PAPER 1.1 Preparing Financial Statements
FTC
SECTION A (50 %) 25 Multiple choice questions Will cover all areas of the syllabus SECTION B (50%) Longer questions – will include theory and computational questions, each question worth between 8 to 12 marks.
Preparation of financial statements for a sole trader, company or group
Fixed assets ledger accounting
Incomplete records
Accounting standards/ concepts/theory
Ratios and interpretation
Partnership accounts
BPP
• Partnerships
• Fixed Assets/NCA
• Cash Flow Statements
• Interpretation of F/S
* Preparation of a balance sheet or P&L account for a sole trader.
* Consolidated balance sheet for a company.
* Calculation of various ratios with a discussion of the pros and cons of ratio anlaysis.
* Incomplete records for a sole trader.
* Discussion of accounting concepts and possibly problems with historic cost accounting.
* Accounting for non current assets.
PAPER 1.2 Financial Information for Management
FTC
The paper will consist of 25 MCQs of 2 marks each and 5 long questions of 8-12 marks each. The MCQs will vary in difficulty, but the variety will ensure that the paper reflects the syllabus. The five long questions will be a mix of (mostly) calculations and (a few) written marks. The vast majority of the marks in this paper will be for calculations. The nine key areas of the syllabus will make up the bulk of the exam paper:
Cost classification and behaviour.
Material, Labour and Overhead costs.
Absorption and Marginal Costing.
Process Costing.
Standard Costing (includes variances).
CVP analysis (includes break-even).
Pricing Methods.
Relevant Costing
Limiting Factors and Linear Programming
BPP
• Absorption costing process (allocation/apportionment, etc)
• Construction of a P&L under either AC or MC (or both)
• Reconciliation
• Break-even calculations or sketching break-even charts
• Construction of an operating statement to reconcile budget profit to actual profit having calculated sales and cost variances, possibly with a slant towards overhead variances
• Discuss pricing policy including some calculations
* Cost classification and behaviour.
* Material, labour, and overhead costs.
* Absorption and marginal costing.
* Process costing.
* Standard costing (includes variances).
* CVP analysis (includes break-even).
* Pricing methods.
* Relevant costing.
* Limiting factors and linear programming.
PQ tip: The vast majority of the marks in this paper will be for calculations.
1.3
FTC
Primary Tips:
Theories of leadership style
Individual, Groups and Team behaviour
Classical and modern theories of management and structure
Objective setting; performance indicators
Authority, responsibility and delegation
Motivational Theories
Secondary Tips:
Culture, change and the effect on existing structures
Management of Diversity/Equal Opportunities
Effective Communication Practices
The Learning Process – Mumford and Kolb
* Leadership & motivation.
* Organisational culture.
* Health & safety.
* Delegation.
* Organisational structures.
2.1
FTC
Managing Information Systems
Business strategy and IS/IT strategy
Trends in IT
Outsourcing
Recharging IS/IT costs
Legacy systems
Projects: quality plans; slippage
Designing Information Systems
Systems development methodologies (Student Accountant article August 2005)
Data flow diagram; business event model
External design: data input
Software: packages v bespoke
Prototyping, CASE and 4GL
Evaluating Information Systems
Security: physical security; passwords; validation; encryption
Quality management, quality assurance, quality control; V-model
Changeover methods
Metrics (Student Accountant article February 2005)
Maintenance
LVMT
• Cases are meant to test the candidate's ability to handle more pragmatic issues applying his/her theoretical ideas acquired in the classroom
• Cases would always require the candidate to assume himself in the case to be able to answer the question as required by the examiner
• Most case questions have at least some amount of clues embedded in them and that calls for careful reading to know the mind of the examiner
• Each paragraph in most cases are very vital since they carry different set of information
• Some of the answers the examiner requires from the candidate would be such that he/she would have to think outside the case.
* Business strategy and IS/IT strategy.
* Trends in IT.
* Outsourcing.
* Recharging IS/IT costs.
* Legacy systems.
* Projects: quality plans, slippage.
* Systems development methodologies (see Student Accountant article, August 2005).
* Data flow diagram, business event model.
* External design, data input.
* Software packages v bespoke.
* Security, physical, passwords, validation and encryption.
* Prototyping CASE and 4GL.
* Quality management, quality assurance, quality control, V-model.
* Changeover methods.
* Metrics (Student Accountant article February 2005).
* Maintenance.
2.2(UK)
English Legal System
Methods of resolving civil disputes
Contract
Offer and acceptance
Consideration (including Pinnel's case)
Discharge by performance
Damages
Agency
Authority
Partnership
Fiduciary duties of partners
Company law
Veil of incorporation
Types of company
Registration
Articles of Association
Discounts & premiums
Financial assistance
Reductions of capital
Appointment & removal of directors
Directors’ duties (including wrongful trading)
Meetings & resolutions
Minority protection
2.3(UK)
Section A Corporation Tax
Q1 Trading Loss relief with capital allowances & industrial buildings allowance and some calculation of chargeable gain Income Tax
Q2 Income tax computation with Benefits as well as Schedule D Case I/II implications leading to income tax and possible gains tax payable. Section B VAT
Q3 Computational and discursive question dealing with Registration /Return Misdeclaration penalty CGT
Q4 Capital Gains Tax Shares - bonus/rights/ takeover Rollover and Gift Relief As from June 2005 exam, the format of the exam has changed and questions 5 to 7 can now be set on any topic Group losses with gains group implications Partnership with losses Employment Verses Self Employment with income tax and NIC calculations Corporation tax loss relief [terminal loss relief for both Sole Traders and Limited companies has not been examined]
PAPER 2.3Business Taxation
LVMT
• Corporation tax for individual companies (not groups)
• The taxation of an unincorporated business and/or employees (employment benefits and pensions)
• VAT registration and deregistration
• Annual VAT
• Flat rate
• Cash schemes
• Capital gains - incorporated business/an unincorporated business on areas like holdover, rollover and gift relief
• Branch vs. subsidiaries
• Employed vs. self-employed
• Basis of assessment
2.4
Budgeting (to include cash budgets, maybe forecasting)
Costing systems (Absorption, ABC, Marginal, throughput)
Working Capital Management (possibly Debtors and/or overtrading)
Investment Appraisal; NPV to include tax and inflation, other methods of appraisal and possibly capital rationing
Gearing, ratios (ROCE, ROE) and multiple objectives
* Investment appraisal.
* Working capital management – trade credit and cash.
* Performance evaluation.
* Throughput accounting and theory of constraints.
* Budget preparation plus written part on budgeting.
2.5
CBS and CIS
Published accounts,EPS ?(maybe normal IS and BS)
Interps (but don’t neglect cashflow)
IAS 12
IAS 17
IAS 36
IAS 18
PAPER 2.5 Financial Reporting
LVMT
• Consolidated financial statements
• Preparing the consolidated profit and loss account/income statement and the consolidated balance sheet
• Published financial statements of a limited company - presentation in accordance with accounting standards and statutory formats with adjustments involving the application of various accounting / financial reporting standards
• Cash flow statement: Presentation in accordance with FRS 1/IAS7
• Interpretation of financial statements ratio analysis and assessing financial performance
• Tangible and intangible non-current assets, goodwill and impairment of assets provisions
• Revenue recognition; recognition of the substance of a transaction: application of the ASB’s Statement of Principles/IASB’s Framework and other relevant accounting standards and concepts.
* Consolidated financial statements is a regular in the compulsory section.
* Published financial statements of a limited company.
* Cash flow statements, in accordance with FRS1/IAS7.
* Interpretation of financial statements ratio analysis and assessing financial performance.
* Tangible and intangible non-current assets.
* Revenue recognition and FRS18.
PQ tip: Watch out for FRS11 & 19 and SSAP21.
2.6
Ethics / New audit appointment
Internal Control Objectives / Procedures for a given company
Substantive Testing of Inventory (Stock) or Receivables (Debtors)
Internal Audit outsourcing
Audit Report scenarios
Practical Audit Planning
Computer Assisted Audit Techniques
PAPER 2.6Audit and Internal Review
LVMT
• Corporate governance (provisions of the Combined Code and the rational for there being provisions of corporate governance)
• Audit committee (what functions an audit committee should have and what advantages a company would have as a result of the establishment of such a committee)
• Internal controls
• Internal audit
• Risk (identify the elements of risk present when an audit is taking place)
* Corporate governance (this has been moved from paper 3.1.).
* Combined code provisions and the rational behind it.
* Functions of an audit committee.
* Internal controls and internal audit.
* Audit procedures, such as planning and testing.
PAPER 3.1 Audit and Assurance Services
FTC
Q1. Case Study - Advanced Auditing - Risk Assessment and Audit Strategy.
Q2. Case Study - Assurance Services - Corporate Social Responsibility Reporting.
Q3. Scenario Question - Accounting Treatments and Audit Evidence - 3 scenarios.
Q4. Audit Reporting - Emphasis of Matters treatments.
Q5. Professional and Ethical matters. Q6. Current Issues - Implications of IFRSs or Auditors' liability
BPP
• Control suggestion and/or evaluation
• Audit evidence on Paper 2.5 accounting areas
• Group audit issues (including audit work on fair values)
• Planning/practice management/quality control issues
• Assurance services
• Reporting
• Ethics, professional and quality control issues
* Identify business risk, suggesting controls to mitigate the risks.
* Planning, risk assessment, long-term contracts.
* Audit evidence on tangible fixed assets (FRS15), provisions (FRS12) and long-term loans.
* Ethical issues – the fundamental principles of integrity and objectivity.
* Corporate social responsibility reporting.
* Audit reports involving significant uncertainty relating to going concern.
* Emphasis of matters treatments.
* Auditors liability or implications of IFRSs.
3.2(UK)
IHT including lifetime and death gifts and the definition of domicile
Trusts – Uses of different types of trust and the tax implications of trustees disposing of chargeable assets held in the trust.
CGT –Assignment of a short lease, gift relief, PPR exemption and Letting exemption, EIS reinvestment relief, overseas aspects.
Income tax computation including Schedule A, employment income (particularly share and share option incentive schemes) overseas aspects (including overseas aspects definition of residency and rules for travelling expenses for employees and their families), donations to charity under gift aid.
National Insurance
Income tax – trading losses for a partnership on commencement/cessation of a business.
Financial planning – sources of finance, lease versus buy, investments including ISAs and pensions (SSAS/ EPP, SIPP) the Financial Services and Markets Act 2000.
Protection products such as life assurance, critical illness insurance, heath insurance, keyperson insurance, intervivos insurance
Corporation tax including IBA, loss relief and group and consortium relief.
Overseas aspects of corporation tax including controlled foreign companies and transfer pricing.
Stamp duty land tax
3.3
Contribution based decision-making
Practical aspects of pricing policy
Performance evaluation – a question based around the examiner’s article dated 5 Sept 2005 – Pyramids and Pitfalls of Performance Measurement
The strategic framework
The learning effect
PAPER 3.3Performance Management
BPP
• Budgeting (short term planning)
• Performance measurement (numerical analysis)
• Performance measurement
• Transfer pricing (which can also include qualitative issues)
• Uncertainty in decision-making.
* Contribution based decision-making.
* Practical aspects of pricing policy.
* Performance evaluation.
* The strategic framework.
* The learning effect.
3.4
Soft systems methodologies – this topic has been examined on a number of occasions and the theory as well as the development of practical questions are required
MacFarlan’s Applications Portfolio – an important management model, an understanding of its application to scenario is a possibility for this sitting
Strategy –application of an IS/IT/IM strategy in the context of a scenario
Porters 3 generic strategies in relation to the development of e-commerce systems or the Internet
Knowledge management – problems of knowledge sharing and solutions within a business context – perhaps relating to knowledge and data workers
Lewins model and managing change – the application of the model and how problems can be reduced in relation to policies which address behaviour.
Reasons for the development of strategy and alignment issues – core topic area – yet to examine the reasons for the development of an IS strategy – alignment issues could be linked to one of the above models g value chain
Globalisation – issues in relation to the setting up of a global organisation with the application of e-commerce
* Strategy models (SWOT, PEST, Porter).
* Nolan's 'Stage Hypothesis'.
* Checkland's 'Soft Systems Methodology'.
* Earl's 'System's Audit Grid' and 'Three Leg' analysis.
* McFarlan's 'Applications Portfolio' and Peppard's adaptation.
* Parson's '6 IS Strategies'.
* Zuboff's 'Automate, Informate, Transformate'.
* The 'Three Stage' change process and 'Unfreeze, Change, Re-freeze'.
* BPR and CSFs.
* Soft and hard approaches.
* Managing change.
3.5
Current position analysis
Ethics
Marketing
Strategic Options
Balanced Scorecard and multidimensional performance measures The role of the accountant in strategic decision making (see the examiner's article in the September addition of student accountant)
PAPER 3.5Strategic Business Planning and Development
BPP
• A discussion of the relative merits of different ways of making strategy
• Stakeholder analysis and objective setting
• Application of strategic analysis models
• Evaluation of strategic objectives, using the numbers included
• Marketing issues
• Marketing, including new product development
• Change management
• Globalisation strategy
• Ethics and corporate social responsibility
3.6
Preparation of a group income statement with either disposal or foreign subsidiary or both! - (though it could be a balance sheet (again) or a cash flow
EPS
Financial instruments
International issues
Reporting of non financial performance e.g. Corporate Social Responsibility, sustainability reporting
PAPER 3.6 Advanced Stage Corporate Reporting
LVMT
• Consolidated profit and loss account including adjustments for disposals and deemed disposals; also goodwill impairment calculation
• Foreign group implementing FRS 23/IAS 21
• Financial reporting in hyper-inflationary economy (FRS 24/IAS 29) and events after the balance sheet date (FRS 21/IAS10)
• Earnings per share (FRS 22)
• Joint ventures and associates (FRS 9/IAS28 & IAS31)
• A combination of different standards in one question possibly involving FRS 21 (IAS 10) OFR, corporate governance and environmental reporting
3.7
Section A:
Risk management: Currency Risk / Interest rate risk
Overseas NPV: Ability to perform a basic overseas NPV/FCF calculation. Including one off cash flows, annuities and perpetuity calculations and the knowledge of the specific issues that relate to foreign direct investment.
Company Valuation: A possible question that requires a valuation under various methods like NAV, DVM, P/E Ratio and FCFs. (maybe within the context of Going Private.) Also review the share for share exchange style questions.
WACC or Risk adjusted WACC calculation within the context of a standard investment appraisal question. However risk adjusted WACC could also be examined within the context of traditional gearing.
Management Buy Outs: Including the review of an existing finance package. Together with a discussion of the advantages and disadvantages of the package.
Section B:
Dividend Policy
Term Structure of Interest rate: possible linked to the calculation of the market value of debt.
International economics – I.M.F., Treasury Management. Balance of payments deficits.
Control of foreign subsidiaries,
Economic Value Added – EVA
Management by Objectives
PAPER 3.7 Strategic Financial Management
BPP
• Overseas investment appraisal
• Free cash flow
• Corporate governance
• CAPM and portfolio theory
• You may have to calculate a Beta Factor from a formula. The formula is not given so it needs to be learnt
• Currency or interest rate risk management
• Mergers and acquisitions
• Corporate restructuring
• Capital structure
• Adjusted Present Value
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