FRS FRS 23 15 8 8

FRS 8 IAS 27 IAS 26 FRS 2 FRS 2

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EXAM NOTES

IAS 28 IAS 29 IAS 31 IAS 32 IAS 33 IAS 34 IAS 36 IAS 36 IAS 36

FRS 9 FRS 24 FRS 9 FRS 25 FRS 22 Statement on Interim reports FRS 11 FRS 11 FRS 11

Equity accounting in income statement shows associate split out across a number of lines whereas International show associate as one balance No examinable differences Does not allow proportional consolidation for joint venture but gross equity accounting instead No examinable differences No examinable differences No examinable differences Impairment on IGU specifically allocated to specifically damaged asset then to goodwill, intangibles and then tangible assets. International does not separate intangibles from tangibles Allocation of impairment loss on clear consumption to income statement irrespective of revaluation balance relating to asset Reversals of goodwill and intangibles only if external event clear demonstrates reversal of impairing event. UK standard more restrictive. Goodwill impairments will realistically not be reversed whereas International specifically disallows reversals of goodwill impairments. Requires future cash flows to be monitored for next five years to ensure that asset not further impaired. No examinable differences Choice as to whether capitalise development costs or write off to income statement Only separable intangibles can be capitalised whereas International allows capitalisation if non separable but legal or contractual rights are held Treatment of financial asset differences due to IFRS 9 otherwise no examinable differences. See IFRS 9 No choice between cost model or fair value model Treatment of revaluation gains and losses to revaluation reserve unless permanent diminution No UK equivalent No UK equivalent No examinable differences Merger accounting where applicable Merger accounting on reconstructions NCI only calculated under partial method Acquisition costs capitalised Changes in contingent consideration capitalised within cost of investment Only separable intangibles can be capitalised Goodwill amortised with rebuttable assumption of life not exceeding 20 years Negative goodwill capitalised and amortised over life of assets to which they relate Goodwill calculation difference on piecemeal acquisitions Covers life assurance businesses although principles are similar Discontinued criteria difference meaning that UK likely to show discontinuance later than International Both continuing and discontinued must be analysed on face of profit and loss account Encourages separate disclosure of acquisitions Covers oil and gas, with similar principles of capitalisation and impairment No examinable differences Identification of segments based on risks and returns approach whereas International based on management information and decision-making process Disclosure for both business and geographical segments unlike International which is based on management decision making process Segment information prepared in accordance with accounting policies whereas International based management information Seriously prejudicial exemption available Not yet updated to changes in financial asset classification categories and therefore recognition differences Differences in principle not actual accounting differences examinable between FRSSE and IFRS for SME

No No No No No No No Yes

No No No Yes Yes No No No No No No No No Yes Yes Yes Yes Yes Yes No No Yes Yes No No No No No No No No No

FRS 11 IAS 37 IAS 38 FRS 12 SSAP 13 FRS 10 IAS 39 IAS 40 IAS 41 IFRS 1 IFRS 2 IFRS 3 FRS 26 SSAP 19 SSAP 19

FRS FRS FRS FRS

6 6 7 7

FRS 7 FRS 10 FRS 10 IFRS 4 IFRS 5 FRS 7 FRS 27 FRS 3 FRS 3 IFRS 6 IFRS 7 IFRS 8 FRS 3 SORP FRS 29 SSAP 25 SSAP 25 SSAP 25 IFRS 9 SSAP 25 FRS 26

IFRS for SMEs FRSSE

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011

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Additionally for Paper F7 (UK) the following basic Companies Act requirements surrounding when: single and group entity financial statements are required and when exemptions may be claimed from the preparation. a subsidiary may be excluded from the group financial statements are also examinable.

ISA 540

AUDIT INTERNATIONAL

PAPER F8, AUDIT AND ASSURANCE Knowledge of new examinable regulations issued by 30 September will be examinable in exam sessions being held in the following calendar year. Documents may be examinable even if the effective date is in the future. This means that all regulations issued by 30 September 2010 will be examinable in the December 2011 exams. The Study Guide offers more detailed guidance on the depth and level at which the examinable documents should be examined. The Study Guide should therefore be read in conjunction with the examinable documents list. ACCOUNTING STANDARDS The accounting knowledge that is assumed for Paper F8 is the same as that examined in Paper F3. Therefore, candidates studying for Paper F8 should refer to the accounting standards listed under Paper F3 (see Appendix A). International Standards on Auditing (ISAs) Glossary of Terms International Framework for Assurance Assignments Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services ISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with ISAs ISA 210 Agreeing the Terms of Audit Engagements ISA 230 Audit Documentation ISA 240 The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements ISA 260 Communication with Those Charged with Governance ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management ISA 300 Planning an Audit of Financial Statements ISA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment ISA 320 Materiality in Planning and Performing an Audit ISA 330 The Auditors Responses to Assessed Risks ISA 402 Audit Considerations Relating to an Entity Using a Service Organisation ISA 450 Evaluation of Misstatements Identified During the Audit ISA 500 Audit Evidence ISA 501 Audit Evidence Specific Considerations for Selected Items ISA 505 External Confirmations ISA 510 Initial Audit Engagements Opening Balances ISA 520 Analytical Procedures ISA 530 Audit Sampling

Auditing Accounting Estimates, Including Fair Value Accounting Estimates and Related Disclosures ISA 560 Subsequent Events ISA 570 Going Concern ISA 580 Written Representations ISA 610 Using the Work of Internal Auditors ISA 620 Using the Work of an Auditors Expert ISA 700 Forming an Opinion and Reporting on Financial Statements ISA 705 Modifications to the Opinion in the Independent Auditors Report ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditors Report ISA 710 Comparative Information Corresponding Figures and Comparative Financial Statements ISA 720 The Auditors Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements International Auditing Practice Statements (IAPSs) IAPS 1000 Inter-bank Confirmation Procedures IAPS 1013 Electronic Commerce: Effect on the Audit of Financial Statements International Standards on Assurance Engagements (ISAEs) ISAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information Other Documents ACCAs Code of Ethics and Conduct The UK Corporate Governance Code as an example of a code of best practice

AUDIT UK

PAPER F8, AUDIT AND ASSURANCE Knowledge of new examinable regulations issued by 30 September will be examinable in exam sessions being held in the following calendar year. Documents may be examinable even if the effective date is in the future. This means that all regulations issued by 30 September 2010 will be examinable in the December 2011 exams. The Study Guide offers more detailed guidance on the depth and level at which the examinable documents should be examined. The Study Guide should therefore be read in conjunction with the examinable documents list. ACCOUNTING STANDARDS All questions set will be based on International Financial Reporting Standards. The accounting knowledge that is assumed for Paper F8 is the same as that examined in Paper F3. Therefore, candidates studying for Paper F8 should refer to the accounting standards listed under Paper F3 (see Appendix A). International Standards on Auditing (ISAs) (UK and Ireland) Glossary of terms 2009 ISA 200 Overall objectives of the independent auditor and the conduct of an audit in accordance with ISAs (UK and Ireland) ISA 210 Agreeing the terms of audit engagements ISA 220 Quality control for an audit of financial statements ISA 230 Audit documentation ISA 240 The Auditors responsibilities relating to fraud in an audit of financial statements

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EXAM NOTES

ISA 250A ISA 260 ISA 265 ISA 300 ISA 315 ISA 320 ISA 330 ISA 402 ISA 450 ISA 500 ISA 501 ISA ISA ISA ISA ISA ISA ISA ISA ISA ISA ISA ISA 505 510 520 530 540 560 570 580 610 620 700 705

ISA 706 ISA 710 ISA 720A ISA 720B

Consideration of laws and regulations in an audit of financial statements Communication with those charged with governance Communicating deficiencies in internal control to those charged with governance and management Planning an audit of financial statements Identifying and assessing the risks of material misstatement through understanding the entity and Its environment Materiality in planning and performing an audit The auditors responses to assessed risks Audit considerations relating to entities using a service organisation Evaluation of misstatements identified during the audit Audit evidence Audit evidence specific considerations for selected items External confirmations Initial audit engagements opening balances Analytical procedures Audit sampling Auditing accounting estimates, including fair value accounting estimates and related disclosures Subsequent events Going concern Written representations Using the work of internal auditors Using the work of an auditors expert The auditors report on financial statements Modifications to opinions in the independent auditors report Emphasis of matter paragraphs and other matter paragraphs in the independent auditors report Comparative information corresponding figures and comparative financial statements The auditors responsibilities relating to other information in documents containing audited financial statements The auditors statutory reporting responsibility in relation to directors reports

Bulletins 2001/03 2008/10 2009/2 2009/4

E-business: identifying financial statement risks Going Concern Issues During the Current Economic Conditions Auditors Reports on Financial Statements in the United Kingdom Developments in corporate governance affecting the responsibilities of auditors of UK companies

Other Documents ACCAs Code of Ethics and Conduct The UK Corporate Governance Code Scope and Authority of APB Pronouncements (Revised) October 2009

APPENDIX A

ACCOUNTING STANDARDS EXAMINABLE IN PAPER F3, RELEVANT TO PAPER F8, AUDIT AND ASSURANCE CANDIDATES International Accounting Standards (IASs)/International Financial Reporting Standards (IFRSs) IAS IAS IAS IAS 1 2 7 10 Presentation of Financial Statements Inventories Statement of Cash Flows Events After the Reporting Period Property, Plant and Equipment Revenue Consolidated and Separate Financial Statements Investments in Associates Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Business Combinations (revised)

IAS 16 IAS 18 IAS 27 IAS 28 IAS 37 IAS 38 IFRS 3

Other Statements Framework for the Preparation and Presentation of Financial Statements* Note: * The Conceptual Framework was issued 28 September 2010. Given the proximity to the cut off ACCA has made the decision that in the interests of all stakeholders this revised document will not be examined and any questions relating to the framework will be based on the documents listed in the above table. ** It would normally be the case that exams in 2012 would be based on regulation and legislation issued/passed on or before 30 September 2011. As the first exam session of FIA/new F3 papers is December 2011 ACCA has decided that it would be not be in the interest of stakeholders to have learning materials applicable to only one exam session. Unless the IASB release regulation that significantly affects the above papers the above table of examinable documents based on regulation in existence as at 30 September 2010 will be examinable for sessions in December 2011, throughout 2012 until the end of January 2013.

Practice Notes (PNs) PN 16 Bank reports for audit purposes in the United Kingdom (Revised) PN 25 Attendance at stocktaking PN 26 (Revised) Guidance for smaller entity audit documentation (December 2009) Ethical Standards (ESs) ES (Revised April 2008) Provisions available for small entities ES1 (Revised April 2008) Integrity, objectivity and independence ES2 (Revised April 2008) Financial, business, employment and personal relationships ES3 (Revised October 2009) Long association with the audit engagement ES4 (Revised April 2008) Fees, remuneration and evaluation policies, litigation, gifts and hospitality ES5 (Revised April 2008) Non-audit services provided to audit clients Glossary

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SYLLABUS AIMS
RELEVANT TO ALL ACCA QUALIFICATION PAPERS F4 TO P7
PAPER F4 CORPORATE AND BUSINESS LAW
RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/f8/ To develop knowledge and skills in the understanding of the general legal framework, and of specific legal areas relating to business. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/f4/

PAPER P4 ADVANCED FINANCIAL MANAGEMENT

PAPER F9 FINANCIAL MANAGEMENT

To develop knowledge and skills expected of a financial manager. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/f9/

To apply relevant knowledge, skills, and exercise professional judgment as expected of a senior financial executive or advisor, in taking or recommending decisions relating to the financial management of an organisation. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p4/

PAPER F5 PERFORMANCE MANAGEMENT

To develop knowledge and skills in the application of management accounting techniques to quantitative and qualitative information for planning, decision making, performance evaluation and control. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/f5

PAPER P1 GOVERNANCE, RISK AND ETHICS

To apply relevant knowledge, skills, and exercise professional judgment in carrying out the role of the accountant relating to governance, internal control, compliance, and the management of risk within an organisation. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p1/

PAPER P5 ADVANCED PERFORMANCE MANAGEMENT

PAPER F6 TAXATION

To apply relevant knowledge, skills, and exercise professional judgment in selecting and applying strategic management accounting techniques in different business contexts and to contribute to the evaluation of the performance of an organisation and its strategic development. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p5/

To develop knowledge and skills relating to the tax system as applicable to individuals, single companies, and groups of companies. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/f6/

PAPER P2 CORPORATE REPORTING

To apply knowledge, skills, and exercise professional judgment in the application and evaluation of financial reporting principles and practices in a range of business contexts and situations. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p2/

PAPER P6 ADVANCED TAXATION

PAPER F7 FINANCIAL REPORTING

To develop knowledge and skills in understanding and applying accounting standards and the theoretical framework in the preparation of financial statements of entities, including groups, and how to analyse and interpret those financial statements. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/f7/

PAPER P3 BUSINESS ANALYSIS

To apply relevant knowledge, skills, and exercise professional judgment in providing relevant information and advice to individuals and businesses on the impact of the major taxes on financial decisions and situations. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p6/

To apply relevant knowledge, skills, and exercise professional judgment in assessing strategic position, determining strategic choice, and implementing strategic action through business process and structural change, coordinating knowledge systems and information technology, and by managing quality processes, projects, and people. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p3/

PAPER P7 ADVANCED AUDIT AND ASSURANCE

PAPER F8 AUDIT AND ASSURANCE

To develop knowledge and skills in the process of carrying out the assurance engagement and its application in the context of the professional regulatory framework.

To apply relevant knowledge, skills, and exercise professional judgment in analysing, evaluating, concluding and reporting on the assurance engagement and other audit and assurance issues, in the context of best practice and current developments. RELEVANT RESOURCES www2.accaglobal.com/students/acca/ exams/p7/

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ETHICS

HOW TO BE GOOD
PROFESSIONAL ETHICS RELEVANT TO ACCA QUALIFICATION PAPERS
Values, ethics and governance are essential skills for finance professionals. This is why ACCA has adopted a holistic approach to your ethical development via the exams syllabus, the practical experience requirements and the Professional Ethics module requirements you need to complete in order to obtain your ACCA Qualification. As an ACCA student, your ethical and professional development starts from day one as soon as you have registered with ACCA. PROFESSIONAL ETHICS MODULE As part of your ethical development, students are required to complete the Professional Ethics module, developed by ACCA. This will give you exposure to a range of ethical perspectives and includes several self-tests which require you to reflect on your own ethical behaviour and values. You then apply what you have learned in a case study where you experience an audit situation from two points of view that of the auditor and the corporate financial accountant. MODULE CONTENT So what can you expect the module to be like? It consists of nine units detailed below each designed to help you understand what it means to think and act as a professional accountant. Sometimes, without you even realising, your personal values can get in the way of your professional ethics. As accounting students, you have been learning the technical aspects of your chosen profession, and may not have spent much time thinking about your own values, how you make decisions, and how you may be influenced in making those decisions. The Professional Ethics module includes some exercises to help you explore these issues. Then, when you are faced with a difficult decision and find yourself applying the fundamental principles of your profession, you will be better prepared to apply your professional judgment rather than your personal beliefs. Professional ethics module units 1 Start here 2 Judging the acceptability of arguments 3 What is ethics? 4 Rules vs principles 5 About ACCAs fundamental principles 6 The framework 7 Case study 8 Applying what you have learned 9 Tell us what you have learned Looking at some of the units within the Professional Ethics module more closely: Unit 2 gives you the opportunity to judge the acceptability of arguments for and against some difficult decisions. It is important that you give careful consideration to these arguments, and there is great value in discussing these with your friends and colleagues. The objective is to help you see what kinds of arguments might make you change your mind. Providing you with this valuable knowledge about yourself will be useful when you are a qualified accountant, where you may be faced with a difficult decision and find that people are trying to influence your decisions or behaviour. Unit 3 contains a brief overview of ethical schools of thought to help you recognise your own personal values in the context of established theory. Unit 7 is an interactive case study. Based on a realistic scenario and using computer animation, the unit provides the opportunity to apply what you have learned from other units by evaluating information, assessing the consequences of your actions, and making ethical judgments. The case study is a chance for you to practice your ethical decision-making skills and will provide you with feedback on all the decisions you make. Unit 8 gives you further practice at making ethical decisions. Within this module you are presented with five situations. For each one, you are required to select what you think is the best solution, and obtain feedback on your decision. In Unit 9, you are required to write a short paragraph about what you have learned from completing the module. You are given access to the Professional Ethics module as soon as you become eligible to take Paper P1, Governance, Risk and Ethics. It is recommended that you take the Professional Ethics module at the same time as, or before Paper P1. While you have the flexibility to complete the Professional Ethics module in your own time, if you registered as a student after January 2007, you should note that ethics is now one of your requirements of membership. ACCA will now contact you as soon as you have met all of the requirements exams, ethics, experience and performance objectives and invite you to transfer to membership.

BAD

GOOD

RESOURCES
The Resources section contains important information to prepare for your exams, and also includes answers to your frequently-asked questions and contact details for ACCA Connect 60 FEES Exam fees for ACCA papers and ways to pay 61 EXAM TIMETABLE Detailed exam timetable for the December 2011 exam session to help with your diary planning 62 EXAM RULES Important exam rules for students intending to take exams in December 2011

63 EXAM ENTRY The exam entry procedure and key dates have changed 63 STUDY OPTIONS Choosing a tuition provider 64 EXAM DAY FAQS Advice on exam day preparation 65 OXFORD BROOKES BSC Information about the BSc (Hons) in Applied Accounting from Oxford Brookes University

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ACCA CONNECT
FEES
ANNUAL SUBSCRIPTION 2011 Please note that, as a student, you are required to pay an annual subscription for each year you are registered with ACCA. This is a separate fee to your initial registration fee. Your annual subscription is due on 1 January irrespective of the month you registered. For example, if you registered in December, you will still be required to pay an annual subscription by 1 January. The payment enables ACCA to provide you with services and support to assist you with your studies and training as you work towards gaining your qualification. Students who fail to pay fees when due (including exam/ exemption fees) will have their names removed from the ACCA register. Students wishing to re-register are required to submit any amounts unpaid at the time of their removal in addition to the re-registration fee. No penalty fee will be charged. Confirmation of your unpaid fees can be obtained from your national ACCA office or ACCA Connect. The following fees and subscriptions apply: ACCA Qualification students Initial registration Re-registration Annual subscription *plus unpaid fee(s) For all enquiries, simply contact ACCA Connect our global customer service centre. However you want to contact us, by phone, fax, email or post, one of our expert advisers will be happy to assist you. MONDAY TO THURSDAY Open 21 hours (closed 20.00 to 23.00) FRIDAY Open 20 hours (closed 20.00 to midnight) SATURDAY Closed SUNDAY Open 09.00 to 17.00 and 23.00 to midnight (all times based on GMT/BST as appropriate) ACCA Connect 2 Central Quay 89 Hydepark Street Glasgow G3 8BW United Kingdom tel: +44 (0)141 582 2000 fax: +44 (0)141 582 2222 email: students@accaglobal.com website: www.accaglobal.com EXAM FEES Exam entry period December 2011 exam fee (per exam) 72 *72 72

students@ accaglobal.com +44 (0)141 582 2000

June 2012 exam fee (per exam)

Fundamentals level Skills module exams Papers F4, F5 F6, F7, F8 and F9 Early 69 Standard 76 Late 198

69 80 208

Professional level exams Papers P1, P2 and P3 (and any two from Papers P4, P5, P6 and P7) Early 81 81 Standard 89 94 Late 211 222

ACHIEVING ACCA MEMBERSHIP


ACCA will now invite you to transfer to membership as soon as your records indicate that you are ready. For more information visit www2.accaglobal.com/students/acca/ membership/. However, if, after the next set of results in February 2012, you

think you are ready, you can download and complete the application form available at www2.accaglobal.com/ students/acca/membership/ and return it to: ACCA Customer Services, 2 Central Quay, 89 Hydepark Street, Glasgow United Kingdom, G3 8BW It will take approximately four to six weeks to process your application for membership.

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011


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2011 DECEMBER T F S W T S M 1 2 3 0 3 9 2 8 27 2 7 8 9 10 6 5 4 16 17 5 1 4 1 3 1 11 12 23 24 2 2 1 2 0 2 18 19 29 30 31 8 2 7 2 6 2 25

Wednesday 7 December FA2 Maintaining Financial Records Financial Reporting F7 Thursday 8 December MA1 Management Information Audit and Assurance F8 Advanced Performance P5 Management Friday 9 December FAB Accountant in Business F1 Accountant in Business F9 Financial Management P6 Advanced Taxation

DECEMBER 2011 EXAM SESSION


The following dates have been confirmed for the next exam session: DECEMBER 2011 Week 1 5 to 9 December Week 2 12 to 14 December Exams will take place over an eight-day period with one session of exams each day. The exams will be held concurrently in five different time zones. The base starting times in each of these time zones will be: Zone 1 (Caribbean) 08.00hrs Zone 2 (UK) 10.00hrs Zone 3 (Pakistan and South Asia) 14.00hrs Zone 4 (Asia Pacific) 15.00hrs Zone 5 (Australasia) 17.00hrs.

Local starting times will be set falling out from these base start times for every centre. Details of local start times can be found against each centre on the Examination Centre List accompanying your Examination Entry Form. Papers F1 to F3 are two-hour exams, and Papers F4 to F9 and P1 to P7 are three-hour exams. Monday 5 December FTX Foundations in Taxation F5 Performance Management P7 Advanced Audit and Assurance Tuesday 6 December MA2 Managing Costs and Finance FFM Foundations in Financial Management F6 Taxation P4 Advanced Financial Management

Monday 12 December FAU Foundations in Audit F4 Corporate and Business Law P3 Business Analysis Tuesday 13 December FFA Financial Accounting F3 Financial Accounting P2 Corporate Reporting

Wednesday 14 December FA1 Recording Financial Transactions FMA Management Accounting F2 Management Accounting P1 Governance, Risk and Ethics ACCA exam rules: www2. accaglobal.com/students/rules/ exam_regs

EXAMS WILL TAKE PLACE OVER AN EIGHT-DAY PERIOD WITH ONE SESSION OF EXAMS EACH DAY.

KEEPING YOU INFORMED


The quickest way for us to send you important information such as changes to exam entry and exam results is by e-communication (such as email and SMS) but we need you to give us your permission its the law! To update your details to ensure we use your preferred

method of communication, please visit our website at www2.accaglobal.com/ consent for further information.

EXAM TIMETABLE

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EXAM RULES
1 You are required to comply in all respects with any instructions issued by the registrar, exam supervisor, and invigilators before and during an exam. 2 You may not attempt to deceive the registrar or the exam supervisor by giving false or misleading information. 3 You are not allowed to take to your exam desk, possess, use, or intend to use while at that desk, any books, notes or other materials except those authorised by the registrar. If you are found to have taken to your desk, or possessed while at that desk, unauthorised materials which are relevant to the syllabus being examined, it will be assumed that you intended to use them to gain an unfair advantage in the exam. In any subsequent disciplinary proceedings, it shall be for you to prove that you did not intend to use the materials to gain an unfair advantage in the exam. 4 You may not assist, attempt to assist, obtain, or attempt to obtain assistance by improper means from any other person during your exams. 5 You are required to adhere at all times to the Instructions to Candidates, which you receive with your Examination Attendance Docket. 6 You are required to comply with the exam supervisors ruling. Supervisors are obliged to report any cases of irregularity or improper conduct to the registrar. The supervisor is empowered to discontinue your exam if you are suspected of misconduct and to exclude you from the exam hall.

Important information for ACCA students intending to take exams at the December 2011 exam session
THESE RULES ARE REPRODUCED ON YOUR EXAMINATION ATTENDANCE DOCKET YOU SHOULD TAKE TIME BEFORE THE EXAMS TO FAMILIARISE YOURSELF WITH THEM. IN ORDER TO BE ELIGIBLE TO SIT YOUR EXAMS YOU MUST SIGN YOUR DOCKET CONFIRMING YOUR AGREEMENT TO COMPLY WITH THESE RULES.
7 You may not engage in any other unprofessional conduct designed to assist you in your exam attempt. 8 You are not permitted to remove either your script booklet or your question paper from the exam hall. All exam scripts remain the property of ACCA. 9 Once the exam has started, you are not allowed to leave the exam hall permanently until the end of the session, and then only when instructed by the supervisor. These regulations are reproduced on your Examination Attendance Docket you should take time to familiarise yourself with them. In order to be eligible to sit your exams, you must sign your docket confirming your agreement to comply with these regulations. Important examination rules Mobile phones and pagers should be switched off at all times in the exam hall, and are not permitted to be taken to your desk under any circumstances. Mobile phones are not permitted on your desk even if they remain switched off. Calculators taken into the exam must comply with the regulations stated on your Examination Attendance Docket, ie they should be noiseless, pocket-sized, and they must not have a print-out facility or graphic word display facility in any language. For security reasons, the exams are held concurrently in five different time zones. Students are therefore not permitted to leave the hall permanently until the end of the exam session. Any student in breach of this regulation will be reported. In the exam hall Every effort is made to ensure that you sit your exams in the best conditions. However, if you have a complaint regarding the centre operation, you should make this known to the exam supervisor in the first instance. The supervisor will do everything within their power to resolve the matter to your satisfaction there and then. If the complaint is of a fundamental nature, ACCA will take whatever further remedial action it considers appropriate in the circumstances.

RULES AND REGULATIONS


ACCAs disciplinary procedures cover matters such as professional misconduct, misconduct in exams and breaches of regulations which include any actions likely to bring discredit to you, ACCA, or the accountancy profession. The rules governing disciplinary procedures for students (and members) are set out in ACCAs Bye-laws and Regulations. All registered students are bound by these Bye-laws and Regulations. Further enquiries about matters which may be subject to disciplinary procedures, can be directed to the Professional Conduct Department at our London office in the UK. ACCAs Rulebook is available for reading online, or at ACCA offices. Visit www2.accaglobal.com/students/rules/ for more information.

THE LATEST VERSION OF ACCAS RULEBOOK IS AVAILABLE FOR READING ONLINE,OR AT ACCA OFFICES. VISIT WWW2.ACCAGLOBAL.COM/ STUDENTS/RULES/FOR MORE INFORMATION.

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011


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IMPORTANT CHANGES TO EXAM ENTRY


Exciting changes are happening at ACCA. You can now: submit an exam entry at any time of the year enter for exams early and save money enter for one of the next two exam sessions December or June make amendments to existing exam entries including changing exam centre, variant papers or entering for other exams. ALL OF THESE NEW BENEFITS ARE EXCLUSIVELY AVAILABLE FOR EXAM ENTRIES MADE ONLINE We are also making changes to the standard exam entry closing date for online and paper exam entries and we are keeping the online late exam entry period for those last minute exam entry emergencies. The dates to remember are illustrated in Table 1 (December 2011) and Table 2 (June 2012). TABLE 1: CLOSING DATES TO REMEMBER FOR DECEMBER 2011 EXAM ENTRY 8 September 2011 8 October 2011 8 November 2011 Early exam entry (online only) Standard exam entry (online and paper) Late exam entry (online only) TABLE 2: CLOSING DATES TO REMEMBER FOR JUNE 2012 EXAM ENTRY 8 March 2012 8 April 2012 8 May 2012 Early exam entry (online only) Standard exam entry (online and paper) Late exam entry (online only)

STUDY OPTIONS
Choosing how you are going to study will be one of the most important decisions you make during your time preparing for your exams. Will you study with a tuition provider, or at home? How do you decide, from all the institutions offering tuition, which will be most suitable for your needs? There are numerous tuition providers and a wide variety of different study methods, so selecting the one which is right for you can be difficult. Taking recommendations from friends and colleagues can provide some guidance, but what is suitable for one individual may not be the best option for another. APPROVED LEARNING PARTNERS If you choose to study with a tuition provider, ACCA strongly recommends you opt for one which is approved under ACCAs Approved Learning Partner Student Tuition programme, as you can be sure: they have been assessed against ACCAs widely recognised and highly-regarded global best practice benchmarks they have access to a range of development opportunities and tools provided by ACCA an investigation will be carried out in the event of any student complaints. HOW TO CHOOSE A TUITION PROVIDER Regardless of whether or not you choose to study with one of ACCAs Approved Learning Partners, there are a number of factors that you may wish to take into consideration when choosing a tuition provider: Location: is there a choice of tuition providers in your local area? If not, you may want to consider a tuition provider who offers a distance learning package. Qualifications and courses offered: does the tuition provider offer a course for the qualification and paper(s) that you are studying for? Will you be able to take subsequent papers with the same tuition provider? Modes of study offered: are you looking for a full-time, part-time or revision course? Do you want to attend a tuition provider who offers face-to-face tuition, or would a distance learning package be more suited to your needs? Variants and adapted papers: does the tuition provider offer tuition for the variant or adapted paper that you are studying for? Computer-based exams: if you are studying towards papers or the Knowledge module of the ACCA Qualification, will you be able to take computer-based exams with the same tuition provider? Facilities: if you intend to drive to your chosen tuition provider, are there car parking facilities available? If you do not have access to a computer or the internet, does the tuition provider have computers available for students use? Do you require disabled access? You can search for a tuition provider using ACCAs Tuition Provider database (www2.accaglobal.com/students/ study/search).

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RESOURCES

EXAM DAY FAQS


WHAT HAPPENS ON THE EXAM DAY? You will receive an Examination Attendance Docket which includes a timetable of all the exams that you are entered for; details of the desk that has been assigned to you for each paper; and the address of your exam centre. If you are not completely sure of the location of the centre, how to get there or how long it may take you, make sure you rehearse your route before the day of the exam. Please remember that exams may start at peak times so you should allow for rush-hour traffic and possible hold-ups. On arrival at the centre you must show your Examination Attendance Docket in order to gain entry to the exam hall. You must sit at the desk detailed on your docket. This will ensure that you are registered as being in attendance for that exam. The docket will be collected by the supervisor during the exam to record your attendance. If you have any other exams during the session, the docket will be returned to you. If it is your last exam of the session, the docket will be retained for our records. The Examination Attendance Docket also details important exam regulations and guidelines. You should read these carefully to familiarise yourself with the exam procedure and what equipment you are allowed to take with you into the exams. These regulations are reproduced regularly in the noticeboard section of Student Accountant. Please also remember to take your student registration card with you to each exam. If you do not have a student registration card, please take some other form of photographic ID. This will be checked during the exam together with your Examination Attendance Docket to verify your identity. You should try to arrive at the exam centre about 30 minutes before the start of the exam. This will give you time to relax and prepare yourself. If you are sitting a three-hour exam, you will be given an additional 15-minute reading and planning time allowance. However, you should still be at your desk at the time stated on your docket. in the results process. You must provide documentary evidence of the situation. WHAT WILL HAPPEN IF I MAKE AN ERROR ON THE EXAM DOCUMENTATION I HAVE TO COMPLETE? It is important that you take care when completing your details on the exam documentation and the front of the exam answer booklet. These details are used in the marking process to ensure that you are issued with a result. Please check carefully the information that you have filled in using the bubbles and written on the answer booklet. Make sure that you complete all of the fields requested. Please remember to do this during the exam as no time can be allowed once you have been advised the exam has ended. Invigilators are not permitted to make any markings on your documentation on your behalf. WHAT AM I ALLOWED/NOT ALLOWED TO TAKE INTO THE EXAM CENTRE? The items which you are allowed to take into the exam hall are listed on your Examination Attendance Docket and you should refer to your docket before each session to ensure that you are aware of the up-to-date regulations. The items that you may take to your desk are: rulers, pens, pencils and an eraser a slide-rule, logarithm tables, geometrical instruments and charting templates a small bottle of water, all labels removed. No other drinks are permitted a noiseless, cordless pocket calculator which may be programmable but may not have a print out or graphic/word display facility in any language. IF I HAVE COMPLETED MY EXAMINATION FORM IN PENCIL WILL THIS BE SUBMITTED FOR CONSIDERATION OR WILL MY EXAM PAPER BE REJECTED? You must complete all exam documentation in accordance with the instructions given. The instructions require you to complete your details using black pen. As some of the documentation you submit is processed electronically by technology that cannot read pencil markings or other colours of pen, it is in your interests to use black pen in order to ensure that we can issue you with a result.

IF SOMETHING HAPPENS AT THE EXAM CENTRE WHICH AFFECTS MY PERFORMANCE, CAN I MAKE A COMPLAINT? ACCA makes every effort to ensure that you sit the exams in the best conditions possible. However, should you need to make a complaint, please contact the exam supervisor during the exam in order that everything possible can be done to rectify the situation. If you feel that the situation has affected your performance, please write to ACCA as soon as possible and within four weeks of the exam in order for the situation to be investigated and taken into account in the results process. IF I ATTEND THE EXAMS BUT HAVE BEEN AFFECTED BY ILLNESS OR OTHER FACTORS, CAN THIS BE TAKEN INTO ACCOUNT IN THE MARKING PROCESS? ACCA recognises that some students may sit exams in difficult personal circumstances. If this is the case for you and the circumstances have affected your performance, please write to ACCA as soon as possible and within four weeks of the exam in order for the situation to be investigated and taken into account

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 10/2011


Are your contact details up to date? https://www.acca-business.org

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IMPORTANT INFORMATION
OXFORD BROOKES BSC (HONS)
Students completing certain papers of the ACCA Qualification are eligible to apply for a BSc (Hons) in Applied Accounting from Oxford Brookes University. The degree must be completed within 10 years of your initial registration on to ACCAs professional qualification; otherwise, your eligibility will be withdrawn. Check your eligibility status at www2.accaglobal.com/ students/bsc/. The dates below outline the forthcoming deadlines for completing the qualifying exams and the last opportunity to submit your Research and Analysis Project (RAP): First session (1) Final session for completing the qualifying exams (2) December 2001 June 2011 June 2002 December 2011 Final date for submission of RAP November 2011 May 2012

STUDENT ACCOUNTANT All registered students with valid email addresses receive an alert every two weeks to inform them that a new digital issue of Student Accountant is available. Each digital issue contains a range of technical articles, as well as careers-related features and advice. The digital magazine is a Flash-based platform, and we also provide PDF downloads for students who want to read the magazine offline. In addition, each month (generally the third week of the month) we email Student Accountant Direct, which contains jobs in your region, news you can use, country/region-specific information, reminders, ACCA news, surveys and calls to action for future articles in Student Accountant. Further developments include regional Student Accountant Direct e-magazines for students in the Middle East, the Caribbean, Pakistan and Europe. We also produced paper specific microsites for Papers F5, F7 and F8 and will develop microsites for more papers during 2011. We no longer produce a monthly printed Student Accountant magazine. However, in addition to the range of digital products delivered by the Student Accountant team, we also produce a printed Essential Guide magazine in April and October that is completely focused on the next exam session. If you have any queries about the Student Accountant range of products, please email the editorial team at studentaccountant@accaglobal.com For queries relating to your ACCA administration, exams, application process and fees, please contact ACCA Connect at students@ accaglobal.com or telephone +44 (0)141 582 2000. You can access your records by logging into your myACCA account, and in addition the ACCA website (www.accaglobal.com) also contains a host of information that could help you with your queries.

Notes 1 First applicable exam session as confirmed at the time of your initial registration with ACCA. 2 Completion of Fundamentals level exams. Professional Ethics module Students wishing to submit their Research and Analysis Project (RAP) must complete the Professional Ethics module. For more information visit www2.accaglobal. com/students/bsc/

ALL REGISTERED STUDENTS RECEIVE AN ALERT EVERY TWO WEEKS TO INFORM THEM THAT A NEW DIGITAL ISSUE OF STUDENT ACCOUNTANT IS AVAILABLE. EACH DIGITAL ISSUE CONTAINS A RANGE OF TECHNICAL ARTICLES, AS WELL AS FEATURES AND ADVICE.

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