© icsa 2018 page 1 of 46 · is graded at pass (p), merit (m) and distinction (d) – students...

© ICSA 2018 of 46

ICSA: The Governance Institute is the professional body for governance. With over 125 years’ experience, we work with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance. We support our members and students in 80 countries across the world, in organisations of all sizes and across all sectors of the economy, including large corporates, SMEs, the public sector and charities. To gain chartered status, you must pass ICSA’s qualifying programme or one of our Accredited Masters Programmes and have more than five years’ relevant work experience. Chartered professional status is a widely recognised mark of credibility and professional competence maintained through membership of ICSA. Developed by Kelly Padwick © ICSA 2018

© ICSA 2018 of 46

Contents

Key features 4

The ICSA qualifying programme 5

Module format 6

Qualification structure 7

Modules 9

Introducing the Business Environment 10

Introduction to Law 16

Principles of Company Compliance and Administration 28

Introduction to Finance and Accounting 37

© ICSA 2018 of 46

Key features The ICSA Foundation Programme:

is aimed at individuals wishing to achieve Chartered professional status with ICSA or those wishing to pursue roles/careers in company secretarial, governance, risk and compliance-related fields

is a Level 4 programme – set at first-year undergraduate level

contains four compulsory modules

is an open-entry programme, with no prior qualifications required, and is suitable for individuals who do not meet the eligibility criteria for Part One entry on to the ICSA qualifying programme (see the ICSA website for further information on entry requirements – www.icsa.org.uk)

is externally assessed – ICSA will set and mark the assessment

is assessed twice a year – in June and November

is graded at Pass (P), Merit (M) and Distinction (D) – students whose level of achievement is below

Pass will be classified as Fail A, Fail B, Fail C or Fail D, depending on the number of marks achieved.

Prior knowledge, skills and understanding You do not need to achieve any other qualifications before registering for the ICSA Foundation Programme. No prior knowledge, skills or understanding are necessary. There are no formal entry requirements and the qualifications are suitable for non-degree holders, although it is recommended to be working in a relevant occupation. Assessment The programme is externally assessed via one closed-book examination that will cover content from all the modules in this syllabus. The examination is set and marked by ICSA and the pass mark is 50%. See the Qualification structure section on page 7 for further information. The examination provides independent assessed evidence of learning. It also enables you to demonstrate the range of transferable skills you have developed throughout your programme of study by requiring you to apply your knowledge in unfamiliar contexts.

http://www.icsa.org.uk/

© ICSA 2018 of 46

The ICSA qualifying programme Becoming a member of the ICSA The path to becoming Chartered begins with the ICSA Foundation Programme. It is the first step on the path to a career as a governance professional or company secretary. The programme provides a broad introduction to businesses, how they are governed, maintained and financially managed, and the laws to which they must adhere. The knowledge and skills gained through this programme help to prepare you to meet the demands of Part One and Part Two of the ICSA qualifying programme – the next stages in the path to becoming Chartered. The diagram below demonstrates the path to Chartered status with ICSA.

Foundation Programme

Module 5

Risk

Management

Module 6 Development

of Strategy

Module 7 Boardroom

Dynamics

Part

Tw

o

(6+ years of professional experience)

(8+ years of professional experience)

Associate (ACIS)

Fellow (FCIS)

GradICSA

Module 2 Company

Compliance and

Administration

Module 4 Interpreting

Financial and Accounting

Information

Module 3

Company Law

Module 1 Governance

Choice of Corporate, Health

Service or Not-for-Profit Governance Part

On

e

Affiliated member

© ICSA 2018 of 46

Module format Module title The title describes the content of the module. Level All the modules in this syllabus document are set at Level 4, which is equivalent to first-year undergraduate level in the UK. Module type All of the modules in this syllabus document are compulsory. Total hours study time This is the total number of hours that students are expected to take to study the module. This time incorporates self-study with the study text, tuition (if taken), wider reading and reflection on work experiences, practice assessment tasks and exam preparation. Introduction The introduction provides a snapshot of the module and summarises the learning outcomes. Learning outcomes The learning outcomes of a module set out what a student is expected to know, understand or be able to do as the result of a process of learning. Module content This section identifies the breadth of knowledge, skills and understanding needed to achieve each of the learning outcomes through a programme of study. Topic Each learning outcome is further broken down into a series of themes that should be covered in the programme of study for the module. Exemplification The content of this section provides the range of subject material to be studied under each topic heading.

© ICSA 2018 of 46

Qualification structure

ICSA Foundation Programme This qualification comprises four modules and is assessed via one 3-hour (with 15 minutes’ reading time) closed-book examination which is set and marked by ICSA. Students must pass this examination to be awarded the qualification. The pass mark is 50%.

Module

number

Module title Total hours

study time

F1 Introducing the Business Environment 20

F2 Introduction to Law 70

F3 Principles of Compliance and Company Administration 50

F4 Introduction to Finance and Accounting 60

Total hours 200

© ICSA 2018 of 46

Modules

MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT

© ICSA 2018 of 46

Module F1

Introducing the Business Environment Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 20

Introduction This module provides an overview of how organisations are structured and managed, and how the external environment affects business activities and influences decision making. The module will explore how organisations are categorised according to the economic sector they operate in and the size and scope of the organisation. It will then look at some of the different types of legal ownership structures available to organisations, the objectives that might be pursued, and how organisations structure and manage the workforce to help them achieve their objectives. The module will then examine the wider issues organisations need to consider when trying to achieve their objectives. This includes the influence of stakeholders who have an interest in the activities of the organisations and how to analyse the potential impact of external factors that may affect efforts to achieve organisational objectives. Learning outcomes After successful completion of this module you should:

1 Know about types of organisations and their objectives 2 Understand how organisations are structured to achieve their objectives 3 Know the stakeholders who influence and affect organisations and their activities 4 Be able to analyse the external factors that may impact achievement of organisational objectives.


© ICSA 2018 of 46

Module content

Section A: Organisations and their objectives

30% – 6 learning hours

LO.1: Know about types of organisations and their objectives

Topic Exemplification

Categorising organisations Sectors of business activity:

primary (extractive industries) – farming, fishing,

mining, forestry

secondary (manufacturing goods from raw materials) –

engineering, construction

tertiary (providing services) – banks, retail businesses,

transport, leisure

quaternary (the knowledge economy) – intellectual

services linked to technological innovation, e.g.

scientific research and information technology

quinary – high-level decision makers (e.g. top

government officials) and domestic activities (e.g.

childcare and housekeeping)

Size and scope of organisations:

defining size by number of employees and turnover

size categories – micro, small, medium, large

differences in criteria for categorising organisational

size

Legal/ownership structures Definition of legal/ownership structures and owners’ liability

for debt in private, public and voluntary sector

organisations

Private sector organisations:

sole trader

partnerships:

− ‘ordinary’ business partnership

− limited partnership

− limited liability partnership

limited companies:

− limited by shares – public and private

− limited by guarantee

parent and subsidiary

unincorporated association

co-operatives

Public sector organisations:

central and local government

public corporations

municipal enterprises

Voluntary organisations, e.g. charities, foundations,

community groups, recreational sports clubs


© ICSA 2018 of 46


Organisational objectives Types of organisational objectives:

supply of products or services

private sector organisational objectives:

− breakeven

− survival

− profit maximisation

− growth

public sector organisational objectives:

− service provision

− reducing costs

− value for money

− meeting charitable purposes

voluntary sector organisational objectives:

− helping a particular cause

− to benefit and enrich society

− meeting charitable purposes

Difficulties organisations encounter when pursuing and

attempting to achieve objectives:

sector differences

influence of legal structure/ownership type

influence of stakeholder goals

Creating vision, mission and core values statements

Potential uses of vision and mission statements

How organisational objectives link to vision, mission and

core values


© ICSA 2018 of 46

Section B: Structuring and managing organisations


LO.2: Understand how organisations are structured to achieve their objectives


Organisational structures The purpose of organisation charts – to illustrate:

how work roles are delegated, controlled and

co-ordinated

how information and work flows through the

organisation

Structuring the workforce:

layers of management – tall versus flat hierarchies

authority for decision making:

− centralised versus decentralised structures

− advantages and disadvantages of centralised and

decentralised structures

Creating organisational structures to meet business needs:

functional structure

divisional structure

matrix structure

Advantages and disadvantages of different organisational

structures

How business objectives may determine organisational

structure

How organisational structure impacts on decision making:

where decision-making powers reside within different

organisational structures

role of structure on strategic planning

how structure helps achieve objectives

Managing an organisation The board of directors – roles and responsibilities:

chair

chief executive officer (CEO)

executive directors

non-executive directors (NEDs)

senior independent director (SID)

The importance of separating the role of chair and CEO

Board size and composition

Board structures – unitary versus two-tier structures


© ICSA 2018 of 46

Section C: The wider organisational context


LO.3: Know the stakeholders who influence and affect organisations and their activities

LO.4: Be able to analyse the external factors that may impact achievement of organisational objectives


Stakeholders Definition and role of stakeholders

Definition of internal and external stakeholders

Internal stakeholders for different types of organisation,

including:

shareholders

workers/employees

External stakeholders for different types of organisation,

including:

financial institutions – banks and mortgage lenders

customers

suppliers

creditors

debtors

government

local and national communities

trade unions

pressure groups

Definition of primary and secondary stakeholders

Influence of stakeholders over business activities and

decision making

Stakeholder interests and conflicts

How stakeholder theory supports arguments in favour of

corporate social responsibility (CSR)

Analysing the business environment

Definition of the business environment

Definition of the internal and external environment for

organisations

Definition of situational analysis

Benefits of effective situational analysis

Consequences to organisations of not understanding the

external environment

Definition and purpose of different types of situational

analysis:

PESTEL analysis – political, economic, sociocultural,

technological, environmental and legal factors affecting

organisations

LoNGPESTEL analysis – PESTEL factors examined

on a local, national and global level

SWOT analysis – strengths, weaknesses, opportunities

and threats


© ICSA 2018 of 46


Use of PESTEL analysis to monitor and forecast external

influences on organisations:

political – government regulations and legal issues

affecting organisational activities, e.g. tax policy,

copyright and property law enforcement, political

stability, trade regulations, employment laws

economic – factors that influence the economy, e.g.

taxes, inflation, stock market trends, wage costs

sociocultural – consumer behaviour, e.g. lifestyles,

demographic change, buying trends

technological – the effect of levels and advancements

in technology on operational activities, e.g. mobile

technology, new production technology

environmental – issues such as climate change,

weather patterns and ecological-friendliness of

products

legal – factors affecting how organisations can operate,

e.g. obtaining a patent, consumer protection, data

protection, health and safety

Uses of LoNGPESTEL analysis

Use of SWOT analysis as a framework for:

reviewing organisational strategy, direction and

position

identifying strengths and weaknesses to maximise

opportunities and minimise threats

Benefits and limitations of different types of situational

analysis

MODULE F2 – INTRODUCTION TO LAW

© ICSA 2018 of 46

Module F2

Introduction to Law Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 70

Introduction This module introduces business law, including its purposes, administration and sources. Understanding the law is vital but, in order to fully understand the law, it is important to understand where laws come from, the different types of laws that exist (and how they interrelate), and how the law is administered and applied. It is also important to be able to identify which areas of the law are most applicable to businesses. Learning outcomes After successful completion of this module you should: 1 Understand the purposes of business law and how the law is classified 2 Understand how the law is administered and applied 3 Understand the sources of law and how law is created 4 Understand the UK’s company law and corporate governance frameworks 5 Know which areas of law principally impact upon businesses.


© ICSA 2018 of 46

Module content

Section A: Purposes and classification of the law


LO.1: Understand the purposes of business law and how the law is classified


The purposes of business law The principal purposes of business law:

accountability – ensuring businesses are held to

account for any unlawful acts and omissions

transparency:

− the importance of, and need for, businesses to be

transparent when disclosing certain information

− the benefits of transparency

flexibility and autonomy:

− reasons why business laws should be flexible

− ways in which the law provides flexibility for

businesses, including creating a company’s articles

of association

efficiency:

− the importance of not imposing laws that are costly

for businesses to comply with

− the concept of the ‘comply or explain’ approach

adopted by the UK Corporate Governance Code

predictability and certainty:

− reasons why business law should be predictable

and certain

− potential consequences to business of laws that

are not predictable and certain

the importance of ensuring those who act on behalf of

the business (e.g. directors) act in the interests of the

business

dispute resolution, including the three systems of

dispute resolution:

− legal proceedings in a court

− tribunal

− Alternative Dispute Resolution (ADR)

preventing disaster and failure:

− how business law attempts to help prevent

business failure and disaster

− how business law can help when business failure

or disaster cannot be avoided

Issues that can arise when there is a conflict of purposes


© ICSA 2018 of 46


Classifying the law Definition of legal subjects, e.g. company law, commercial

law, employment law

Principal ways the law can be classified and the differences

between them:

criminal law and civil law

common law and civil law

common law and statute law

common law and equity

public law and private law


© ICSA 2018 of 46

Section B: Administration of the law


LO.2: Understand how the law is administered and applied


The courts system Differences between courts with a first instance jurisdiction

and those with an appellate jurisdiction

Types of court, their composition, purposes and

relationships to other types of court:

magistrates’ courts:

− criminal jurisdiction

− civil jurisdiction

− the three categories of criminal offences

the County Court:

− civil jurisdiction

− the track system – small claims track, fast track,

multi-track

the Crown Court – trial by jury

the High Court of Justice:

− the Chancery Division

− the Queen’s Bench Division

− jury trial in civil cases

the Court of Appeal:

− the Civil Division

− the Criminal Division

the Supreme Court of the United Kingdom

the Judicial Committee of the Privy Council

Tribunals The development of the tribunal system

Typical composition of tribunal panels

Reasons why claimants choose a tribunal over taking their

case to Court

The Tribunals, Courts and Enforcement Act 2007:

First-tier Tribunal

Upper Tribunal

specialist tribunals, e.g. Employment Tribunal and

Employment Appeal Tribunal

Alternative Dispute Resolution (ADR)

The development of ADR in relation to businesses

The advantages of ADR:

less costly than court cases or tribunal hearings

can help to maintain business relationships

avoids publicity

The differences between arbitration, mediation and

conciliation


© ICSA 2018 of 46


The judiciary, the law officers, and the legal profession

The judiciary:

specific judicial roles, including:

− Lord Chief Justice

− President of the Supreme Court

− Master of the Rolls

− Heads of Division

the judicial hierarchy

Government appointees involved in the administration of

the law:

the law officers, including the Attorney General and the

Solicitor General

the Director of Public Prosecutions

The legal profession – roles and responsibilities:

solicitors

barristers

legal executives, including the impact of the Legal

Services Act 2007

paralegals


© ICSA 2018 of 46

Section C: Sources of law


LO.3: Understand the sources of law and how law is created


Legislation Types of legislation – differences between different types of

legislation and how they are used effectively:

Acts of Parliament

subordinate legislation

Creating and passing Acts of Parliament:

sources of legislative proposals

bills:

− public bills

− private bills

− hybrid bills

the legislative process, including the role of:

− the House of Commons

− the House of Lords

− the monarch

Statutory interpretation – interpreting and applying

legislation:

aids to interpretation:

− presumptions

− intrinsic aids

− extrinsic aids

the canons of interpretation – rules applied by a court

to aid its interpretation of a written document, such as a

statute or contract:

− the literal rule

− the golden rule

− the mischief rule and the purposive approach

Case law The doctrine of precedent and how it is applied by courts,

including:

binding precedent

persuasive authority

no precedent

The court hierarchy – the extent to which different courts

can establish binding precedent:

the magistrates’ courts and the County Court

the Crown Court

the High Court

the Divisional Courts

the Court of Appeal


© ICSA 2018 of 46


the Supreme Court and House of Lords

the Judicial Committee of the Privy Council

Establishing the aspects of a case that are binding:

stare decisis

ratio decidendi

The law-making role of the judiciary and how it exercises

that role

European Union (EU) law The establishment of the EU

The EU institutions – role, composition and key functions:

the European Council

the European Parliament

the Council of the European Union

the European Commission

the Court of Justice of the European Union:

− the Court of Justice

− the General Court

EU legislation:

the concepts of direct applicability and direct effect

types of EU legislation:

− treaty provisions

− regulations

− directives

− decisions

− recommendations and opinions

The supremacy of EU law

The impact of the UK’s withdrawal from the EU

Human rights law ‘Human’ rights and business

The European Convention on Human Rights (ECHR)

The European Court of Human Rights – role, composition

and functions

The Human Rights Act 1998:

enforcing the ECHR in UK courts

the ECHR and statutory interpretation

declarations of incompatibility

The future of human rights protection in the UK


© ICSA 2018 of 46

Section D: Company law and governance framework


LO.4: Understand the UK’s company law and corporate governance frameworks


Sources of company law Legislation:

the Companies Act 2006

the importance and influence of the Companies Act on

company law

other notable Acts of Parliament, including:

− Stock Transfer Act 1963

− Companies Act 1985

− Insolvency Act 1986

− Company Directors Disqualification Act 1986

− Criminal Justice Act 1993

− Financial Services and Markets Act 2000 (FSMA

2000)

− Corporate Manslaughter and Corporate Homicide

Act 2007

subordinate legislation – its significance and principal

functions

the role of the Department of Business, Energy and

Industrial Strategy (BEIS)

rules with legislative backing

Case law – reasons why case law is an important source of

company law

The constitution of the company – use and benefits

Contract

EU law and its impact on the UK company law system:

right of establishment

the harmonisation programme

the UK’s withdrawal from the EU

Human rights laws as a source of company law

Sources of governance recommendations

Definition of corporate governance

Corporate governance codes and their purposes:

the impact of the Cadbury Code (1992) and the

Combined Code

the UK Corporate Governance Code

the UK Stewardship Code

the concept of ‘comply or explain’

corporate governance and private companies

the impact of the Corporate Governance Review


© ICSA 2018 of 46


The influence of different reports on the content of codes of

governance, including:

the Greenbury Report (1995) on directors’

remuneration

the Turnbull Report (1999) on internal control

the Smith Report (2003) on audit committees

the Higgs Report (2003) on the role and effectiveness

of non-executive directors

the Walker Review (2009) on the governance of UK

banks during the financial crisis

Lord Davies’ Women on Boards reports (2011–16) on

gender diversity in the boardroom

the Parker Review (2017) into ethnic diversity in the

boardroom


© ICSA 2018 of 46

Section E: Law and business


LO.5: Know which areas of law principally impact upon businesses


Contract law The advantages of contracts for business

How contract law helps to regulate commercial and

consumer dealings undertaken by businesses

The law of torts Types of torts applicable to businesses, including:

negligence

wrongful interference with goods

occupiers’ liability

nuisance

defamation

unlawful interference with contract, trade or business

The doctrine of vicarious liability

interpreting the law of torts, e.g. the Consumer Protection

Act 1987, the Defamation Act 2013

Employment law Identifying key areas covered by employment law, including:

employment rights provided to employees and workers

health and safety in the workplace

the prevention of discrimination in the workplace

providing remedies to those who are unfairly or

wrongfully dismissed

rights provided to employees following a business

transfer

rights relating to collective action, e.g. strikes

Key legislation, including:

Employment Rights Act 1996

National Minimum Wage Act 1998

Commercial law The role of commercial law in regulating and facilitating the

commercial dealings of businesses

Key commercial law topics, including:

domestic sale of goods

international sale of goods

the law of agency

Consumer law The importance to businesses of adhering to consumer law

The principal aim of consumer law and ways in which it can

help protect consumers

Key legislation, e.g. Consumer Rights Act 2015, Consumer

Credit Act 1974

The role of independent regulators, e.g. the Advertising

Standards Authority


© ICSA 2018 of 46


Environmental law The purpose of environmental law

How environmental law can affect business operations

Key environmental law topics, including:

regulating activities that can affect air and water quality

measures designed to combat climate change

requiring businesses that engage in certain activities to

obtain an environmental permit

rules regarding the disposal of waste

the decontamination of contaminated land

conservation of plants, wildlife and habitats

The impact of international law on protecting the

environment, including the United Nations Framework

Convention on Climate Change


Wildlife and Countryside Act 1981

Environmental Protection Act 1990

Climate Change Act 2008

Intellectual property law Definition of ‘intellectual property’ (IP)

Reasons why businesses may want to protect their IP

Ways in which IP law can help businesses protect their IP,

including:

patents

copyright

design rights

trade marks


Patents Act 1977

Trade Marks Act 1994

Cyber security and data protection

Common forms of cyber attack and their impact, including:

fraudulent emails

infecting computer systems with viruses and malware

ransomware

denial of service attacks

National Cyber Security Centre advice on preventing cyber

attacks

Key legislation and developments, including:

EU General Data Protection Regulation (GDPR)

Data Protection Act 2018

the Directive on Security of Network and Information

Systems


© ICSA 2018 of 46


Competition law The benefits of competition amongst businesses

The impact of monopolies on other businesses

The purpose of competition law

Key competition law topics, including:

prohibiting businesses from engaging in activity that

can prevent, restrict or distort competition

preventing businesses from abusing their dominant

position in the marketplace

prohibiting cartel activity

assessing the impact of proposed mergers or

takeovers on competition in the marketplace

empowering certain bodies to investigate competition

concerns in the marketplace and impose solutions


Competition Act 1998

Enterprise Act 2002

Role and responsibilities of the Competition and Markets

Authority (CMA)

MODULE F3 – PRINCIPLES OF COMPANY COMPLIANCE AND ADMINISTRATION

© ICSA 2018 of 46

Module F3

Principles of Company Compliance and Administration Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 50

Introduction The aim of this module is to understand the historical origins of modern company law and introduce the legal process that has to be followed to create a corporate entity or company (known as incorporation). It also covers the administration side of incorporation and the obligation for companies to be transparent when providing information about their activities and financial status. The module examines different types of trading structures available for businesses and, in particular, the different types of company available to be incorporated under the Companies Act 2006. It then covers the organisational structure of companies, including the separation of ownership and management and the interaction of the authority, rights, duties, responsibilities and liabilities attached to share ownership or appointment as a company director. Finally, the module explores the routine compliance obligations placed on companies, directors and shareholders, many of which are delegated to the company secretary or governance professional. Learning outcomes After successful completion of this module you should: 1 Understand the different legal structures available for companies 2 Know how companies are incorporated 3 Understand the routine compliance and governance obligations placed on companies 4 Understand the ownership and management structures and the decision-making processes for

shareholders and directors.


© ICSA 2018 of 46

Module content

Section A: How companies are structured

35% – 17.5 learning hours

LO.1: Understand the different legal structures available for companies

LO.2: Know how companies are incorporated


Historical background Limited liability and separate legal personality:

historical background

the impact of key legislation, including:

− Joint Stock Companies Act 1844 (leading to the

Companies Act 2006)

− Limited Liability Act 1855

comparing the UK unitary board model to international

models, e.g. Germany and Japan

Company structure Types of company that can be incorporated under the

Companies Act 2006, including:

private company limited by shares

public company limited by shares

private company limited by guarantee

private unlimited company, with or without shares

Registered address:

requirements for a registered office in country of

registration

use of Single Alternative Inspection Location (SAIL)

address

legal requirements for stationery

public reporting and accountability – statutory accounts

and reports

Ownership:

members and/or shareholders

definition of a share

share allotments, including:

− authority to issue new shares

− the importance of the Articles of Association and

Model Articles

pre-emption rights

transfers and transmission of shares, including:

− stamping

− the role of the Alternative Investment Market (AIM)

of the London Stock Exchange


© ICSA 2018 of 46


Managing the company The role of directors in managing the company, including:

appointment and cessation of office, including:

− incorporation document IN01

− requirement for at least one natural person to be

director of a company

− influence of the Articles of Association

− circumstances in which a corporate director can be

appointed

− how rules for appointment of directors and

cessation of office vary according to company type

authority, including:

− general restrictions in the Articles of Association

and how these can be varied, waived or cancelled

by special resolution

− other restrictions, including those in commercial

agreements and director service contracts

directors’ duties and responsibilities according to the

Companies Act 2006:

− to act within their powers (s. 171)

− to promote the success of the company (s. 172)

− to exercise independent judgement (s. 173)

− to exercise reasonable care, skill and diligence

(s. 174)

− to avoid conflicts of interest (s. 175)

− to not accept benefits from third parties (s. 176)

− to declare interests in any proposed transaction or

arrangement (s. 177)

accountability and personal liability of directors

Company secretary:

general duties and responsibilities

role and responsibilities in relation to:

− the board

− the company

− the members

Persons with Significant Control (PSC):

purpose of the PSC register

when to notify the Registrar of Companies of changes

impact of Market Abuse Regulations (MAR)


© ICSA 2018 of 46


Incorporation process Key questions/criteria to consider when choosing an

appropriate corporate vehicle for a company

Naming a company:

name availability

restrictions and requirements according to:

− the Company, Limited Liability Partnership and

Business Names (Sensitive Words and

Expressions) Regulations 2014

− the Company, Limited Liability Partnership and

Business (Names and Trading Disclosures)

Regulations 2015

Company incorporation process (also known as formation

or registration process), including:

documentation required, including Companies House

form IN01, Memorandum of Association and Articles of

Association

incorporation by third-party registration agents such as

lawyers or accountants

contents of a certificate of incorporation

when trading activities can commence for different

types of company

Share capital structures Prescribed particulars attached to shares, including:

rights to vote

rights to profit

rights to capital

rights to manage

Different types of shares and the rights attached to them:

ordinary

preference

redeemable

Advantages and disadvantages of issuing different types of

share

Protection for existing shareholders in relation to:

additional share allotments, including pre-emption

provisions

pre-emption rights on transfers

tag along/drag along rights

Share administration:

updating the register of members

share transfers and transmissions

issuing a replacement share certificate

death of a member

communicating with members


© ICSA 2018 of 46


Constitutional documents Memorandum of Association – purpose and typical

contents

Articles of Association – format and typical topics covered,

including:

share capital

directors

meetings

communication

Shareholders and investment agreements – purpose and

typical contents

Ongoing obligations Meetings:

types of meeting, their structure and content, including:

− directors’ meetings

− members’ meetings

− class meetings

key terms, including:

− notice

− quorum

− resolutions – ordinary and special

− proxy voting

Filing requirements, including:

Companies House:

− annual report and accounts

− confirmation statement

− ad hoc filings, e.g. changes to the Articles,

commencement of liquidation

HM Revenue and Customs (HMRC):

− annual filings – corporation tax

− ad hoc filings, e.g. VAT, PAYE, stamp duty

listed and traded companies

general disclosures

insurance


© ICSA 2018 of 46

Section B: Records management, filing requirements and document retention


LO.3: Understand the routine compliance and governance obligations placed on companies


Statutory registers Contents and purpose of main statutory registers that

companies must keep as required by Companies House,

including:

register of directors

register of directors’ usual residential addresses

register of secretaries

Persons with Significant Control (PSC) register

register of members

register of replies to disclosure requests

Contents and purpose of other statutory registers and

books companies are required to keep, including:

register of transfers

register of allotments

minute books

Obligation to maintain statutory registers:

in house

use of the central registry at Companies House

use of third-party service providers

Where the registers must be kept

Format of the statutory registers

Updating the statutory registers

Inspection of statutory registers and who can request

copies, including:

the registers and documents that must be available for

inspection

when registers and documents for public and private

companies must be available for inspection

Fees in respect of inspection of registers by non-members

Fees for provision of copies of entries in registers and

copies of reports

Companies House Reasons why companies are required to file documents

with Companies House

Duty to notify any changes to the Registrar of Companies

Regular filing requirements, including:

annual report and accounts:

− financial statements – statement of financial

position (balance sheet) and statement of

comprehensive income (profit and loss)

− directors’ report – matters to be covered within the

report


© ICSA 2018 of 46


− strategic report – matters to be covered within the

report

confirmation statements – form CS01

changes in PSC information – forms PSC01–PSC09

appointment of new directors and changes in officers –

forms AP01–AP04, CH01–CH04, TM01 and TM02

change of registered office – form AD01

change of accounting reference date – form AA01

changes to share capital – forms SH01–SH19

changes to constitution – copy of resolution, forms

CC01–CC06 and NE01–NE06

mortgages and charges – forms MR01–MR10

liquidation/administration/receivership – forms RM01,

RM02 and LQ01

presenter information and fees

Format of filings:

hard copy

electronic filing

web filing

software filing

electronic versus paper filing:

− advantages of electronic filing over paper-based

filing

− pros and cons of paper-only filing, e.g. different

fees, uncertainty of whether a document has

arrived on time

− documents that cannot be filed electronically

Period allowed for notification of different types of changes

Penalties for late submissions

Consequences for failure to file documents, including:

late filings

no filings

Company identification Legal requirements for:

stationery (including websites)

offices

websites

business names

Data protection considerations Suppression of individuals’ residential address data

Data protection registration regime

Retention of documents – how the period of retention

depends upon the nature of the document


© ICSA 2018 of 46

Section C: Meetings

35% – 17.5 learning hours

LO.4: Understand the ownership and management structures and the decision-making processes for shareholders

and directors


Introducing meetings What a meeting is, including the common-law definition of

a meeting – a valid meeting normally consists of people

who can both see and hear each other

Purpose of different meetings

Limits on authority

Types of meeting

Reaching decisions without a meeting

Shareholder requisitions:

meeting

resolutions

statements

Members’ meetings Types and purpose of meetings:

general

annual

class

court

Types of resolution:

ordinary

special

Notice of meetings:

convening

content

notice periods for different types of company

special notice

Proxies:

right to appoint

appointment process

revocation

Quorum requirements for different types of company and

meetings

Attendance by non-members

Role and responsibilities of the chair

Voting:

show of hands

poll

Written resolutions of members

Unanimity rule


© ICSA 2018 of 46


Communicating with members:

paper communications

electronic communications

use of website

Directors’ meetings Types of meeting, their purpose and frequency:

management meetings

board meetings

Convening – who has the authority to convene directors’

meetings

Notice – format and content

Quorum requirements

Conflicts of interest

Attendance by non-directors

Chairing board meetings – role and responsibilities

How to make meetings effective, including:

appropriate documentation and information

ensuring the board and/or participants have a clear

understanding of their role

allowing sufficient time for debate and challenge

allowing appropriate time for agenda items

meeting etiquette, e.g. listening to others’ contributions,

not checking emails whilst others are talking, not

dominating the debate

managing hygiene factors, e.g. meeting length, number

of breaks, location

Minutes:

legal requirement to take minutes

purpose, e.g. to record decisions and actions

good practice

the importance of accurate minute taking

The role of committees, e.g. audit committee,

remuneration committee, nominations committee,

operations committee

MODULE F4 – INTRODUCTION TO FINANCE AND ACCOUNTING

© ICSA 2018 of 46

Module F4

Introduction to Finance and Accounting Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 60

Introduction This module introduces the components of financial documentation and the principles of financial decision making. It provides an overview of basic accounting terms and concepts and examines the importance of financial reporting. The module then covers how financial statements and reports can be analysed to help inform the decision-making activities of both internal and external stakeholders, such as management and investors. Students are not expected to memorise complicated formulae and a formulae sheet will be provided in the exam. Learning outcomes After successful completion of this module you should: 1 Know about costs, revenue and profit 2 Understand principles of accounting and financial reporting 3 Understand principles of management accounting 4 Understand principles of financial decision making and the impact of financial decisions on

businesses.


© ICSA 2018 of 46

Module content

Section A: Revenue, costs and profit


LO.1: Know about costs, revenue and profit


Revenue Definition of revenue

Definition of separate/business entity concept

Alternative terms for revenue, including:

turnover

sales/net sales

income/gross income

How businesses generate revenue – sources of revenue:

sales of goods or services

interest income/receivable

royalties

other income, including income from:

− the sale of an asset

− the sale of a business

− a change in value of property or land

− one-off items

Costs and expenditure Definition of costs and expenditure

Differences between expenditure, expenses and costs

Differences between fixed and variable costs, direct and

indirect costs, total costs

How income and expenses appear on a statement of profit

or loss

Cost of sales/cost of goods sold (COGS), including:

raw materials

inventory/stock

work(s) in progress

Selling and distribution costs

Administrative expenses/costs

Finance costs, including:

interest expense

bank charges

other borrowing/financing charges or fees

Start-up costs:

definition and types, including:

− rent of premises

− business insurance

− staff recruitment fees

− employee uniforms, if needed


© ICSA 2018 of 46


− initial stock or materials

− fixtures and fittings, e.g. lights, office furniture

− legal and accountancy advice

− financing costs

− marketing costs for launch of the business

Operating (running) costs:

definition

types of fixed costs, including:

− rent

− utilities

− business insurance

types of variable costs, including:

− raw materials

− staff costs

− distribution costs

definition of semi-variable costs

types of direct costs, including:

− raw materials

− staff costs relating directly to the production of

goods or services sold

types of indirect costs, including:

− depreciation and amortisation

− administrative expenses

Total costs:

total fixed cost and total variable cost

average fixed cost and average variable cost

marginal cost

calculating total costs

Profit and loss Definition of profit and loss

How to calculate profit

Profit and loss metrics – how businesses measure profit

and loss, including calculating:

gross profit

operating profit and EBIT (earnings before interest and

tax – this is usually the same as operating profit)

net profit

EBITDA (earnings before interest, tax, depreciation

and amortisation)

profit margins, including:

− gross profit margin

− operating margin

− net profit margin


© ICSA 2018 of 46

Section B: Financial accounting and management


LO.2: Understand principles of accounting and financial reporting


The purpose of financial reporting

Reasons why financial reporting is governed by local and

international standards

Objectives of financial reporting, including International

Financial Reporting Standards (IFRS) definition

Types of financial reporting standards and their purposes,

including:

Generally Accepted Accounting Practice (GAAP):

− variations between countries, e.g. UK GAAP versus

US GAAP

− Financial Reporting Standard for Smaller Entities

(FRSSE) in the UK replaced by FRS 105 (Financial

Reporting Standard for Micro-Entities Regime) or

Section 1A of FRS 102 (The Financial Reporting

Standard)

IFRS for listed companies

Qualitative characteristics of financial reporting:

fundamental characteristics:

− relevance

− materiality

− faithful representation

enhancing characteristics:

− understandability

− comparability

− verifiability

− timeliness

Components of financial statements

The concept of ‘going concern’

Recording financial data:

ledgers and ledger accounting:

− nominal (or general) ledger

− sales ledger

− purchase ledger

books of prime entry:

− sales day book

− purchases day book

− cash book

− petty cash book

− journal


© ICSA 2018 of 46


double-entry bookkeeping:

− understanding the accounting equation and how to

apply it

trial balance:

− how to prepare a trial balance at the end of an

accounting period (e.g. a year-end) to assist in the

preparation of financial statements

− year-end accounting adjustments in the journal

Financial statements and their purposes:

statement of profit or loss and other comprehensive

income:

− format – how a statement of profit or loss would

appear in a company’s accounts

− the importance of comparing statements of profit or

loss from different accounting periods

statement of financial position (balance sheet):

− assets – fixed assets (property, plant and

equipment, goodwill), current assets

(debtors/receivables, inventory/stock, cash and

cash equivalents, prepayments)

− definition of net assets

− liabilities – current liabilities (trade

creditors/accounts payable, other creditors,

accruals, short-term loans, taxes payable) and long-

term liabilities (e.g. loans)

− shareholders’ equity

statement of cash flows (cash flow statement):

− reconciliation of operating profit to cash flow from

operations

− operating activities

− investing activities

− financing activities

statement of income and retained earnings (UK GAAP):

− retained earnings/profit and loss account

− equity dividends paid (distributions)

Students will not be required to prepare full financial

statements as part of their assessment.

Analysing and evaluating financial statements

Tracking performance measures across financial

statements using:

horizontal analysis

vertical analysis

ratio analysis, including:

− return on assets

− return on equity


© ICSA 2018 of 46


How different types of financial statements are used to

analyse trends and calculate ratios for analysis:

statement of comprehensive income (profit and loss),

including:

− profit margins

− interest cover

− break-even point

statement of financial position (balance sheet),

including:

− working capital (current assets minus current

liabilities) and its significance

− using the working capital cycle to evaluate company

performance

− current ratio

− quick (acid test) ratio

− gearing (debt–equity ratio)

− debtors’ turnover/debtor days

− creditors’ turnover/creditor days

− inventory turnover/stock turnover

Advantages and disadvantages of different types of ratio

analysis


© ICSA 2018 of 46

Section C: Management accounting


LO.3: Understand principles of management accounting


Understanding management accounting

Definition of management accounting and management

accounting systems

The purpose of management accounting

The importance of integrating management systems within

organisations

The distinction between management accounting and

financial accounting (looking forward versus looking

backwards)

The importance of presenting financial information for users

that is:

reliable

up-to-date

accurate

understandable

Primary users of financial information:

management accounts – primarily internal stakeholders

financial accounts – external stakeholders

Management accounting systems

Cost accounting, including:

standard cost accounting

activity-based costing (ABC)

life cycle costing

target costing

Performance evaluation and analysis, including:

key performance indicators (KPIs)

balanced scorecard

Planning and forecasting, including:

cost allocation

financial modelling:

− weighted average cost of capital (WACC)

− scenario planning

− business valuation of projects – discounted cash

flow, net present value

Benefits and limitations of different types of management

accounting systems


© ICSA 2018 of 46


Management accounting techniques

Costs and cost analysis (cost–benefit analysis)

Cost behaviour

Variances and statement of variance analysis, including:

sales volume variance

direct material price (and/or usage) variance

fixed/variable overhead variance

Budgetary control statements

Financial statements for management information

Breakeven analysis

The importance and usefulness to businesses of using

planning tools, e.g. breakeven analysis and cash flow

forecasting

Potential consequences of inadequate planning


© ICSA 2018 of 46

Section D: Introduction to financial decision making


LO.4: Understand principles of financial decision making and the impact of financial decisions on businesses


Principles of financial decision making

The importance of careful consideration of costs and cash

flows when making decisions

Cost–volume–profit (CVP) analysis, its objective and uses,

including:

the contribution – defined as remaining earnings after

all direct costs have been subtracted from revenue

the contribution margin – defined as contribution

divided by revenue

assumptions of CVP when making business

decisions – that:

− all costs, including manufacturing, administrative

and overhead costs, can be accurately identified as

either fixed or variable

− the selling price per unit is constant

− all units produced are sold

− changes in activity are the only factors that affect

costs

Integrated reporting:

information that should be produced alongside financial

statements in an integrated report, including:

− financial information

− governance and remuneration

− sustainability information

− management commentary

the concept, purpose and benefits of integrated

reporting, including the impact on:

− value creation

− corporate governance

− sustainability

Impact of financial decisions The importance of not making business decisions solely on

financial information but considering the impact on, for

example:

the environment

society

© icsa 2018 page 1 of 46 · is graded at pass (p), merit (m) and distinction (d) – students...

Documents