ACCAѧϰÍø£ºwww.52acca.com                    ACCAÂÛ̳£ºbbs.52acca.com




                                      Financial...
ACCAѧϰÍø£ºwww.52acca.com                                   ACCAÂÛ̳£ºbbs.52acca.com




                                ...
ACCAѧϰÍø£ºwww.52acca.com                                      ACCAÂÛ̳£ºbbs.52acca.com
                                 ...
ACCAѧϰÍø£ºwww.52acca.com                                      ACCAÂÛ̳£ºbbs.52acca.com
                                 ...
ACCAѧϰÍø£ºwww.52acca.com                                    ACCAÂÛ̳£ºbbs.52acca.com
                                   ...
ACCAѧϰÍø£ºwww.52acca.com                                        ACCAÂÛ̳£ºbbs.52acca.com
                               ...
ACCAѧϰÍø£ºwww.52acca.com                                           ACCAÂÛ̳£ºbbs.52acca.com
                            ...
ACCAѧϰÍø£ºwww.52acca.com                                          ACCAÂÛ̳£ºbbs.52acca.com


                           ...
ACCAѧϰÍø£ºwww.52acca.com                                                 ACCAÂÛ̳£ºbbs.52acca.com


                    ...
ACCAѧϰÍø£ºwww.52acca.com                                               ACCAÂÛ̳£ºbbs.52acca.com


                      ...
ACCAѧϰÍø£ºwww.52acca.com                                                 ACCAÂÛ̳£ºbbs.52acca.com


                    ...
ACCAѧϰÍø£ºwww.52acca.com                                          ACCAÂÛ̳£ºbbs.52acca.com


                           ...
ACCAѧϰÍø£ºwww.52acca.com                                                ACCAÂÛ̳£ºbbs.52acca.com


                     ...
ACCAѧϰÍø£ºwww.52acca.com                                           ACCAÂÛ̳£ºbbs.52acca.com


                          ...
ACCAѧϰÍø£ºwww.52acca.com                                                ACCAÂÛ̳£ºbbs.52acca.com


                     ...
ACCAѧϰÍø£ºwww.52acca.com                                          ACCAÂÛ̳£ºbbs.52acca.com


                           ...
ACCAѧϰÍø£ºwww.52acca.com                                                  ACCAÂÛ̳£ºbbs.52acca.com


                   ...
ACCAѧϰÍø£ºwww.52acca.com                                              ACCAÂÛ̳£ºbbs.52acca.com


                       ...
ACCAѧϰÍø£ºwww.52acca.com                                              ACCAÂÛ̳£ºbbs.52acca.com


                       ...
ACCAѧϰÍø£ºwww.52acca.com                                            ACCAÂÛ̳£ºbbs.52acca.com


                         ...
ACCAѧϰÍø£ºwww.52acca.com                                              ACCAÂÛ̳£ºbbs.52acca.com


                       ...
ACCAѧϰÍø£ºwww.52acca.com                                           ACCAÂÛ̳£ºbbs.52acca.com


                          ...
ACCAѧϰÍø£ºwww.52acca.com                                               ACCAÂÛ̳£ºbbs.52acca.com


                      ...
ACCAѧϰÍø£ºwww.52acca.com                                          ACCAÂÛ̳£ºbbs.52acca.com


                           ...
ACCAѧϰÍø£ºwww.52acca.com                                              ACCAÂÛ̳£ºbbs.52acca.com


                       ...
ACCAѧϰÍø£ºwww.52acca.com                                           ACCAÂÛ̳£ºbbs.52acca.com


                          ...
ACCAѧϰÍø£ºwww.52acca.com                                                 ACCAÂÛ̳£ºbbs.52acca.com


                    ...
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Financial Reporting
Upcoming SlideShare
Loading in...5
×

Financial Reporting

3,396

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
3,396
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
62
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Financial Reporting

  1. 1. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Financial Reporting Part 2 Paper 2.5 Study Text Edition July 2005 AH05 – 25 ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com © BPP Professional Education 2005 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  2. 2. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com We want to help you pass. Your BPP team for Paper 2.5 Financial Reporting Mary Maclean Janice Ross Katy Hibbert We are here to answer the technical and study queries that you have as you progress through the course. We will always reply to you promptly. E-mail us on accaqueries@bpp.com or fax us on 020 8740 2293. Alternatively call us during working hours on 0845 0751 100 (UK only, local rate) or +44 (0)20 8740 2233 if calling from outside the UK, or leave a voice message on our overnight message service. ACCAÊéµê£ºshop.52acca.com Please help us to save both you and BPP time by giving us details of which paper ACCA²©¿Í£ºblog.52acca.com you are studying, which piece of material you are using, such as Study Text, Revision Kit or Passcards, and which page or question number you are looking at. Give us details of who you are and your work and home numbers. Tell us if there are any times we will not be able to reach you. If you have any course administration queries, such as amending exam submission dates, then please call 0845 0751 100 (UK only, local rate) or +44 (0)20 8740 2233 if calling from outside the UK. We look forward to seeing you progress through the course. ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  3. 3. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Text Edition: July 2005 FINANCIAL REPORTING 1 Introduction This Home Study course will guide you through the July 2005 edition of the BPP Study Text. This June 2005 edition is for exams in December 2005 and June 2006. If your Study Text does not have that date on the back cover, please contact BPP. 2 Using the BPP Home Study (a) The Study Programme is made up of 23 Study Periods, which BPP has graded as high, medium or low priority, based upon guidance from ACCA and the examiners. Each Study Period consists of the following elements. (i) Exam Guidance This gives an introduction to each Study Period by explaining the emphasis that the examiner has placed on the topics to be covered on the basis of the pilot ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com paper, past exams and discussions with BPP authors and tutors. (ii) Guidance through the Study Text Here you are given important instructions on how to work through the BPP Study Text. You must follow the guidance in this table for time effective study, as you will be told which areas of each chapter must be worked through in detail and which can be skimmed over. The table contains essential points, summarising the most vital areas of the Study Period. (iii) Were you awake? These are brief questions on the essential points, designed to test whether you were concentrating. You MUST get these questions right! If not you'll need to go back and study the material again. There is space for you to add your own notes as you study the Text. (iv) Common Pitfalls To help your question practice and revision, we give you guidance on the most common mistakes made by students on key areas. (v) Learning Resource Centre For further help with study and revision, we refer you to the relevant sections on BPP's i-Pass CD-ROM and BPP's i-Learn CD-ROM. Each Study Period should take about 2½ hours. There is an overview of all Study Periods, on page (v), which can be used to set up a timetable. The annotated Study Programme will become a key document in your revision phase. (i) ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  4. 4. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Text Edition: July 2005 (b) Some of the Study Periods are 'progress tests' which assess the work done on a limited number of Study Periods. You should mark the tests yourself using the solutions at the end of the Study Programme. (c) You also have two Course Examinations. These should be attempted at the point suggested within the Study Programme (they cover all preceding Study Periods) and sent to BPP for marking. You will receive a detailed analysis of your performance, together with suggested solutions, which should help your exam technique as well as pointing out strengths and weaknesses in your understanding. To help you plan your study time, BPP will send you separately an Exam Timetable with recommended dates for submission of the exams. Should these dates prove impractical, please feel free to amend them to suit your own planned schedule. However the date given for Course Exam 2 is the latest date by which we can guarantee to get the scripts back in time for the exams. To gain the greatest benefit from the exams, you must set aside a period of three hours during which you will have no interruptions. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com By submitting these exams, you will increase your chances of passing the real exams by 30%. (d) If you have any difficulty with your studies, e-mail us at accaqueries@bpp.com. Alternatively, please telephone, fax or write to the Customer Services Administrator at BPP who will pass your query to one of our authors and tutors. Please help us to save both your time and BPP time by giving us the following details about your query. • Paper name/number • Material reference and version (eg Study Text 2005, Revision Kit 2006) • Page or question number • A brief description of your query Remember to include your name, student number and a contact number if necessary. Please make your query as specific as possible. 3 BPP's i-Pass CD ROM Your home study course includes BPP's i-pass CD-Rom, which is designed to test knowledge and perfect exam technique. It enables you to attempt tests, making it an ideal revision tool. Paper 1.1 and 1.2 computer-based exams. BPP i-Pass for these two papers provides an exam-like environment with testing against the clock. Regular practice will ensure you're ready for the real thing. BPP i-Pass for 1.3 and Part 2 papers provides an opportunity to test and revise your knowledge of important syllabus areas. BPP i-Pass for Part 3 papers enable you to test and revise your knowledge - and your ability to apply this knowledge. (ii) ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  5. 5. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Text Edition: July 2005 i-Pass queries To help us answer any BPP i-Pass queries you have quickly and effectively, please follow the steps below. (This procedure is necessary as questions appear in a different order each time the CD is used). Step 1. With the question you wish to query on-screen, push the Print Scrn (Print Screen) button on your keyboard (usually located to the right of the F12 key). This will copy the image of the question to your computer's 'clipboard'. Step 2. Start Microsoft Word. (You can do this while i-Pass is running – click on the start button, then select Microsoft word from the programs option.) Step 3. Paste the image from the clipboard into a new Word document. Do this by selecting Edit, Paste – or by using the Paste button on the Word toolbar. Step 4. Save the document with a meaningful name, eg iPass_Paper1.2_query.doc (or better still use the number referred to in Step 5 below in the document name, excluding the /s). Step 5. E-mail the document, with details of your query, to accaqueries@bpp.com. If you ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com make contact by phone, the person dealing with your query will ask you to e-mail or post a copy of the document to them. If possible, in the detail of your query please include the reference number that appears very faintly on-screen in the white area below the 'Exit' option - for example 02/CO/0134. 4 Learning to Learn Accountancy Whether you are about to start your studies or continuing them, BPP's Learning to Learn Accountancy will help you learn efficiently and effectively. It also provides essential guidance on dealing with your exam. If you did not request this when ordering your Home Study Course you should contact Customer Services on 0845 0751 100 (UK only, local rate) or +44 (0)20 8740 2233 if calling from outside the UK. (Only one copy per student – it can be used again and again throughout your course.) 5 Revising with the BPP Home Study Course For your revision phase, your Home Study Course includes the following. (a) The BPP Practice and Revision Kit, which contains past paper questions and other useful practice questions. The Kit also contains Revision Guidance which highlights the key questions to attempt to maximise your chances of exam success. (b) The Study Programme, where the Essential Points and Common Pitfalls will serve as a reminder of the work you did in each Study Programme. (c) The BPP Passcards, which give short summaries of the content of each chapter of the Text. Revision should not start until you have completed your second course examination. (iii) ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  6. 6. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Text Edition: July 2005 6 Feedback The success of BPP's courses has been built on what you the students tell us. Towards the end of your course you will be sent a feedback form to complete and return. If you have any issues or ideas before you are given the form to complete, please contact the course administrator, on 0845 0751 100 (UK only, local rate) or +44(0)20 8740 2233 (overseas) or via e-mail at accaqueries@bpp.com. 7 Overview of Financial Reporting The paper aims to test your ability to: • Appraise and apply specified accounting concepts and theories to practical work place situations • Appraise and apply the regulatory framework of financial reporting • Prepare financial statements for different entities to comply with the specified ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com International Accounting Standards and other related pronouncements • Prepare group financial statements (excluding group cash flow statements) to include a single subsidiary and possibly an associated company or joint venture • Analyse, interpret and report on financial statements (including cash flow statements) and related information to a variety of user groups • Discuss and apply the requirements of other specified International Accounting Standards • Demonstrate the skills expected in Part 2 How to use your Study Text The cornerstone of your studies is the BPP Study Text. The front pages give essential guidance on how to use the Text and vital information on study skills. Before you go any further, look at the front pages of your Study Text. They are there to help. Step 1 Read the section: Help yourself study for your ACCA exams. Read and apply the study skills section. Consider your style of learning and try to develop a personal study plan. Step 2 Look at the syllabus, to see what you're up against. Step 3 Look at the topics that have been examined in the past, in our analysis of past papers. (iv) ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  7. 7. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Text Edition: July 2005 STUDY PERIOD PLANNER Use this schedule and your exam timetable to plan the dates on which you will complete each study period. The letters 'H' ‘M’ and 'L' tell you whether the topic is high, medium or low priority. Detailed guidance and prioritisation of each study period begins overleaf. Study Topic Due Date Study Topic Due Date Period Period 1 Review of basic M 12 Progress Test 1 H accounting concepts and the regulatory 13 Hire purchasing and H framework Leasing 2 Companies Act H 14 Stocks and work in H requirements and progress accounting policies 15 Taxation in company M 3 Reporting financial H accounts performance – FRS3 16 Earnings per share H ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com 4 Theoretical aspects of L 17 Cash flow statements H accounting 18 Liabilities and H 5 Fixed assets: tangible H provisions; reporting assets the substance of 6 Fixed assets: H transactions intangible assets and 19 Share capital and M investments reserves; financial 7 Constitution of a M instruments group 20 Distributable profits M 8 Consolidated balance H and capital sheet: basic transactions principles 21 Related parties; M 9 Acquisition of H segmental subsidiaries information 10 Consolidated profit H 22 Interpretation of H and loss account financial statements 11 Associates and joint H 23 Progress Test 2 H ventures COURSE EXAM 1 COURSE EXAM 2 A practice exam covering Study Periods 1–12. A mock exam covering the whole syllabus. REVISION PHASE Your revision, using the questions and revision guidance in the BPP Passcards and the BPP Practice and Revision Kit, will begin when Course Exam 2 is complete. This should, at the latest, be four weeks before the final exam. (v) ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  8. 8. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com APPROACHING FINANCIAL REPORTING Your examiner Steve Scott is an experienced ACCA examiner. He was the examiner for the forerunner of this paper – Accounting and Audit Practice. The examiner's approach is to achieve a broad coverage of the syllabus and avoid a focus on being able to succeed by learning a few topics better than others. So the question mix is therefore likely to comprise bigger questions and many smaller questions. His exam papers are practical and up to date. ACCA examinations in general, and Paper 2.5 in particular, tends to have a practical flavour and is inevitably topical and up to date. You should therefore be aware of the issues affecting the current financial reporting climate – mis-reporting of earnings, choice of accounting policies and estimation techniques, solvency problems, off balance sheet arrangements and inflated market prices. You will be expected to keep abreast of developments by reading financial and accounting press. Exam Format Number of marks ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Section A: One compulsory question 25 Section B: Choice of 3 from 4 questions (25 marks each) 75 100 The examination is a three hour paper in two sections. It will contain a mix of computational and discursive elements. Some questions will adopt a scenario/case study approach. The Section A compulsory question will be the preparation of group financial statements, and may include a small related discussion element. Computations will be designed to test an understanding of principles. At least one of the optional questions in Section B will be a conceptual/discursive question that may include a simple illustrative numerical element. An individual question may often involve elements that relate to different areas of the syllabus. For example a published financial statements question could include elements relating to several accounting standards. In scenario questions candidates may be expected to comment on management's chosen accounting treatment and determine a more appropriate one, based on circumstance described in the question. Another popular line of questioning is to link the impact of given transactions to accounting ratios or to discuss a given accounting treatment in relation to a conceptual framework. Questions on topic areas that are also included in Paper 1.1 will be examined at an appropriately greater depth in Paper 2.5. Some Accounting Standards are very detailed and complex, particularly recent ones. At Paper 2.5 candidates need to be aware of the principles and key elements of these Standards. You will also be expected to have an appreciation of the background need for an accounting standard and what reporting issues they address. Also you should be aware that questions involving knowledge of new examinable regulations will not be set until at least six months after the last day of the month in which the regulation was issued. The Study Text provides more detailed guidance on the syllabus. Examinable documents are listed in the 'Exam Notes' section of the Student Accountant, as well as on the ACCA website. Finally good luck with the course and please do not hesitate to contact BPP tutors for further study guidance or to resolve any technical problems. 1 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  9. 9. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 1 Review of basic accounting concepts and the regulatory framework Priority = Medium Examined: 12/04, 6/05 Date due: Exam Guidance You need to be able to discuss the characteristics of useful accounting information, explain the regulatory system of accounting and discuss the notion of GAAP and a conceptual framework. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Exam focus point The December 2004 Exam had a discussion question on the ASB and the standard setting process. The June 2005 exam had a question on IFRS1. Guidance through the Study Text These topics are covered in Chapter 1 Review of basic accounting concepts, Chapter 2 The regulatory framework and Chapter 21 The ASB's Statement of Principles. Section Approach Essential points Chapter 1 1–8 The topics covered by this chapter are likely to • Conceptual framework constitute light direct testing in an exam. However, • Objectives of financial statements they provide the platform for later chapters. Read, • Elements of financial statements developing a sound awareness of the points • Recognition and measurement covered. Chapter 2 1–8 This is effectively another background chapter. • Regulatory bodies Read through it, highlight any key points you • ASB standards and development consider important/difficult to develop a general process awareness of the regulatory framework and little • Convergence and IFRS 1 GAAP. • FRSSE Convergence is now a major issue, with changes from 1 Jan 2005. Note IFRS 1 and the latest FRSSE Chapter 21 1 Read, highlight and develop grasp of chapter • Contents of the SoP chapters contents for future reference to syllabus topics. Try Questions 1, 2 & 25 in the Exam Question Bank of your Study Text 2 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  10. 10. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 1 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. List the objectives of a conceptual framework. State the objectives of financial statements. List the steps in developing an accounting standard. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com What body develops international financial reporting standards? Common Pitfalls • Ignoring the importance of the Statement of Principles and not being able to link up to the principles in written questions where relevant • Forgetting to include basic concepts in written questions on other SSAPs or FRSs • Not understanding modern approach to prudence • Not learning the ASB standards setting process • Not ensuring that 'neutrality' is appropriately taken into consideration Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Framework for Test your knowledge BPP i-Pass * Financial Statements Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want this product, visit: www.bpp.com/acca 3 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  11. 11. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 2 Companies Act requirements and accounting policies Priority = High Examined: Pilot Paper, 12/01, 6/02, 6/03 Date due: Exam Guidance You should be able to explain the legal background to limited companies and state the requirements regarding the preparation of annual accounts and the uses of prescribed formats. The examiner also expects you to be able to describe the content and effect of the main accounting provisions of company law and prepare accounts in accordance with prescribed formats. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Exam focus points Issues surrounding the choice of accounting policies and estimation techniques is particularly pertinent within the current financial reporting climate. The December 2001 paper sought a discussion of the circumstances when a company should change its accounting policies plus the accounting entries giving effect to a change in accounting policy. The June 2003 exam required candidates to assess whether a given scenario represented a change of accounting policy. Guidance through the Study Text These topics are covered in Chapter 3 Companies Act requirements and the format of accounts. Section Approach Essential points 1&2 Ensure you are aware of why SSAP 2 was withdrawn • Relegation of prudence and and replaced with FRS 18 and where it is different, consistency albeit subtly. • FRS 18 and SoP • Neutrality and true and fair 3 Read, highlight and summarise. • Interpretation • Override disclosures 4 This is basic knowledge which you must take on • Documents in accounts board. • Classification of companies 5 Review and learn formats. Unfortunately there is no • Formats and layout magic bullet you can use to acquire this very essential knowledge. Look at published accounts if it helps. 6 Again no need to learn these requirements. • Notes 7&8 Learn in overview only. Try Question 3 in the Exam Question Bank of your Study Text 4 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  12. 12. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 2 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. What is an accrual? How should tensions between accruals and prudence be resolved, applying the spirit of FRS 18? How might the concept of prudence be used albeit inappropriately, to smooth a company's earnings? ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Give an example of: (a) Estimation technique (b) Measurement basis Common Pitfalls • Not learning the formats of the balance sheet and the profit and loss account • Not applying good exam technique by drawing proformas, dealing with the easy issues (marks) first. Grab the easy marks and build your confidence • Not being able to deal with a number of SSAPs or FRSs within an accounts preparation question • Not dealing properly with basics such as dividends, post balance sheet events, accounting policy changes • Lack of practice of accounts preparation questions under exam conditions • Not understanding the basic reasons for the various notes to the accounts Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Framework for Test your knowledge BPP i-Pass* Financial Statements Learn interactively BPP i-Learn/BPP Learn Online Module 1 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 5 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  13. 13. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 3 FRS 3 – Reporting financial performance Priority = High Examined: Pilot Paper, 12/01, 6/02, 12/02, 6/03, 12/03 Date due: Exam Guidance In his guidance on the syllabus the examiner stated that students should be able to discuss the requirements of FRS 3, explain the problems associated with the definitions of extraordinary and exceptional items and discontinued activities. You may also be asked to prepare financial statements and disclosure notes in accordance with FRS 3. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Exam focus point An extremely popular exam topic which appears regularly in papers, particularly in respect of the structure of the profit and loss account, continuing and discontinued activities, STRGL, and reconciliation of movements in shareholder funds and note of historical profits and losses. The June 2003 and December 2003 accounts preparation questions included, a STRGL. Guidance through the Study Text These topics are covered in Chapter 9 Earnings per share and reporting financial performance. Section Approach Essential points 2 Read once quickly, highlighting key points. • Exceptional v extraordinary then go through it learning the FRS 3 format • Types of exceptionals and working through the questions carefully • P&L structure and thoroughly. • Discontinued activities • STRGL • Movement in shareholders funds • Historical profits and losses Try Question 6 in the Exam Question Bank of your Study Text 6 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  14. 14. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 3 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. Identify three categories of exceptional items that must be disclosed separately on the face of the profit and loss account. What statements, reconciliations and notes has FRS 3 introduced? ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Give an example of an extraordinary item, if you can. Common Pitfalls • Unfamiliarity with relevant definitions and criteria for discontinued activities • Not knowing formats for the P&L and additional statements • Failure to understand the implication of a prior period adjustment • Not being able to identify exceptional items and lack of grasp of how these are disclosed in the P&L account • Mixing up the additional statements and having a lack of understanding what to disclose in each statement • Not being able to explain in a more discursive question the reasons for this standard Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Test your knowledge BPP i-Pass* FRS 3 Learn interactively BPP i-Learn/BPP Learn Online Module 7 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 7 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  15. 15. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 4 Theoretical aspects of accounting Priority = Low Examined: 6/03 Date due: Exam Guidance You should be able to explain the concepts of current purchasing power and current cost accounting (calculations based on these concepts are only examinable to a very basic level). The examiner also expects you to have a basic understanding of the following: • Comprehensive income • ACCAÊéµê£ºshop.52acca.com Fair value ACCA²©¿Í£ºblog.52acca.com These are current issues which could appear in a discussion question. Exam focus point The June 2003 paper required candidates to explain the problems that can be encountered when users rely on financial statements prepared under the historical cost convention for their information needs. The June 2003 exam also asked candidates to calculate the depreciation charge for the plant of a company (based on year-end values) and its balance sheet carrying values using three bases: historical cost, current purchasing power and current cost. Guidance through the Study Text These topics are covered in Chapter 20 Theoretical aspects of accounting. Section Approach Essential points 1 Read through fairly quickly, developing • Comprehensive income 2 sufficient awareness for a small question. • Fair value 3 Go through carefully. • CPP 4 Work through this section carefully. • CCA 5 Work through this section carefully. • Advantages and disadvantages of historical cost accounting Try Question 24 in the Exam Question Bank of your Study Text 8 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  16. 16. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 4 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. What does ‘comprehensive income’ refer to? State two situations in which ‘fair value’ is applied. What are the adjustments that need to be made to produce current cost accounts? ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Explain why we still use historical cost accounting. Common Pitfalls • Spending too much time getting to grips with the numbers and calculations • Not being able to explain the differences between CPP, CCA and HCA • Not being able to state advantages and disadvantages of each Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Interpreting company Test your knowledge BPP i-Pass * accounts and Inflation accounting BPP's Learning to Learn Accountancy Improve your study skills book* * Included within your Home Study course If you want this product, visit: www.bpp.com/acca 9 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  17. 17. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 5 Fixed assets: tangible assets Priority = High Examined: 12/04, 6/05 Date due: Exam Guidance As well as having a knowledge of the requirements of FRS 15, the examiner expects candidates to be able to describe alternative ways of treating capital based government grants received, apply the provisions of SSAP 4, distinguish the treatment of investment properties from other properties and explain the provisions of SSAP 19. Accounts preparation questions might include a revaluation and the depreciation; also how to account for gains and losses on disposal of revalued assets. These standards are likely to be incorporated as parts of bigger questions. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Exam focus point The June 2003 paper asked candidates to discuss whether a given company's policy for the treatment of government grants accorded with the ASB's Statement of Principles. The December 2003 exam had a 5 mark question on depreciation of plant. The December 2004 exam had part of a question (13 marks) on dealing with fixed asset transactions and the June 2005 paper had part of a question on self-constructed assets. Guidance through the Study Text These topics are covered in Chapter 4 Fixed assets: tangible assets. Sec. Approach Essential points 1 Read and understand statutory requirements. • Historic cost v alternative accounting rules • Uses of revaluation reserve 2 Read, highlight and annotate text. Work through • Finance costs questions carefully. You need to be able to deal • Self-constructed assets with basics such as self constructed assets and the • Subsequent expenditure rules for capitalisation of subsequent expenditure. • Depreciation 3 This is a key section. Read and work through the • Valuation basis questions and examples, especially Moggy Ltd and • Treatment of gains and losses Kevin Ltd which are very comprehensive. • Depreciation on revalued assets • Gains and losses on disposal 4 Read briskly, work through and understand the • Key term questions. You will need to identify an investment • Accounting treatment property and account for it correctly. 5 Work through example and questions quickly. • Treatment of capital based grants Try Question 4 in the Exam Question Bank of your Study Text 10 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  18. 18. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 5 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. How should abnormal costs incurred In the process of producing a fixed asset be treated? If it is the policy to capitalise finance costs, when should this start? Define: (a) Recoverable amount (b) Net realisable value (c) Value in use ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Explain what you understand by an IGU. Explain how an impairment loss should be allocated. Common Pitfalls • Failure to apply the provisions of SSAP 19 to investment properties • Not having a solid knowledge of FRS 15 • Not knowing basics such as what expenses should be expensed or capitalised • Not being able to calculate depreciation on a revalued asset or correctly calculate the gain/loss on disposal of a fixed asset • Failure to deal properly with the revaluation and depreciaton of leased property. • Not being fully au fait with the indicators of impairment • Failure to distingush owner-occupied and investment properties and apply the correct accounting treatment Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Fixed assets and Test your knowledge BPP i-Pass* stock Learn interactively BPP i-Learn/BPP Learn Online Module 2 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 11 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  19. 19. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 6 Fixed assets: intangible assets and investments Priority = High Examined: 12/03, 6/04 Date due: Exam Guidance In his guidance on the syllabus, the examiner stated that students needed to be able to explain the requirements of current accounting standards regarding goodwill and intangible assets, principally FRS 10. You need to understand the provisions of SSAP 13 on accounting for research and development. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Also be able to discuss the requirements of FRS 11 on the impairment of fixed assets and goodwill. FRS 11 has come up in the past as part of a discursive question, along with applications of the standard to specific scenarios. Exam focus point The December 2003 exam had a consolidated balance sheet question including negative goodwill. The June 2004 exam had a 25 mark question on FRS 10. Guidance through the Study Text These topics are covered in Chapter 5 Fixed assets: intangible assets and investments. Section Approach Essential points 1 Quick read will do. 2 Read and ensure you have a good go at • Criteria for capitalisation of development the questions. expenditure 3 Read highlight and annotate text. Make • Initial recognition 4 sure you work through the diagrams • Amortisation and impairment and questions. As mentioned above, this • Revaluation is a key area. • Negative goodwill 5 Another key section to be worked • Indicators of impairment through thoroughly. Ensure you are • Process of identifying new carrying value fully aware of the indicators of • IGUs impairment as well as being able to • Allocation of impairment loss allocate an impairment loss. 6 A brisk review is likely to suffice. Try Questions 5 & 6 in the Exam Question Bank of your Study Text 12 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  20. 20. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 6 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. Fill in the mnemonic: S E C T O R Identify three internally developed intangibles which might justify being capitalised. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com How should negative goodwill be treated? Common Pitfalls • Failure to address the key issues in a discursive question • Not knowing where to take an impairment through the accounts (eg P&L or reserves) • Not being able to apply FRS 11 to specific scenarios • Failure to understand the different implications between inherent, purchased goodwill, internally generated intangibles etc Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Test your knowledge BPP i-Pass* Fixed assets and stock Learn interactively BPP i-Learn/BPP Learn Online Module 10 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 13 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  21. 21. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 7 Constitution of a group Priority = Medium Examined: 6/03, 12/04 Date due: Exam Guidance The examiner expects you to be able to explain the requirements of the Companies Acts and FRS 2 regarding groups. Question 1 is likely to be a computational question, based on a set of trial balances, from which a set of group accounts must be prepared. There may be a small discursive element. Markers of past papers have intimated that they felt the mark schemes for group accounts ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com questions were a little on the generous side. So you need to be prepared for more marks being focused on the more complex areas of an answer. The smaller marks are of course still worth having in your challenge of clocking up at least fifty marks! Exam focus point Group accounting is an important area for Paper 2.5 as Question 1 will always be a groups question, therefore it is vital that you make sure you understand the basic principles before moving on. The June 2003 paper required candidates to suggest why reliance on the entity financial statements of a subsidiary may mislead a potential purchaser of the company. The December 2004 exam required an explanation of why consolidated accounts are useful to users. Guidance through the Study Text These topics are covered in Chapter 15 Constitution of a group. Section Approach Essential points 1 Read and ensure you understand the definitions because • Key terms they go to the heart of group accounts. 2 Read, learn and be ready to apply. This lends itself neatly • Mandatory v optional to a part question. exclusions 3 Ensure you remember and can apply the thresholds. • Size criteria 4 Read and summarise. • Typical package • Co-terminous APs 5 Although you will not get a group with more than a single subsidiary, work through and understand the various structure. You do not need to know these off pat, but they form the essential building blocks for successful study and completion of group accounting questions. Try Question 17 in the Exam Question Bank of your Study Text 14 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  22. 22. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 7 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. Are the expressions 'holding company' and 'parent undertaking' interchangeable for financial reporting purposes? Explain your response. Define 'control ' for group accounting purposes. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com List the five categories of circumstances whereby a subsidiary might be mandatorily or optionally excluded from consolidation. Common Pitfalls • Assuming a holding of > 50% of ordinary shares indicates dominant influence. This may not be the case if more than 1 class of share is in issue, each class having different voting rights attached. Control of the voting rights must be held. • Not being aware of when a subsidiary is mandatorily or optionally excluded from the preparation of group accounts • Overrunning on your time for the group accounts question. Build up speed so you can complete in good time and do justice to the other questions. Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Acquisition accounting – General Test your knowledge BPP i-Pass* principles and balance sheet Learn interactively BPP i-Learn/BPP Learn Online Module 2 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 15 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  23. 23. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 8 Consolidated balance sheet: basic principles Priority: High Examined: 6/04, 6/05 Date due: Exam Guidance The examiner expects you to be able to prepare a consolidated balance sheet for a simple group, accounting for goodwill and minority interest as well as intra group transactions. In addition the examiner has stated that he will not set a question incorporating more than one subsidiary. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com It is not possible to 'rote learn' consolidation – you must ensure you understand the process involved. Exam focus points The first question on the paper always deals with group accounts and is most likely to include a consolidated balance sheet. The group accounts question in the June 2002 tested intra group transactions and unrealised profit in stock. The treatment of goodwill arising on consolidation was also tested. These aspects tend to recur in group accounts questions. The June 2003 paper required candidates to eliminate unearned profit in stocks and explain why it is necessary to eliminate unrealised profits when preparing group financial statements. June 2004 and June 2005 papers both had a compulsory consolidated balance sheet question. Guidance through the Study Text These topics are covered in Chapter 16 Consolidated balance sheet: basic principles. Section Approach Essential points 1–8 You need to develop a good grasp of the • Cancellation process basic principles of consolidation and this • Calculation of minority interest will involve you working through the • Goodwill arising on consolidation contents of this chapter methodically and • Pre vs post-acquisition profits diligently. Work through all the questions and examples until you have the key • Unrealised profit in stock learning points at your fingertips. • Unrealised profit on fixed asset transfers Try Question 18 in the Exam Question Bank of your Study Text 16 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  24. 24. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 8 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. What happens to the share capital of a subsidiary on consolidation? How do you calculate minority interests? Summarise the rules for accounting for goodwill arising on consolidation ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com An 80% owned subsidiary invoices its parent for goods provided at £1,500, original cost £1,000. At year end the parent has only sold half of these goods. What consolidation adjustments are required? Common Pitfalls • Not showing 100% of what you control • Ignoring the split between pre and post acquisition reserves • Forgetting to take group share only of 'net assets acquired' in the goodwill calculation • Forgetting to cancel out intercompany balances before consolidation • Skimming through the chapter! • Not attempting ALL questions Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Acquisition accounting – General Test your knowledge BPP i-Pass* principles and balance sheet Learn interactively BPP i-Learn/BPP Learn Online Module 3 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 17 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  25. 25. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 9 Acquisition of subsidiaries Priority: High Examined: 6/02, 12/02, 6/03 Date due: Exam Guidance The examiner expects you to be able to show the effect on a consolidated balance sheet of an acquisition of a subsidiary during its accounting period and understand the basic principles and disclosure requirements as set out in FRS 7. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com The examiner has also stated that disposals will not be examined in group accounting. Exam focus points FRS 7 is very important and will be included in most consolidation questions. However, it is likely to be tested as part of a question rather than on its own. The group accounts question in the June 2002 exam included a fair value adjustment. The December 2002 and June 2003 papers involved an acquisition of a subsidiary part way through the year. This is a popular requirement favoured by examiners. The June 2005 exam asked for consolidated balance sheet extracts including a fair value adjustment. Guidance through the Study Text These topics are covered in Chapter 17 Acquisition of subsidiaries. Section Approach Essential points 1 Read through quickly and then work through • Identifying cut off for splitting example and question carefully. profits pre v post acquisition 2 Read and understand issues re dividends from • Treatment of pre-acquisition pre-acquisition profits. This is a dividend controversial area and you need to be aware • Theory v practice of the issues involved and what is current best practice. 3 FRS 7 is a key area and lends itself to both • Dealing with the major numerical and discussion questions. Ensure categories you understand the thinking behind the • Businesses held with view to standard. Complete the questions carefully. subsequent resale Try Questions 19 & 20 in the Exam Question Bank of your Study Text 18 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  26. 26. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 9 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. Explain how pre- and post acquisition profits of a subsidiary should be calculated. Explain how best practice relates to Companies Act requirements regarding the treatment dividends paid out of pre-acquisition profits. Describe what you understand by a fair value adjustment. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com State the FRS 7 guidance for how fair values should be assessed for the following categories of items. (a) Tangible fixed assets (b) Intangible assets (c) Closing stocks Common Pitfalls • Miscalculation of pre and post acquisition profits • Mistreatment of dividends paid out of pre acquisition profits • Not being able to deal with fair values at acquisition and post acquisition Any problems? Email accaqueries @bpp.com or phone us. Learning Resource Centre What do you want to do? How to do it! Reference Acquisition accounting Test your knowledge BPP i-Pass* – General principles and fair values Learn interactively BPP i-Learn/BPP Learn Online Module 4 Improve your study skills BPP's Learning to Learn Accountancy book* * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca 19 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com
  27. 27. ACCAѧϰÍø£ºwww.52acca.com ACCAÂÛ̳£ºbbs.52acca.com Study Period 10 Consolidated profit and loss account Priority = High Examined: 12/04 Date due: Exam Guidance In his guidance on the syllabus the examiner stated that students needed to be able to prepare a consolidated profit and loss account for a simple group and show the effect on a consolidated profit and loss account of an acquisition of a subsidiary during an accounting period. ACCAÊéµê£ºshop.52acca.com ACCA²©¿Í£ºblog.52acca.com Look out for mid-year acquisitions when doing a consolidated profit and loss account as this was frequently examined under the old syllabus. Exam focus point An area which demonstrates your group accounting skills. Beware of mid year acquisitions which has come up frequently in the past. Note that merger accounting is no longer in the syllabus. The December 2004 exam had a compulsory consolidated profit and loss account question. Guidance through the Study Text These topics are covered in Chapter 18 The consolidated profit and loss account. Section Approach Essential points 1 You need to go through this chapter slowly and • Ensure you deal properly with meticulously and make sure that you have the inter-company transactions techniques totally buttoned down by working • Inter-company dividends through the questions and examples • Pre-acquisition profits Try Question 21 in the Exam Question Bank of your Study Text 20 ACCA Learning Web£ºen.52acca.com ACCA Forum£ºforum.52acca.com

×