ACCA Exam Tips December 2010 (BPP)

BPP released their exam tips for December 2010

All these are merely intelligent guesses, not 100% accurate. Use it wisely. May the force be with you!

Operation of judicial precedent
Implied legal intention in contract formation
Tort of negligence – breach of duty of care
Breach of contract and remedies
Directors’ duties
Insider dealing

Specialist Cost and Management Accounting Techniques: ABC, Throughput Accounting & Target Costing have featured recently. Be prepared to discuss techniques such as ABC compared to traditional costing techniques such as Absorption Costing.
Decision making techniques: Relevant costing, linear programming and risk & uncertainty have been examined recently; pricing can be combined with other parts of the syllabus.
Budgeting: Learning curves have featured most regularly to date. Discussion marks may look at the appropriateness of budgeting types or the behavioural impacts of types of budgeting. Numerical elements in a budgeting question could include flexed budgets or time series analysis.
Standard costing & variance analysis: Mix & yield variances, planning & operating variances and operating statements have been examined. Be prepared to discuss performance, and whether variances are an indicative measure of good / bad performance.
Performance Measurement and Control: Questions focusing on interpretation of performance, and financial vs. non financial measures have featured on all papers to date. Questions could focus on the public sector, divisional performance measures such as ROI / RI or a discussion of the impact on performance of various transfer prices.

Income tax involving employment income and national insurance contributions
Corporation tax involving a long period of account
Husband and wife disposing a number of different assets including chattels, inter-spouse transfers, entrepreneurs’ relief
Sole trade commencing trade and then changing their accounting date
Income tax losses

Q1 (25 marks): Consolidated SOCI and/or SOFP with one subsidiary plus associate (including adjustments for fair values, unrealised profit, intragroup trading, goods/cash in transit, other syllabus area). In addition, there is also a discursive part (b) on reasons for adjusting for unrealised profit or other group topic.
Q2 (25 marks): Accounts restatement/preparation with adjustments e.g. depreciation, current/deferred tax, inventory valuation, leases, substance over form issues, financial instruments (change in FV or amortised cost), revaluations, share issues or government grants. May include discontinued operation, EPS calculation or SOCIE with a prior period adjustment
Q3 (25 marks): Interpretation and/or statement of cash flows, perhaps with written part on aims of not-for-profit entities. Interpretation may focus on limited ratios and their interpretation (e.g. liquidity); sections of a statement of cash flows (rather than whole statement) may be tested
Q4 & Q5 (15 & 10 marks): One question in context of conceptual framework, and the other containing one or two discrete topics; the possibilities include: regulatory framework, inflation, government grants, discontinued operations, impairments, deferred tax, leases, intangible assets, or provisions

Audit planning (analytical procedures)
The assessment of audit risk
Audit procedures (both substantive and tests of control) relevant to key audit assertions
Not for profit organisations
Subsequent events
Audit reporting and materiality

Working capital: this has always been a favourite theme; questions on inventory management and receivables management are likely here. Make sure that you are comfortable with using working capital ratios to calculate inventory, receivables, payables and cash balances
Investment decisions: this exam normally contains a question involving net present value (NPV), often with tax and inflation. Remember that you may need to calculate a weighted average cost of capital before you calculate an NPV.
Sources of finance: this is a topical area, we would expect a part question on financing problems covering gearing issues and problems for small-medium sized companies. Ratio analysis is likely to feature here.
Business Valuations: this area is commonly tested and is a core syllabus area. You should note that in recent sittings the examiner has looked to combine 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. Make sure that you are also able to value debt.
Financial environment & risk management: recent exchange rate and interest rate volatility could impact on a company’s financial management plans – a part question on this area could be set, with further discussion and calculations on hedging techniques.

The topic of stakeholders was examined in June but remains a key area.
Over the last few months the role of the board of directors has remained at the forefront of the news.
You may be asked to identify and categorise some key risks in a scenario.
You should make sure that you can discuss and apply ethical theories.
Don’t neglect the less glamorous areas of the syllabus, corporate governance or risk and control disclosure could always be tested.

Section A
The compulsory case study is likely to require you to prepare a group statement of financial position (balance sheet) and/or statement of comprehensive income (profit and loss account) with continuing and discontinued activities or foreign subsidiary. Alternatively, it could be a consolidated statement of cash flows which would include other accounting complications such as financial instruments, pensions, share-based payment and impairments.
There will also be discursive requirements on a linked accounting adjustment and social/ethical/moral aspects of corporate reporting.
Section B
An industry question (often Q3), testing a range of standards (NB: no specific knowledge of the particular industry is required).
A discussion question (Q4) looking at current developments in corporate reporting, such as: small and medium-sized entities, revenue recognition, success/issues on implementation of IFRSs, management commentary, comprehensive income/presentation of financial statements, improvements in performance measurement. It may also include a related computational part based on figures from a case study.
Single topic (e.g. share-based payment, deferred tax, pensions) or 'multi-part' question (Q2) testing a range of standards separately, such as: related parties, accounting policies, discontinued operations, recognition and/or impairment of tangible and intangible assets, government grants, foreign currency transactions, provisions, events after the reporting period (balance sheet date), leases, consistency of standards with the conceptual framework, the effect of accounting treatments on earnings per share or ratios.

Important areas to cover:
Strategic analysis: Key models of analysis include mission and objectives, stakeholder analysis, PESTEL, Porters five forces and diamond models, the value chain, 9Ms and portfolio analysis. This may culminate in a SWOT and appraisal of the organisations overall position.
Strategic choice: The syllabus makes a distinction between the approach and role taken by the corporate parent and a Strategic Business Unit (SBU). You should therefore ensure that you are aware of the differences and be able to identify the appropriate approach from the scenario in the question.
Key models here include Porter’s Generic strategies, Bowman’s Strategy Clock, Ansoff's matrix and Lynch’s expansion matrix.
Finally the strategic criteria for assessing options of suitability, acceptability and feasibility may be employed to justify recommendations.
Strategic action: Implementation issues cover much of the rest of the syllabus and could include issues of culture (e.g. Cultural web, Handy’s cultures, Miles and Snow), quality (TQM, six sigma, CMMI, V-model), process improvement and software selection (Harman, Skidmore and Eva), e-business or people management (e.g. planning, recruitment, performance management, development) or change management (Force Field analysis).

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.
Advanced investment appraisal: The compulsory question often features an NPV question with an analysis of risk and / or financing. Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options and adjusted present value are also popular themes, and are normally tested in section B of the exam.
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: This is a topical area; a question could also ask you to evaluate a capital reconstruction e.g. a business that is considering offering its creditors shares in order to enable it to survive.
Advanced risk management: We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging. Foreign currency derivatives are due to be tested numerically; the new examiner has indicated that questions may well ask you to compare the results of a hedge using a number of different hedging techniques.

Strategic management accounting: This is a key theme of this paper. Numerical questions could include analysing risk using expected values and probabilities; benchmarking and discussion of critical success factors are likely to be key discussion areas.
Budgeting: Financial data has appeared repeatedly in past exams. You may be asked to draw up an income statement or budget or to compare actual performance against a benchmark. This could include the use of activity-based approaches, learning curves or non-financial indicators; although 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.
‘Beyond budgeting’ is an important area that can be tested either as a discussion or a numerical question.
Strategic performance measures in the private sector: Divisional performance measurement is another key area; ROI, RI , EVA, NPV or even ABC could feature here and transfer pricing could feature as an aspect of these questions.
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.
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.

Income tax – EIS/VCT schemes, personal service companies, losses, overseas aspects
Corporation tax – close companies, liquidations, transfer of trade
Inheritance tax – lifetime gifts, fall in value of lifetime gifts, quick succession relief
Capital gains tax – takeovers, damaged/destroyed assets, small part disposal of land, leases and wasting assets
VAT – groups, imports/exports

• A risk-based and/or planning scenario in the compulsory section
• Questions based on articles published in Student Accountant in the past six months
• A number of requirements asking for audit procedures and required evidence in respect of specific financial reporting issues
• A practice-based scenario looking at professional, ethical and quality control issues
• A reporting scenario of some sort - probably testing either emphasis of matter or other matter paragraphs

Via PQ Magazine Thanks to PQ Magazine for compiling and sharing the tips!

For more Compiled Exam Tips CLICK HEEEERRRREEE

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