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ACCA September Tips - the Options papers

26 August 2016

The option paper tips from BPP

P4 Advanced Financial Management
Important areas to cover include:
Q1: We would expect section A questions to be mainly based on core syllabus areas such as: project appraisal (domestic or overseas) and business valuations; both of these areas are likely to include cost of capital calculations. Risk management may also feature as an aspect of this question in a number of different ways e.g. VaR, real options, hedging.

• Risk management (currency or interest rate)
• Business re-organisation
• Real options

General advice
The 50 mark compulsory question will, inevitably, draw from a number of different syllabus areas. The examiner has said that he does not plan exams by referring to past exams (i.e. checking that the whole syllabus is being tested over the course of a number of exam sittings). These factors mean that question spotting extremely difficult for this paper. However we would expect section A questions to test core syllabus areas as listed above.

In section B one of the questions may be entirely discussion based (but this is not guaranteed from June 2013), and often involves ethical issues and general financing issues (e.g. dividend policy).

Remember that this paper is not a maths exam – in all exam questions the examiner is interested in your ability to communicate well and to give good management advice that relates to the scenario in the question.

Keep checking the ACCA website for articles written by the P4 examiner in the lead up to the exam, these are often tested.

P5 Advanced Financial Management
Q1: Section A (50 marks) contains one compulsory question. In recent exams, part of question 1 required some data analysis using numerical techniques e.g. KPIs, EVA. Remember, however, that you are aiming to turn data into information, NOT to produce complicated calculations. Nonetheless, the numerical techniques in this paper (e.g. financial ratios, budget variances, EVA, ABC, transfer pricing) need to be mastered in case the come up in the compulsory question.

In recent exams, there have been several questions which have asked candidates to evaluate a performance report. This means: how useful is the report for the people using it. It is vital that candidates appreciate the distinction between evaluating a performance report, and evaluating the underlying performance of the organisation.

Similarly, in several questions, the scenario has identified a request for information from the CEO, and the question requirement has, in effect, then asked candidates to respond to that request. In such a situation, it is crucial to refer back to the original request in the scenario to identify exactly what has been asked for.

Q2-4: In section B (2 × 25 mark questions from a choice of 3), performance management frameworks (e.g Building Blocks model or the Balanced Scorecard) have been tested quite frequently. It is vital that you understand the purpose and limitations of these models, and that you can practice applying them in a practical way.

There are a number of past exam questions that can be practised to improve your skills and knowledge in this area.

Other popular areas in section B include quality management (e.g. Six Sigma), information for reporting (e.g. CSFs and KPIs, non-financial performance indicators), HR frameworks (e.g. reward & appraisal systems) and performance management in not-for-profit organisations (e.g. league tables.

Many P5 questions also include requirements related to an organisation’s information systems and their implications for performance management; (e.g. do the systems provide management with the information they need; or, how might changes in the information systems help to improve performance in an organisation?)

Keep checking the ACCA website for articles in the lead up to the exam. There is one such article on ‘Big data’ – a topical issue throughout the business world at the moment – so this might be expected to feature in a question reasonably soon.

Exam length
Finally, remember that from September 2016 there is no longer any separate reading time in the exam. Nonetheless, it remains very important to read the question scenarios (and requirements) carefully and to plan your answers before beginning to write them.

ACCA P6 (UK) Advanced Taxation
The exam will comprise two compulsory questions within Section A which will both be of a case study style. The first question will be 35 marks in length and will contain four marks for professional skills. The second will be for 25 marks in total and will contain no professional skills marks. One of these questions will focus on personal tax issues and the other will focus on corporate tax issues.

Section B will comprise three questions, each of 20 marks in length of which only two are to be answered. These will be in a more succinct, note form style.
The whole syllabus is examinable throughout the paper.

The paper will examine candidates’ ability to analyse and evaluate the tax implications of various situations, numerical calculations will only be required to assist in producing an answer and no purely numerical questions will be set.

Topics we would expect to see are:
• Groups of companies involving overseas aspects
• Unincorporated business particularly loss relief or involving a partnership
• Capital gains tax versus inheritance tax
• Overseas aspects particularly the new rules on residence
• Personal service company
• Company purchase of own shares
• Enterprise investment schemes/ venture capital trusts
• Change in accounting date
• Takeover
• VAT partial exemption
• Transfer of trade versus sale of subsidiary
• Disincorporation relief
• Pension contributions
• Patent box, research and development expenditure

When answering these questions you should remember to write succinctly but you must write in full sentences. Keep your paragraphs short (3-4 sentences) and use headings and space between the paragraphs to give your answer structure. This helps you to keep your answer punchy whilst still remaining professional. It also makes it easier for your marker to progress through your answer and you always want to keep your marker happy.

The examining team like to see that you know the rules that need to be applied. So remember to include relevant conditions and effects of certain actions. For instance, don’t just say that entrepreneurs’ relief applies to a disposal of shares. Say why! The taxpayer is an employee who owns more than 5% of the company, has been for at least a year, the company is a trading company so the gain will be taxed at 10% rather than 18% or 28%.

Remember the pass mark is 50% so you are not aiming for perfection. There will be loads of stuff you can get right quite readily to get really easy marks, so don’t get bogged down in the really hard stuff. Make a guess and move through your answer as quickly as you can.

P7 Advanced Audit and Assurance
ACCA P7 has had the following exam format since June 2013:
Section A: This comprises two compulsory questions worth 35 marks and 25 marks respectively. Typically question 1 will test planning, risk assessment, evidence gathering and practice management issues using a scenario where audit client details are presented, often including financial statements extracts, which candidates need to consider as part of their answers.

However, the topics covered by question 2 will be more uncertain to predict – possibly a non-audit engagement such as prospective financial information (PFI) or due diligence, or a question testing specific parts of the syllabus, such as audit completion or consolidated groups. Whatever the subject, application is vital for success here.

Within one of the compulsory questions, there will be 4 professional marks available which reward candidates for the layout and presentation of their answers.

Section B: A choice of two from three written questions that are each worth 20 marks and typically test the following syllabus areas: audit evidence and financial reporting issues, practice management including ethics and quality control and reporting including completion and communication. Again, candidates will be expected to apply their knowledge to the scenario in order to score well.

P7 has the following syllabus areas:
A Regulatory environment
B Professional and ethical considerations
C Practice management
D Audit of historical financial information
E Other assignments
F Reporting
G Current issues and developments

General advice
From this sitting onwards, you will no longer be given the 15 minutes ‘reading and planning’ time separately as the exam duration is now 3 hours and 15 minutes to include reading, planning and writing. We would still advise you to use a period similar to this however to continue to plan the things you need to include in your answer. It is essential that you use the information in the scenario to make your answers relevant – due to the size of the scenario typically presented in question 1, we would advise that you still use this notional 15 minutes to plan this question above all others.

During this time you should also pay attention to the verbs used in question requirements as these indicate the number of marks available. For example, the verb “explain” requires a sentence and will score one mark if properly explained, whereas the verb “list” simply requires you to present information with no further explanation: this will typically only score . mark per point listed.

Recent exams have tested fresh content from the examiner’s technical articles: for example, audit quality and professional scepticism were examined in June 2015, while INT candidates were tested on the audit of public sector performance information in December 2015. All technical articles can be found here: http://www.accaglobal.com/zm/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles.html and for this sitting, there are two areas that appear to be highly examinable – corporate governance and the recent changes to the auditor’s report – so you are strongly advised to read both in advance of the exam.

Good luck!

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