F7 (Int) Exam tips from BPP, Kaplan, ATC and First Intuition – June 2011 sitting

BPP

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.

First Intuition

Qn 1 Consolidation- Revenue statement with goodwill computation
Qn 2 Single company accounts with, lease, non current asset, tax and sale or return
Qn 3 Cash flow and report writing
Qn 4 The framework with contingent liabilities and Financial instruments
Qn 5 EPS

ATC

The examiner is Steve Scott, he has written an article in July 2010 Student
Accountant relating to IFRS 3 group accounts. This is no major indicator as we
know that Q1 will be a consolidation issue, however, please ensure that you have
read this article.
The June 2010 pass rate from this paper was very poor, at 28%, and ACCA have
now enhanced the F7 guidance for students in their website. Please ensure that you
do visit the F7 specific area of the website and read the various articles included. It
should be noted that these articles have not been written by the examiner but they
should all be helpful in increasing your knowledge base.
Q1 will be a consolidation question.
Q2 will be a final accounts question.
Q3 will be a ratio analysis or cash flow question or a mixture of the two.
One of the main reasons students fail the exam is their inability to write and
discuss accounting issues, many students focus on the numerical parts of the
exam, which may only account for 65% of the marks. You must ensure that you
are able to write and discuss about financial reporting issues.
Exam Tips
Common areas that feature on a regular basis in the exam are as follows
• Leases
• Revenue recognition
• Substance vs form
• Convertible instruments (IAS 39)
• Accounting for taxation
• Accounting for assets, particularly IAS 16
Exam Tips – June 2011 Session
Important areas that have not been examined under the new syllabus and
therefore may feature in the near future are
• Construction contracts
• Impairment of assets
Exam Technique
Don’t forget the following advice while in the exam:
Answer all questions, including the written elements of questions. It is very difficult
to pass the exam by learning the numbers.
Cross reference your workings, they are an integral part of your answer.
Make sure you get the sign the right way round with any cash flows, the examiner
sometimes only awards the marks if the sign is correct.
Answer the question set, not the one you wished had been set, focus on the
requirements especially relating to the written part of the answers.
Look at the marks available for each part of the question, do not write pages of
answers for a 3 mark part similarly if the question has allocated 6 marks then make
sure you adequately answer that part, a line is not enough to get you 6 marks.
For a 25 mark question you should be spending no more than 45 minutes on it.
Good Luck!
In addition to noting the guidance set out above, students should make use of
ACCA past examination papers, pay close attention to articles published in Student
Accountant and should read the Examiner’s review of the last examination session
at http://www.accaglobal.com/students.

Kaplan tips

• Q1: Consolidated income statement including an associate and possibly a mid-year acquisition.
• Q2: Redraft of the financial statements including drafting SOCIE.
• Q3: Possible mixed cash flow/interpretation question.
• Q4 & 5: Finance lease, impairment, IASB framework, government grants.

Examiner’s tips

The Financial Reporting paper pass rates were in a downward spiral until December 2010, explained F7 examiner Steve Scott. The June pass rates are also generally two or three percentage points lower than those achieved in December. Scott revealed that candidates on their first attempt have the highest success rate and those sitting at the third or more attempt have very low pass rates – at some diets these candidates barely get into double figures, he revealed.
Now the December 2010 results were genuinely better. Consolidated accounts (Q1) is still the best answered question, but before December the average mark was declining slightly (by 2 marks). PQs do well on the techniques, he said, aided by tutors’ standard workings.
Candidates score well on Q2 (financial statements), although few gain full marks. However, as with consolidations the average mark is declining. Statements of cash flow are also well answered.
So that’s what candidates do well, the list of what isn’t done well is slightly longer! Scott is concerned that although the technique is good for consolidated accounts, he’s just not sure PQs understand what they are doing. Students also don’t understand post-acquisition change of NCI and this is often completely omitted in income statement questions.
Other problems areas are:
• Contingent and deferred consideration.
• There is confusion between pre- and post-acquisition adjustment.
• Calculation of group retained earnings is also poor.
• Written sections (as in June 10) are often left or totally misunderstood.
For Q2 (financial statements) adjustments are not done well. Even simple deferred tax is poorly understood, let alone when he asks for a revaluation. There also seems to be a lot of confusion over construction contracts. Scott went on to say that revaluations of non-current assets is examined in virtually every paper, but it is still answered badly.
Other areas of concern are:
• Revenue recognition issues – deferred revenue relating to ongoing serving, agency sales and a cut off error.
• Not applying the effective interest rate or applying it to nominal value of loan instead of carrying value.
• Classified issues: gains on investment, presentation of dividends.
When it comes to Q3 (performance appraisal) the examiner explained that to prevent mechanical churn he said he would target certain cash flow classifications and specific ratios. The response has been very poor and there appears to be a fundamental lack of understanding of what is required.
Full cash flow statements are generally done well, but the focused extracts less so.
His more specific recently tested problem areas here have been:
• Provision for environmental costs shown as a cash flow.
• The inability to distinguish the cash flow effects of a loan to equity conversion/redemption.
• Answers to the effects of (new) finance leases were weak.
Scott said that candidates must ensure they are up to speed with F3 material before they embark on F7. He feels candidates must study the wider syllabus over a sensible time period. In the exam hall, too many PQs don’t attempt all the questions asked and he pleaded for them to avoid question-spotting. Students can also learn from the mistakes of previous students by reading the Examiners’ Reports.
He revealed that one of his markers reported despair as she had lost count of the number of students who had scored around 40 marks after completing the paper up to Q3 (a) and then failed to score more than 5 further marks for the rest of the paper. That’s just sad, said Scott.
The examiner stressed that candidates must focus on developing an ability to apply accounting standards to a specific example. They have to be prepared to criticise and correct accounting treatments suggested by management. It is unlikely that simply agreeing with them will earn many marks – that’s not what the exam is about!
Scott also asked students to focus on the requirement and plan and present the answer clearly. He wants sections of questions answered together, not scattered through the answer booklet. That makes is hard for the markers than it need to be.
He likes referenced workings, although workings can be taken to excess becoming just time wasting.
Handwriting must also be legible and the language used intelligible. And while exam technique is useful he pointed out that it is no substitute for knowledge.
The UK paper is changing and in future will mostly be based on the international paper (at least 90%). Therefore he will be using IFRSs and the US dollar is the currency denomination. Up to 10 marks will test UK differences to IFRS.
Scott revealed there will be a slight increase in rules based (legal) questions. Candidates should also be aware of revisions to framework and standards under examinable date rules.
Finally, he said that his question requirements may become a bit long to avoid any ambiguity.

DO YOU UNDERSTAND?
• Substance over form issues.
• Treatment of financial leases.
• EPS, particularly what dilution means.
• Can you apply definitions from the framework and standards?

MEET THE EXAMINER: Stephen Scott qualified as a chartered accountant with Stott & Gollard. He then spent several years lecturing in the private sector before moving to his current home – Manchester Met University. He started working for the ACCA as a marker before becoming the assessor, and then the examiner in 1997.

source – PQ Magazine
https://www.pqaccountant.com

best of luck with exam!
ansi