June 2011 ACCA Exam Tips (BPP)

This is what the subject specialists at BPP think....

Q1 - Operation of judicial precedent OR statutory interpretation
Q2 – Formation of a contract
Q3 – Tort of negligence
Q6 – Directors’ duties
Q7 – Employment law, the employment contract / relationship

Other likely topics – breach of contract and remedies, binding power of the Articles of Association, company insolvency and Insider Dealing.


Specialist Cost and Management Accounting Techniques: ABC vs AC, throughput accounting & target costing have featured recently. Be prepared to discuss environmental accounting techniques as this is a new area on the syllabus.

Decision making techniques: Relevant costing, linear programming and risk & uncertainty have been examined recently; pricing can be combined with other parts of the syllabus and questions can now include an optimal pricing element.

Budgeting: Discussion marks often focus on the appropriateness of budgeting types or the behavioural impacts of types of budgeting. Numerical elements in a budgeting question could include flexed budgets, time series analysis or learning curves.

Standard costing & variance analysis: Questions typically require discussion of performance based on variances given and calculation of some variances. Sales mix and quantity variances are new to the syllabus and could form a numerical element to this type of question.

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.


Question 1 will test income tax with 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. Dates for paying tax may also be examined. The VAT section will look at registration, pre registration expenses and computation of VAT payable.

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

Questions 4 and 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
- Self assessment system
- Employment versus self employment
ACCA F7 (International)
Q1: Consolidated SOCI and/or SOFP with one subsidiary plus associate with intra-group 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: Statement of cash flows and/or interpretation. 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.


Q1 (30 marks)
This question is likely to be based on a scenario and incorporate 3 or 4 distinct requirements.
Areas likely to be tested include audit risk, audit planning, audit procedures (substantive tests and/ or tests of control) and internal control.

Q2 (10 marks)
This is 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.
There are many knowledge based areas in the F8 syllabus which could be examined in Question 2 and these include definitions such as audit risk, substantive procedures, tests of control, audit assertions, audit regulation and corporate governance.

Q3, Q4 and 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.


Working capital: questions on inventory management and receivables management are likely. Ensure that you are comfortable with working capital ratios.

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.

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.

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.

Financial environment & risk management: recent exchange rate and interest rate volatility could impact on a company’s financial management plans – a part question could be set, with discussion and calculations on hedging techniques.


Various aspects of risk were examined widely in December 2010 but risk remains a key area. You may be asked to identify and categorise some key risks in a scenario.
Over the last few months the role of the board of directors has remained at the forefront of the news. There have been changes to the code of corporate governance in the UK with diversity at board level receiving much attention.
Make sure that you are comfortable applying the principles of good corporate governance to non-corporate organisations such as schools and hospitals/.
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.
The topic of stakeholders is important with wide application.

ACCA P2 (International)
Q1: group SOFP and/or SOCI including discontinued activities, acquisitions and disposals or foreign subsidiary, 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, related parties, foreign currency, financial instruments, 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 and events after the reporting period.
Q4: discussion question e.g. revenue recognition, first time adoption of IFRSs, fair values, management commentary, improvements in performance measurement, including an application part with some computations.


Important areas to cover:

Strategy models

Analysis of the environment or internal factors has featured in most exams. Key models include PESTEL, Porter’s Five Forces and the value chain. Forecasting has come into the syllabus and may well be tested, including the interpretation of numbers.

Evaluation of strategic options is usually tested one way or another, 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 was heavily tested in the compulsory question in the last paper. Take this as a warning that you need to cover the whole syllabus!

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 how technology can be used in customer relationship management.

Project Management

This was already a major topic and has expanded in the new syllabus. I would expect to see this tested in every sitting. Questions may 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 now assumed knowledge here, including budgeting, variance analysis and relevant costing. You may need to do calculations, but remember the focus in this paper is on using the calculations for decision-making, not the calculations themselves. Ratio analysis is still examinable and often provides opportunities for easy marks.


Less important than it was in the previous syllabus. Most likely to be tested in conjunction with one of the other topics.

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!


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. This area was not tested in December 2010.

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; neither area was tested in December 2010. 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.


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. 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. These models were not tested in December 2010.

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.


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
Partial exemption for VAT
Close companies
Sole trader/partnerships
Inheritance tax versus capital gains tax
Property income
Enterprise investment scheme/venture capital trust


Despite the syllabus refresh for 2011, there are still 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
• A practice-based scenario looking at professional, ethical and quality control issues
• A reporting scenario of some sort - probably testing candidates’ knowledge of the various modifications to the standard audit report.
We would also recommend that candidates keep the following additional issues in mind as part of their revision:
• Aspects of brought forward knowledge from F8 (such as the terms of audit engagements, sampling and documentation) could easily fit into practice-related scenarios more at home in the P7 exam.
• The correct accounting treatment of complex issues, such as a newcomer for 2011 IAS 21 The effects of changes in foreign exchange rates or the associated issues of disclosure (such as IFRS 8 Operating segments or IAS 33 Earnings per share) could form part of either section in the exam.
• The examiner has reiterated that specific ISAs will be examined in sufficient detail to require learning more than just the headlines for regurgitation in the exam. Untested areas still include comparatives (ISA 710) written representations (ISA 580) and opening balances (ISA 510).
• ISAs created as part of the Clarity Project could also form part of either compulsory or optional questions – examples include ISA 265 on reporting deficiencies in internal controls, ISA 320 on materiality and ISA 450 on evaluating misstatements identified during the audit.
• Candidates need to be able to both understand and debate current issues such as audit reform, globalisation

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