Wednesday, November 16, 2011


F4 Corporate and Business Law

Q1 Statutory interpretation
Q2 Formation of a contract – consideration or intention
Q3 Tort of negligence – how the duty of care is breached
Q5 Debentures and charges
Q6 Appointment/termination of directors
Q7 Employment law - the employment contract/relationship
Other likely topics – breach of contract and remedies, company insolvency and Insider Dealing.

F5 Performance Management

Specialist Cost and Management Accounting Techniques: Environmental accounting techniques have not yet been tested under the new syllabus, so could feature. Throughput accounting featured numerically in June. ABC vs AC or target costing is also possible.

Decision making techniques: There is a trend for pricing to be examined with other areas of the syllabus, for example learning curves. Relevant costing, CVP, make or buy or other short term decisions could feature as dealing with risk and uncertainty and limiting factors have featured recently.
Budgeting: Discussion marks often focus on the appropriateness of budgeting types or the behavioural impacts of types of budgeting. Numerically it could be tested via time series as a forecasting method.

Standard costing & variance analysis: Variances are likely to feature in the exam, students should be prepared for mix and yield variances, planning and operational variances as well as the basic variances and operating statements. Questions typically require thought about the most appropriate layout and could include discussion of variances which have already been calculated.

Performance Measurement and Control: In June, there was a change in emphasis, with this being the first paper not to contain a question focusing on interpretation of performance and financial vs. non financial measures. Detailed knowledge could instead be required on any of the performance measurement tools. Transfer pricing has not been examined recently, so could feature.

F6 Taxation

Question 1 will test income tax with maybe a VAT section attached as a separate part. The income tax will focus on a self employed individual with property income and some investment income. The VAT section could look at calculation of VAT payable, penalties and special schemes.

Question 2 will test corporation tax and could involve a long period of account, capital allowance computations for plant and machinery, computation of corporation tax payable and payment of tax.

Question 3 will test capital gains tax from an individuals’ perspective. This question will involve a number of different disposals involving entrepreneurs’ relief, part disposals, chattels and shares with a computation of capital gains tax payable. It is possible this question could alternatively involve a company disposing of shares.

Question 4 & 5 will test anything else. Possible topics that may be examined here are:
- commencement, cessation and change of accounting date rules for sole traders and partnerships
- inheritance tax testing the inheritance tax liabilities on lifetime gifts and as a result of the individual’s death.
- Group relief
- Overseas aspects of corporation tax
- Self assessment system
- Badges of trade
- Corporation tax loss relief

F7 Financial Reporting(INT)

Q1: Consolidated SOCI and/or SOFP with one subsidiary plus associate with intragroup adjustments and fair value adjustments. May include written part on a group topic.

Q2: SOCI and SOFP preparation from TB or restatement with usual adjustments for depreciation, revaluation, current/deferred tax plus others such as leases/substance, financial instruments (change in FV or amortised cost). May include discontinued operation/EPS/SOCIE.

Q3: Interpretation and/or statement of cash flows. Could focus on specific part of SOCF or specific ratios.

Q4 & Q5: One question in context of conceptual framework, and the other containing one or two discrete topics, such as regulatory framework, inflation, government grants, discontinued operations, impairments, deferred tax, leases or intangible assets.

F8 Audit and Assurance(INT)

Q1 (30 marks)
This question will be based on a scenario and incorporate between 3 and 5 distinct requirements.
The areas most likely to be tested in this question include audit planning and the identification and explanation of audit risk, audit procedures (substantive tests and/ or tests of control) and internal control.

Q2 (10 marks)
This will be a factual or knowledge based question. It is likely to cover several areas of the syllabus with 2 or 3 separate requirements worth between 2 and 5 marks each.
Topics for Question 2 can be drawn from all areas of the F8 syllabus and questions could include the responsibilities of directors and auditors as well as other definitions such as audit risk, audit assertions, audit regulation and corporate governance.

Q3, Q4 & Q5 (20 marks each)
These questions will be scenario based but will also include some knowledge based requirements.
Areas which are likely to be covered in these questions include ethics, planning, the audit of specific transactions or account balances (including estimates), subsequent events, management representations, going concern, audit reports, internal control and corporate governance.
Note that the scenario may be set in the context of a profit making or non-profit making organisation.

F9 Financial Management

Important areas to cover:

WACC: - any element of the WACC could be tested, including cost of equity, preference shares & different types of debt, along with their corresponding market values & then putting all of this together to calculate the WACC.

Investment decisions: the exam normally contains a question involving net present value (NPV), often with tax and inflation. In order to discount the NPV, you may be asked to first calculate a weighted average cost of capital (see above)

Working capital: questions on inventory management and receivables management are likely. Ensure that you are comfortable with working capital ratios as you may have to be able to put these in reverse

Sources of finance: a topical area, we would expect a part question on financing problems covering gearing issues and problems companies. Ratio analysis is likely to feature here with discussion of the numbers calculated. Ensure you are comfortable with the calculations of the different sources of finance. Islamic Finance was new on the syllabus for the June 11 exam but was not tested. It is possible it may come up in Dec 11, though if it does, it should be straightforward knowledge for a few marks only.

Business Valuations: commonly tested and a core syllabus area. The examiner often combines different syllabus areas within the same exam question – for example asking you to calculate a cost of equity and then use it to value a company.

P1 Governance, Risk & Ethics

In the long 50 mark scenario question you can expect to see all areas of the syllabus being tested. For this reason you should ensure that you have not neglected any of the broad syllabus areas of governance, risk and ethics. The topic of risk can be further subdivided between risk and control.
Some good areas of governance to look at are agency, stakeholders and directors’ remuneration.
Don’t neglect internal control reporting.
Ethical theories get tested regularly, and professional codes of ethics are an important part of the syllabus. The examiner did not touch environmental issues in the June exam – you should ensure you brush up on these too.

P2 Corporate Reporting(INT)

Q1: group SOFP and/or SOCI including discontinued activities, acquisitions and disposals or a statement of cash flows, plus adjustments on other syllabus areas such as financial instruments, pensions, share-based payment and impairments. Written part on a linked accounting adjustment and social/ethical/moral aspects of corporate reporting.

Q2 & Q3:2 case study questions, one following a theme such as non-current assets, deferred tax, foreign currency, financial instruments, pensions, share-based payment, the other an industry-based question testing a range of standards such as accounting policies and the framework, leases, grants, IFRS for SMEs, reorganisations, provisions, events after the reporting period and related parties.

Q4:discussion question e.g. revenue recognition, fair values, management commentary, improvements in performance measurement, leasing, including an application part with some computations.

P3 Business Analysis

Important areas to cover:

Strategy models
Analysis of the environment and/or internal factors has featured in most exams. Key models include PESTEL, Porter’s Five Forces and the value chain. Expect something on forecasting soon.
Evaluation of strategic options is usually tested one way or another (although wasn’t in the last paper).SAF can be a useful framework to generate ideas but don’t feel you need to follow it slavishly.
Strategic action (largely change management and organisational configuration) is often overlooked, but has featured in the last two papers, emphasising the need for good syllabus coverage.

Business Process Change
A popular area, which may be based around models such as Harmon, or completely unstructured, describing a process and asking for improvements. Expect to see some numbers coming in to questions in this area to help with decisions such as automation and outsourcing.

Information Technology
A pervasive theme in many questions. Make sure you are comfortable with some of the more important recent concepts in technology such as cloud computing, viral marketing and new business models.

Project Management
This is a major topic and was not tested in the last sitting so may well be this time. Questions could well focus on analysis and realisation of benefits and again are likely to include a numerical element.
Financial Analysis
Lots of management accounting knowledge from F5 is assumed knowledge here, including budgeting, variance analysis and relevant costing. The lessons from Q1 in the last paper are that, 1) this may be in the compulsory question and 2) you may not be specifically told which techniques to use, but have to work it out from the data given.

This is most likely to be tested in conjunction with one of the other topics, as it was in the last paper.
Most importantly…
Knowledge alone will not get you close to a pass on this paper. You need to be able to apply your knowledge to specific situations. Practice this using past questions and stories in the press or on the web as often as you can and you will be ready for whatever the exam throws at you!

P4 Advanced Financial Management

Role and responsibility towards stakeholders:
Ethical issues continue to appear regularly as an optional discussion question, normally with practical financial issues from elsewhere in the syllabus. The discussion question is normally one of the easier optional questions.
Economic value added and ratio analysis can also be used to appraise the performance of a company.
Advanced investment appraisal:
The compulsory question often features an NPV question with an analysis of risk and/or financing; it could easily be set in the context of an overseas investment.
Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options are also a popular theme.
Acquisitions and mergers:
This exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus; valuations questions are also likely to cover strategic and financing issues.
Corporate reconstruction:
A question could also ask you to evaluate a management buy out i.e. whether a business will be worth more if it splits itself up.
Advanced risk management:
We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging; currency hedging was tested in June 2011.

P5 Advanced Performance Management

Performance analysis:
The new examiner has indicated that his questions will require more skill in interpreting data and discussing strategies to improve performance rather than performing calculations. You may be asked to analysis performance vs budget to identify underlying problems that a company needs to address. This analysis could include the use of activity-based approaches, learning curves or non-financial performance measures.
‘Beyond budgeting’ is an important area that can be tested either as a discussion or a numerical question.
Performance appraisal requires effective information systems, expect to be asked to identify the key strategic, tactical and operational information requirements of a business.

Risk analysis:
Analysis of the risk of a new proposal could include numerical techniques such as expected values and probabilities; but strategic frameworks such as PEST analysis could feature here.
Strategic performance measures in the private sector:
Divisional performance measurement is another key area; ROI, RI , EVA, NPV or even cost of quality could feature here and transfer pricing could feature as an aspect of these questions.
EVA is especially likely given the recent articles published in this area – make sure you have read them. Modified IRR is new to the syllabus so make sure that you are comfortable with this area.

Reward systems:
HR issues are new to the syllabus from June 2011; the examiner is interested in the impact of reward systems on performance management.
Alternative views of performance measurement:
Questions are commonly set that require a good understanding of the balanced scorecard, the building blocks model and the performance pyramid. Questions will often require you to analyse data that has been collected using one of these models. The balanced scorecard and performance pyramid were tested heavily in June 2011.

Performance hierarchy:
Linking strategic decisions to mission statements or suggesting strategic options using models such as Ansoff’s matrix or the BCG matrix lend themselves to questions containing a mixture of financial and discursive elements that could easily include a simple NPV or profit analysis.

P6 Advanced Taxation(UK)

Section A will involve two case study questions covering around 60-70% of the marks. One will be from a personal tax perspective and the other from a corporate tax perspective. Both questions will cover a range of topics and taxes and will require the construction of professional documents like reports/letters.

Section B will comprise 3 questions making up the balance of the marks.
Topics that may appear this sitting are as follows:
Group/Consortium relief
Close companies
Sole trader/partnerships
Inheritance tax versus capital gains tax
Property income
Enterprise investment scheme/venture capital trust
Termination of employment
Income tax losses
Personal service companies
Land and buildings aspects of VAT

P7 Advanced Audit and Assurance(INT)

There are a number of areas that candidates can expect to see in their exam, such as:
•A risk-based planning scenario in the compulsory section
•Questions based on articles published in Student Accountant (although not necessarily from the last six months)
•A number of requirements asking for audit procedures and required evidence in respect of specific financial reporting issues and ISAs
•A practice-based scenario looking at professional, ethical and quality control issues
•A reporting scenario of some sort - probably testing candidates’ knowledge of either the various modifications to the standard audit report or other forms of communication available to the external auditor.
We would also recommend that candidates read the examiner’s report from the June 2011 exam (in the context of the June 2011 exam paper) and keep the following additional issues in mind as part of their revision:
•Don’t forget key brought-forward knowledge from Paper F8 which candidates have traditionally struggled with at P7(audit risk, audit procedures and audit reports).
•Candidates should also not forget about practice-related issues (such as the terms of audit engagements, sampling and documentation) where topics such as quality control procedures, ACCA firm practising requirements and the ethical implications of one firm providing both internal and external audit services could be discussed.
•The correct accounting treatment of complex issues, such as IAS 19 Employee benefits or a newcomer for 2011 IAS 21 The effects of changes in foreign exchange rates or even the associated issues of disclosure (such as IFRS 8 Operating segments or IAS 33

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