Study Zone

ACCA Exam Tips June 2010

Health warning These should only be used in conjunction with proper studying. We cannot guarantee that these topics will appear in the actual exam as we have not seen the exam papers. Examiners are not predictable so it is vital that all core syllabus areas are revised fully. For F7, F8 & P2 see this months magazine

F4 Corporate & Business Law

BPP says:

• Operation of judicial precedent
• Offer and acceptance of contracts
• The tort of negligence
• Breach of contract and remedies
• Directors’ statutory duties under the Companies Act 2006
• Insider dealing and/or Money Laundering

Kaplan says:

• Damages
• Supreme Court
• Tort of negligence
• Liability of agents & partners

F5 Performance Management

BPP says:

Specialist Cost and Management Accounting Techniques
• ABC, Throughput Accounting & Target Costing have featured recently. Backflush accounting has not yet been examined. 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 is yet to be examined in much detail other than a brief discussion about discounting and a requirement to suggest two pricing strategies.
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.

Kaplan says:

• Financial and non-financial performance indicators
• Mix and Yield variances
• Transfer Pricing
• Activity Based Costing

F6 Taxation

BPP says:

Income tax
• Employment income including benefits and PAYE system
• NIC for employed earners
• Income tax losses
• Property income
• Calculation of income tax payable
• Treatment of pension contributions

Corporation tax
• Calculation of plant and machinery capital allowances
• Calculation of CT payable
• Submission of CT return and payment of tax
• Group relief

Capital gains tax
• Calculation of various disposals from a company’s perspective
• Share disposals
• Replacement of business asset relief
• Part disposal

VAT
• Default surcharge liability notice
• Common penalty regime
• Annual accounting/flat rate scheme

Kaplan says:

• Employment Income - benefits
• Capital allowances including IBA
• VAT return
• Disposal of chattels
• Partnerships with loss

LSBF says:

Question 1
• Income tax computations for husband and wife or partnership
• For a self employed person involving adjustment of profit
• Capital allowances for plant and machinery
• Closing year rules.
• Employment income including the evaluation of benefitsincluding the car, fuel, mileage allowance, accommodation benefit
• Savings income and dividend income and interest payable on special loans
• Computing the income tax payable
• Computing national insurance contributions
• Computing payments on account and balancing payments.
Question 2
A: Corporation tax computation (maybe long period of account)
• Adjustment of a trading loss and the computation of capital allowances on plant and machinery and industrial buildings.
• Rules relating to the relief for a trading loss and extended relief
• Capital gains on disposal of an office building with the possibility of rollover relief
• Computing corporation tax for a straddling CAP
B: VAT
• Accounting for VAT.
• Surcharges and penalties
• Determination of tax point.
• Contents of VAT invoice.
Question 3
Capital gains/ loss computations for Companies
• Determining capital gains and losses
• Rollover and holdover relief
• Computations involving part disposals and chattel rules.
• Disposals including the matching rules for shares and rights or bonus issues.
Question 4
• Sole trader/ partnership in business making trading losses and deciding on the best way to relieve the losses.
Question 5
• Property business profits including the rules for furnished holiday letting accommodation and the advantages.

F9 Financial Management

BPP says:

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.

Kaplan says:

• IRR with tax
• Inventory management
• Asset and cash flow based values
• Gearing/capital structure calculations
• Interest rate risk

P3 Business Analysis

BPP says:

Internal/External analysis
• A core area of the syllabus and could be based around a number of key models all of which may be used to analyse the current position of the organisation. This could be the main part of your section A. The value chain and BCG matrix are included so make sure you are able to work with these models. Ensure that you can undertake analysis of a business' current position and performance using ratios as this is increasingly an element of P3

Generation and evaluation of strategic options
• Leading on from an initial analysis of a business you may be asked to offer advice on the best options in light of the current position or having been informed of an issue an organisation is facing.

Project management
• Most business decisions result in projects being initiated. This is an important area of P3 and although we have seen this before there are a number of ways this area could be examined.

Business processes and Change management
• Although seen in previous sittings this could be part of a requirement. This could incorporate changes to both upstream and downstream supply chains.

Quality
• A popular area of the syllabus that has featured in a number of sittings. We have seen the key models examined in recent sittings. The importance of quality may see it included as a part requirement or underpinning a business decision.

Marketing
• Techniques and customer relationship could feature in section B. Competitive behaviour through lifecycle modelling could be an underpinning issue in either section A or B.

Stakeholders
• Identification of stakeholders has been examined previously although you may still see this as a part requirement.

Kaplan says:

• Strategy evaluation
• Environmental or internal analysis
• Business process change
• Marketing
• Organisation structure

LSBF says:

• Strategic analysis
• Strategic choice
• Marketing mix
• Reward management
• Change management

P4 Advanced Financial Management

BPP says:

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. 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:
• Although this area was heavily examined in December, this exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus.

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.

Kaplan says:

• Acquisitions and business valuation (especially free cash flow method)
• Net Present Value
• Black Scholes model, but not the Grabbe variant
• WACC
• Interest rate hedging

P5 Advanced Performance Management

BPP says:

Scope of strategic performance measures in the private sector
• Analysis of financial and non-financial performance; this could include the use of activity-based approaches or learning curves, and strategies to improve performance.

Divisional performance and transfer pricing issues
• ROI, RI , EVA or even ABC could feature here; transfer pricing could feature as an aspect of these questions.

Problems with budgeting
• Budgeting has been a favourite essay question with your examiner, especially an awareness of the problems of budgeting but was largely unexamined in 2009.

Alternative views of performance measurement
• The examiner often includes a question to evaluate an organisation against an established theoretical model. The balanced scorecard, performance pyramid and building blocks have all appeared in previous exams.

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.

Kaplan says:

• Forecasting
• Divisional assessment
• Strategic alternatives
• Corporate failure
• Dealing with uncertainty

LSBF says:

• Comparison of performance
• Evaluation of performance systems
• BCG / Ansoff to evaluate decisions
• Non-financial performance indicators
• Budgeting

P6 Advanced Taxation

BPP says:

Income tax
• Pension contributions – tax relief
• EIS/VCT schemes
• Income tax losses
• Accrued income scheme
• Personal service companies
• Termination payments
• Share schemes
• Overseas aspects for individuals

Capital gains tax
• Small part disposal of land
• Takeover/reorganisations
• EIS reinvestment relief
• Damaged/destroyed assets
• Leases/wasting assets

Inheritance tax
• Death estate, treatment of lifetime gifts
• Quick succession relief
• Gifts with reservation of benefit
• Variation of will
• Payment of IHT
• IHT implications of transferring property into a trust

Corporation tax
• Research and development
• Intangible assets
• Liquidation/winding up
• Consortium relief

Value added tax
• VAT groups
• Imports/exports
• Partial exemption
• Treatment of VAT on disposal of buildings

Kaplan says:

• Capital allowances: new rules for cars
• Capital Gains: incorporation relief
• Inheritance Tax: business property relief
• Benefits: share option schemes;
• Personal financial planning - ISAs

LSBF says:

• IHT with the death estate including BPR and valuation rules. Transfer of unused nil rate band between spouses and gifts with reservation. Changing the will after a person is dead.
• Extended relief for companies carrying back trading losses.
• Incorporation of a sole trader/ partnership business
• Mergers, takeovers, reorganisations.
• Employment income - share options, share incentive plans and taxable and tax free benefits
• A person setting up a business making losses and deciding whether to run the business as a sole trader/partnership or company.
• Partnership - with wife being employed or being introduced as a partner
• Partial exemption for VAT.
• Purchase of own shares by a company.
• Personal service companies.
• Ethics

P7 Advanced Audit & Assurance

7City says:

• Corporate fraud and forensic audit procedures
• The audit risks associated with an international group and the difficulties in collecting sufficient and appropriate audit evidence
• Ethical scenarios
• Auditor liability and good practice management
• Assurance work associated with environmental parameters
• Audit opinions and the relationship to inherent uncertainty and corporate viability

BPP says:

• A risk-based and/or planning scenario in the compulsory section
• Questions based on articles published in Student Accountant in the past six months - such as the article on Going Concern from February 2010
• 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
• Legal and regulatory issues affecting assurance providers, especially in the context of firms’ professional liability and the UK Companies Act 2006
• Specific procedures for obtaining evidence (such as analytical procedures and other ISAs that have changed following the Clarity Project) and evaluating the quality of audit work carried out, both for components and groups
• The requirements of other forms of assurance engagement, such as Value for Money (VfM) studies or agreed upon procedures
• The correct treatment of more complex accounting issues (such as employee benefits and adoption of IFRS) than has been seen before
• Specific ISAs may be examined in sufficient detail to warrant learning the key elements for regurgitation in the exam, such as comparatives (ISA 710) other information (ISA 720) or opening balances (ISA 510)
• Discrete topics that we have not yet seen such as questions using the context of internal audit or examples of other non-audit engagements
• The need to understand current issues such as globalisation, the impact of the recession on auditors, corporate governance, risk management and auditor liability - especially relevant in the context of the going concern article from February 2010.

Kaplan says:

• Auditing in a Computer Based Environment
• Audit of employee benefits and discontinued operations
• ISA 570 Going Concern
• Engagement planning and risk assessment;
• Engagement reporting (ISA’s 700, 705, 706 in particular).

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