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