acca syllabus june & december 2012 this is a narrative ...50-70 compulsory marks from two...

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ACCA SyllabusJune & December 2012This syllabus and study guide is designed to helpwith planning study and to provide detailedinformation on what could be assessed inany examination session.

THE STRUCTURE OF THE SYLLABUS ANDSTUDY GUIDE

Relational diagram of paper with other papers

This diagram shows direct and indirect linksbetween this paper and other papers preceding orfollowing it. Some papers are directly underpinnedby other papers such as Advanced PerformanceManagement by Performance Management. Theselinks are shown as solid line arrows. Other papersonly have indirect relationships with each othersuch as links existing between the accounting andauditing papers. The links between these are shownas dotted line arrows. This diagram indicates whereyou are expected to have underpinning knowledgeand where it would be useful to review previouslearning before undertaking study.

Overall aim of the syllabus

This explains briefly the overall objective of thepaper and indicates in the broadest sense thecapabilities to be developed within the paper.

Main capabilities

This paper’s aim is broken down into several maincapabilities which divide the syllabus and studyguide into discrete sections.

Relational diagram of the main capabilities

This diagram illustrates the flows and links betweenthe main capabilities (sections) of the syllabus andshould be used as an aid to planning teaching andlearning in a structured way.

Syllabus rationale

This is a narrative explaining how the syllabus isstructured and how the main capabilities are linked.The rationale also explains in further detail what theexamination intends to assess and why.

Detailed syllabus

This shows the breakdown of the main capabilities(sections) of the syllabus into subject areas. This isthe blueprint for the detailed study guide.

Approach to examining the syllabus

This section briefly explains the structure of theexamination and how it is assessed.

Study Guide

This is the main document that students, tuitionproviders and publishers should use as the basis oftheir studies, instruction and materials.Examinations will be based on the detail of thestudy guide which comprehensively identifies whatcould be assessed in any examination session.The study guide is a precise reflection andbreakdown of the syllabus. It is divided into sectionsbased on the main capabilities identified in thesyllabus. These sections are divided into subjectareas which relate to the sub-capabilities includedin the detailed syllabus. Subject areas are brokendown into sub-headings which describe the detailedoutcomes that could be assessed in examinations.These outcomes are described using verbsindicating what exams may require students todemonstrate, and the broad intellectual level atwhich these may need to be demonstrated(*see intellectual levels below).

Learning Materials

ACCA's Approved Learning Partner - content (ALP-c) is the programme through which ACCA approveslearning materials from high quality contentproviders designed to support study towards ACCA’squalifications.

ACCA has one Platinum Approved Learning Partnercontent which is BPP Learning Media. In addition,there are a number of Gold Approved LearningPartners - content.


For information about ACCA'sApproved Learning Partners - content, please goACCA's Content Provider Directory.

The Directory also lists materials by Subscribers,these materials have not been quality assured byACCA but may be helpful if used in conjunction withapproved learning materials. You will alsofind details of Examiner suggested AdditionalReading which may be a useful supplement toapproved learning materials.

ACCA's Content Provider Directory can be foundhere–http://www.accaglobal.com/learningproviders/alpc/c

ontent_provider_directory/search/.

Relevant articles will also be published in StudentAccountant.

INTELLECTUAL LEVELS

The syllabus is designed to progressively broadenand deepen the knowledge, skills and professionalvalues demonstrated by the student on their waythrough the qualification.

The specific capabilities within the detailedsyllabuses and study guides are assessed at one ofthree intellectual or cognitive levels:

Level 1: Knowledge and comprehensionLevel 2: Application and analysisLevel 3: Synthesis and evaluation

Very broadly, these intellectual levels relate to thethree cognitive levels at which the Knowledgemodule, the Skills module and the Professional levelare assessed.

Each subject area in the detailed study guideincluded in this document is given a 1, 2, or3 superscript, denoting intellectual level, marked atthe end of each relevant line. This gives anindication of the intellectual depth at which an areacould be assessed within the examination. However,while level 1 broadly equates with the Knowledgemodule, level 2 equates to the Skills module andlevel 3 to the Professional level, some lower levelskills can continue to be assessed as the studentprogresses through each module and level. Thisreflects that at each stage of study there will be a

requirement to broaden, as well as deepencapabilities. It is also possible that occasionallysome higher level capabilities may be assessed atlower levels.

LEARNING HOURS

The ACCA qualification does not prescribe orrecommend any particular number of learning hoursfor examinations because study and learningpatterns and styles vary greatly between people andorganisations. This also recognises the widediversity of personal, professional and educationalcircumstances in which ACCA students findthemselves.

Each syllabus contains between 23 and 35 mainsubject area headings depending on the nature ofthe subject and how these areas have been brokendown.

GUIDE TO EXAM STRUCTURE

The structure of examinations varies within andbetween modules and levels.

The Fundamentals level examinations contain100% compulsory questions to encouragecandidates to study across the breadth of eachsyllabus.

The Knowledge module is assessed by equivalenttwo-hour paper based and computer basedexaminations.

The Skills module examinations are all paper basedthree-hour papers. The structure of papers variesfrom ten questions in the Corporate and BusinessLaw (F4) paper to four 25 mark questions inFinancial Management (F9). Individual questionswithin all Skills module papers will attract between10 and 30 marks.

The Professional level papers are all three-hourpaper based examinations, all containing twosections. Section A is compulsory, but there will besome choice offered in Section B.

For all three hour examination papers, ACCA hasintroduced 15 minutes reading and planning time.

This additional time is allowed at the beginning ofeach three-hour examination to allow candidates to

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http://www.accaglobal.com/learningproviders/alpc/content_provider_directory/search/


read the questions and to begin planning theiranswers before they start writing in their answerbooks. This time should be used to ensure that allthe information and exam requirements are properlyread and understood.

During reading and planning time candidates mayonly annotate their question paper. They may notwrite anything in their answer booklets until told todo so by the invigilator.

The Essentials module papers all have a Section Acontaining a major case study question with allrequirements totalling 50 marks relating to thiscase. Section B gives students a choice of two fromthree 25 mark questions.

Section A of each of the Options papers contains50-70 compulsory marks from two questions, eachattracting between 25 and 40 marks. Section B willoffer a choice of two from three questions totalling30-50 marks, with each question attractingbetween 15 and 25 marks.

The pass mark for all ACCA Qualificationexamination papers is 50%.

GUIDE TO EXAMINATION ASSESSMENT

ACCA reserves the right to examine anythingcontained within the study guide at any examinationsession. This includes knowledge, techniques,principles, theories, and concepts as specified.

For the financial accounting, audit and assurance,law and tax papers except where indicatedotherwise, ACCA will publish examinabledocuments once a year to indicate exactlywhat regulations and legislation could potentially beassessed within identified examination sessions..

For paper based examinations regulation issued orlegislation passed on or before 30th Septemberannually, will be assessed from June 1st of thefollowing year to May 31st of the year after. .Please refer to the examinable documents for thepaper (where relevant) for further information.

Regulation issued or legislation passed inaccordance with the above dates may beexaminable even if the effective date is in thefuture.

The term issued or passed relates to whenregulation or legislation has been formally approved.

The term effective relates to when regulation orlegislation must be applied to an entity transactionsand business practices.

The study guide offers more detailed guidance onthe depth and level at which the examinabledocuments will be examined. The study guideshould therefore be read in conjunction with theexaminable documents list.


Corporate and BusinessLaw (ENG) (F4)

AIM

To develop knowledge and skills in theunderstanding of the general legal framework, andof specific legal areas relating to business,recognising the need to seek further specialist legaladvice where necessary.

MAIN CAPABILITIES

On successful completion of this paper candidatesshould be able to:

A Identify the essential elements of the legalsystem, including the main sources of law

B Recognise and apply the appropriate legalrules relating to the law of obligations

C Explain and apply the law relating toemployment relationships

D Distinguish between alternative forms andconstitutions of business organisations

E Recognise and compare types of capitaland the financing of companies

F Describe and explain how companies aremanaged, administered and regulated

G Recognise the legal implications relating tocompanies in difficulty or in crisis

H Demonstrate an understanding of governanceand ethical issues relating to business.

RELATIONAL DIAGRAM OF MAIN CAPABILITIES

Essential elements of the legal system (A)

The law of obligations(B)

Capital and thefinancing ofcompanies

(E)

Governance and ethical issues relating to business (H)

Management,administration

and regulation ofcompanies

(F)

Employment law(C)

The formation and constitution ofbusinessorganisations (D)

Legal implicationsrelating to

companies indifficulty or in

crisis (G)

FR (F7)

CR (P2)

CL (F4) AA (F8)FR (F7)

CR (P2)

CL (F4) AA (F8)


RATIONALE

Corporate and Business Law is divided into eightareas.The syllabus starts with an introduction to theoverall English legal system such as the courtsystem and sources of law – including – humanrights legislation. It then leads into the area of thelaw of obligations including contract and tort, whichunderpin business transactions generally.

The syllabus then covers a range of specific legalareas relating to various aspects of business of mostconcern to finance professionals. These are the lawrelating to employment and the law relating tocompanies. These laws include the formation andconstitution of companies, the financing ofcompanies and types of capital, and the day-to-daymanagement, the administration and regulation ofcompanies and legal aspects of companies facingdifficulty or in crisis.

The final section links back to all the previous areas.This section deals with corporate governance, ethicsand ethical behaviour relating to business includingcriminal law.

DETAILED SYLLABUS

A Essential elements of the legal system

1. Court structure

2. Sources of law

3. Human rights

B The law of obligations

1. Formation of contract

2. Content of contracts

3. Breach of contract and remedies

4. The law of torts

5. Professional negligence

C Employment law

1. Contract of employment

2. Dismissal and redundancy

D The formation and constitution of businessorganisations

1. Agency law

2. Partnerships

3. Corporations and legal personality

4. Company formations

E Capital and the financing of companies

1. Share capital

2. Loan capital

3. Capital maintenance and dividend law

F Management, administration and regulation ofcompanies

1. Company directors

2. Other company officers

3. Company meetings and resolutions

G Legal implications relating to companies indifficulty or in crisis

1. Insolvency

2. Administration

H Governance and ethical issues relating tobusiness

1. Corporate governance

2. Fraudulent and criminal behaviour


APPROACH TO EXAMINING THE SYLLABUS

The syllabus is assessed by a three hour paper-based examination.

The examination consists of seven 10 markquestions assessing knowledge of the law, and three10 mark application questions.

NOTE ON CASE LAWCandidates should support their answers withanalysis referring to cases or examples. There is noneed to detail the facts of the case. Remember, it isthe point of law that the case establishes that isimportant, although knowing the facts of cases canbe helpful as sometimes questions include scenariosbased on well-known cases. Further it is notnecessary to quote section numbers of Acts.


Study GuideA ESSENTIAL ELEMENTS OF THE LEGAL

SYSTEM

1. Court structure

a) Define law and distinguish types of law.[1]

b) Explain the structure and operation of thecourts and tribunals systems.[1]

2. Sources of law

a) Explain what is meant by case law andprecedent within the context of the hierarchy ofthe courts.[2]

b) Explain legislation and evaluate delegatedlegislation. [2]

c) Illustrate the rules and presumptions used bythe courts in interpreting statutes. [1]

3. Human rights

a) Identify the concept of human rights asexpressed in the Human Rights Act 1998.[2]

b) Explain the impact of human rights law onstatutory interpretation. [2]

c) Explain the impact of human rights law on thecommon law.[2]

B THE LAW OF OBLIGATIONS


a) Analyse the nature of a simple contract.[2]

b) Explain the meaning of offer and distinguish itfrom invitations to treat.[2]

c) Explain the meaning and consequence ofacceptance.[2]

d) Explain the need for consideration.[2]

e) Analyse the doctrine of privity.[2]

f) Distinguish the presumptions relating tointention to create legal relations. [2]

2. Content of contracts

a) Distinguish terms from mere representations.[2]

b) Define the various contractual terms. [1]

c) Explain the effect of exclusion clauses andevaluate their control. [2]

3. Breach of contract and remedies

a) Explain the meaning and effect of breach ofcontract.[2]

b) Explain the rules relating to the award ofdamages.[2]

c) Analyse the equitable remedies for breach ofcontract.[2]

4. The law of torts

a) Explain the meaning of tort.[2]

b) Identify examples of torts including ‘passing off’and negligence. [2]

c) Explain the duty of care and its breach.[2]

d) Explain the meaning of causality andremoteness of damage. [2]

e) Discuss defences to actions in negligence.[2]

5. Professional negligence

a) Explain and analyse the duty of care ofaccountants and auditors.[2]

C EMPLOYMENT LAW

1. Contract of employment

a) Distinguish between employees and the self-employed.[2]

b) Explain the nature of the contract ofemployment and give examples of the mainduties placed on the parties to such acontract.[2]


2. Dismissal and redundancy

a) Distinguish between wrongful and unfairdismissal including constructive dismissal.[2]

b) Explain what is meant by redundancy. [2]

c) Discuss the remedies available to those whohave been subject to unfair dismissal orredundancy. [2]

D THE FORMATION AND CONSTITUTION OFBUSINESS ORGANISATIONS

1. Agency law

a) Define the role of the agent and give examplesof such relationships paying particular regardto partners and company directors.[2]

b) Explain how the agency relationship isestablished.[2]

c) Define the authority of the agent.[2]

d) Explain the potential liability of both principaland agent.[2]

2. Partnerships

a) Demonstrate a knowledge of the legislationgoverning the partnership, both unlimited andlimited.[1]

b) Discuss how partnerships are established. [2]

c) Explain the authority of partners in relation topartnership activity.[2]

d) Analyse the liability of various partners forpartnership debts.[2]

e) Explain the way in which partnerships can bebrought to an end and partners’ subsequentrights and liabilities.[2]


a) Distinguish between sole traders, partnershipsand companies. [2]

b) Explain the meaning and effect of limitedliability.[2]

c) Analyse different types of companies,especially private and public companies.[2]

d) Illustrate the effect of separate personality.[2]

e) Recognise instances where separatepersonality will be ignored.[2]

4. Company formations

a) Explain the role and duties of companypromoters. [2]

b) Explain the meaning of, and the rules relatingto, pre-incorporation contracts..[2]

c) Describe the procedure for registeringcompanies, both public and private.[2]

d) Describe the statutory books, records andreturns that companies must keep or make.[1]

e) Analyse the effect of a company’sconstitutional documents.[2]

f) Describe the contents of model articles ofassociation.[1]

g) Explain how articles of association can bechanged.[2]

h) Explain the controls over the names thatcompanies may or may not use.[2]

E CAPITAL AND THE FINANCING OFCOMPANIES

1. Share capital

a) Examine the different meanings of capital.[2]

b) Explain allotment of shares and distinguishbetween rights issue and bonus issue ofshares. [2]

c) Illustrate the difference between variousclasses of shares. [2]

d) Explain the procedure for altering class rights.[2]

2. Loan capital

a) Define companies’ borrowing powers.[1]


b) Explain the meaning of debenture. [2]

c) Distinguish loan capital from share capital andexplain the different rights held by shareholdersand debenture holders.[2]

d) Explain the concept of a company charge anddistinguish between fixed and floatingcharges. [2]

e) Describe the need and the procedure forregistering company charges.[2]


a) Explain the doctrine of capital maintenanceand capital reduction. [2]

b) Explain the nature of treasury shares.[2]

c) Examine the effect of issuing shares at either adiscount, or at a premium.[2]

d) Explain the rules governing the distribution ofdividends in both private and publiccompanies. [2]

F MANAGEMENT, ADMINISTRATION ANDREGULATION OF COMPANIES


a) Explain the role of directors in the operation ofa company. [2]

b) Discuss the ways in which directors areappointed, can lose their office or be subject toa disqualification order.[2]

c) Distinguish between types of directors, such asexecutive/ non-executive directors or de jureand de facto directors . [2]

d) Distinguish between the powers of the board ofdirectors, the managing director/chief executiveand individual directors to bind theircompany. [2]

e) Explain the duties that directors owe to theircompanies. [2]

f) Demonstrate an understanding of the way inwhich statute law has attempted to controldirectors.[2]


a) Discuss the appointment procedure relating to,and the duties and powers of, a companysecretary.[2]

b) Discuss the appointment procedure relating to,and the duties, powers and rights of companyauditors and their subsequent removal orresignation.[2]


a) Distinguish between types of meetings:ordinary general meetings and annual generalmeetings.[1]

b) Explain the procedure for calling suchmeetings.[2]

c) Detail the procedure for conducting companymeetings.[1]

d) Distinguish between types of resolutions:ordinary, special, and written.[2]

G LEGAL IMPLICATIONS RELATING TOCOMPANIES IN DIFFICULTY OR IN CRISIS

1. Insolvency

a) Explain the meaning of and procedure involvedin voluntary liquidation.[2]

b) Explain the meaning of, the grounds for, andthe procedure involved in compulsoryliquidation.[2]

c) Explain the order in which company debts willbe paid off. [2]

2. Administration

a) Explain administration as a general alternativeto winding up.[2]

b) Explain in particular the way in whichadministrators may be appointed, the effects of


such appointment, and the powers and dutiesof administrators. [2]

H GOVERNANCE AND ETHICAL ISSUESRELATING TO BUSINESS


a) Explain the idea of corporate governance.[2]

b) Recognise and explain the extra-legal codes ofcorporate governance. [2]

c) Identify and explain the legal regulation ofcorporate governance. [2]


a) Recognise the nature and legal control overinsider dealing and market abuse.[2]

b) Recognise the nature and legal control overmoney laundering. [2]

c) Recognise the nature and legal control overbribery.[2]

d) Discuss potential criminal activity in theoperation, management and winding up ofcompanies.[2]

e) Distinguish between fraudulent and wrongfultrading. [2]


SUMMARY OF CHANGES TO F4 (ENG)

ACCA periodically reviews it qualification syllabusesso that they fully meet the needs of stakeholderssuch as employers, students, regulatory andadvisory bodies and learning providers.

The main areas that have been clarified in thesyllabus (all were implicitly included previously) areshown in Table 1 below:

Table 1 – Amendments to F4 (ENG)

Section and subject area Syllabus contentD2e) Partnerships Termination of partnershipsD4b) Company formations Pre-incorporation contractsE1b) Share capital Allotment of sharesE2c) Loan capital Rights of debenture holders and rights of shareholdersF1c) Company directors Types of directorsF2b) Other company officers Rights and removal of company auditorsG1b) Insolvency Grounds for compulsory liquidationG1c) Order of payment of company debtsG2b) Administration Appointment, powers and duties of administratorsH1b) Corporate governance Explain extra-legal codes of corporate governanceH2a) Fraudulent and criminal behaviour Market abuse

The main areas that have been added to the syllabusare shown in Table 2 below:

Table 2 – Additions to F4 (ENG)

Section and subject area Syllabus contentE3b) Capital maintenance Treasury sharesH2c) Fraudulent and criminal behaviour Bribery


Corporate and BusinessLaw (GLO) (F4)

AIMTo develop knowledge and skills in theunderstanding of the general legal framework withinwhich international business takes place, and ofspecific legal areas relating to business, recognisingthe need to seek further specialist legal advicewhere necessary.

MAIN CAPABILITIES


A Identify the essential elements of differentlegal systems including the main sources oflaw, the relationship between the differentbranches of a state’s constitution, and the need

for international legal regulation, andexplain the roles of internationalorganisations in the promotion and regulationof international trade, and the role ofinternational arbitration as an alternative tocourt adjudication

B Recognise and apply the appropriate legalrules applicable under the United NationsConvention on Contracts for the InternationalSale of Goods, and explain the various waysin which international business transactionscan be funded

C Recognise different types of internationalbusiness forms

D Distinguish between the alternative formsand constitutions of business organisations

E Recognise and compare types of capitaland the financing of companies

F Describe and explain how companies aremanaged, administered and regulated

G Recognise the legal implications relating tocompanies in difficulty or in crisis

H Demonstrate an understanding of governanceand ethical issues relating to business


Essential elements of legal systems (A)

International businesstransactions(B)

Capital and thefinancing of

companies (E)

Governance and ethical issues relating to business (H)

Management,administration

and regulation ofcompanies(F)

International Businessforms(C)

The formation and constitution ofjoint stockcompanies (D)

Legalimplicationsrelating to

companiesindifficulty or in crisis (G)

FR (F7)

CR (P2)

CL (F4) AA (F8)


RATIONALE

Corporate and Business Law Global is divided intoeight areas. The syllabus starts with an introductionto different legal systems, different types of law andthose organisations which endeavour to promoteinternationally applicable laws. It also introducesarbitration as an alternative to court adjudication.Itthen leads into an examination of the substantivelaw as stated in United Nations Convention onContracts for the International Sale of Goods, whichrelates to the formation, content and discharge ofinternational contracts for the sale of goods.

The syllabus then covers a range of specific legalareas relating to various aspects of internationalbusiness of most concern to finance professionals.These are the law relating to the financing ofinternational transactions, and the various legalforms through which international businesstransactions may be conducted. Particular attentionis focused on the law relating to companies. Aspectsexamined include the formation and constitution ofcompanies, the financing of companies and types ofcapital, and the day to day management, theadministration and regulation of companies andlegal aspects of companies facing difficulty or incrisis.

The final section links back to all the previous areas.This section deals with corporate governance, ethicsand ethical behaviour relating to business includingthe criminal law.

DETAILED SYLLABUS

A Essential elements of legal systems

1. Economic, Political and Legal Systems

2. Different legal systems

3. International trade, international legalregulation and conflict of laws

4. Alternative Dispute Resolution mechanismsand the UNCITRAL Model Law on InternationalCommercial Arbitration

B International business transactions

1. Introduction to the United Nations Conventionon Contract for the International Sale of Goodsand ICC Incoterms


3. Obligations of the seller

4. Obligations of the buyer

5. Provisions common to both the seller and thebuyer, the passage of risk

6. Transportation documents

7. Means of payment

C International business forms

1. Agency

2. Partnerships

D The formation and constitution of joint stockcompanies


2. The formation of the company

3. The constitution of the company

E Capital and the financing of companies

1. Share capital

2. Loan capital


F Management, administration and regulation ofcompanies





G Legal implications relating to companies indifficulty or in crisis

1. Insolvency

2. Administration

H Governance and ethical issues relating tobusiness





The syllabus is assessed by a three hour paper-based examination.

The examination consists of seven 10 markquestions assessing knowledge of the law, and three10 mark application questions.

NOTE ON CASE LAW

Candidates should support their answers withanalysis referring to cases or examples. There is noneed to detail the facts of the case. Remember, it isthe point of law that the case establishes that isimportant, although knowing the facts of cases canbe helpful as sometimes questions include scenariosbased on well-known cases. Further it is notnecessary to quote section numbers of Acts.


Study GuideA ESSENTIAL ELEMENTS OF LEGAL SYSTEMS

1. Economic, Political and Legal Systems

a) Explain the inter-relationship of Economic andPolitical and Legal systems.[2]

b) Explain the doctrine of the separation ofpowers and its impact on the legal system.[2]

2. Different legal systems

a) Differentiate between different systems oflaw.[1]

b) Explain the distinction between criminal andcivil law.[1]

c) Outline the operation of the following legalsystems:[1]

i) Common lawii) Civil Lawiii) Sharia law.

3. International trade, international legalregulation and conflict of laws

a) Explain the need for international legalregulation in the context of conflict of laws.[2]

b) Explain the function of international treaties,conventions and model codes. [2]

c) Explain the roles of international organisations,UN. ICC, WTO, COE, OECD, UNIDROIT, etcand courts in the promotion and regulation ofinternational trade. [1]

4 Alternative Dispute Resolution mechanisms

a) Explain the operation, and evaluate the distinctmerits, of court-based adjudication andAlternative Dispute Resolution mechanisms.[2]

b) Explain and apply the provisions of theUNCITRAL Model Law on InternationalCommercial Arbitration.[2]

B INTERNATIONAL BUSINESSTRANSACTIONS

1. Introduction to the United Nations Conventionon Contract for the International Sale of Goodsand ICC Incoterms

a) Explain the sphere of application and generalprovisions of the convention. [1]

b) Explain the meaning and effect of the ICCIncoterms.[1]


a) Explain and be able to apply the rules forcreating contractual relations under theconvention.[2]

3. Obligations of the seller

a) Explain and be able to apply the rules relatingto the obligations of the seller under theconvention:[2]

i) delivery of goods and handing overdocuments

ii) conformity of the goods and third partyclaims

iii) remedies for breach of contract by theseller.

4. Obligations of the buyer

a) Explain and be able to apply the rules relatingto the obligations of the buyer under theconvention:[2]

i) payment of the priceii) taking deliveryiii) remedies for breach of contract by the

buyer.

5. Provisions common to both the seller and thebuyer, the passage of risk

a) Explain and be able to apply the rules relatingto the provisions common to both the sellerand the buyer under the convention:[2]

i) anticipatory breach and instalmentcontracts

ii) damagesiii) interestiv) exemptionsv) effects of avoidance


vi) preservation of the goods.

b) Explain and be able to apply the rules relatingto the passing of risk under the convention. [2]

6. Transportation documents

a) Define and explain the operation of bills oflading.[1]

7. Means of payment

a) Explain the operation of: [1]

i) Bank transfersii) Bills of exchangeiii) Letters of creditiv) Letters of comfort.

b) Explain and be able to apply the rules ofUNCITRAL model law on International CreditTransfer. [2]

c) Explain and be able to apply the rules ofUnited Nations Convention on InternationalBills Of Exchange And International PromissoryNotes. [2]

C INTERNATIONAL BUSINESS FORMS

1. Agency

a) Define the role of the agent and give examplesof such relationships paying particular regardto partners and company directors.[2]

b) Explain how the agency relationship isestablished.[2]

c) Define the authority of the agent.[2]

d) Explain the potential liability of both principaland agent.[2]

2. Partnerships

a) Demonstrate a knowledge of the legislationgoverning the partnership, both unlimited andlimited.[1]

b) Discuss how partnerships are established. [2]

c) Explain the authority of partners in relation topartnership activity.[2]

d) Analyse the liability of various partners forpartnership debts.[2]

e) Explain the way in which partnerships can bebrought to an end and partners’ subsequentrights and liabilities.[2]

D THE FORMATION AND CONSTITUTION OFJOINT STOCK COMPANIES


a) Distinguish between sole traders, partnershipsand companies. [2]

b) Explain the meaning and effect of limitedliability.[2]

c) Analyse different types of companies,especially private and public companies.[2]

d) Illustrate the effect of separate personality.[2]

e) Recognise instances where separatepersonality will be ignored.[2]

2. The formation of the company

a) Explain the role and duties of companypromoters. [2]

b) Explain the meaning of, and the rules relatingto, pre-incorporation contracts.[2]

c) Describe the procedure for registeringcompanies, both public and private.[1]

d) Describe the statutory books, records andreturns that companies must keep or make.[1]

3. The constitution of the company

a) Analyse the effect of a company’sconstitutional documents.[2]

b) Describe the contents of model articles ofassociation.[1]

c) Explain how articles of association can bechanged.[2]

d) Explain the control over the names thatcompanies may or may not use.[2]


E CAPITAL AND THE FINANCING OFCOMPANIES

1. Share capital

a) Examine the different meanings of capital.[2]

b) Explain allotment of shares and distinguishbetween rights issue and bonus issue ofshares. [2]

c) Illustrate the difference between variousclasses of shares. [2]

d) Explain the procedure for altering class rights.[2]

2. Loan capital

a) Define companies’ borrowing powers.[1]

b) Explain the meaning of debenture. [2]

c) Distinguish loan capital from share capital andexplain the different rights held by shareholdersand debenture holders.[2]

d) Explain the concept of a company charge anddistinguish between fixed and floatingcharges. [2]

e) Describe the need and the procedure forregistering company charges.[2]


a) Explain the doctrine of capital maintenanceand capital reduction. [2]

b) Explain the nature of treasury shares.[2]

c) Examine the effect of issuing shares at either adiscount, or at a premium.[2]

d) Explain the rules governing the distribution ofdividends in both private and publiccompanies. [2]

F MANAGEMENT, ADMINISTRATION ANDREGULATION OF COMPANIES


a) Explain the role of directors in the operation ofa company. [2]

b) Discuss the ways in which directors areappointed, can lose their office or be subject toa disqualification order.[2]

c) Distinguish between types of directors, such asexecutive/ non-executive directors or de jureand de facto directors .[2]

d) Distinguish between the powers of the board ofdirectors, the managing director/chief executiveand individual directors to bind theircompany.[2]

e) Explain the duties that directors owe to theircompanies. [2]

f) Demonstrate an understanding of the way inwhich statute law has attempted to controldirectors. [2]

2 Other company officers

a) Discuss the appointment procedure relating to,and the duties and powers of, a companysecretary.[2]

b) Discuss the appointment procedure relating to,and the duties, powers and rights of, companyauditors and their subsequent removal orresignation.[2]


a) Distinguish between types of meetings:ordinary general meetings and annual generalmeetings.[1]

b) Explain the procedure for calling suchmeetings.[2]

c) Detail the procedure for conducting companymeetings.[1]

d) Distinguish between types of resolutions:ordinary, special and written.[2]


G LEGAL IMPLICATIONS RELATING TOCOMPANIES IN DIFFICULTY OR IN CRISIS

1 Insolvency

a) Explain the meaning of and procedureinvolved in voluntary liquidation.[2]

b) Explain the meaning of, the grounds for andthe procedure involved in compulsoryliquidation.[2]

c) Explain the order in which company debts willbe paid off .[2]

d) Explain and apply the rules in the 1997UNCITRAL Model Law on Cross-BorderInsolvency.[2]

2. Administration

a) Explain administration as an alternative towinding up.[2]

b) Compare administration and Chapter 11protection. [2]

c) Explain in particular the way in whichadministrators may be appointed, the effects ofsuch appointment, and the powers and dutiesof administrators. [2]

H GOVERNANCE AND ETHICAL ISSUESRELATING TO BUSINESS

1 Corporate governance

a) Explain the idea of corporate governance.[2]

b) Recognise and explain the extra-legal codes ofcorporate governance. [2]

c) Identify and explain the legal regulation ofcorporate governance. [2]

2 Fraudulent and criminal behaviour

a) Recognise the nature and legal control overinsider dealing and market abuse.[2]

b) Recognise the nature and legal control overmoney laundering. [2]

c) Recognise the nature and legal control overbribery. [2]

d) Discuss potential criminal activity in theoperation, management and winding up ofcompanies. [2]

e) Distinguish between fraudulent and wrongfultrading. [2]


SUMMARY OF CHANGES TO F4 (GLO)

ACCA periodically reviews it qualification syllabusesso that they fully meet the needs of stakeholderssuch as employers, students, regulatory andadvisory bodies and learning providers.The areas that have been clarified in the syllabus(all were implicitly included) are shown in Table 1below:


:Table 1 – Amendments to F4 (GLO)Section and subject area Syllabus contentC2e) Partnerships Termination of partnershipsD2b) The formation of the company Pre-incorporation contractsD3d) The constitution of the company Company namesE1b) Share capital Allotment of sharesE2c) Loan capital Rights of debenture holders and rights of shareholdersF1c) Company directors Types of directorsF2b) Other company officers Rights and removal of company auditorsG1b) Insolvency Grounds for compulsory liquidationG1c) Order of payment of company debtsG2c) Administration Appointment, powers and duties of administratorsH1b) Corporate governance Explain extra-legal codes of corporate governanceH2a) Fraudulent and criminal behaviour Market abuse

The areas to be added to the syllabus are shown inTable 2 below:

Table 1 – Additions to F4 (GLO)

Section and subject area Syllabus contentE3b) Capital maintenance Treasury sharesH2c) Fraudulent and criminal behaviour Bribery

The areas to be deleted from the syllabus are shown inTable 3 below:

Table 3 – Deletions to F4 (GLO)

Section and subject area Syllabus contentA2a) Different legal systems Different types of lawA3a) International trade, international regulation Public and private international law


Performance Management(F5)

AIM

To develop knowledge and skills in the applicationof management accounting techniques toquantitative and qualitative information for planning,decision-making, performance evaluation, andcontrol

MAIN CAPABILITIES

On successful completion of this paper, candidatesshould be able to:

A Explain and apply cost accounting techniques

B Select and appropriately applydecision-making techniques to facilitatebusiness decisions and promote efficient andeffective use of scarce business resources,appreciating the risks and uncertainty inherentin business and controlling those risks

C Identify and apply appropriate budgetingtechniques and methods for planning andcontrol

D Use standard costing systems to measureand control business performance and toidentify remedial action

E Assess the performance of a business fromboth a financial and non-financial viewpoint,appreciating the problems of controllingdivisionalised businesses and the importanceof allowing for external aspects


PM (F5)

APM (P5)

F2/FMA

Decision-makingtechniques (B)

Standard costing andvariance analysis (D)

Budgeting (C)

Performancemeasurement and

control (E)

Specialist cost andmanagement accounting

techniques (A)


RATIONALE

The syllabus for Paper F5, PerformanceManagement, builds on the knowledge gained inPaper F2, Management Accounting. It alsoprepares candidates for more specialist capabilitieswhich are covered in P5 Advanced PerformanceManagement.

The syllabus begins by introducing more specialisedmanagement accounting topics. There is someknowledge assumed from Paper F2 – primarilyoverhead treatments. The objective here is toensure candidates have a broader background inmanagement accounting techniques.

The syllabus then considers decision-making.Candidates need to appreciate the problemssurrounding scarce resource, pricing andmake-or-buy decisions, and how this relates to theassessment of performance. Risk and uncertaintyare a factor of real-life decisions and candidatesneed to understand risk and be able to apply somebasic methods to help resolve the risks inherent indecision-making.

Budgeting is an important aspect of manyaccountants’ lives. The syllabus explores differentbudgeting techniques and the problems inherent inthem. The behavioural aspects of budgeting areimportant for accountants to understand, and thesyllabus includes consideration of the wayindividuals react to a budget.

Standard costing and variances are then built on.All the variances examined in Paper F2 areexaminable here. The new topics are mix and yieldvariances, and planning and operational variances.Again, the link is made to performancemanagement. It is important for accountants to beable to interpret the numbers that they calculateand ask what they mean in the context ofperformance.

The syllabus concludes with performancemeasurement and control. This is a major area ofthe syllabus. Accountants need to understand howa business should be managed and controlled.They should appreciate the importance of bothfinancial and non-financial performance measures inmanagement. Accountants should also appreciatethe difficulties in assessing performance indivisionalised businesses and the problems caused

by failing to consider external influences onperformance. This section leads directly to PaperP5.

All of the subject areas covered in this syllabuscould be examined in either a public sector orprivate sector context.

DETAILED SYLLABUS

A Specialist cost and management accountingtechniques

1. Activity-based costing

2. Target costing

3. Life-cycle costing

4. Throughput accounting

5. Environmental accounting

B Decision-making techniques

1. Relevant cost analysis

2. Cost volume analysis

3. Limiting factors

4. Pricing decisions

5. Make-or-buy and other short-term decisions

6. Dealing with risk and uncertainty in decision-making

C Budgeting

1. Objectives

2. Budgetary systems

3. Types of budget

4. Quantitative analysis in budgeting

5. Behavioural aspects of budgeting


D Standard costing and variances analysis

1. Budgeting and standard costing

2. Basic variances and operating statements

3. Mix and yield variances

4. Planning and operational variances

5. Behavioural aspects of standard costing

E Performance measurement and control

1. The scope of performance measurement

2. Divisional performance and transfer pricing

3. Performance analysis in not-for-profitorganisations and the public sector

4. External considerations and behaviouralaspects


Paper F5, Performance Management, seeks toexamine candidates’ understanding of how tomanage the performance of a business.

The paper builds on the knowledge acquired inPaper F2, Management Accounting, and preparesthose candidates who choose to study Paper P5,Advanced Performance Management, at theProfessional level

The syllabus is assessed by a three-hour paper-based examination.

The examination will contain five compulsory 20-mark questions. There will be calculation anddiscursive elements to the paper with the balancebeing broadly in line with the pilot paper. The pilotpaper contains questions from four of the fivesyllabus sections. Generally, the paper will seek todraw questions from as many of the syllabussections as possible.


Study GuideA SPECIALIST COST AND MANAGEMENT

ACCOUNTING TECHNIQUES

1. Activity based costing

a) Identify appropriate cost drivers under ABC.[1]

b) Calculate costs per driver and per unit usingABC.[2]

c) Compare ABC and traditional methods ofoverhead absorption based on productionunits, labour hours or machine hours.[2]

2. Target costing

a) Derive a target cost in manufacturing andservice industries.[2]

b) Explain the difficulties of using target costing inservice industries.[2]

c) Suggest how a target cost gap might beclosed.[2]

3. Life-cycle costing

a) Identify the costs involved at different stages ofthe life-cycle.[2]

b) Derive a life cycle cost in manufacturing andservice industries.[2]

c) Identify the benefits of life cycle costing.[2]

4. Throughput accounting

a) Calculate and interpret a throughputaccounting ratio (TPAR).[2]

b) Suggest how a TPAR could be improved.[2]

c) Apply throughput accounting to a multi-productdecision-making problem.[2]

5. Environmental accounting

a) Discuss the issues business face in themanagement of environmental costs.[1]

b) Describe the different methods a business mayuse to account for its environmental costs.[1]

B DECISION-MAKING TECHNIQUES

1 Relevant cost analysis

a) Explain the concept of relevant costing.[2].

b) Identify and calculate relevant costs for aspecific decision situations from given data.[2]

c) Explain and apply the concept of opportunitycosts .[2]

2. Cost volume profit analysis

a) Explain the nature of CVP analysis.[2]

b) Calculate and interpret break even point andmargin of safety.[2]

c) Calculate the contribution to sales ratio, insingle and multi-product situations, anddemonstrate an understanding of its use.[2].

d) Calculate target profit or revenue in single andmulti-product situations, and demonstrate anunderstanding of its use.[2]

e) Prepare break even charts and profit volumecharts and interpret the information containedwithin each, including multi-productsituations.[2]

f) Discuss the limitations of CVP analysis forplanning and decision making.[2]

3. Limiting factors

a) Identify limiting factors in a scarce resourcesituation and select an appropriate technique.[2]

b) Determine the optimal production plan wherean organisation is restricted by a single limitingfactor, including within the context of “make”or “buy” decisions.[2].

c) Formulate and solve multiple scarce resourceproblem both graphically and usingsimultaneous equations as appropriate.[2]


d) Explain and calculate shadow prices (dualprices) and discuss their implications ondecision-making and performancemanagement. [2]

e) Calculate slack and explain the implications ofthe existence of slack for decision-making andperformance management.[2]

(Excluding simplex and sensitivity to changesin objective functions)

4. Pricing decisions

a) Explain the factors that influence the pricing ofa product or service.[2]

b) Explain the price elasticity of demand.[1]

c) Derive and manipulate a straight line demandequation. Derive an equation for the total costfunction(including volume-based discounts).[2]

d) Calculate the optimum selling price andquantity for an organisation, equating marginalcost and marginal revenue[2]

e) Evaluate a decision to increase production andsales levels, considering incremental costs,incremental revenues and other factors.[2]

f) Determine prices and output levels for profitmaximisation using the demand basedapproach to pricing (both tabular and algebraicmethods) .[1]

g) Explain different price strategies, including: [2]

i) All forms of cost-plusii) Skimmingiii) Penetrationiv) Complementary productv) Product-linevi) Volume discountingvii) Discriminationviii) Relevant cost

h) Calculate a price from a given strategy usingcost-plus and relevant cost.[2]

5. Make-or-buy and other short-term decisions

a) Explain the issues surrounding make vs. buyand outsourcing decisions.[2]

b) Calculate and compare make” costs with “buy-in” costs.[2]

c) Compare in-house costs and outsource costs ofcompleting tasks and consider other issuessurrounding this decision.[2]

d) Apply relevant costing principles in situationsinvolving shut down, one-off contracts and thefurther processing of joint products.[2]

6. Dealing with risk and uncertainty in decision-making

a) Suggest research techniques to reduceuncertainty e.g. Focus groups, marketresearch.[2]

b) Explain the use of simulation, expected valuesand sensitivity.[1]

c) Apply expected values and sensitivity todecision-making problems.[2]

d) Apply the techniques of maximax, maximin,and minimax regret to decision-makingproblems including the production of profittables.[2]

e) Draw a decision tree and use it to solve amulti-stage decision problem

f) Calculate the value of perfect and imperfectinformation.

C BUDGETING

1. Objectives

a) Outline the objectives of a budgetary controlsystem. [2]

b) Explain how corporate and divisional objectivesmay differ and can be reconciled.[2]

c) Identify and resolve conflicting objectives andexplain implications.[2]

2. Budgetary systems

a) Explain how budgetary systems fit within theperformance hierarchy.[2]


b) Select and explain appropriate budgetarysystems for an organisation, including top-down, bottom-up, rolling, zero-base, activity-base, incremental and feed-forward control.[2]

c) Describe the information used in budgetsystems and the sources of the informationneeded.[2]

d) Explain the difficulties of changing a budgetarysystem. [2]

e) Explain how budget systems can deal withuncertainty in the environment.[2]

3. Types of Budget

a) Indicate the usefulness and problems withdifferent budget types (zero-base, activity-based, incremental, master, functional andflexible).[2]

b) Explain the difficulties of changing the type ofbudget used.[2]

4. Quantitative analysis in budgeting

a) Analyse fixed and variable cost elements fromtotal cost data using high/low and regressionmethods.[2]

b) Explain the use of forecasting techniques,including time series, simple averagegrowth models and estimates based onjudgement and experience. Predict a futurevalue from provided time series analysis datausing both additive and proportional data.[2]

c) Estimate the learning effect and apply thelearning curve to a budgetary problem,including calculations on steady states [2]

d) Discuss the reservations with the learningcurve.[2]

e) Apply expected values and explain theproblems and benefits.[2]

f) Explain the benefits and dangers inherent inusing spreadsheets in budgeting.[1]

5. Behavioural aspects of budgeting

a) Identify the factors which influencebehaviour.[2]

b) Discuss the issues surrounding setting thedifficulty level for a budget. [2]

c) Explain the benefits and difficulties of theparticipation of employees in the negotiation oftargets.[2]

D STANDARD COSTING AND VARIANCESANALYSIS

1. Budgeting and standard costing

a) Explain the use of standard costs.[2]

b) Outline the methods used to derive standardcosts and discuss the different types of costpossible.[2]

c) Explain the importance of flexing budgets inperformance management.[2]

d) Prepare budgets and standards that allow forwaste and idle time.[2]

e) Explain and apply the principle ofcontrollability in the performance managementsystem.[2]

f) Prepare a flexed budget and comment on itsusefulness.[2]

2. Basic variances and operating statements

a) Calculate, identify the cause of and interpretbasic variances: [1]

i) Sales price and volumeii) Materials total, price and usageiii) Labour total, rate and efficiencyiv) Variable overhead total, expenditure and

efficiencyv) Fixed overhead total, expenditure and,

where appropriate, volume, capacity andefficiency.

b) Explain the effect on labour variances wherethe learning curve has been used in the budgetprocess.[2]


c) Produce full operating statements in both amarginal cost and full absorption costingenvironment, reconciling actual profit tobudgeted profit.[2]

d) Calculate the effect of idle time and waste onvariances including where idle time has beenbudgeted for.[2]

e) Explain the possible causes of idle time andwaste and suggest methods of control.[2]

f) Calculate, using a simple situation, ABC-basedvariances.[3]

g) Explain the different methods available fordeciding whether or not too investigate avariance cause.[2]

3. Material mix and yield variances

a) Calculate, identify the cause of, and explainmaterial mix and yield variances.[2]

b) Explain the wider issues involved in changingmaterial mix e.g. cost, quality and performancemeasurement issues.[2]

c) Identify and explain the relationship of thematerial price variance with the material mixand yield variances.[2]

d) Suggest and justify alternative methods ofcontrolling production processes.[2]

4. Sales mix and quantity variances

a) Calculate, identify the cause of, and explainsales mix and quantity variances.[2]

b) Identify and explain the relationship of thesales volume variances with the sales mix andquantity variances.[2]

5. Planning and operational variances

a) Calculate a revised budget.[2]

b) Identify and explain those factors that couldand could not be allowed to revise an originalbudget.[2]

c) Calculate planning and operational variancesfor sales, including market size and marketshare, materials and labour.[2]

d) Explain and discuss the manipulation issuesinvolved in revising budgets.[2]

6. Behavioural aspects of standard costing

a) Describe the dysfunctional nature of somevariances in the modern environment of JITand TQM.[2]

b) Discuss the behavioural problems resultingfrom using standard costs in rapidly changingenvironments.[2]

c) Discuss the effect that variances have on staffmotivation and action.[2]

E PERFORMANCE MEASUREMENT ANDCONTROL

1. The scope of performance measurement

a) Describe, calculate and interpret financialperformance indicators (FPIs) for profitability,liquidity and risk in both manufacturing andservice businesses. Suggest methods toimprove these measures.[2]

b) Describe, calculate and interpret non-financialperformance indicators (NFPIs) and suggestmethod to improve the performanceindicated.[2]

c) Explain the causes and problems created byshort-termism and financial manipulation ofresults and suggest methods toencourage a long term view.[2]

d) Explain and interpret the BalancedScorecard, and the Building Block modelproposed by Fitzgerald and Moon.[2]

e) Discuss the difficulties of target setting inqualitative areas.[2]


2. Divisional performance and transfer pricing

a) Explain and illustrate the basis for setting atransfer price using variable cost, full cost andthe principles behind allowing for intermediatemarkets.[2]

b) Explain how transfer prices can distort theperformance assessment of divisions anddecisions made.[2]

c) Explain the meaning of, and calculate, Returnon Investment (ROI) and Residual Income (RI),and discuss their shortcomings.[2]

d) Compare divisional performance and recognisethe problems of doing so.[2]

3. Performance analysis in not for profitorganisations and the public sector

a) Comment on the problems of having non-quantifiable objectives in performancemanagement.[2]

b) Explain how performance could be measuredin this sector.[2]

c) Comment on the problems of having multipleobjectives in this sector.[2]

d) Outline Value for Money (VFM) as a publicsector objective.[1]

4. External considerations and behaviouralaspects

a) Explain the need to allow for externalconsiderations in performance management,including stakeholders, market conditions andallowance for competitors.[2]

b) Suggest ways in which external considerationscould be allowed for in performancemanagement.[2]

c) Interpret performance in the light of externalconsiderations.[2]

d) Identify and explain the behaviour aspects ofperformance management [2]


SUMMARY OF CHANGES TO F5

ACCA periodically reviews its qualificationsyllabuses so that they fully meet the needs ofstakeholders such as employers, students,regulatory and advisory bodies and learningproviders.

There are no changes to the syllabus. One areahowever has been clarified in the syllabus (it wasimplicitly included previously) and is shown in Table1 below:

Table 1 – Amendments to F5Section and subject area Syllabus contentB6f) Dealing with risk and uncertainty in decisionmaking

Calculate the value of perfect and imperfectinformation.

© ACCA 2012 All rights reserved. 4 Taffsdfsdf

Taxation (UK) (F6) AIM To develop knowledge and skills relating to the tax system as applicable to individuals, single companies, and groups of companies.

MAIN CAPABILITIES On successful completion of this paper candidates should be able to: A Explain the operation and scope of the tax system B Explain and compute the income tax liabilities of individuals C Explain and compute the corporation tax liabilities of individual companies and groups of companies D Explain and compute the chargeable gains arising on companies and individuals E Explain and compute the inheritance tax

liabilities of individuals F Explain and compute the effect of national insurance contributions on employees, employers and the self employed G Explain and compute the effects of value added tax on incorporated and unincorporated businesses H Identify and explain the obligations of tax payers and/or their agents and the implications of non-compliance


ATX (P6)

TX (F6)

Corporation tax liabilities (C)

Chargeable gains (D)

Income tax liabilities (B)

The obligations of the taxpayer and/or their agents (H)

The UK tax system (A)

National Insurance contributions (F)

VAT (G)

Inheritance tax (E)

© ACCA 2012 All rights reserved. 5

RATIONALE The syllabus for Paper F6, Taxation, introduces candidates to the subject of taxation and provides the core knowledge of the underlying principles and major technical areas of taxation as they affect the activities of individuals and businesses. Candidates are introduced to the rationale behind – and the functions of – the tax system. The syllabus then considers the separate taxes that an accountant would need to have a detailed knowledge of, such as income tax from self-employment, employment and investments, the corporation tax liability of individual companies and groups of companies, the national insurance contribution liabilities of both employed and self employed persons, the value added tax liability of businesses, and the chargeable gains arising on disposals of investments by both individuals and companies. Having covered the core areas of the basic taxes, candidates should be able to compute tax liabilities, explain the basis of their calculations, apply tax planning techniques for individuals and companies and identify the compliance issues for each major tax through a variety of business and personal scenarios and situations. DETAILED SYLLABUS A. The UK tax system 1. The overall function and purpose of taxation in a modern economy 2. Different types of taxes 3. Principal sources of revenue law and practice 4. Tax avoidance and tax evasion B. Income tax liabilities 1. The scope of income tax 2. Income from employment 3. Income from self-employment 4. Property and investment income

5. The comprehensive computation of taxable income and income tax liability 6. The use of exemptions and reliefs in deferring and minimising income tax liabilities C. Corporation tax liabilities 1. The scope of corporation tax 2. Taxable total profits 3. The comprehensive computation of corporation tax liability 4. The effect of a group corporate structure for corporation tax purposes 5. The use of exemptions and reliefs in deferring and minimising corporation tax liabilities D. Chargeable gains 1. The scope of the taxation of capital gains 2. The basic principles of computing gains and losses. 3. Gains and losses on the disposal of movable and immovable property 4. Gains and losses on the disposal of shares and securities 5. The computation of capital gains tax payable

by individuals 6. The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets E. Inheritance tax 1. The scope of inheritance tax 2. The basic principles of computing transfers of

value 3. The liabilities arising on chargeable lifetime

transfers and on the death of an individual 4. The use of exemptions in deferring and

minimising inheritance tax liabilities


5. Payment of inheritance tax F. National insurance contributions 1. The scope of national insurance 2. Class 1 and Class 1A contributions for employed persons 3. Class 2 and Class 4 contributions for self- employed persons G. Value added tax 1. The scope of value added tax (VAT) 2. The VAT registration requirements 3. The computation of VAT liabilities 4. The effect of special schemes H. The obligations of taxpayers and/or their agents 1. The systems for self-assessment and the making of returns 2. The time limits for the submission of information, claims and payment of tax, including payments on account 3. The procedures relating to compliance checks,

appeals and disputes 4. Penalties for non-compliance


APPROACH TO EXAMINING THE SYLLABUS The syllabus is assessed by a three-hour paper-based examination. Assessment: Taxation (UK) The paper will be predominantly computational and will have five questions, all of which will be compulsory. • Question one will focus on income tax and

question two will focus on corporation tax. The two questions will be for a total of 55 marks, with one of the questions being for 30 marks and the other being for 25 marks.

• Question three will focus on chargeable gains

(either personal or corporate) and will be for 15 marks.

• Questions four and five will be on any area of

the syllabus, can cover more than one topic, and will be for 15 marks.

There will always be at a minimum of 10 marks on value added tax. These marks will normally be

included within question one or question two, although there might be a separate question on value added tax. There will always be between 5 and 15 marks on inheritance tax. Inheritance tax can be included within questions three, four or five. National insurance contributions will not be examined as a separate question, but may be examined in any question involving income tax or corporation tax. Groups and overseas aspects of corporation tax may be examined in either question two, question four or question five. A small element of chargeable gains may be included in questions other than question three. Any of the five questions might include the consideration of issues relating to the minimisation or deferral of tax liabilities.


Study Guide A THE UK TAX SYSTEM 1. The overall function and purpose of taxation in a modern economy a) Describe the purpose (economic, social etc) of taxation in a modern economy.[2] 2. Different types of taxes a) Identify the different types of capital and revenue tax.[1]

b) Explain the difference between direct and indirect taxation.[2] 3. Principal sources of revenue law and practice a) Describe the overall structure of the UK tax system.[1]

b) State the different sources of revenue law.[1]

c) Appreciate the interaction of the UK tax system with that of other tax jurisdictions.[2] 4. Tax avoidance and tax evasion a) Explain the difference between tax avoidance and tax evasion.[1]

b) Explain the need for an ethical and professional approach.[2]

Excluded topics

• Anti-avoidance legislation. B INCOME TAX LIABILITIES 1. The scope of income tax a) Explain how the residence of an individual is determined.[1] Excluded topics

• The treatment of a person who comes to the UK to work or a person who leaves the UK to take up employment overseas.

• Foreign income, non-residents and double

taxation relief.

• Income from trusts and settlements. 2. Income from employment a) Recognise the factors that determine whether an engagement is treated as employment or self-employment.[2]

b) Recognise the basis of assessment for employment income.[2]

c) Compute the income assessable.[2]

d) Recognise the allowable deductions, including travelling expenses.[2]

e) Discuss the use of the statutory approved mileage allowances.[2]

f) Explain the PAYE system.[1]

g) Identify P11D employees.[1]

h) Compute the amount of benefits assessable.[2]

i) Explain the purpose of a dispensation from HM Revenue & Customs.[2] k) Explain how charitable giving can be made through a payroll deduction scheme.[1] Excluded topics

• The calculation of a car benefit where emission figures are not available.

• The exemption for zero emission company

motor cars.

• Share and share option incentive schemes for employees.

• Payments on the termination of

employment, and other lump sums received by employees.


3 Income from self-employment a) Recognise the basis of assessment for self- employment income.[2]

b) Describe and apply the badges of trade.[2]

c) Recognise the expenditure that is allowable in calculating the tax-adjusted trading profit.[2]

d) Recognise the relief that can be obtained for pre-trading expenditure.[2]

e) Compute the assessable profits on commencement and on cessation.[2]

f) Change of accounting date i) Recognise the factors that will influence the choice of accounting date.[2] ii) State the conditions that must be met for a change of accounting date to be valid.[1] iii) Compute the assessable profits on a change of accounting date.[2]

g) Capital allowances i) Define plant and machinery for capital allowances purposes.[1] ii) Compute writing down allowances, first-

year allowances and the annual investment allowance.[2]

iii) Compute capital allowances for motor cars, including motor cars already owned at 6 April 2009 (1 April 2009 for companies).[2]

iv) Compute balancing allowances and balancing charges.[2] v) Recognise the treatment of short life assets.[2] vi) Explain the treatment of assets included in the special rate pool.[2] h) Relief for trading losses i) Understand how trading losses can be carried forward.[2] ii) Explain how trading losses can be carried forward following the incorporation of a business.[2] iii) Understand how trading losses can be claimed against total income and chargeable gains.[2]

iv) Explain and compute the relief for trading losses in the early years of a trade.[1] v) Explain and compute terminal loss relief.[1]

i) Partnerships and limited liability partnerships i) Explain how a partnership is assessed to tax.[2] ii) Compute the assessable profits for each partner following a change in the profit sharing ratio.[2] iii) Compute the assessable profits for each partner following a change in the membership of the partnership.[2] iv) Describe the alternative loss relief claims that are available to partners.[1] v) Explain the loss relief restriction that applies to the partners of a limited liability partnership.[1] Excluded topics

• The 100% allowance for expenditure on renovating business premises in disadvantaged areas, flats above shops and water technologies.

• Capital allowances for industrial buildings,

agricultural buildings, patents, scientific research and know how.

• Enterprise zones.

• Investment income of a partnership.

• The allocation of notional profits and losses

for a partnership.

• Farmers averaging of profits.

• The averaging of profits for authors and creative artists.

• Loss relief for shares in unquoted trading

companies. 4. Property and investment income a) Compute property business profits.[2]

b) Explain the treatment of furnished holiday lettings.[1]

c) Describe rent-a-room relief.[1]


d) Compute the amount assessable when a premium is received for the grant of a short lease.[2]

e) Understand how relief for a property business loss is given.[2]

f) Compute the tax payable on savings income.[2]

g) Compute the tax payable on dividend income.[2]

h) Explain the treatment of individual savings accounts (ISAs) and other tax exempt investments.[1] Excluded topics

• The deduction for expenditure by landlords on energy-saving items.

. • Junior ISAs.

5 The comprehensive computation of taxable income and income tax liability a) Prepare a basic income tax computation involving different types of income.[2]

b) Calculate the amount of personal allowance

available generally, and for people aged 65 and above.[2]

c) Compute the amount of income tax payable.[2]

d) Explain the treatment of interest paid for a qualifying purpose.[2]

e) Explain the treatment of gift aid donations.[1]

f) Explain the treatment of property owned jointly by a married couple, or by a couple in a civil partnership.[1] Excluded topics

• The blind person’s allowance and the married couple’s allowance.

• Tax credits. • Maintenance payments.

• The income of minor children. 6. The use of exemptions and reliefs in deferring and minimising income tax liabilities a) Explain and compute the relief given for

contributions to personal pension schemes, using the rules applicable from 6 April 2011.[2]

b) Describe the relief given for contributions to occupational pension schemes, using the rules applicable from 6 April 2011.[1]

c) Explain how a married couple or a couple in a

civil partnership can minimise their tax liabilities.[2]

Excluded topics

• The conditions that must be met in order for a pension scheme to obtain approval from HM Revenue & Customs.

• The enterprise investment scheme.

• Venture capital trusts.


C CORPORATION TAX LIABILITIES 1. The scope of corporation tax a) Define the terms ‘period of account’, ‘accounting period’, and ‘financial year’.[1]

b) Recognise when an accounting period starts and when an accounting period finishes.[1]

c) Explain how the residence of a company is determined.[2] Excluded topics

• Investment companies.

• Close companies.

• Companies in receivership or liquidation.

• Reorganisations.

• The purchase by a company of its own shares.

• Personal service companies.

2. Taxable total profits a) Recognise the expenditure that is allowable in calculating the tax-adjusted trading profit.[2]

b) Explain how relief can be obtained for pre- trading expenditure.[1]

c) Compute capital allowances (as for income tax).[2]

d) Compute property business profits.[2]

e) Explain the treatment of interest paid and received under the loan relationship rules.[1]

f) Explain the treatment of gift aid donations.[2]

g) Understand how trading losses can be carried forward.[2]

h) Understand how trading losses can be claimed against income of the current or previous accounting periods.[2]

i) Recognise the factors that will influence the choice of loss relief claim.[2]

j) Explain how relief for a property business loss is given.[1]

k) Compute taxable total profits.[2] Excluded topics

• Research and development expenditure.

• Non-trading deficits on loan relationships.

• Relief for intangible assets. 3. The comprehensive computation of corporation tax liability a) Compute the corporation tax liability and apply marginal relief.[2]

b) Explain the implications of receiving franked investment income.[2]

4. The effect of a group corporate structure for corporation tax purposes a) Define an associated company and recognise the effect of being an associated company for corporation tax purposes.[2] b) Define a 75% group, and recognise the reliefs that are available to members of such a group.[2]

c) Define a 75% capital gains group, and recognise the reliefs that are available to members of such a group.[2]

d) Compare the UK tax treatment of an overseas

branch to an overseas subsidiary.[2] e) Calculate double taxation relief.[2]

f) Explain the basic principles of the transfer pricing rules.[2] Excluded topics

• Relief for trading losses incurred by an overseas subsidiary.


• Consortia.

• Pre-entry gains and losses.

• The anti-avoidance provisions where arrangements exist for a company to leave a group.

• The tax charge that applies where a

company leaves a group within six years of receiving an asset by way of a no gain/no loss transfer.

• Controlled foreign companies. • Foreign companies trading in the UK.

• Expense relief in respect of overseas tax.

• Election for the exemption of profits from an

overseas branch.

• Transfer pricing transactions not involving an overseas company.

5. The use of exemptions and reliefs in deferring and minimising corporation tax liabilities:

The use of such exemptions and reliefs is

implicit within all of the above sections 1 to 4 of part C of the syllabus, concerning corporation tax.

D CHARGEABLE GAINS 1. The scope of the taxation of capital gains a) Describe the scope of capital gains tax.[2]

b) Explain how the residence and ordinary residence of an individual is determined.[2]

c) List those assets which are exempt.[1] Excluded topics

• Assets situated overseas and double taxation relief.

• Partnership capital gains.

2. The basic principles of computing gains and losses. a) Compute capital gains for both individuals and companies.[2]

b) Calculate the indexation allowance available to companies.[2]

c) Explain the treatment of capital losses for both individuals and companies.[1]

d) Explain the treatment of transfers between a husband and wife or between a couple in a civil partnership.[2] e) Compute the amount of allowable expenditure for a part disposal.[2]

f) Explain the treatment where an asset is damaged, lost or destroyed, and the implications of receiving insurance proceeds and reinvesting such proceeds.[2] Excluded topics

• Small part disposals of land.

• Losses in the year of death.

• Relief for losses incurred on loans made to traders.

• Negligible value claims.

3. Gains and losses on the disposal of movable and immovable property a) Identify when chattels and wasting assets are exempt.[1]

b) Compute the chargeable gain when a chattel is disposed of.[2]

c) Calculate the chargeable gain when a wasting asset is disposed of.[2]

d) Compute the exemption when a principal private residence is disposed of.[2]

e) Calculate the chargeable gain when a principal private residence has been used for business purposes.[2]


f) Identify the amount of letting relief available when a principal private residence has been let out.[2]

Excluded topics

• The disposal of leases and the creation of sub-leases.

4. Gains and losses on the disposal of shares and securities a) Calculate the value of quoted shares where they are disposed of by way of a gift.[2]

b) Explain and apply the identification rules as they apply to individuals and to companies, including the same day, nine day, and 30 day matching rules.[2]

c) Explain the pooling provisions.[2]

d) Explain the treatment of bonus issues, rights issues, takeovers and reorganisations.[2]

e) Explain the exemption available for gilt-edged securities and qualifying corporate bonds.[1] Excluded topics

• A detailed question on the pooling provisions for shares as they apply to limited companies.

• The small part disposal rules applicable to

rights issues.

• Substantial shareholdings.

• Gilt-edged securities and qualifying corporate bonds other than the fact that they are exempt.

5. The computation of capital gains tax payable by individuals a) Compute the amount of capital gains tax payable.[2]

6. The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

a) Explain and apply entrepreneurs’ relief as it

applies to individuals. [2]

b) Explain and apply rollover relief as it applies to individuals and companies.[2]

c) Explain and apply holdover relief for the gift of business assets.[2]

d) Explain and apply the incorporation relief that is available upon the transfer of a business to a company.[2]

Excluded topics

• Reinvestment relief. • Entrepreneurs’ relief for associated

disposals. E INHERITANCE TAX 1. The scope of inheritance tax a) Describe the scope of inheritance tax. [2] b) Identify and explain the persons chargeable. [2] Excluded topics

• Pre 18 March 1986 lifetime transfers. • Transfers of value by close companies.

• Domicile, deemed domicile, and non-UK

domiciled individuals.

• Trusts. 2. The basic principles of computing transfers of

value a) State, explain and apply the meaning of

transfer of value, chargeable transfer and potentially exempt transfer. [2]

b) Demonstrate the diminution in value principle.

[2] c) Demonstrate the seven year accumulation

principle taking into account changes in the level of the nil rate band. [2]


Excluded topics

• Excluded property. • Related property.

• The tax implications of the location of

assets.

• Gifts with reservation of benefit.

• Associated operations. 3. The liabilities arising on chargeable lifetime

transfers and on the death of an individual

a) Understand the tax implications of chargeable

lifetime transfers and compute the relevant liabilities. [2]

b) Understand the tax implications of transfers

within seven years of death and compute the relevant liabilities. [2]

c) Compute the tax liability on a death estate. [2] d) Understand and apply the transfer of any

unused nil rate band between spouses.[2] Excluded topics

• Specific rules for the valuation of assets (values will be provided).

• Business property relief.

• Agricultural relief.

• Relief for the fall in value of lifetime gifts.

• Quick succession relief. • Double tax relief.

• Variation of wills and disclaimers of

legacies.

• Grossing up on death. • Post mortem reliefs.

• Double charges legislation.

4. The use of exemptions in deferring and

minimising inheritance tax liabilities a) Understand and apply the following

exemptions: i) small gifts exemption[2] ii) annual exemption[2] iii) normal expenditure out of income[2] iv) gifts in consideration of marriage[2] v) gifts between spouses.[2]

Excluded topics

• Gifts to charities. • Gifts to political parties.

• Gifts for national purposes.

5. Payment of inheritance tax a) Identify who is responsible for the payment of

inheritance tax. [2] b) Advise on the due date for payment of

inheritance tax. [2] Excluded topics

• Administration of inheritance tax other than listed above.

• The instalment option for the payment of

tax.

• Interest and penalties.


F NATIONAL INSURANCE CONTRIBUTIONS 1. The scope of national insurance a) Describe the scope of national insurance.[1] 2. Class 1 and Class 1A contributions for employed persons a) Compute Class 1 NIC.[2]

b) Compute Class 1A NIC.[2] Excluded topics

• The calculation of directors’ national insurance on a month by month basis.

• Contracted out contributions.

3. Class 2 and Class 4 contributions for self- employed persons a) Compute Class 2 NIC.[2]

b) Compute Class 4 NIC.[2] Excluded topics

• The offset of trading losses against non-trading income.

G VALUE ADDED TAX 1. The scope of value added tax (VAT) a) Describe the scope of VAT.[2]

b) List the principal zero-rated and exempt supplies.[1] 2. The VAT registration requirements a) Recognise the circumstances in which a person must register for VAT.[2]

b) Explain the advantages of voluntary VAT registration.[2]

c) Explain the circumstances in which pre- registration input VAT can be recovered.[2]

d) Explain how and when a person can deregister for VAT.[1]

e) Explain the conditions that must be met for

two or more companies to be treated as a group for VAT purposes, and the consequences of being so treated.[1]

3. The computation of VAT liabilities a) Explain how VAT is accounted for and administered.[2]

b) Recognise the tax point when goods or services are supplied.[2]

c) List the information that must be given on a VAT invoice.[1]

d) Explain and apply the principles regarding the valuation of supplies.[2]

e) Recognise the circumstances in which input VAT is non-deductible.[2]

f) Compute the relief that is available for impairment losses on trade debts.[2]

g) Explain the circumstances in which the default

surcharge, a penalty for an incorrect VAT return, and default interest will be applied.[1]

h) Explain the treatment of imports, exports and

trade within the European Union. Excluded topics

• VAT periods where there is a change of VAT rate.

• Partial exemption.

• In respect of property and land: leases, do-

it-yourself builders, and a landlord's option to tax.

• Penalties apart from those listed in the

study guide.


4. The effect of special schemes a) Describe the cash accounting scheme, and recognise when it will be advantageous to use the scheme.[2]

b) Describe the annual accounting scheme, and recognise when it will be advantageous to use the scheme.[2]

c) Describe the flat rate scheme, and recognise when it will be advantageous to use the scheme.[2] Excluded topics

• The second-hand goods scheme.

• The capital goods scheme.

• The special schemes for retailers. H THE OBLIGATIONS OF TAX PAYERS AND/OR

THEIR AGENTS 1. The systems for self-assessment and the making of returns a) Explain and apply the features of the self- assessment system as it applies to individuals.[2]

b) Explain and apply the features of the self- assessment system as it applies to companies, including the use of iXBRL.[2] 2. The time limits for the submission of information, claims and payment of tax, including payments on account

a) Recognise the time limits that apply to the filing of returns and the making of claims.[2]

b) Recognise the due dates for the payment of tax under the self-assessment system.[2]

c) Compute payments on account and balancing payments/repayments for individuals.[2]

d) Explain how large companies are required to account for corporation tax on a quarterly basis.[2]

e) List the information and records that taxpayers need to retain for tax purposes.[1] Excluded topics

• The payment of CGT by annual instalments. 3. The procedures relating to compliance checks,

appeals and disputes a) Explain the circumstances in which HM

Revenue & Customs can make a compliance check into a self-assessment tax return.[2]

b) Explain the procedures for dealing with appeals and disputes.[1] 4. Penalties for non-compliance a) Calculate late payment interest.[2]

b) State the penalties that can be charged.[2]


SUMMARY OF CHANGES TO F6 (UK) ACCA periodically reviews it qualification syllabuses so that they fully meet the needs of stakeholders such as employers, students, regulatory and advisory bodies and learning providers. The main areas that have been added to the syllabus are shown in Table 1 below: Table 1 – Additions to F6 (UK) Section and subject area Syllabus content B3 Income from self-employment – Excluded topics Industrial buildings allowance (IBA) B4 Property and investment income – Excluded topics Junior ISAs C4 Group Structure – Excluded topics Profits from overseas branch The main areas that have been added to the syllabus are shown in Table 2 below: Table 2 – Deletions from F6 (UK) Section and subject area Syllabus content B3g)vii) Income from self-employment Industrial buildings allowance (IBA) B3g)viii) Income from self-employment IBA B3 Income from self-employment – Excluded topics 40% FYA B3 Income from self-employment – Excluded topics Apportionment of AIA B3 Income from self-employment – Excluded topics Calculation of IBA B3 Income from self-employment – Excluded topics Additional loss relief B4 Property and investment income – Excluded topics Pension additional tax charge B4 Property and investment income – Excluded topics Anti-forestalling provisions C2 Taxable total profits – Excluded topics Extended loss relief C3c) The comprehensive computation of corporation tax liability

Exemptions and reliefs (as repetition of C5)

C3 The comprehensive computation of corporation tax liability– Excluded topics

The corporate venturing scheme

C4 Group Structure – Excluded topics Overseas dividends D2 Computing gains and losses – Excluded topics Disposals prior to 23 June 2010 D6 Use of exemptions – Excluded topics Entrepreneurs’ relief qualifying limits prior to 22 June

2010 The main areas that have been amended or clarified in the syllabus are shown in Table 3 below: Table 3 – Amendments to F6 (UK) Section and subject area Amendment Approach to examining Groups and overseas aspects can also be examined in

question four Approach to examining A small element of chargeable gains could be included

in questions other than question three


Approach to examining Inheritance tax specified as between 5 and 15 marks on every paper, within questions three, four or five.

B6a) Use of exemptions Pensions rules will only be examined from 6 April 2011 E3 The liabilities arising on chargeable lifetime transfers and on the death of an individual – Excluded topics

Double grossing up on death amended to Grossing up on death

F3g) The computation of VAT liabilities A serious misdeclaration penalty replaced with a penalty for an incorrect VAT return

H1b) Corporate self-assessment Use of iXBRL H3a) Procedures relating to compliance checks ‘Enquiry’ changed to ‘compliance check’ to agree to

HMRC terminology H4a) Penalties for non-compliance Interest on overdue tax replaced with late payment

interest


Financial Reporting (INT)(F7)

AIM

To develop knowledge and skills in understandingand applying accounting standards and thetheoretical framework in the preparation of financialstatements of entities, including groups and how toanalyse and interpret those financial statements..

MAIN CAPABILITIES


A Discuss and apply a conceptual framework forfinancial reporting

B Discuss a regulatory framework for financialreporting

C Prepare and present financial statementswhich conform with International accountingstandards

D Account for business combinations inaccordance with International accountingstandards

E Analyse and interpret financial statements.


FR(F7)

CR (P2)

FA (F3)

AA (F8)CL (F4)

BA (P3)

A conceptual frameworkfor financial reporting

(A)

A regulatoryframework for financial

reporting (B)

Financial statements (C)

Business combinations (D)

Analysingand

interpretingfinancial

statements(E)


RATIONALE

The financial reporting syllabus assumes knowledgeacquired in Paper F3, Financial Accounting, anddevelops and applies this further and in greaterdepth.

The syllabus begins with the conceptual frameworkof accounting with reference to the qualitativecharacteristics of useful information and thefundamental bases of accounting introduced in thePaper F3 syllabus within the Knowledge module. Itthen moves into a detailed examination of theregulatory framework of accounting and how thisinforms the standard setting process.

The main areas of the syllabus cover the reporting offinancial information for single companies and forgroups in accordance with generally acceptedaccounting principles and relevant accountingstandards.

Finally, the syllabus covers the analysis andinterpretation of information from financial reports.

DETAILED SYLLABUS

A A conceptual framework for financial reporting

1. The need for a conceptual framework

2. Understandability, relevance, reliability andcomparability

3. Recognition and measurement

4. The legal versus the commercial view ofaccounting

5. Alternative models and practices

6. The concept of ‘faithful representation’ (‘trueand fair view’)

B A regulatory framework for financial reporting

1. Reasons for the existence of a regulatoryframework

2. The standard setting process

3. Specialised, not-for-profit, and public sectorentities

C Financial statements

1. Statements of cash flows

2. Tangible non-current assets

3. Intangible assets

4. Inventory

5. Financial assets and financial liabilities

6. Leases

7. Provisions, contingent liabilities, andcontingent assets

8. Impairment of assets

9. Taxation

10. Regulatory requirements relating to thepreparation of financial statements

11. Reporting financial performance

D Business combinations

1. The concept and principles of a group

2. The concept of consolidated financialstatements

3. Preparation of consolidated financialstatements including an associate

E Analysing and interpreting financialstatements

1. Limitations of financial statements

2. Calculation and interpretation of accountingratios and trends to address users’ andstakeholders’ needs

3. Limitations of interpretation techniques





All questions are compulsory. It will contain bothcomputational and discursive elements.Some questions will adopt a scenario/case studyapproach.

Question 1 will be a 25 mark question on thepreparation of group financial statements and/orextracts thereof, and may include a small discussionelement. Computations will be designed to test anunderstanding of principles.

Question 2, for 25 marks, will test the reporting ofnon-group financial statements. This may be frominformation in a trial balance or by restating draftfinancial statements.

Question 3, for 25 marks, is likely to be anappraisal of an entity’s performance and mayinvolve statements of cash flows.

Questions 4 and 5 will cover the remainder of thesyllabus and will be worth 15 and 10 marksrespectively.

An individual question may often involve elementsthat relate to different subject areas of the syllabus.For example the preparation of an entity’s financialstatements could include matters relating to severalaccounting standards.

Questions may ask candidates to comment on theappropriateness or acceptability of management’sopinion or chosen accounting treatment. Anunderstanding of accounting principles and conceptsand how these are applied to practical examples willbe tested.

Questions on topic areas that are also included inPaper F3 will be examined at an appropriatelygreater depth in this paper.

Candidates will be expected to have an appreciationof the need for specified accounting standards andwhy they have been issued. For detailed or complexstandards, candidates need to be aware of theirprinciples and key elements.


Study GuideA A CONCEPTUAL FRAMEWORK FOR

FINANCIAL REPORTING


a) Describe what is meant by a conceptualframework of accounting.[2]

b) Discuss whether a conceptual framework isnecessary and what an alternative systemmight be.[2]


a) Discuss what is meant by understandability inrelation to the provision of financialinformation.[2]

b) Discuss what is meant by relevance andreliability and describe the qualities thatenhance these characteristics.[2]

c) Discuss the importance of comparability tousers of financial statements.[2]

d) Distinguish between changes in accountingpolicies and changes in accounting estimatesand describe how accounting standards applythe principle of comparability where an entitychanges its accounting policies.[2]

e) Recognise and account for changes inaccounting policies and the correction of priorperiod errors.[2]


a) Define what is meant by ‘recognition’ infinancial statements and discuss therecognition criteria. [2]

b) Apply the recognition criteria to: [2]

i) assets and liabilities.ii) income and expenses

c) Discuss revenue recognition issues; indicatewhen income and expense recognition shouldoccur.[2]

d) Demonstrate the role of the principle ofsubstance over form in relation to recognisingsales revenue.[2]

e) Explain the following measures and computeamounts using: [2]

i) historical costii) fair value/current costiii) net realisable valueiv) present value of future cash flows.


a) Explain the importance of recording thecommercial substance rather than the legalform of transactions – give examples whererecording the legal form of transactions may bemisleading.[2]

b) Describe the features which may indicate thatthe substance of transactions differs from theirlegal form.[2]

c) Apply the principle of substance over form tothe recognition and derecognition of assets andliabilities.[2]

d) Recognise the substance of transactions ingeneral, and specifically account for thefollowing types of transaction: [2]

i) goods sold on sale or return/consignmentinventory

ii) sale and repurchase/leaseback agreementsiii) factoring of receivables.


a) Describe the advantages and disadvantages ofthe use of historical cost accounting.[2]

b) Discuss whether the use of current valueaccounting overcomes the problems ofhistorical cost accounting. [2]

c) Describe the concept of financial and physicalcapital maintenance and how this affects thedetermination of profits.[1]



a) Describe what is meant by financial statementsachieving a faithful representation. [2]

b) Discuss whether faithful representationconstitutes more than compliance withaccounting standards.[1]

c) Indicate the circumstances and requireddisclosures where a ‘true and fair’ override mayapply.[1]

B A REGULATORY FRAMEWORK FORFINANCIAL REPORTING


a) Explain why a regulatory framework is neededalso including the advantages anddisadvantages of IFRS over a nationalregulatory framework.[2]

b) Explain why accounting standards on their ownare not a complete regulatory framework.[2]

c) Distinguish between a principles based and arules based framework and discuss whetherthey can be complementary. [1]


a) Describe the structure and objectives of theIFRS Foundation, the International AccountingStandards Board (IASB), the IFRS AdvisoryCouncil (IFRS AC) and the IFRS InterpretationsCommittee (IFRS IC).[2]

b) Describe the IASB’s Standard setting processincluding revisions to and interpretations ofStandards. [2]

c) Explain the relationship of national standardsetters to the IASB in respect of the standardsetting process.[2]

3. Specialised, not-for-profit and public sectorentities

a) Distinguish between the primary aims of not-for profit and public sector entities and those ofprofit oriented entities.[1]

b) Discuss the extent to which InternationalFinancial Reporting Standards (IFRSs) arerelevant to specialised, not-for-profit and publicsector entities.[1]

C FINANCIAL STATEMENTS

1. Statements of Cash flows

a) Prepare a statement of cash flows for a singleentity (not a group) in accordance with relevantaccounting standards using the direct and theindirect method .[2]

b) Compare the usefulness of cash flowinformation with that of an income statementor statement of comprehensive income.[2]

c) Interpret a statement of cash flows (togetherwith other financial information) to assess theperformance and financial position of anentity.[2]


a) Define and compute the initial measurement ofa non-current (including a self-constructed andborrowing costs) asset.[2]

b) Identify subsequent expenditure that may becapitalised, distinguishing between capital andrevenue items.[2]

c) Discuss the requirements of relevantaccounting standards in relation to therevaluation of non-current assets.[2]

d) Account for revaluation and disposal gains andlosses for non-current assets.[2]

e) Compute depreciation based on the cost andrevaluation models and on assets that havetwo or more significant parts (complexassets).[2]


f) Apply the provisions of relevant accountingstandards in relation to accounting forgovernment grants.[2]

g) Discuss why the treatment of investmentproperties should differ from other properties.[2]

h) Apply the requirements of relevant accountingstandards for investment property.[2]


a) Discuss the nature and accounting treatment ofinternally generated and purchasedintangibles.[2]

b) Distinguish between goodwill and otherintangible assets.[2]

c) Describe the criteria for the initial recognitionand measurement of intangible assets.[2]

d) Describe the subsequent accounting treatment,including the principle of impairment tests inrelation to goodwill.[2]

e) Indicate why the value of purchaseconsideration for an investment may be lessthan the value of the acquired identifiable netassets and how the difference should beaccounted for. [2]

f) Describe and apply the requirements ofrelevant accounting standards to research anddevelopment expenditure.[2]

4. Inventory

a) Describe and apply the principles of inventoryvaluation. [2]

b) Define a construction contract and discuss therole of accounting concepts in the recognitionof profit.[2]

c) Describe the acceptable methods ofdetermining the stage (percentage) ofcompletion of a contract.[2]

d) Prepare financial statement extracts forconstruction contracts.[2]

5 Financial assets and financial liabilities

a) Explain the need for an accounting standard onfinancial instruments. [1]

b) Define financial instruments in terms offinancial assets and financial liabilities.[1]

c) Indicate for the following categories of financialinstruments how they should be measured andhow any gains and losses from subsequentmeasurement should be treated in the financialstatements: [1]

i) amortised costii) fair value ( including option to classify

equity instruments through othercomprehensive income)

d) Distinguish between debt and equity capital.[2]

e) Apply the requirements of relevant accountingstandards to the issue and finance costs of: [2]

i) equityii) redeemable preference shares and debt

instruments with no conversion rights(principle of amortised cost)

iii) convertible debt

6. Leases

a) Explain why recording the legal form of afinance lease can be misleading to users(referring to the commercial substance of suchleases).[2]

b) Describe and apply the method of determininga lease type (i.e. an operating or financelease).[2]

c) Discuss the effect on the financial statementsof a finance lease being incorrectly treated asan operating lease.[2]

d) Account for assets financed by finance leasesin the records of the lessee.[2]

e) Account for operating leases in the records ofthe lessee.[2]


7. Provisions, contingent liabilities andcontingent assets

a) Explain why an accounting standard onprovisions is necessary.[2]

b) Distinguish between legal and constructiveobligations.[2]

c) State when provisions may and may not bemade and demonstrate how they should beaccounted for. [2]

d) Explain how provisions should be measured.[1]

e) Define contingent assets and liabilities anddescribe their accounting treatment.[2]

f) Identify and account for: [2]

i) warranties/guaranteesii) onerous contractsiii) environmental and similar provisionsiv) provisions for future repairs or

refurbishments.


a) Define an impairment loss. [2]

b) Identify the circumstances that may indicateimpairments to assets.[2]

c) Describe what is meant by a cash generatingunit.[2]

d) State the basis on which impairment lossesshould be allocated, and allocate animpairment loss to the assets of a cashgenerating unit.[2]

9. Taxation

a) Account for current taxation in accordance withrelevant accounting standards.[2]

b) Record entries relating to income tax in theaccounting records.[2]

c) Explain the effect of taxable temporarydifferences on accounting and taxable profits.[2]

d) Compute and record deferred tax amounts inthe financial statements.[2]


a) Describe the structure (format) and content offinancial statements presented under IFRS.[2]

b) Prepare an entity’s financial statements inaccordance with the prescribed structure andcontent.[2]


a) Discuss the importance of identifying andreporting the results of discontinuedoperations.[2]

b) Define and account for non-current assets heldfor sale and discontinued operations.[2]

c) Indicate the circumstances where separatedisclosure of material items of income andexpense is required.[2]

d) Prepare and explain the contents and purposeof the statement of changes in equity.[2]

e) Describe and prepare a statement of changesin equity. [2]

f) Earnings per share (eps)i) calculate the eps in accordance with

relevant accounting standards (dealing withbonus issues, full market value issues andrights issues) [2]

ii) explain the relevance of the diluted eps andcalculate the diluted eps involvingconvertible debt and share options(warrants) [2]

iii) explain why the trend of eps may be a moreaccurate indicator of performance than acompany’s profit trend and the importanceof eps as a stock market indicator [2]

iv) discuss the limitations of using eps as aperformance measure.[3]

g) Events after the reporting datei) distinguish between and account for

adjusting and non-adjusting events after thereporting date [2]

ii) Identify items requiring separate disclosure,including their accounting treatment andrequired disclosures[2]


D BUSINESS COMBINATIONS


a) Describe the concept of a group as a singleeconomic unit.[2]

b) Explain and apply the definition of a subsidiarywithin relevant accounting standards.[2]

c) Identify and outline using accounting standardsand other applicable regulation thecircumstances in which a group is required toprepare consolidated financial statements.[2]

d) Describe the circumstances when a group mayclaim exemption from the preparation ofconsolidated financial statements. .[2]

e) Explain why directors may not wish toconsolidate a subsidiary and outline usingaccounting standards and other applicableregulation the circumstances where this ispermitted.[2

f) Explain the need for using coterminous yearends and uniform accounting polices whenpreparing consolidated financial statements.[2]

g) Explain why it is necessary to eliminate intra-group transactions.[2]


a) Explain the objective of consolidated financialstatements.[2]

b) Indicate the effect that the related partyrelationship between a parent and subsidiarymay have on the subsidiary’s entity statementsand the consolidated financial statements.[2]

c) Explain why it is necessary to use fair valuesfor the consideration for an investment in asubsidiary together with the fair values of asubsidiary’s identifiable assets and liabilitieswhen preparing consolidated financialstatements.[2]

d) Describe and apply the required accountingtreatment of consolidated goodwill.[2]


a) Prepare a consolidated statement of financialposition for a simple group (parent and onesubsidiary) dealing with pre and postacquisition profits, minority interests andconsolidated goodwill.[2]

b) Prepare a consolidated income statement andconsolidated statement of comprehensiveincome for a simple group dealing with anacquisition in the period and minorityinterest.[2]

c) Explain and account for other reserves (e.g.share premium and revaluation reserves). [1]

d) Account for the effects in the financialstatements of intra-group trading.[2]

e) Account for the effects of fair valueadjustments (including their effect onconsolidated goodwill) to: [2]

i) depreciating and non-depreciating non-current assets

ii) inventoryiii) monetary liabilitiesiv) assets and liabilities not included in the

subsidiary’s own statement of financialposition, including contingent assets andliabilities

f) Account for goodwill impairment.[2]

g) Define an associate and explain the principlesand reasoning for the use of equityaccounting.[2]

h) Prepare consolidated financial statements toinclude a single subsidiary and an associate.[2]

E ANALYSING AND INTERPRETINGFINANCIAL STATEMENTS


a) Indicate the problems of using historicinformation to predict future performance andtrends.[2]


b) Discuss how financial statements may bemanipulated to produce a desired effect(creative accounting, window dressing).[2]

c) Recognise how related party relationships havethe potential to mislead users.[2]

d) Explain why figures in a statement of financialposition may not be representative of averagevalues throughout the period for example, dueto: [2]

i) seasonal tradingii) major asset acquisitions near the end of the

accounting period.

2 Calculation and interpretation of accountingratios and trends to address users’ andstakeholders’ needs

a) Define and compute relevant financial ratios.[2]

b) Explain what aspects of performance specificratios are intended to assess. [2]

c) Analyse and interpret ratios to give anassessment of an entity’s performance andfinancial position in comparison with: [2]

i) an entity’s previous period’s financialstatements

ii) another similar entity for the same reportingperiod

iii) industry average ratios.

d) Interpret an entity’s financial statements to giveadvice from the perspectives of differentstakeholders.[2]

e) Discuss how the interpretation of current valuebased financial statements would differ fromthose using historical cost based accounts.[1]


a) Discuss the limitations in the use of ratioanalysis for assessing corporate performance.[2]

b) Discuss the effect that changes in accountingpolicies or the use of different accountingpolices between entities can have on the abilityto interpret performance.[2]

c) Indicate other information, including non-financial information, that may be of relevanceto the assessment of an entity’s performance.[1]


a) Discuss the different approaches that may berequired when assessing the performance ofspecialised, not-for-profit and public sectororganisations.[1]


SUMMARY OF CHANGES TO F7 (INT)

RATIONALE FOR CHANGES


Note of significant changes to study guide PaperF7 INT

The main areas to be added or deleted from thesyllabus from that date are shown in Table 1 and 2below:

Table 1 – Additions to F7 INT

There have not been any additions to the 2011 study guide for 2012. However there have been minoramendments to the wording of some of the study guide outcomes corresponding to changes within examinabledocuments and to ensure greater clarity.

Table 2 – Deletions to F7 INT

There have not been any deletions to the 2011 study guide for 2012. However there have been minoramendments to the wording of some of the study guide outcomes corresponding to changes within examinabledocuments and to ensure greater clarity.


Financial Reporting (UK)(F7)

AIM

To develop knowledge and skills in understandingand applying accounting standards and thetheoretical framework in the preparation of financialstatements of entities, including groups and how toanalyse and interpret those financial statements.

MAIN CAPABILITIES


A Discuss and apply a conceptual framework forfinancial reporting

B Discuss a regulatory framework for financialreporting

C Prepare and present financial statementswhich conform with International accountingstandards

D Account for business combinations inaccordance with International accountingstandards

E Analyse and interpret financial statements.


FR(F7)

CR (P2)

FA (F3)

AA (F8)CL (F4)

BA (P3)

A conceptual frameworkfor financial reporting

(A)

A regulatoryframework for financial

reporting (B)

Financial statements (C)

Business combinations (D)

Analysingand

interpretingfinancial

statements(E)


RATIONALE

The financial reporting syllabus assumes knowledgeacquired in Paper F3, Financial Accounting, anddevelops and applies this further and in greaterdepth.

The UK syllabus is primarily based on Internationalaccounting standards together with elements of UKlegislation governing the preparation of financialstatements both for individual and group entities.Selected differences between UK and Internationalaccounting standards will also be tested.

The syllabus begins with the conceptual frameworkof accounting with reference to the qualitativecharacteristics of useful information and thefundamental bases of accounting introduced in thePaper F3 syllabus within the Knowledge module. Itthen moves into a detailed examination of theregulatory framework of accounting and how thisinforms the standard setting process.

The main areas of the syllabus cover the reporting offinancial information for single companies and forgroups in accordance with generally acceptedaccounting principles and relevant accountingstandards.

Finally, the syllabus covers the analysis andinterpretation of information from financial reports.

DETAILED SYLLABUS

A A conceptual framework for financial reporting







B A legal and regulatory framework for financialreporting




4. Legal requirements relating to the preparationof single entity financial statements

C Financial statements

1. Statements of cash flows



4. Inventory

5. Financial assets and financial liabilities

6. Leases

7. Provisions, contingent liabilities, andcontingent assets


9. Taxation



D Business combinations





E Analysing and interpreting financialstatements


2. Calculation and interpretation of accountingratios and trends to address users’ andstakeholders’ needs






All questions are compulsory. It will contain bothcomputational and discursive elements.Some questions will adopt a scenario/case studyapproach.

Question 1 will be a 25 mark question on thepreparation of group financial statements and/orextracts thereof, and may include a small discussionelement. Computations will be designed to test anunderstanding of principles.

Question 2, for 25 marks, will test the reporting ofnon-group financial statements. This may be frominformation in a trial balance or by restating draftfinancial statements.

Question 3, for 25 marks, is likely to be anappraisal of an entity’s performance and mayinvolve statements of cash flows.

Questions 4 and 5 will cover the remainder of thesyllabus and will be worth 15 and 10 marksrespectively.An individual question may often involve elementsthat relate to different subject areas of the syllabus.For example the preparation of an entity’s financialstatements could include matters relating to severalaccounting standards.

Questions may ask candidates to comment on theappropriateness or acceptability of management’sopinion or chosen accounting treatment. Anunderstanding of accounting principles and conceptsand how these are applied to practical examples willbe tested.

Questions on topic areas that are also included inPaper F3 will be examined at an appropriatelygreater depth in this paper.

Candidates will be expected to have an appreciationof the need for specified accounting standards andwhy they have been issued. For detailed or complexstandards, candidates need to be aware of theirprinciples and key elements.


Study GuideA A CONCEPTUAL FRAMEWORK FOR

FINANCIAL REPORTING


a) Describe what is meant by a conceptualframework of accounting. [2]

b) Discuss whether a conceptual framework isnecessary and what an alternative systemmight be.[2]


a) Discuss what is meant by understandability inrelation to the provision of financialinformation.[2]

b) Discuss what is meant by relevance andreliability and describe the qualities thatenhance these characteristics.[2]

c) Discuss the importance of comparability tousers of financial statements.[2]

d) Distinguish between changes in accountingpolicies and changes in accounting estimatesand describe how accounting standards applythe principle of comparability where an entitychanges its accounting policies.[2]

e) Recognise and account for changes inaccounting policies and the correction of priorperiod errors.[2]


a) Define what is meant by ‘recognition’ infinancial statements and discuss therecognition criteria. [2]

b) Apply the recognition criteria to: [2]

i) assets and liabilities.ii) income and expenses

c) Discuss revenue recognition issues; indicatewhen income and expense recognition shouldoccur.[2]

d) Demonstrate the role of the principle ofsubstance over form in relation to recognisingsales revenue.[2]

e) Explain the following measures and computeamounts using: [2]

i) historical costii) fair value/current costiii) net realisable valueiv) present value of future cash flows.


a) Explain the importance of recording thecommercial substance rather than the legalform of transactions – give examples whererecording the legal form of transactions may bemisleading.[2]

b) Describe the features which may indicate thatthe substance of transactions differs from theirlegal form.[2]

c) Apply the principle of substance over form tothe recognition and derecognition of assets andliabilities.[2]

d) Recognise the substance of transactions ingeneral, and specifically account for thefollowing types of transaction: [2]

i) goods sold on sale or return/consignmentinventory

ii) sale and repurchase/leaseback agreementsiii) factoring of receivables.


a) Describe the advantages and disadvantages ofthe use of historical cost accounting.[2]

b) Discuss whether the use of current valueaccounting overcomes the problems ofhistorical cost accounting. [2]

c) Describe the concept of financial and physicalcapital maintenance and how this affects thedetermination of profits.[1]



a) Describe what is meant by financial statementsachieving a faithful representation. [2]

b) Discuss whether faithful representationconstitutes more than compliance withaccounting standards.[1]

c) Indicate the circumstances and requireddisclosures where a ‘true and fair’ override mayapply.[1]

B A REGULATORY FRAMEWORK FORFINANCIAL REPORTING


a) Explain why a regulatory framework is neededalso including the advantages anddisadvantages of IFRS over a nationalregulatory framework[2]

b) Explain why accounting standards on their ownare not a complete regulatory framework.[2]

c) Distinguish between a principles based and arules based framework and discuss whetherthey can be complementary. [1]


a) Describe the structure and objectives of theIFRS Foundation, the International AccountingStandards Board (IASB), the IFRS AdvisoryCouncil (IFRS AC) and the IFRS InterpretationsCommittee (IFRS IC).[2]

b) Describe the IASB’s Standard setting processincluding revisions to and interpretations ofStandards. [2]

c) Explain the relationship of national standardsetters to the IASB in respect of the standardsetting process.[2]


a) Distinguish between the primary aims of not-for profit and public sector entities and those ofprofit oriented entities.[1]

b) Discuss the extent to which InternationalFinancial Reporting Standards (IFRSs) arerelevant to specialised, not-for-profit and publicsector entities.[1]


a) Identify and outline the circumstances in whicha single entity is required to prepare andpresent statutory financial statements. [2]

b) Recognise and apply the laws, regulations,accounting standards and other requirementsto the preparation of statutory financialstatements of an entity[2]

C FINANCIAL STATEMENTS

1. Statements of Cash flows

a) Prepare a statement of cash flows for a singleentity (not a group) in accordance with relevantaccounting standards using the direct and theindirect method . Describe the differences informat under a UK presentation of a cash flowstatement. [2]

b) Compare the usefulness of cash flowinformation with that of an income statementor statement of comprehensive income.[2]

c) Interpret a statement of cash flows (togetherwith other financial information) to assess theperformance and financial position of anentity.[2]


a) Define and compute the initial measurement ofa non-current (including a self-constructed andborrowing costs under International and UKrules) asset.[2]

b) Identify subsequent expenditure that may becapitalised, distinguishing between capital andrevenue items.[2]


c) Discuss the requirements of relevantaccounting standards in relation to therevaluation of non-current assets. Outline howrevaluation guidance differs under UK rulesincluding frequency of valuation, methods ofvaluation given different property types. .[2]

d) Account for revaluation and disposal gains andlosses for non-current assets. Outline howaccounting for revaluation gains and lossesdiffers under UK rules (including nonspecialised property and situations where anasset is subject to revaluation and is nowsubject to clear consumption of economicbenefit)[2]

e) Compute depreciation based on the cost andrevaluation models and on assets that havetwo or more significant parts (complexassets).[2]

f) Apply the provisions of relevant accountingstandards in relation to accounting forgovernment grants.[2]

g) Discuss why the treatment of investmentproperties should differ from other properties.[2]

h) Apply the requirements of relevant accountingstandards for investment property.[2]


a) Discuss the nature and accounting treatment ofinternally generated and purchasedintangibles.[2]

b) Distinguish between goodwill and otherintangible assets.[2]

c) Describe the criteria for the initial recognitionand measurement of intangible assets. Outlinehow under UK rules the recognition criteria forintangibles. [2]

d) Describe the subsequent accounting treatment,including the principle of impairment tests inrelation to goodwill.[2]

e) Indicate why the value of purchaseconsideration for an investment may be lessthan the value of the acquired identifiable netassets and how the difference should beaccounted for. [2]

f) Describe and apply the requirements ofrelevant accounting standards to research anddevelopment expenditure including the choicefor deferment under UK rules. [2]

4. Inventory

a) Describe and apply the principles of inventoryvaluation.[2]

b) Define a construction contract and discuss therole of accounting concepts in the recognitionof profit.[2]

c) Describe the acceptable methods ofdetermining the stage (percentage) ofcompletion of a contract.[2]

d) Prepare financial statement extracts forconstruction contracts and outline howconstruction contracts should be accountedand presented under UK rules.[2]

5 Financial assets and financial liabilities

a) Explain the need for an accounting standard onfinancial instruments. [1]

b) Define financial instruments in terms offinancial assets and financial liabilities.[1]

c) Indicate for the following categories of financialinstruments how they should be measured andhow any gains and losses from subsequentmeasurement should be treated in the financialstatements: [1]

i) amortised costii) fair value ( including option to classify

equity instruments through othercomprehensive income)

d) Distinguish between debt and equity capital.[2]

e) Apply the requirements of relevant accountingstandards to the issue and finance costs of: [2]

i) equityii) redeemable preference shares and debt

instruments with no conversion rights(principle of amortised cost)

iii) convertible debt


6. Leases

a) Explain why recording the legal form of afinance lease can be misleading to users(referring to the commercial substance of suchleases).[2]

b) Describe and apply the method of determininga lease type (i.e. an operating or finance lease).Outline how under UK rules a lease isclassified. [2]

c) Discuss the effect on the financial statementsof a finance lease being incorrectly treated asan operating lease.[2]

d) Account for assets financed by finance leasesin the records of the lessee.[2]

e) Account for operating leases in the records ofthe lessee.[2]

7. Provisions, contingent liabilities andcontingent assets

a) Explain why an accounting standard onprovisions is necessary. [2]

b) Distinguish between legal and constructiveobligations.[2]

c) State when provisions may and may not bemade and demonstrate how they should beaccounted for. [2]

d) Explain how provisions should be measured.[1]

e) Define contingent assets and liabilities anddescribe their accounting treatment.[2]

f) Identify and account for: [2]

i) warranties/guaranteesii) onerous contractsiii) environmental and similar provisionsiv) provisions for future repairs or

refurbishments.


a) Define an impairment loss. [2]

b) Identify the circumstances that may indicateimpairments to assets.[2]

c) Describe what is meant by a cash generatingunit.[2]

d) State the basis on which impairment lossesshould be allocated, and allocate animpairment loss to the assets of a cashgenerating unit.[2]

9. Taxation

a) Account for current taxation in accordance withrelevant accounting standards.[2]

b) Record entries relating to income tax in theaccounting records.[2]

c) Explain the effect of taxable temporarydifferences on accounting and taxable profits.[2]

d) Compute and record deferred tax amounts inthe financial statements and distinguishbetween International and UK treatment forrevaluation of non-current assets and in thediscounting of the deferred tax liability.[2]


a) Describe the structure (format) and content offinancial statements presented under IFRS.[2]

b) Prepare an entity’s financial statements inaccordance with the prescribed structure andcontent.[2]


a) Discuss the importance of identifying andreporting the results of discontinuedoperations.[2]

b) Define and account for non-current assets heldfor sale and discontinued operations.[2]

c) Outline the different definitions and treatmentof discontinued operations and assets held forsale under UK standards. [1]

d) Indicate the circumstances where separatedisclosure of material items of income andexpense is required.[2]


e) Prepare and explain the contents and purposeof the statement of changes in equity.[2]

f) Describe and prepare a statement of changesin equity. [2]

g) Earnings per share (eps)i) calculate the eps in accordance with

relevant accounting standards (dealing withbonus issues, full market value issues andrights issues) [2]

ii) explain the relevance of the diluted eps andcalculate the diluted eps involvingconvertible debt and share options(warrants) [2]

iii) explain why the trend of eps may be a moreaccurate indicator of performance than acompany’s profit trend and the importanceof eps as a stock market indicator [2]

iv) discuss the limitations of using eps as aperformance measure.[3]

h) Events after the reporting datei) distinguish between and account for

adjusting and non-adjusting events after thereporting date [2]

ii) Identify items requiring separate disclosure,including their accounting treatment andrequired disclosures [2]

D BUSINESS COMBINATIONS


a) Describe the concept of a group as a singleeconomic unit.[2]

b) Explain and apply the definition of a subsidiarywithin relevant accounting standards.[2]

c) Identify and outline using accounting standards,other applicable regulation and UK legislationthe circumstances in which a group is requiredto prepare consolidated financial statements.[2]

d) Describe the circumstances when a group mayclaim exemption from the preparation ofconsolidated financial statements underaccounting standards, other applicableregulation and UK legislation .[2]

e) Explain why directors may not wish toconsolidate a subsidiary and outline usingaccounting standards and other applicableregulation the circumstances where this ispermitted.[2

f) Explain the need for using coterminous yearends and uniform accounting polices whenpreparing consolidated financial statements.[2]

g) Explain why it is necessary to eliminate intra-group transactions.[2]


a) Explain the objective of consolidated financialstatements.[2]

b) Indicate the effect that the related partyrelationship between a parent and subsidiarymay have on the subsidiary’s entity statementsand the consolidated financial statements.[2]

c) Explain why it is necessary to use fair valuesfor the consideration for an investment in asubsidiary together with the fair values of asubsidiary’s identifiable assets and liabilitieswhen preparing consolidated financialstatements.[2]

d) Describe and apply the required accountingtreatment of consolidated goodwill.[2]


a) Prepare a consolidated statement of financialposition for a simple group (parent and onesubsidiary) dealing with pre and postacquisition profits, non-controlling interest (atfair value or proportionate share of subsidiary’snet assets) and consolidated goodwill.[2]

b) Prepare a consolidated income statement andconsolidated statement of comprehensiveincome for a simple group dealing with anacquisition in the period and non-controllinginterest..[2]

c) Explain and account for other reserves (e.g.share premium and revaluation reserves).[1]


d) Account for the effects in the financialstatements of intra-group trading.[2]

e) Account for the effects of fair valueadjustments (including their effect onconsolidated goodwill) to: [2]

i) depreciating and non-depreciating non-current assets

ii) inventoryiii) monetary liabilitiesiv) assets and liabilities not included in the

subsidiary’s own statement of financialposition, including contingent assets andliabilities

f) Account for goodwill impairment.[2]

g) Outline differences under UK rules ofaccounting for goodwill (initial measurementand subsequent treatment), minority interest,contingent consideration and acquisitionexpenses.

h) Define an associate and explain the principlesand reasoning for the use of equityaccounting.[2]

i) Prepare consolidated financial statements toinclude a single subsidiary and an associate.[2]

E ANALYSING AND INTERPRETINGFINANCIAL STATEMENTS


a) Indicate the problems of using historicinformation to predict future performance andtrends.[2]

b) Discuss how financial statements may bemanipulated to produce a desired effect(creative accounting, window dressing).[2]

c) Recognise how related party relationships havethe potential to mislead users.[2]

d) Explain why figures in a statement of financialposition may not be representative of averagevalues throughout the period for example, dueto: [2]

i) seasonal tradingii) major asset acquisitions near the end of the

accounting period.

2 Calculation and interpretation of accountingratios and trends to address users’ andstakeholders’ needs

a) Define and compute relevant financial ratios.[2]

b) Explain what aspects of performance specificratios are intended to assess.[2]

c) Analyse and interpret ratios to give anassessment of an entity’s performance andfinancial position in comparison with: [2]

i) an entity’s previous period’s financialstatements

ii) another similar entity for the same reportingperiod

iii) industry average ratios.

d) Interpret an entity’s financial statements to giveadvice from the perspectives of differentstakeholders.[2]

e) Discuss how the interpretation of current valuebased financial statements would differ fromthose using historical cost based accounts.[1]


a) Discuss the limitations in the use of ratioanalysis for assessing corporate performance.[2]

b) Discuss the effect that changes in accountingpolicies or the use of different accountingpolices between entities can have on the abilityto interpret performance.[2]

c) Indicate the effect that the application of thedifferent UK rules contained in this syllabusguide may have on an assessment of anentities performance. [1]

d) Indicate other information, including non-financial information, that may be of relevanceto the assessment of an entity’s performance.[1]


a) Discuss the different approaches that may berequired when assessing the performance ofspecialised, not-for-profit and public sectororganisations.[1]


SUMMARY OF CHANGES TO F7 (UK)


ACCA periodically reviews its qualificationsyllabuses so that they fully meet the needs of

stakeholders such as employers, students,regulatory and advisory bodies and learningproviders.

These changes are summarised in Table 1 and 2below:

Table 1 – Additions to F7 UK

There have not been any additions to the 2011 study guide for 2012. However there have been minoramendments to the wording of some of the study guide outcomes corresponding to changes within examinabledocuments and to ensure greater clarity.

Table 2 – Deletions to F7 UK

There have not been any deletions to the 2011 study guide for 2012. However there have been minoramendments to the wording of some of the study guide outcomes corresponding to changes within examinabledocuments and to ensure greater clarity.


Audit and Assurance(INT) (F8)

AIM

To develop knowledge and understanding of theprocess of carrying out the assurance engagementand its application in the context of the professionalregulatory framework.

MAIN CAPABILITIES


A Explain the nature, purpose and scope ofassurance engagements including the role ofthe external audit and its regulatory and ethicalframework

B Explain the nature of internal audit anddescribe its role as part of overallperformance management and its relationshipwith the external audit

C Demonstrate how the auditor obtains anunderstanding of the entity and itsenvironment, assesses the risk of materialmisstatement (whether arising from fraud orother irregularities) and plans an audit offinancial statements

D Describe and evaluate information systemsand internal controls to identify andcommunicate control risks and their potentialconsequences, making appropriaterecommendations

E Identify and describe the work and evidencerequired to meet the objectives of auditengagements and the application of theInternational Standards on Auditing

F Evaluate findings and modify the audit planas necessary

G Explain how the conclusions from audit workare reflected in different types of audit report,explain the elements of each type of report.


AA(F8)

AAA(P7)

FR (F7)CL (F4)

PA(P1)

Review (F)

Reporting (G)

Planning and risk assessment (C)

Internal control (D) Audit evidence (E)

Audit framework and regulation (A) Internal audit (B)


RATIONALE

The Audit and Assurance syllabus is essentiallydivided into seven areas. The syllabus starts withthe nature, purpose and scope of assuranceengagements, including the statutory audit, itsregulatory environment, and introduces professionalethics relating to audit and assurance. It then leadsinto internal audit, including the scope of internalaudit as well as the differences between internalaudit and external audit. The syllabus then covers arange of areas relating to an audit of financialstatements. These include planning and riskassessment, evaluating internal controls, auditevidence, and a review of the financial statements.The final section then deals with reporting, includingstatutory audit reports, management reports, andinternal audit reports.

DETAILED SYLLABUS

A. Audit framework and regulation

1. The concept of audit and other assuranceengagements

2. Statutory audits

3. The regulatory environment and corporategovernance

4. Professional ethics and ACCA’s Code of Ethicsand Conduct

B. Internal audit

1. Internal audit and corporate governance

2. Differences between the external auditor andthe internal audit function

3. The scope of the internal audit function

4. Outsourcing the internal audit function

5. Internal audit assignments

C. Planning and risk assessment

1. Objective and general principles

2. Assessing the risks of material misstatement

3. Understanding the entity and its environment

4. Materiality, fraud, laws and regulations

5. Analytical procedures

6. Planning an audit

7. Audit documentation

D. Internal control

1. Internal control systems

2. The use of internal control systems by auditors

3. Transaction cycles

4. Tests of control

5. The evaluation of internal control components

6. Communication on internal control

E. Audit evidence

1. The use of assertions by auditors

2. Audit procedures

3. The audit of specific items

4. Audit sampling and other means of testing

5. Computer-assisted audit techniques

6. The work of others

7 Not-for-profit organisations

F. Review

1. Subsequent events

2. Going concern

3. Written representations

4. Audit finalisation and the final review

G. Reporting

1. Audit reports


2. Reports to management

3. Internal audit reports


The syllabus is assessed by a three-hour paper-based examination, consisting of five compulsoryquestions. The bulk of the questions will bediscursive but some questions involvingcomputational elements will be set from time totime.

The questions will cover all areas of the syllabus.

Question 1 will be a scenario-based question worth30 marks. Question 2 will be a knowledge-basedquestion worth 10 marks. Questions 3, 4 and 5 willbe worth 20 marks each.


Study GuideA AUDIT FRAMEWORK AND REGULATION


a) Identify and describe the objective and generalprinciples of external audit engagements.[2]

b) Explain the nature and development of auditand other assurance engagements. [1]

c) Discuss the concepts of accountability,stewardship and agency.[2]

d) Discuss the concepts of true and fairpresentation and reasonable assurance.[2]

e) Explain reporting as a means of communicationto different stakeholders.[1]

f) Define and provide the objectives of anassurance engagement.[1]

g) Explain the five elements of an assuranceengagement.[2]

h) Explain the level of assurance provided byaudit and other review engagements.[1]

.2. Statutory audits

a) Describe the regulatory environment withinwhich statutory audits take place.[1]

b) Discuss the reasons and mechanisms for theregulation of auditors. [2]

c) Explain the statutory regulations governing theappointment, rights, removal and resignation ofauditors.[1]

d) State the objectives and principle activities ofstatutory audit and assess its value (e.g. inassisting management to reduce risk andimprove performance).[1]

e) Describe the limitations of statutory audits. [1]


a) Explain the development and status ofInternational Standards on Auditing (ISAs).[1]

b) Explain the relationship between InternationalStandards on Auditing and nationalstandards. [1]

c) Discuss the objective, relevance andimportance of corporate governance.[2]

d) Discuss the need for auditors to communicatewith those charged with governance.[2]

e) Discuss the provisions of international codes ofcorporate governance (such as OECD) that aremost relevant to auditors.[2]

f) Describe good corporate governancerequirements relating to directors’responsibilities (e.g. for risk management andinternal control) and the reportingresponsibilities of auditors. [1]

g) Analyse the structure and roles of auditcommittees and discuss their benefits andlimitations.[2]

h) Explain the importance of internal control andrisk management.[1]

i) Compare the responsibilities of managementand auditors for the design and operation ofsystems and controls.[2]

4. Professional ethics and ACCA’s Code of Ethicsand Conduct

a) Define and apply the fundamental principles ofprofessional ethics of integrity, objectivity,professional competence and due care,confidentiality and professional behaviour.[2]

b) Define and apply the conceptual framework,including the threats to the fundamentalprinciples of self-interest, self-review,advocacy, familiarity, and intimidation. [2]

c) Discuss the safeguards to offset the threats tothe fundamental principles.[2]


d) Describe the auditor’s responsibility with regardto auditor independence, conflicts of interestand confidentiality.[1]

e) Discuss the preconditions, requirements ofprofessional ethics, and other requirements inrelation to the acceptance of new auditengagements.[2]

f) Discuss the process by which an auditorobtains an audit engagement.[2]

g) Explain the importance of engagement lettersand state their contents.[1]

B INTERNAL AUDIT


a) Discuss the factors to be taken into accountwhen assessing the need for internal audit.[2]

b) Discuss the elements of best practice in thestructure and operations of internal audit withreference to appropriate international codes ofcorporate governance. [2]


a) Compare and contrast the role of external andinternal audit. [2]


a) Discuss the scope of internal audit and thelimitations of the internal audit function.[2]


a) Explain the advantages and disadvantages ofoutsourcing the internal audit function. [1]


a) Discuss the nature and purpose of internalaudit assignments including value for money,IT, best value and financial.[2]

b) Discuss the nature and purpose of operationalinternal audit assignments includingprocurement.[2]

C PLANNING AND RISK ASSESSMENT


a) Identify the overall objectives of the auditor.[2]

b) Identify and describe the need to plan andperform audits with an attitude of professionalscepticism, and to exercise professionaljudgment.[2]

c) Explain the need to conduct an audit inaccordance with ISAs.[1]


a) Explain the components of audit risk.[1]

b) Explain the risks of material misstatement inthe financial statements. [2]


a) Explain how auditors obtain an initialunderstanding of the entity and itsenvironment. [2]

b) Describe risk assessment procedures for theidentification and assessment of the risks ofmaterial misstatement. [2]


a) Define and explain the concepts of materialityand performance materiality. [2]

b) Explain and calculate materiality levels fromfinancial information.[2]

c) Discuss the effect of fraud and misstatementson the audit strategy and extent of auditwork.[2]

d) Discuss the responsibilities of internal andexternal auditors for the prevention anddetection of fraud and error.[2]

e) Explain the auditor’s responsibility to considerlaws and regulations.[2)



a) Describe and explain the nature, and purposeof, analytical procedures in planning.[2]

b) Compute and interpret key ratios used inanalytical procedures.[2]


a) Identify and explain the need for planning anaudit. [2]

b) Identify and describe the contents of the overallaudit strategy and audit plan.[2]

c) Explain and describe the relationship betweenthe overall audit strategy and the audit plan. [2]

d) Explain the difference between interim andfinal audit. [1]

e) Describe the purpose of an interim audit, andthe procedures likely to be adopted at thisstage in the audit.[2]

f) Describe the impact of the work performedduring the interim audit on the final audit.[2]


a) Explain the need for, and the importance of,audit documentation. [1]

b) Describe the contents of working papers andsupporting documentation. [2]

c) Explain the procedures to ensure safe custodyand retention of working papers. [1]

D INTERNAL CONTROL

The following transaction cycles and accountbalances are relevant to this capability:

revenue, purchases, inventory, revenue and capital expenditure, payroll, bank and cash.


a) Explain why an auditor needs to obtain anunderstanding of internal control relevant tothe audit.[1]

b) Describe and explain the five components of aninternal control system of the controlenvironment, the entity’s risk assessmentprocess, the information system, including therelated business processes, relevant to financialreporting, and communication, controlactivities relevant to the audit, and monitoringof controls.[2]

c) Discuss the difference between tests of controland substantive procedures. [2]

2. The use of internal control systems byauditors

a) Explain how auditors record internal controlsystems including the use of internal controlquestionnaires and internal control evaluationquestionnaires. [2]

b) Explain how auditors identify deficiencies andsignificant deficiencies in internal controlsystems and how those significant deficiencieslimit the extent of auditors’ reliance on thosesystems.[2]


a) Explain, analyse and provide examples ofinternal control procedures and controlactivities.[2]

b) Provide examples of computer systemcontrols.[2]

4. Tests of control

a) Explain and tabulate tests of control suitablefor inclusion in audit working papers. [2]

b) List examples of application controls andgeneral IT controls.[2]


a) Analyse the limitations of internal controlcomponents in the context of fraud and error.[2]


b) Explain the need to modify the audit strategyand audit plan following the results of tests ofcontrol.[1]

c) Identify and explain management’s riskassessment process with reference to internalcontrol components.[1]


a) Discuss and provide examples of how thereporting of internal control significantdeficiencies and recommendations to overcomethose significant deficiencies are provided tomanagement.[2]

E AUDIT EVIDENCE


a) Explain the assertions contained in thefinancial statements.[2]

b) Explain the assertions in relation to classes oftransactions, account balances, andpresentation and disclosures. [1]

c) Explain the use of assertions in obtaining auditevidence.[2]

2. Audit procedures

a) Discuss the quality and quantity of auditevidence.[2]

b) Discuss the relevance and reliability of auditevidence.[2]

c) Discuss and provide examples of howanalytical procedures are used as substantiveprocedures.[2]

d) Discuss the problems associated with the auditand review of accounting estimates.[2]

e) Describe why smaller entities may havedifferent control environments and describe thetypes of evidence likely to be available insmaller entities.[1]

f) Explain the auditor’s responsibilities anddescribe procedures to be applied in relation to

opening balances and comparativeinformation.[2]


For each of the account balances stated in this sub-capability:

explain the purpose of substantiveprocedures in relation to assertions,

explain the substantive procedures used inauditing each balance.

a) Receivables: [2]

i) direct confirmation of accounts receivableii) other evidence in relation to receivables

and prepayments, andiii) the related income statement entries.

b) Inventory: [2]

i) inventory counting procedures in relationto year-end and continuous inventorysystems

ii) cut-offiii) auditor’s attendance at inventory countingiv) direct confirmation of inventory held by

third parties,v) other evidence in relation to inventory.

c) Payables, accruals, provisions andcontingencies: [2]

i) supplier statement reconciliations anddirect confirmation of accounts payable,

ii) obtain evidence in relation to payablesand accruals, and

iii) the related income statement entries.

d) Bank and cash: [2]

i) bank confirmation reports used inobtaining evidence in relation to bank andcash

ii) other evidence in relation to bank andcash, and

iii) the related income statement entries.

e) Tangible non-current assets and non-currentliabilities: [2]

i) evidence in relation to non-current assetsand

ii) non-current liabilities andiii) the related income statement entries.

f) Share capital, reserves and directors’emoluments: [2]


i) evidence in relation to share capital,reserves and directors’ emoluments, and

ii) the related income statement entries.


a) Define audit sampling and explain the need forsampling. [1]

b) Identify and discuss the differences betweenstatistical and non-statistical sampling.[2]

c) Discuss and provide relevant examples of, theapplication of the basic principles of statisticalsampling and other selective testingprocedures. [2]

d) Discuss the results of statistical sampling,including consideration of whether additionaltesting is required.[2]


a) Explain the use of computer-assisted audittechniques in the context of an audit.[1]

b) Discuss and provide relevant examples of theuse of test data and audit software for thetransaction cycles and balances mentioned insub-capability 3.[2]


a) Discuss why auditors rely on the work ofothers.[2]

b) Discuss the extent to which auditors are able torely on the work of experts. [2]

c) Discuss the extent to which external auditorsare able to rely on the work of internal audit.[2]

d) Discuss the audit considerations relating toentities using service organisations. [2]

e) Explain the extent to which reference to thework of others can be made in audit reports. [1]

7. Not-for-profit organisations

a) Apply audit techniques to not-for-profitorganisations.[2]

b) Explain how the audit of not-for-profitorganisations differs from the audit of for-profitorganisations.[1]

F REVIEW


a) Explain the purpose of a subsequent eventsreview.[1]

b) Discuss the procedures to be undertaken inperforming a subsequent events review.[2]

2. Going concern

a) Define and discuss the significance of theconcept of going concern.[2]

b) Explain the importance of and the need forgoing concern reviews. [2]

c) Explain the respective responsibilities ofauditors and management regarding goingconcern.[1]

d) Identify and explain potential indicators that anentity is not a going concern. 2]

e) Discuss the procedures to be applied inperforming going concern reviews.[2]

f) Discuss the disclosure requirements in relationto going concern issues.[2]

g) Discuss the reporting implications of thefindings of going concern reviews. [2]


a) Explain the purpose of and procedure forobtaining written representations.[2]

b) Discuss the quality and reliability of writtenrepresentations as audit evidence.[2]

c) Discuss the circumstances where writtenrepresentations are necessary and the matterson which representations are commonlyobtained. [2]



a) Discuss the importance of the overall review ofevidence obtained.[2]

b) Explain the significance of uncorrectedmisstatements. [1]

c) Evaluate the effect of dealing with uncorrectedmisstatements. [2]

G REPORTING

1. Audit reports

a) Describe and analyse the format and content ofunmodified audit reports.[2]

b) Describe and analyse the format and content ofmodified audit reports.[2]


a) Identify and analyse internal control andsystem deficiencies and significant deficienciesand their potential effects, and makeappropriate recommendations to managementand those charged with governance.[2]


a) Describe and explain the format and content ofinternal audit review reports and makeappropriate recommendations to managementand those charged with governance. [2]




The main areas to be added or deleted from thesyllabus are shown in Table 1 below:.

Table 1 – Additions to F8

Section and subject area Syllabus contentC6E and C6f) Planning an audit Interim auditF2d) Going concern Going concern indicators

The main area to be deleted from the syllabus isshown in Table 2 below:

Table 2 – Deletions to F8

Section and subject area Syllabus content

G3b Internal audit reports Explain the process for producing an internal auditreport.


Audit and Assurance(UK) (F8)

AIM

To develop knowledge and understanding of theprocess of carrying out the assurance engagementand its application in the context of the professionalregulatory framework.

MAIN CAPABILITIESOn successful completion of this paper, candidatesshould be able to:

A Explain the nature, purpose and scope ofassurance engagements including the role ofthe external audit and its regulatory and ethicalframework

B Explain the nature of internal audit anddescribing its role as part of overallperformance management and its relationshipwith the external audit

C Demonstrate how the auditor obtains anunderstanding of the entity and itsenvironment, assesses the risk of materialmisstatement (whether arising from fraud orother irregularities) and plans an audit offinancial statements

D Describe and evaluate information systemsand internal controls to identify andcommunicate control risks and their potentialconsequences, making appropriaterecommendations

E Identify and describe the work and evidencerequired to meet the objectives of auditengagements and the application of theInternational Standards on Auditing (UK andIreland)

F Evaluate findings and modify the audit planas necessary

G Explain how the conclusions from audit workare reflected in different types of audit report,explaining the elements of each type of report


AA(F8)

AAA(P7)

FR (F7)CL (F4)

PA(P1)

Review (F)

Reporting (G)

Planning and risk assessment (C)

Internal control (D) Audit evidence (E)

Audit framework and regulation (A) Internal audit (B)


RATIONALE

The syllabus for Paper F8, Audit and Assurance, isdivided into seven areas. The syllabus starts withthe nature, purpose and scope of assuranceengagements, including the statutory audit, itsregulatory environment, and introduces professionalethics relating to audit and assurance. It then leadsinto internal audit, including the scope of internalaudit as well as the differences between internalaudit and external audit. The syllabus then covers arange of areas relating to an audit of financialstatements. These include planning and riskassessment, evaluating internal controls, auditevidence, and a review of the financial statements.The final section then deals with reporting, includingstatutory audit reports, management reports, andinternal audit reports.

DETAILED SYLLABUS

A Audit framework and regulation


2. Statutory audits


4. APB ethical standards and ACCA’s Code ofEthics and Conduct

B Internal audit






C Planning and risk assessment








D Internal control


2. The use of internal control systems by auditors


4. Tests of control



E Audit evidence


2. Audit procedures






F Review


2. Going concern



G Reporting

1. Audit reports




APROACH TO EXAMINING THE SYLLABUS

The syllabus is assessed by a three-hour paper-based examination, consisting of five compulsoryquestions. The bulk of the questions will bediscursive but some questions involvingcomputational elements will be set from time totime.

The questions will cover all areas of the syllabus.

Question 1 will be a scenario-based question worth30 marks. Question 2 will be a knowledge-basedquestion worth 10 marks. Questions 3, 4 and 5 willbe worth 20 marks each.


Study GuideA AUDIT FRAMEWORK AND REGULATION


a) Identify and describe the objective and generalprinciples of external audit engagements.[2]

b) Explain the nature and development of auditand other assurance engagements.[1]

c) Discuss the concepts of accountability,stewardship and agency.[2]

d) Discuss the concepts of true and fairpresentation and reasonable assurance.[2]

e) Explain reporting as a means of communicationto different stakeholders.[1]

f) Define and provide the objectives of anassurance engagement.[1]

g) Explain the five elements of an assuranceengagement.[2]

h) Explain the level of assurance provided byaudit and other review engagements.[1]

2. Statutory audits

a) Describe the regulatory environment withinwhich statutory audits take place.[1]

b) Discuss the reasons and mechanisms for theregulation of auditors. [2]

c) Explain the statutory regulations governing theappointment, rights, removal and resignation ofauditors.[1]

d) State the objectives and principle activities ofstatutory audit and assess its value (e.g. inassisting management to reduce risk andimprove performance).[1]

e) Describe the limitations of statutory audits. [1]


a) Explain the development and status ofInternational Standards on Auditing (ISAs) (UKand Ireland). [1]

b) Explain the relationship between InternationalStandards on Auditing and the work of theAuditing Practices Board. [1]

c) Discuss the objective, relevance andimportance of corporate governance.[2]

d) Discuss the need for auditors to communicatewith those charged with governance.[2]

e) Discuss the provisions of international codes ofcorporate governance (such as the CombinedCode on Corporate Governance) that are mostrelevant to auditors.[2]

f) Describe good corporate governancerequirements relating to directors’responsibilities (e.g. for risk management andinternal control) and the reportingresponsibilities of auditors. [1]

g) Analyse the structure and roles of auditcommittees and discuss their benefits andlimitations.[2]

h) Explain the importance of internal control andrisk management.[1]

i) Compare the responsibilities of managementand auditors for the design and operation ofsystems and controls.[2]

4. APB ethical standards and ACCA’s Code ofEthics and Conduct

a) Define and apply the fundamental principles ofprofessional ethics of integrity, objectivity,professional competence and due care,confidentiality and professional behaviour.[2]

b) Define and apply the conceptual framework,including the threats to the fundamentalprinciples of self-interest, self-review,advocacy, familiarity, and intimidation. [2]


c) Discuss the safeguards to offset the threats tothe fundamental principles.[2]

d) Describe the auditor’s responsibility with regardto auditor independence, conflicts of interestand confidentiality.[1]

e) Discuss the preconditions, requirements ofprofessional ethics and other requirements inrelation to the acceptance of new auditengagements.[2]

f) Discuss the process by which an auditorobtains an audit engagement.[2]

g) Explain the importance of engagement lettersand state their contents.[1]

B INTERNAL AUDIT


a) Discuss the factors to be taken into accountwhen assessing the need for internal audit.[2]

b) Discuss the elements of best practice in thestructure and operations of internal audit withreference to the UK Corporate GovernanceCode. [2]


a) Compare and contrast the role of external andinternal audit.. [2]


a) Discuss the scope of internal audit and thelimitations of the internal audit function.[2]


a) Explain the advantages and disadvantages ofoutsourcing the internal audit function. [1]


a) Discuss the nature and purpose of internalaudit assignments including value for money,IT, best value and financial.[2]

b) Discuss the nature and purpose of operationalinternal audit assignments includingprocurement. [2]

C PLANNING AND RISK ASSESSMENT


a) Identify the overall objectives of the auditor.[2]

b) Identify and describe the need to plan andperform audits with an attitude of professionalscepticism, and to exercise professionaljudgment.[2]

c) Explain the need to conduct an audit inaccordance with ISAs.[1]


a) Explain the components of audit risk.[2]

b) Explain the risks of material misstatement inthe financial statements.[2]


a) Explain how auditors obtain an initialunderstanding of the entity and itsenvironment. [2]

b) Risk assessment procedures for theidentification and assessment of the risks ofmaterial misstatement. [2]


a) Define and explain the concepts of materialityand performance materiality.[2]

b) Explain and calculate materiality levels fromfinancial information.[2]

c) Discuss the effect of fraud and misstatementson the audit strategy and extent of auditwork.[2]

d) Discuss the responsibilities of internal andexternal auditors for the prevention anddetection of fraud and error.[2]

e) Explain the auditor’s responsibility to considerlaws and regulations.[2)



a) Describe and explain the nature, and purposeof, analytical procedures in planning.[2]

b) Compute and interpret key ratios used inanalytical procedures.[2]


a) Identify and explain the need for planning anaudit. [2]

b) Identify and describe the contents of the overallaudit strategy and audit plan.[2]

c) Explain and describe the relationship betweenthe overall audit strategy and the audit plan.[2]

d) Explain the difference between interim andfinal audit. [1]

e) Describe the purpose of an interim audit, andthe procedures likely to be adopted at thisstage in the audit.[2]

f) Describe the impact of the work performedduring the interim audit on the final audit.[2]


a) Explain the need for, and the importance of,audit documentation. [1]

b) Describe the contents of working papers andsupporting documentation. [2]

c) Explain the procedures to ensure safe custodyand retention of working papers.[1]

D INTERNAL CONTROL

The following transaction cycles and accountbalances are relevant to this capability:

revenue, purchases, inventory, revenue and capital expenditure, payroll, bank and cash.


a) Explain why an auditor needs to obtain anunderstanding of internal control activitiesrelevant to the audit. [1]

b) Describe and explain the five components of aninternal control system of the controlenvironment, the entity’s risk assessmentprocess, the information system, including therelated business processes, relevant to financialreporting, and communication, controlactivities relevant to the audit, and monitoringof controls.[2]

c) Discuss the difference between tests of controland substantive procedures. [2]

2. The use of internal control systems byauditors

a) Explain how auditors record internal controlsystems including the use of internal controlquestionnaires and internal control evaluationquestionnaires. [2]

b) Explain how auditors identify deficiencies andsignificant deficiencies in internal controlsystems and how those significant deficiencieslimit the extent of auditors’ reliance on thosesystems.[2]


a) Explain, analyse and provide examples ofinternal control procedures and controlactivities.[2]

b) Provide examples of computer systemcontrols.[2]

4. Tests of control

a) Explain and tabulate tests of control suitablefor inclusion in audit working papers. [2]

b) List examples of application controls andgeneral IT controls.[2]


a) Analyse the limitations of internal controlcomponents in the context of fraud and error.[2]


b) Explain the need to modify the audit strategyand audit plan following the results of tests ofcontrol.[1]

c) Identify and explain management’s riskassessment process with reference to internalcontrol components. [1]


a) Discuss and provide examples of how thereporting of internal control significantdeficiencies and recommendations to overcomethose significant deficiencies are provided tomanagement.[2]

E AUDIT EVIDENCE


a) Explain the assertions contained in thefinancial statements.[2]

a) Explain the assertions in relation to classes oftransactions, account balances andpresentation and disclosures. [1]

b) Explain the use of assertions in obtaining auditevidence.[2]

2. Audit procedures

a) Discuss the quality and quantity of auditevidence.[2]

b) Discuss the relevance and reliability of auditevidence.[2]

c) Discuss and provide examples of howanalytical procedures are used as substantiveprocedures. [2]

d) Discuss the problems associated with the auditand review of accounting estimates.[2]

e) Describe why smaller entities may havedifferent control environments and describe thetypes of evidence likely to be available insmaller entities.[1]

f) Explain the auditor’s responsibilities anddescribe procedures to be applied in relation to

opening balances and comparativeinformation. [2]


For each of the account balances stated in this sub-capability:

explain the purpose of substantiveprocedures in relation to assertions,

explain the substantive procedures used inauditing each balance.

a) Receivables: [2]

i) direct confirmation of receivablesii) other evidence in relation to receivables

and prepayments, andiii) the related income statement entries.

b) Inventory: [2]

i) inventory counting procedures in relationto year-end and continuous inventorysystems

ii) cut-offiii) auditor’s attendance at inventory countingiv) direct confirmation of inventory held by

third parties,v) other evidence in relation to inventory.

c) Payables, accruals provisions andcontingencies: [2]

i) supplier statement reconciliations anddirect confirmation of accounts payable,

i) obtain evidence in relation to payablesand accruals, and


d) Bank and cash:[2]

ii) bank confirmation reports used inobtaining evidence in relation to bank andcash

iii) other evidence in relation to bank andcash, and

iv) the related income statement entries.

e) Tangible non-current assets and non-currentliabilities:[2]

iii) evidence in relation to non-current assetsand

v) non-current liabilities andvi) the related income statement entries.


f) Share capital, reserves and directors’emoluments: [2]

i) evidence in relation to share capital,reserves and directors’ emoluments



a) Define audit sampling and explain the need forsampling. [1]

b) Identify and discuss the differences betweenstatistical and non-statistical sampling. [2]

c) Discuss and provide relevant examples of, theapplication of the basic principles of statisticalsampling and other selective testingprocedures. [2]

d) Discuss the results of statistical sampling,including consideration of whether additionaltesting is required.[2]


a) Explain the use of computer-assisted audittechniques in the context of an audit.[1]

b) Discuss and provide relevant examples of theuse of test data and audit software for thetransaction cycles and balances mentioned insub-capability 3.[2]


a) Discuss why auditors rely on the work ofothers.[2]

b) Discuss the extent to which auditors are able torely on the work of experts. [2]

c) Discuss the extent to which external auditorsare able to rely on the work of internal audit. [2]

d) Discuss the audit considerations relating toentities using service organisations. [2]

e) Explain the extent to which reference to thework of others can be made in audit reports.[1]


a) Apply audit techniques to not-for-profitorganisations.[2]

b) Explain how the audit of not-for-profitorganisations differs from the audit of for-profitorganisations.[1]

F REVIEW


a) Explain the purpose of a subsequent eventsreview. [1]

b) Discuss the procedures to be undertaken inperforming a subsequent events review.[2]

2. Going concern

a) Define and discuss the significance of theconcept of going concern.[2]

b) Explain the importance of and the need forgoing concern reviews. [2]

c) Explain the respective responsibilities ofauditors and management regarding goingconcern.[1]

d) Identify and explain potential indicators that anentity is not a going concern. 2]

e) Discuss the procedures to be applied inperforming going concern reviews.[2]

f) Discuss the disclosure requirements in relationto going concern issues.[2]

g) Discuss the reporting implications of thefindings of going concern reviews. [2]


a) Explain the purpose of and procedure forobtaining written representations.[2]

b) Discuss the quality and reliability of writtenrepresentations as audit evidence.[2]

c) Discuss the circumstances where writtenrepresentations are necessary and the matters


on which representations are commonlyobtained.[2]


a) Discuss the importance of the overall review ofevidence obtained.[2]

b) Explain the significance of uncorrectedmisstatements. [1]

c) Evaluate the effect of dealing with uncorrectedmisstatements. [2]

G REPORTING

1. Audit reports

a) Describe and analyse the format and content ofunmodified audit reports.[2]

b) Describe and analyse the format and content ofmodified audit reports.[2]


a) Identify and analyse internal control andsystem deficiencies and significant deficienciesand their potential effects and makeappropriate recommendations to managementand those charged with governance.[2]


a) Describe and explain the format and content ofinternal audit review reports and makeappropriate recommendations to managementand those charged with governance.[2]




The main areas to be added or deleted from thesyllabus are shown in Table 1 below:.

Table 1 – Additions to F8

Section and subject area Syllabus contentC6E and C6f) Planning an audit Interim auditF2d) Going concern Going concern indicators

The main area to be deleted from the syllabus isshown in Table 2 below:

Table 2 – Deletions to F8

Section and subject area Syllabus content

G3b Internal audit reports Explain the process for producing an internal auditreport.


Financial Management(F9)

AIM

To develop the knowledge and skills expected of afinance manager, in relation to investment,financing, and dividend policy decisions.

MAIN CAPABILITIES


A Discuss the role and purpose of the financialmanagement function

B Assess and discuss the impact of theeconomic environment on financialmanagement

C Discuss and apply working capitalmanagement techniques

D Carry out effective investment appraisalE Identify and evaluate alternative sources of

business financeF Explain and calculate the cost of capital and

the factors which affect itG Discuss and apply principles of business

and asset valuationsH Explain and apply risk management

techniques in business.


FM (F9)

AFM (P4)

MA (F2)

Businessfinance (E)

Investment appraisal(D)

Business valuations (G)Cost of capital (F)

Risk management (H)

Financial management environment (B)

Financialmanagement function

(A)

Working capitalmanagement (C)


RATIONALE

The syllabus for Paper F9, Financial Management,is designed to equip candidates with the skills thatwould be expected from a finance managerresponsible for the finance function of a business.The paper, therefore, starts by introducing the roleand purpose of the financial management functionwithin a business. Before looking at the three keyfinancial management decisions of investing,financing, and dividend policy, the syllabus exploresthe economic environment in which such decisionsare made.

The next section of the syllabus is the introductionof investing decisions. This is done in two stages -investment in (and the management of) workingcapital and the appraisal of long-term investments.

The next area introduced is financing decisions. Thissection of the syllabus starts by examining thevarious sources of business finance, includingdividend policy and how much finance can beraised from within the business. Cost of capital andother factors that influence the choice of the type ofcapital a business will raise then follows. Theprinciples underlying the valuation of business andfinancial assets, including the impact of cost ofcapital on the value of business, is covered next.

The syllabus finishes with an introduction to, andexamination of, risk and the main techniquesemployed in the management of such risk.

DETAILED SYLLABUS

A Financial management function

1. The nature and purpose of financialmanagement

2. Financial objectives and relationship withcorporate strategy

3. Stakeholders and impact on corporateobjectives

4. Financial and other objectives in not-for-profitorganisations

B Financial management environment

1. The economic environment for business2. The nature and role of financial markets and

institutions

C Working capital management

1. The nature, elements and importance ofworking capital

2. Management of inventories, accountsreceivable, accounts payable and cash

3. Determining working capital needs and fundingstrategies

D Investment appraisal

1. The nature of investment decisions and theappraisal process

2. Non-discounted cash flow techniques

3. Discounted cash flow (DCF) techniques

4. Allowing for inflation and taxation in DCF

5. Adjusting for risk and uncertainty in investmentappraisal

6. Specific investment decisions (lease or buy;asset replacement, capital rationing)

E Business finance

1. Sources of,and raising short-term finance

2. Sources of,and raising long-term finance

3. Raising short and long term finance throughIslamic financing

4. Internal sources of finance and dividend policy

5. Gearing and capital structure considerations

6. Finance for Small and Medium-size Entities(SMEs)

F Cost of capital

1. Sources of finance and their relative costs


2. Estimating the cost of equity

3. Estimating the cost of debt and other capitalinstruments

4. Estimating the overall cost of capital

5. Capital structure theories and practicalconsiderations

6. Impact of cost of capital on investments

G Business valuations

1. Nature and purpose of the valuation ofbusiness and financial assets

2. Models for the valuation of shares

3. The valuation of debt and other financial assets

4. Efficient market hypothesis (EMH) andpractical considerations in the valuation ofshares

H Risk management

1. The nature and types of risk and approaches torisk management

2. Causes of exchange rate differences andinterest rate fluctuations

3. Hedging techniques for foreign currency risk

4. Hedging techniques for interest rate risk


The syllabus for Paper F9 aims to develop the skillsexpected of a finance manager who is responsiblefor the finance function of a business.

The paper also prepares candidates for moreadvanced and specialist study in Paper P4,Advanced Financial Management.

The syllabus is assessed by a three-hour paper-based examination consisting of four compulsory25-mark questions. All questions will havecomputational and discursive elements. The balancebetween computational and discursive content willcontinue in line with the pilot paper.

Candidates are provided with a formulae sheet andtables of discount and annuity factors.


Study GuideA FINANCIAL MANAGEMENT FUNCTION

1. The nature and purpose of financialmanagement

a) Explain the nature and purpose of financialmanagement.[1]

b) Explain the relationship between financialmanagement and financial and managementaccounting.[1]

2. Financial objectives and the relationship withcorporate strategy

a) Discuss the relationship between financialobjectives, corporate objectives and corporatestrategy.[2]

b) Identify and describe a variety of financialobjectives, including: [2]

i) shareholder wealth maximisationii) profit maximisationiii) earnings per share growth

3. Stakeholders and impact on corporateobjectives

a) Identify the range of stakeholders and theirobjectives [2]

b) Discuss the possible conflict betweenstakeholder objectives [2]

c) Discuss the role of management in meetingstakeholder objectives, including theapplication of agency theory.[2]

d) Describe and apply ways of measuringachievement of corporate objectivesincluding: [2]

i) ratio analysis, using appropriate ratios suchas return on capital employed, return onequity, earnings per share and dividend pershare

ii) changes in dividends and share prices aspart of total shareholder return

e) Explain ways to encourage the achievement ofstakeholder objectives, including: [2]

i) managerial reward schemes such as shareoptions and performance-related pay

ii) regulatory requirements such as corporategovernance codes of best practice and stockexchange listing regulations

4. Financial and other objectives in not-for-profitorganisations

a) Discuss the impact of not-for-profit status onfinancial and other objectives.[2]

b) Discuss the nature and importance of Value forMoney as an objective in not-for-profitorganisations.[2]

c) Discuss ways of measuring the achievement ofobjectives in not-for-profit organisations.[2]

B FINANCIAL MANAGEMENT ENVIRONMENT

1. The economic environment for business

a) Identify and explain the main macroeconomicpolicy targets.[1]

b) Define and discuss the role of fiscal, monetary,interest rate and exchange rate policies inachieving macroeconomic policy targets.[1]

c) Explain how government economic policyinteracts with planning and decision-making inbusiness. [2]

d) Explain the need for, and the interaction with,planning and decision-making in business of: [1]

i) competition policyii) government assistance for businessiii) green policiesiv) corporate governance regulation.[2]

2. The nature and role of financial markets andinstitutions

a) Identify the nature and role of money andcapital markets, both nationally andinternationally.[2]

b) Explain the role of financial intermediaries.[1]

c) Explain the functions of a stock market and acorporate bond market.[2]


d) Explain the nature and features of differentsecurities in relation to the risk/return trade-off.[2]

C WORKING CAPITAL MANAGEMENT

1. The nature, elements and importance ofworking capital

a) Describe the nature of working capital andidentify its elements.[1]

b) Identify the objectives of working capitalmanagement in terms of liquidity andprofitability, and discuss the conflict betweenthem.[2]

c) Discuss the central role of working capitalmanagement in financial management.[2]

2. Management of inventories, accountsreceivable, accounts payable and cash

a) Explain the cash operating cycle and the role ofaccounts payable and accounts receivable.[2]

b) Explain and apply relevant accounting ratios,including: [2]

i) current ratio and quick ratioii) inventory turnover ratio, average collection

period and average payable periodiii) sales revenue/net working capital ratio

c) Discuss, apply and evaluate the use of relevanttechniques in managing inventory, includingthe Economic Order Quantity model and Just-in-Time techniques.[2]

d) Discuss, apply and evaluate the use of relevanttechniques in managing accounts receivable,including:i) assessing creditworthiness [1]

ii) managing accounts receivable [1]

iii) collecting amounts owing [1]

iv) offering early settlement discounts [2]

v) using factoring and invoice discounting [2]

vi) managing foreign accounts receivable [2]

e) Discuss and apply the use of relevanttechniques in managing accounts payable,including:i) using trade credit effectively [1]

ii) evaluating the benefits of discounts forearly settlement and bulk purchase [2]

iii) managing foreign accounts payable [1]

f) Explain the various reasons for holding cash,and discuss and apply the use of relevanttechniques in managing cash, including:[2]

i) preparing cash flow forecasts to determinefuture cash flows and cash balances

ii) assessing the benefits of centralisedtreasury management and cash control

iii) cash management models, such as theBaumol model and the Miller-Orr model

iv) investing short-term

3. Determining working capital needs andfunding strategies

a) Calculate the level of working capitalinvestment in current assets and discuss thekey factors determining this level, including:[2]

i) the length of the working capital cycle andterms of trade

ii) an organisation’s policy on the level ofinvestment in current assets

iii) the industry in which the organisationoperates

b) Describe and discuss the key factors indetermining working capital funding strategies,including:[2]

i) the distinction between permanent andfluctuating current assets

ii) the relative cost and risk of short-term andlong-term finance

iii) the matching principleiv) the relative costs and benefits of

aggressive, conservative and matchingfunding policies

v) management attitudes to risk, previousfunding decisions and organisation size [1]

D INVESTMENT APPRAISAL

1. The nature of investment decisions and theappraisal process

a) Distinguish between capital and revenueexpenditure, and between non-current assetsand working capital investment. [2]

b) Explain the role of investment appraisal in thecapital budgeting process.[2]


c) Discuss the stages of the capital budgetingprocess in relation to corporate strategy.[2]

2. Non-discounted cash flow techniques

a) Identify and calculate relevant cash flows forinvestment projects.[2]

b) Calculate payback period and discuss theusefulness of payback as an investmentappraisal method.[2]

c) Calculate return on capital employed(accounting rate of return) and discuss itsusefulness as an investment appraisalmethod.[2]

3. Discounted cash flow (DCF) techniques

a) Explain and apply concepts relating to interestand discounting, including: [2]

i) the relationship between interest ratesand inflation, and between real andnominal interest rates

ii) the calculation of future values and theapplication of the annuity formula

iii) the calculation of present values,including the present value of an annuityand perpetuity, and the use of discountand annuity tables

iv) the time value of money and the role ofcost of capital in appraising investments

b) Calculate net present value and discuss itsusefulness as an investment appraisalmethod.[2]

c) Calculate internal rate of return and discuss itsusefulness as an investment appraisalmethod.[2]

d) Discuss the superiority of DCF methods overnon-DCF methods.[2]

e) Discuss the relative merits of NPV and IRR.[2]

f) Calculate discounted payback and discuss itsusefulness as an investment appraisalmethod.[2]

4. Allowing for inflation and taxation in DCF

a) Apply and discuss the real-terms and nominal-terms approaches to investment appraisal.[2]

b) Calculate the taxation effects of relevant cashflows, including the tax benefits of capitalallowances and the tax liabilities of taxableprofit.[2]

c) Calculate and apply before- and after-taxdiscount rates. [2]

5. Adjusting for risk and uncertainty ininvestment appraisal

a) Describe and discuss the difference betweenrisk and uncertainty in relation to probabilitiesand increasing project life.[2]

b) Apply sensitivity analysis to investment projectsand discuss the usefulness of sensitivityanalysis in assisting investment decisions.[2]

c) Apply probability analysis to investmentprojects and discuss the usefulness ofprobability analysis in assisting investmentdecisions.[2]

d) Apply and discuss other techniques ofadjusting for risk and uncertainty in investmentappraisal, including:i) simulation [1]

ii) adjusted payback [1]

iii) risk-adjusted discount rates [2]

6. Specific investment decisions (Lease or buy;asset replacement; capital rationing)

a) Evaluate leasing and borrowing to buy usingthe before-and after-tax costs of debt.[2]

b) Evaluate asset replacement decisions usingequivalent annual cost. [2]

c) Evaluate investment decisions under single-period capital rationing, including:[2]

i) the calculation of profitability indexes fordivisible investment projects

ii) the calculation of the NPV of combinationsof non-divisible investment projects

iii) a discussion of the reasons for capitalrationing


E BUSINESS FINANCE

1. Sources of and raising short-term finance

a) Identify and discuss the range of short-termsources of finance available to businesses,including: [2]

i) overdraftii) short-term loaniii) trade creditiv) lease finance

2. Sources of and raising, long-term finance

a) Identify and discuss the range of long-termsources of finance available to businesses,including: [2]

i) equity financeii) debt financeiii) lease financeiv) venture capital

b) Identify and discuss methods of raising equityfinance, including: [2]

i) rights issueii) placingiii) public offeriv) stock exchange listing

3. Raising short and long term finance throughIslamic financing

a) Explain the major difference between Islamicfinance and the other forms of businessfinance.[1]

b) Explain the concept of interest (riba) and howreturns are made by Islamic financialsecurities.[1] (calculations are not required)

c) Identify and briefly discuss a range of short andlong term Islamic financial instrumentsavailable to businesses including[1]

i) trade credit (murabaha)ii) lease finance (ijara)iii) equity finance (mudaraba)iv) debt finance (sukuk)v) venture capital (musharaka)

4. Internal sources of finance and dividendpolicy

a) Identify and discuss internal sources of finance,including:[2]

i) retained earningsii) increasing working capital management

efficiency

b) Explain the relationship between dividendpolicy and the financing decision [2]

c) Discuss the theoretical approaches to, and thepractical influences on, the dividend decision,including: [2]

i) legal constraintsii) liquidityiii) shareholder expectationsiv) alternatives to cash dividends

5. Gearing and capital structure considerations

a) Identify and discuss the problem of high levelsof gearing [2]

b) Assess the impact of sources of finance onfinancial position and financial risk usingappropriate measures, including:i) ratio analysis using statement of financial

position gearing, operational and financialgearing, interest coverage ratio and otherrelevant ratios [2]

ii) cash flow forecasting [2]

iii) effect on shareholder wealth [2]

6. Finance for small and medium sized entities(SMEs)

a) Describe the financing needs of smallbusinesses.[2]

b) Describe the nature of the financing problemfor small businesses in terms of the fundinggap, the maturity gap and inadequatesecurity.[2]

c) Explain measures that may be taken to easethe financing problems of SMEs, including theresponses of government departments andfinancial institutions.[1]


d) Identify appropriate sources of finance forSMEs and evaluate the financial impact ofdifferent sources of finance on SMEs.[2]

F COST OF CAPITAL

1. Sources of finance and their relative costs

a) Describe the relative risk-return relationshipand the relative costs of equity and debt.[2]

b) Describe the creditor hierarchy and itsconnection with the relative costs of sources offinance.[2]

2. Estimating the cost of equity

a) Apply the dividend growth model and discussits weaknesses.[2]

b) Apply the capital asset pricing model (CAPM)and describe and explain the assumptions andcomponents of the CAPM.[2]

c) Explain and discuss the advantages anddisadvantages of the CAPM. [2]

3. Estimating the cost of debt and other capitalinstruments

a) Calculate the cost of capital of a range ofcapital instruments, including:[2]

i) irredeemable debtii) redeemable debtiii) convertible debtiv) preference sharesv) bank debt

4. Estimating the overall cost of capital

a) Distinguish between average and marginal costof capital.[2]

b) Calculate the weighted average cost of capital(WACC) using book value and market valueweightings.[2]

5. Capital structure theories and practicalconsiderations

a) Describe the traditional view of capitalstructure and its assumptions.[2]

b) Describe the views of Miller and Modigliani oncapital structure, both without and withcorporate taxation, and their assumptions.[2]

c) Identify a range of capital market imperfectionsand describe their impact on the views ofMiller and Modigliani on capital structure.[2]

d) Explain the relevance of pecking order theory tothe selection of sources of finance.[1]

6. Impact of cost of capital on investments

a) Explain the relationship between companyvalue and cost of capital. [2]

b) Discuss the circumstances under which WACCcan be used in investment appraisal.[2]

c) Discuss the advantages of the CAPM overWACC in determining a project-specific cost ofcapital. [2]

d) Apply the CAPM in calculating a project-specific discount rate.[2]

G BUSINESS VALUATIONS

1. Nature and purpose of the valuation ofbusiness and financial assets

a) Identify and discuss reasons for valuingbusinesses and financial assets.[2]

b) Identify information requirements for valuationand discuss the limitations of different types ofinformation.[2]

2. Models for the valuation of shares

a) Asset-based valuation models, including: [2]

i) net book value (statement of financialposition basis).

ii) net realisable value basis.iii) net replacement cost basis.

b) Income-based valuation models, including:[2]

i) price/earnings ratio method.ii) earnings yield method.

c) Cash flow-based valuation models, including:[2]

i) dividend valuation model and the dividendgrowth model.


ii) discounted cash flow basis.

3. The valuation of debt and other financialassets

a) Apply appropriate valuation methods to:[2]

i) irredeemable debtii) redeemable debtiii) convertible debtiv) preference shares

4. Efficient Market Hypothesis (EMH) andpractical considerations in the valuation ofshares

a) Distinguish between and discuss weak formefficiency, semi-strong form efficiency andstrong form efficiency [2]

b) Discuss practical considerations in thevaluation of shares and businesses,including:[2]

i) marketability and liquidity of sharesii) availability and sources of informationiii) market imperfections and pricing

anomaliesiv) market capitalisation

c) Describe the significance of investorspeculation and the explanations of investordecisions offered by behavioural finance [1]

H RISK MANAGEMENT

1. The nature and types of risk and approachesto risk management

a) Describe and discuss different types of foreigncurrency risk:[2]

i) translation riskii) transaction riskiii) economic risk

b) Describe and discuss different types of interestrate risk: [1]

i) gap exposureii) basis risk

2. Causes of exchange rate differences andinterest rate fluctuations

a) Describe the causes of exchange ratefluctuations, including:

i) balance of payments [1]

ii) purchasing power parity theory [2]

iii) interest rate parity theory [2]

iv) four-way equivalence [2]

b) Forecast exchange rates using:[2]

i) purchasing power parityii) interest rate parity

c) Describe the causes of interest ratefluctuations, including: [2]

i) structure of interest rates and yield curvesii) expectations theoryiii) liquidity preference theoryiv) market segmentation

3. Hedging techniques for foreign currency risk

a) Discuss and apply traditional and basicmethods of foreign currency risk management,including:i) currency of invoice [1]

ii) netting and matching [2]

iii) leading and lagging [2]

iv) forward exchange contracts [2]

v) money market hedging [2]

vi) asset and liability management [1]

b) Compare and evaluate traditional methods offoreign currency risk management.[2]

c) Identify the main types of foreign currencyderivates used to hedge foreign currency riskand explain how they are used in hedging.[1]

(No numerical questions will be set on thistopic)

4. Hedging techniques for interest rate risk

a) Discuss and apply traditional and basicmethods of interest rate risk management,including:i) matching and smoothing [1]

ii) asset and liability management [1]

ii) forward rate agreements [2]

b) Identify the main types of interest ratederivates used to hedge interest rate risk andexplain how they are used in hedging.[1]

(No numerical questions will be set on thistopic)



ACCA periodically reviews its qualification syllabuses so that they fully meet the needs of stakeholders such asemployers, students, regulatory and advisory bodies and learning providers.

There are no changes to the syllabus. One area however has been clarified in the syllabus (it was implicitlyincluded previously) and is shown in Table 1 below:

Table 1 – Amendments to F9

Section and subject area Syllabus contentD3f) Discounted cash flow (DCF) techniques Calculate discounted payback and discuss its

usefulness as an investment appraisalmethod.[2]


Governance, Risk andEthics (P1)

AIM

To apply relevant knowledge, skills and exerciseprofessional judgement in carrying out the role ofthe accountant relating to governance, internalcontrol, compliance and the management of riskwithin an organisation, in the context of an overallethical framework.

MAIN CAPABILITIES


A Define governance and explain its function inthe effective management and control oforganisations and of the resources for whichthey are accountable

B Evaluate the Governance, Risk and Ethics’srole in internal control, review and compliance

C Explain the role of the accountant in identifyingand assessing risk

D Explain and evaluate the role of the accountantin controlling and mitigating risk

E Demonstrate the application of professionalvalues and judgement through an ethicalframework that is in the best interests ofsociety and the profession, in compliance withrelevant professional codes, laws andregulations.


AB (F1)

GRE(P1)

ProfessionalEthics Module

Professionalpapers

AA (F8)

Professional values and ethics (E)

Governance and responsibility (A)

Internal control andreview (B)

Identifying, assessing andcontrolling risk (C and D)


RATIONALE

The syllabus for Paper P1, Governance, Risk andEthics, acts as the gateway syllabus into theprofessional level. It sets the other Essentials andOptions papers into a wider professional,organisational, and societal context.

The syllabus assumes essential technical skills andknowledge acquired at the Fundamentals levelwhere the core technical capabilities will have beenacquired, and where ethics, corporate governance,internal audit, control, and risk will have beenintroduced in a subject-specific context.

The GRE syllabus begins by examining the wholearea of governance within organisations in the broadcontext of the agency relationship. This aspect ofthe syllabus focuses on the respective roles andresponsibilities of directors and officers toorganisational stakeholders and of accounting andauditing as support and control functions.

The syllabus then explores internal review, control,and feedback to implement and support effectivegovernance, including compliance issues related todecision-making and decision-support functions.The syllabus also examines the whole area ofidentifying, assessing, and controlling risk as a keyaspect of responsible management.

Finally, the syllabus covers personal andprofessional ethics, ethical frameworks – andprofessional values – as applied in the context of theaccountant’s duties and as a guide to appropriateprofessional behaviour and conduct in a variety ofsituations.

DETAILED SYLLABUS

A Governance and responsibility

1. The scope of governance

2. Agency relationships and theories

3. The board of directors

4. Board committees

5. Directors’ remuneration

6. Different approaches to corporate governance

7. Corporate governance and corporate socialresponsibility

8. Governance: reporting and disclosure

B Internal control and review

1. Management control systems in corporategovernance

2. Internal control, audit and compliance incorporate governance

3. Internal control and reporting

4. Management information in audit and internalcontrol

C Identifying and assessing risk

1. Risk and the risk management process

2. Categories of risk

3. Identification, assessment and measurement ofrisk

D Controlling risk

1. Targeting and monitoring risk

2. Methods of controlling and reducing risk

3. Risk avoidance, retention and modelling

E Professional values and ethics

1. Ethical theories

2. Different approaches to ethics and socialresponsibility

3. Professions and the public interest

4. Professional practice and codes of ethics

5. Conflicts of interest and the consequences ofunethical behaviour

6. Ethical characteristics of professionalism


7. Social and environmental issues in the conductof business and of ethical behaviour


The syllabus will be assessed by a three-hour paper-based examination. The examination paper will bestructured in two sections. Section A will be basedon a case study style question comprising acompulsory 50 mark question, with requirementsbased on several parts with all parts relating to thesame case information. The case study will usuallyassess a range of subject areas across the syllabusand will require the candidate to demonstrate highlevel capabilities to evaluate, relate and apply theinformation in the case study to several of therequirements.

Section B comprises three questions of 25 markseach, of which candidates must answer two. Thesequestions will be more likely to assess a range ofdiscrete subject areas from the main syllabussection headings, but may require application,evaluation and the synthesis of informationcontained within short scenarios in which somerequirements may need to be contextualised.


Study GuideA GOVERNANCE AND RESPONSIBILITY

1. The scope of governance

a) Define and explain the meaning of corporategovernance.[2]

b) Explain, and analyse the issues raised by thedevelopment of the joint stock company as thedominant form of business organisation andthe separation of ownership and control overbusiness activity. [3]

c) Analyse the purposes and objectives ofcorporate governance. [2]

d) Explain, and apply in context of corporategovernance, the key underpinning conceptsof: [3]

i) fairnessii) openness/transparencyiii) independenceiv) probity/honestyv) responsibilityvi) accountabilityvii) reputationviii)judgmentix) integrity

e) Explain and assess the major areas oforganisational life affected by issues incorporate governance. [3]

i) duties of directors and functions of theboard (including performancemeasurement)

ii) the composition and balance of the board(and board committees)

iii) reliability of financial reporting and externalauditing

iv) directors’ remuneration and rewardsv) responsibility of the board for risk

management systems and internal controlvi) the rights and responsibilities of

shareholders, including institutionalinvestors

vii) corporate social responsibility and businessethics.

f) Compare, and distinguish between public,private and non-governmental organisations(NGO) sectors with regard to the issues raisedby, and scope of, governance.[3]

g) Explain and evaluate the roles, interests andclaims of, the internal parties involved incorporate governance. [3]

i) Directorsii) Company secretariesiii) Sub-board managementiv) Employee representatives (e.g. trade

unions)

h) Explain and evaluate the roles, interests andclaims of, the external parties involved incorporate governance.[3]

i) Shareholders (including shareholders’ rightsand responsibilities)

ii) Auditorsiii) Regulatorsiv) Governmentv) Stock exchangesvi) Small investors (and minority rights)vii) Institutional investors (see also next point)

i) Analyse and discuss the role and influence ofinstitutional investors in corporate governancesystems and structures, for example theroles and influences of pension funds,insurance companies and mutual funds.[2]

2. Agency relationships and theories

a) Define and explore agency theory.[2]

b) Define and explain the key concepts in agencytheory. [2]

i) Agentsii) Principalsiii) Agencyiv) Agency costsv) Accountabilityvi) Fiduciary responsibilitiesvii) Stakeholders

c) Explain and explore the nature of the principal-agent relationship in the context of corporategovernance.[3]

d) Analyse and critically evaluate the nature ofagency accountability in agency relationships.[3]


e) Explain and analyse the following othertheories used to explain aspects of the agencyrelationship.[2]

i) Transaction costs theoryii) Stakeholder theory

3. The board of directors

a) Explain and evaluate the roles andresponsibilities of boards of directors.[3]

b) Describe, distinguish between and evaluate thecases for and against, unitary and two-tierboard structures.[3]

c) Describe the characteristics, board compositionand types of, directors (including definingexecutive and non-executive directors (NED). [2]

d) Describe and assess the purposes, roles andresponsibilities of NEDs.[3]

e) Describe and analyse the general principles oflegal and regulatory frameworks within whichdirectors operate on corporate boards:[2]

i) legal rights and responsibilities,ii) time-limited appointmentsiii) retirement by rotation,iv) service contracts,v) removal,vi) disqualificationvii) conflict and disclosure of interestsviii)insider dealing/trading

f) Define, explore and compare the roles of thechief executive officer and companychairman.[3]

g) Describe and assess the importance andexecution of, induction and continuingprofessional development of directors onboards of directors.[3]

h) Explain and analyse the frameworks forassessing the performance of boards andindividual directors (including NEDs) onboards.[2]

4. Board committees

a) Explain and assess the importance, roles andaccountabilities of, board committees incorporate governance. [3]

b) Explain and evaluate the role and purpose ofthe following committees in effective corporategovernance:[3]

i) Remuneration committeesii) Nominations committeesiii) Risk committees.iv) Audit committees

5. Directors’ remuneration

a) Describe and assess the general principles ofremuneration. [3]

i) purposesii) componentsiii) links to strategyiv) links to labour market conditions.

b) Explain and assess the effect of variouscomponents of remuneration packages ondirectors’ behaviour. [3]

i) basic salaryii) performance relatediii) shares and share optionsiv) loyalty bonusesv) benefits in kindvi) pension benefits

c) Explain and analyse the legal, ethical,competitive and regulatory issues associatedwith directors’ remuneration.[3]

6. Different approaches to corporate governance

a) Describe and compare the essentials of ‘rules’and ‘principles’ based approaches to corporategovernance. Includes discussion of ‘comply orexplain’. [3]

b) Describe and analyse the different models ofbusiness ownership that influence differentgovernance regimes (e.g. family firms versusjoint stock company-based models).[2]

c) Describe and critically evaluate the reasonsbehind the development and use of codes ofpractice in corporate governance(acknowledging national differences andconvergence).[3]

d) Explain and briefly explore the development ofcorporate governance codes in principles-basedjurisdictions.[2]

i) impetus and background


ii) major corporate governance codesiii) effects of

e) Explain and explore the Sarbanes-Oxley Act(2002) as an example of a rules-basedapproach to corporate governance.[2]

i) impetus and backgroundii) main provisions/contentsiii) effects of

f) Describe and explore the objectives, contentand limitations of, corporate governance codesintended to apply to multiple nationaljurisdictions.[2]

i) Organisation for economic cooperation anddevelopment (OECD) Report (2004)

ii) International corporate governance network(ICGN) Report (2005)

7. Corporate governance and corporate socialresponsibility

a) Explain and explore social responsibility in thecontext of corporate governance.[2]

b) Discuss and critically assess the concept ofstakeholders and stakeholding in organisationsand how this can affect strategy and corporategovernance.[3]

c) Analyse and evaluate issues of ‘ownership,’‘property’ and the responsibilities of ownershipin the context of shareholding. [3]

d) Explain the concept of the organisation as acorporate citizen of society with rights andresponsibilities.[3]

8. Governance: reporting and disclosure

a) Explain and assess the general principles ofdisclosure and communication withshareholders.[3]

b) Explain and analyse ‘best practice’ corporategovernance disclosure requirements.[2]

c) Define and distinguish between mandatory andvoluntary disclosure of corporate information inthe normal reporting cycle.[2]

d) Explain and explore the nature of, and reasonsand motivations for, voluntary disclosure in a

principles-based reporting environment(compared to, for example, the reportingregime in the USA).[3]

e) Explain and analyse the purposes of the annualgeneral meeting and extraordinary generalmeetings for information exchange betweenboard and shareholders.[2]

f) Describe and assess the role of proxy voting incorporate governance. [3].

B INTERNAL CONTROL AND REVIEW

1. Management control systems in corporategovernance

a) Define and explain internal managementcontrol.[2]

b) Explain and explore the importance of internalcontrol and risk management in corporategovernance.[3]

c) Describe the objectives of internal controlsystems.[2]

d) Identify, explain and evaluate the corporategovernance and executive management roles inrisk management (in particular the separationbetween responsibility for ensuring thatadequate risk management systems are inplace and the application of risk managementsystems and practices in the organisation). [3]

e) Identify and assess the importance of theelements or components of internal controlsystems.[3]

2. Internal control, audit and compliance incorporate governance

a) Describe the function and importance ofinternal audit. [1]

b) Explain, and discuss the importance of, auditorindependence in all client-auditor situations(including internal audit). [3]

c) Explain, and assess the nature and sources ofrisks to, auditor independence. Assess thehazard of auditor capture.[3]


d) Explain and evaluate the importance ofcompliance and the role of the internal auditfunction in internal control.[3]

e) Explore and evaluate the effectiveness ofinternal control systems.[3]

f) Describe and analyse the work of the internalaudit committee in overseeing the internalaudit function.[2]

g) Explain and explore the importance andcharacteristics of, the audit committee’srelationship with external auditors.[2]

3. Internal control and reporting

a) Describe and assess the need to report oninternal controls to shareholders.[3]

b) Describe the content of a report on internalcontrol and audit.[2]

c) Explain and assess how internal controlsunderpin and provide information foraccurate financial reporting.[3]

.4. Management information in audit and internal

control

a) Explain and assess the need for adequateinformation flows to management for thepurposes of the management of internal controland risk.[3]

b) Evaluate the qualities and characteristicsof information required in internal control andrisk management and monitoring.[3]

C IDENTIFYING AND ASSESSING RISK

1. Risk and the risk management process

a) Define and explain risk in the context ofcorporate governance.[2]

b) Define and describe managementresponsibilities in risk management.[2]

c) Explain the dynamic nature of riskassessment.[2]

d) Explain the importance and nature ofmanagement responses to changing riskassessments.[2]

e) Explain risk appetite and how this affects riskpolicy.[2]

2. Categories of risk

a) Define and compare (distinguish between)strategic and operational risks.[2]

b) Define and explain the sources and impacts ofcommon business risks. [2]

i) marketii) creditiii) liquidityiv) technologicalv) legalvi) health, safety and environmentalvii) reputationviii)business probityix) derivatives

c) Describe and evaluate the nature andimportance of business and financial risks.[3]

d) Recognise and analyse the sector or industryspecific nature of many business risks.[2]

3. Identification, assessment and measurementof risk

a) Identify, and assess the impact upon, thestakeholders involved in business risk.[3]

b) Explain and analyse the concepts of assessingthe severity and probability of risk events.[2]

c) Describe and evaluate a framework for boardlevel consideration of risk. [3]

d) Describe the process of and importance of,externally reporting on internal control andrisk.[2]

e) Explain the sources, and assess the importanceof, accurate information for risk management.[3]

f) Explain and assess the ALARP (as low asreasonably practicable) principle in riskassessment and how this relates to severityand probability. [3]


g) Evaluate the difficulties of risk perceptionincluding the concepts of objective andsubjective risk perception. [3]

h) Explain and evaluate the concepts of relatedand correlated risk factors.[3]

D CONTROLLING AND MANAGING RISK

1. Targeting and monitoring of risk

a) Explain and assess the role of a risk managerin identifying and monitoring risk.[3]

b) Explain and evaluate the role of the riskcommittee in identifying and monitoring risk.[3]

c) Describe and assess the role of internal orexternal risk auditing in monitoring risk. [3]

2. Methods of controlling and reducing risk

a) Explain the importance of risk awareness at alllevels in an organisation. [2]

b) Describe and analyse the concept ofembedding risk in an organisation’s systemsand procedures.[3]

c) Describe and evaluate the concept ofembedding risk in an organisation’s culture andvalues.[3]

d) Explain and analyse the concepts of spreadingand diversifying risk and when this would beappropriate.[2]

e) Identify and assess how business organisationsuse policies and techniques to mitigate varioustypes of business and financial risks. [3]

3. Risk avoidance, retention and modelling

a) Explain, and assess the importance of, risktransference, avoidance, reduction andacceptance.[3]

b) Explain and evaluate the different attitudes torisk and how these can affect strategy.[3]

c) Explain and assess the necessity of incurringrisk as part of competitively managing abusiness organisation.[3]

d) Explain and assess attitudes towards risk andthe ways in which risk varies in relation to thesize, structure and development of anorganisation [3]

E PROFESSIONAL VALUES AND ETHICS

1. Ethical theories

a) Explain and distinguish between the ethicaltheories of relativism and absolutism.[2]

b) Explain, in an accounting and governancecontext, Kohlberg’s stages of human moraldevelopment.[3]

c) Describe and distinguish between deontologicaland teleological/consequentialist approaches toethics.[2]

d) Apply commonly used ethical decision-makingmodels in accounting and professionalcontexts [2]

i) American Accounting Association modelii) Tucker’s 5-question model

2. Different approaches to ethics and socialresponsibility.

a) Describe and evaluate Gray, Owen & Adams(1996) seven positions on socialresponsibility.[2]

b) Describe and evaluate other constructions ofcorporate and personal ethical stance:[2]

i) short-term shareholder interestsii) long-term shareholder interestsiii) multiple stakeholder obligationsiv) shaper of society

c) Describe and analyse the variables determiningthe cultural context of ethics and corporatesocial responsibility (CSR).[2]

3. Professions and the public interest

a) Explain and explore the nature of a‘profession’ and ‘professionalism’. [2]

b) Describe and assess what is meant by ‘thepublic interest’. [2]


c) Describe the role of, and assess thewidespread influence of, accounting as aprofession in the organisational context. [3]

d) Analyse the role of accounting as a professionin society.[2]

e) Recognise accounting’s role as a value-ladenprofession capable of influencing thedistribution of power and wealth in society. [3]

f) Describe and critically evaluate issuessurrounding accounting and acting against thepublic interest.[3]

4. Professional practice and codes of ethics

a) Describe and explore the areas of behaviourcovered by corporate codes of ethics.[3]

b) Describe and assess the content of, andprinciples behind, professional codesof ethics.[3]

c) Describe and assess the codes of ethicsrelevant to accounting professionals such asthe IFAC or professional body codes.[3]

5. Conflicts of interest and the consequences ofunethical behaviour

a) Describe and evaluate issues associated withconflicts of interest and ethical conflictresolution. [3]

b) Explain and evaluate the nature and impacts ofethical threats and safeguards.[3]

c) Explain and explore how threats toindependence can affect ethical behaviour.[3]

d) Explain and explore 'bribery' and 'corruption' inthe context of corporate governance, andassess how these can undermine confidenceand trust. [3]

e) Describe and assess best practice measures forreducing and combating bribery andcorruption, and the barriers to implementingsuch measures. [3]

6. Ethical characteristics of professionalism

a) Explain and analyse the content and nature ofethical decision-making using content fromKohlberg’s framework as appropriate.[2]

b) Explain and analyse issues related to theapplication of ethical behaviour in aprofessional context.[2]

c) Describe and discuss ‘rules based’ and‘principles based’ approaches to resolvingethical dilemmas encountered in professionalaccounting.[2]

7. Social and environmental issues in theconduct of business and ethical behaviour

a) Describe and assess the social andenvironmental effects that economic activitycan have (in terms of social and environmental‘footprints’).[3]

b) Explain and assess the concept ofsustainability and evaluate the issuesconcerning accounting for sustainability(including the contribution of ‘full cost’accounting). [3]

c) Describe the main features of internalmanagement systems for underpinningenvironmental accounting such as EMAS andISO 14000.[1]

d) Explain the nature of social and environmentalaudit and evaluate the contribution it can maketo the development of environmentalaccounting.[3]


SUMMARY OF CHANGES TO P1

ACCA periodically reviews its qualification syllabuses so that they fully meet the needs of stakeholders includingemployers, students, regulatory and advisory bodies and learning providers.

Table 1 – Additions to P1

Section and subject area Syllabus contentE5d) Explain and explore 'bribery' and 'corruption' in the

context of corporate governance, and assess how thesecan undermine confidence and trust.

E5e) Describe and assess best practice measures forreducing and combating bribery and corruption, andthe barriers to implementing such measures.


Corporate Reporting (INT)(P2)

AIM

To apply knowledge, skills and exercise professionaljudgement in the application and evaluation offinancial reporting principles and practices in arange of business contexts and situations.

MAIN CAPABILITIES


A Discuss the professional and ethical duties ofthe accountant

B Evaluate the financial reporting frameworkC Advise on and report the financial

performance of entitiesD Prepare the financial statements of groups of

entities in accordance with relevantaccounting standards

E Explain reporting issues relating tospecialised entities

F Discuss the implications of changes inaccounting regulation on financial reporting

G Appraise the financial performance andposition of entities

H Evaluate current developments


FA (F3)

FR (F7)

CR(P2)

AAA(P7)

The appraisal of financialperformance and position of

entities (G)

Financial statements ofgroups of entities (D)

Current developments(H)

The financialreporting framework (B)

The professional andethical duty of the

accountant (A)

Reportingthe financial

performance of entities (C)

Implications of changes inaccounting regulation on

financial reporting (F)

Specialisedentities (E)


RATIONALE

The syllabus for Paper P2, Corporate Reporting,assumes knowledge acquired at the Fundamentalslevel including the core technical capabilities toprepare and analyse financial reports for single andcombined entities.

The Paper P2 syllabus takes the subject into greaterdepth and contextualises the role of the accountantas a professional steward and adviser/analyst byinitially exploring the wider professional duties andresponsibilities of the accountant to the stakeholdersof an organisation.

The syllabus examines the financial reportingframework within which the accountant operatesand examines detailed financial reportingrequirements for entities leading to the preparationof group financial reports in accordance withgenerally accepted accounting practice and relevantstandards.

The syllabus then deals with the nature of reportingfor specialised entities including not-for-profit andsmall and medium-sized enterprises.

The final sections of the syllabus explore – in moredepth – the role of the accountant as financialanalyst and adviser through the assessment offinancial performance and position of entities, andthe accountant’s role in assessing and advising onthe implications of accounting regulation oncorporate reporting.

Finally, the syllabus covers the evaluation of currentdevelopments and their implications for financialreporting.

DETAILED SYLLABUS

A The professional and ethical duty of theaccountant

1. Professional behaviour and compliance withaccounting standards

2. Ethical requirements of corporate reportingand the consequences of unethical behaviour

3. Social responsibility

B The financial reporting framework

1. The applications, strengths and weaknesses ofan accounting framework

2. Critical evaluation of principles and practices

C Reporting the financial performance of entities

1. Performance reporting

2. Non-current assets

3. Financial instruments

4. Leases

5. Segment reporting

6. Employee benefits

7. Income taxes

8. Provisions, contingencies and events after thereporting date

9. Related parties

10. Share-based payment

11. Reporting requirements of small and medium-sized entities (SMEs)

D Financial statements of groups of entities

1. Group accounting including statements of cashflows

2. Continuing and discontinued interests

3. Changes in group structures

4. Foreign transactions and entities

E Specialised entities and specialisedtransactions

1. Financial reporting in specialised, not-for-profitand public sector entities

2. Entity reconstructions


F Implications of changes in accountingregulation on financial reporting

1. The effect of changes in accounting standardson accounting systems

2. Proposed changes to accounting standards

G The appraisal of financial performance andposition of entities

1. The creation of suitable accounting policies

2. Analysis and interpretation of financialinformation and measurement of performance

H Current developments

1. Environmental and social reporting

2. Convergence between national andinternational reporting standards

3. Current reporting issues



The syllabus is assessed by a three-hour paper-based examination. It examines professionalcompetences within the corporate reportingenvironment.

Students will be examined on concepts, theories,and principles, and on their ability to question andcomment on proposed accounting treatments.

Students should be capable of relating professionalissues to relevant concepts and practical situations.The evaluation of alternative accounting practicesand the identification and prioritisation of issues willbe a key element of the paper. Professional andethical judgement will need to be exercised,together with the integration of technical knowledgewhen addressing corporate reporting issues in abusiness context.

Global issues will be addressed via the currentissues questions on the paper. Students will berequired to adopt either a stakeholder or an externalfocus in answering questions and to demonstratepersonal skills such as problem solving, dealing withinformation and decision making.The paper also deals with specific professionalknowledge appropriate to the preparation andpresentation of consolidated and other financialstatements from accounting data, to conform withaccounting standards.

The paper will comprise two sections.

Section A Compulsory question 50 marksSection B 2 from 3 questions of

25 marks each 50 marks100 marks

Section A will consist of one scenario basedquestion worth 50 marks. It will deal with thepreparation of consolidated financial statementsincluding group statements of cash flows and withissues in financial reporting.Students will be required to answer two out of threequestions in Section B, which will normallycomprise two questions which will be scenario orcase-study based and one essay question whichmay have some computational element. Section Bcould deal with any aspects of the syllabus.


Study GuideA THE PROFESSIONAL AND ETHICAL DUTIES

OF THE ACCOUNTANT


a) Appraise and discuss the ethical andprofessional issues in advising on corporatereporting.[3]

b) Assess the relevance and importance of ethicaland professional issues in complying withaccounting standards.[3]


a) Appraise the potential ethical implications ofprofessional and managerial decisions in thepreparation of corporate reports.[3]

b) Assess the consequences of not upholdingethical principles in the preparation ofcorporate reports.[3]

3. Social Responsibility

a) Discuss the increased demand for transparencyin corporate reports, and the emergence ofnon-financial reporting standards.[3]

b) Discuss the progress towards a framework forenvironmental and sustainability reporting.[3]

B THE FINANCIAL REPORTING FRAMEWORK


a) Evaluate the valuation models adopted bystandard setters.[3]

b) Discuss the use of an accounting framework inunderpinning the production of accountingstandards.[3]

c) Assess the success of such a framework inintroducing rigorous and consistent accountingstandards.[3]


a) Identify the relationship between accountingtheory and practice.[2]

b) Critically evaluate accounting principles andpractices used in corporate reporting.[3]

C REPORTING THE FINANCIALPERFORMANCE OF ENTITIES


a) Prepare reports relating to corporateperformance for external stakeholders.[3]

b) Discuss the issues relating to the recognition ofrevenue.[3]

c) Evaluate proposed changes to reportingfinancial performance. [3]


a) Apply and discuss the timing of the recognitionof non-current assets and the determination oftheir carrying amounts including impairmentsand revaluations.[3]

b) Apply and discuss the treatment of non-currentassets held for sale.[3]

c) Apply and discuss the accounting treatment ofinvestment properties including classification,recognition and measurement issues.[3]

d) Apply and discuss the accounting treatment ofintangible assets including the criteria forrecognition and measurement subsequent toacquisition and classification.[3]

3. Financial Instruments

a) Apply and discuss the recognition and de-recognition of financial assets and financialliabilities.[2]

b) Apply and discuss the classification of financialassets and financial liabilities and theirmeasurement.[2]


c) Apply and discuss the treatment of gains andlosses arising on financial assets and financialliabilities.[2]

d) Apply and discuss the treatment ofimpairments of financial assets.[2]

e) Account for derivative financial instruments,and simple embedded derivatives.[2]

f) Outline the principles of hedge accounting andaccount for fair value hedges and cash flowhedges including hedge effectiveness.[2]

4. Leases

a) Apply and discuss the classification of leasesand accounting for leases by lessors andlessees.[3]

b) Account for and discuss sale and leasebacktransactions.[3]

5. Segment Reporting

a) Determine the nature and extent of reportablesegments.[3]

b) Specify and discuss the nature of segmentinformation to be disclosed. [3]

6. Employee Benefits

a) Apply and discuss the accounting treatment ofshort term and long term employee benefits.[3]

b) Apply and discuss the accounting treatment ofdefined contribution and defined benefit plans.[3]

c) Account for gains and losses on settlementsand curtailments.[2]

d) Account for the “Asset Ceiling” test and thereporting of actuarial gains and losses.[2]

7. Income taxes

a) Apply and discuss the recognition andmeasurement of deferred tax liabilities anddeferred tax assets.[3]

b) Determine the recognition of tax expense orincome and its inclusion in the financialstatements.[3]


a) Apply and discuss the recognition, de-recognition and measurement of provisions,contingent liabilities and contingent assetsincluding environmental provisions.[3]

b) Calculate and discuss restructuringprovisions.[3]

c) Apply and discuss the accounting for eventsafter the reporting date.[3]

d) Determine and report going concern issuesarising after the reporting date.[3]

9. Related parties

a) Determine the parties considered to be relatedto an entity.[3]

b) Identify the implications of related partyrelationships and the need for disclosure.[3]

10. Share based payment

a) Apply and discuss the recognition andmeasurement criteria for share-based paymenttransactions.[3]

b) Account for modifications, cancellations andsettlements of share based paymenttransactions.[2]


a) Outline the principal considerations indeveloping a set of accounting standards forSMEs.[3]

b) Discuss solutions to the problem of differentialfinancial reporting.[3]

c) Discuss the reasons why the IFRS for SME’sdoes not address certain topics. [3]


d) Discuss the accounting treatments notallowable under the IFRS for SME’s includingthe revaluation model for certain assets [3]

e) Discuss and apply the simplificationsintroduced by the IFRS for SME’s includingaccounting for goodwill and intangible assets,financial instruments ,defined benefit schemes,exchange differences and associates and jointventures. [3]

D FINANCIAL STATEMENTS OF GROUPS OFENTITIES

1. Group accounting including statements ofcash flows

a) Apply the method of accounting for businesscombinations including complex groupstructures. [3]

b) Apply the principles in determining the cost ofa business combination.[3]

c) Apply the recognition and measurement criteriafor identifiable acquired assets and liabilitiesand goodwill including step acquisitions.[3]

d) Apply and discuss the criteria used to identify asubsidiary and an associate.[3]

e) Determine and apply appropriate procedures tobe used in preparing group financialstatements.[3]

f) Identify and outline:- the circumstances in which a group is

required to prepare consolidated financialstatements. [2]

- the circumstances when a group may claimand exemption from the preparation ofconsolidated financial statements.[2]

- why directors may not wish to consolidate asubsidiary and where this is permitted.[2]

g) Apply the equity method of accounting forassociates.[3]

h) Outline and apply the key definitions andaccounting methods which relate to interests injoint arangements.[3]

i) Prepare and discuss group statements of cashflows.[3]


a) Prepare group financial statements whereactivities have been discontinued, or have beenacquired or disposed of in the period.[3]

b) Apply and discuss the treatment of a subsidiarywhich has been acquired exclusively with aview to subsequent disposal.[3]


a) Discuss the reasons behind a groupreorganisation.[3]

b) Evaluate and assess the principal terms of aproposed group reorganisation.[3]


a) Outline and apply the translation of foreigncurrency amounts and transactions into thefunctional currency and the presentationalcurrency.[3]

b) Account for the consolidation of foreignoperations and their disposal.[2]

E SPECIALISED ENTITIES AND SPECIALISEDTRANSACTIONS

1. Financial reporting in specialised, not-for-profit and public sector entities

a) Apply knowledge from the syllabus tostraightforward transactions and events arisingin specialised, not-for-profit, and public sectorentities. [3]

2. Entity reconstructions

a) Identify when an entity may no longer beviewed as a going concern or uncertainty existssurrounding the going concern status.[2]

b) Identify and outline the circumstances in whicha reconstruction would be an appropriatealternative to a company liquidation.[2]


c) Outline the appropriate accounting treatmentrequired relating to reconstructions.[2]

F IMPLICATIONS OF CHANGES INACCOUNTING REGULATION ON FINANCIALREPORTING


a) Apply and discuss the accounting implicationsof the first time adoption of a body of newaccounting standards.[3]


a) Identify issues and deficiencies which have ledto a proposed change to an accountingstandard.[2]

G THE APPRAISAL OF FINANCIALPERFORMANCE AND POSITION OFENTITIES


a) Develop accounting policies for an entity whichmeet the entity’s reporting requirements.[3]

b) Identify accounting treatments adopted infinancial statements and assess their suitabilityand acceptability.[3]


a) Select and calculate relevant indicators offinancial and non-financial performance.[3]

b) Identify and evaluate significant features andissues in financial statements.[3]

c) Highlight inconsistencies in financialinformation through analysis and application ofknowledge.[3]

d) Make inferences from the analysis ofinformation taking into account the limitationof the information, the analytical methods usedand the business environment in which theentity operates.[3]

H CURRENT DEVELOPMENTS


a) Appraise the impact of environmental, social,and ethical factors on performancemeasurement.[3]

b) Evaluate current reporting requirements in thearea.[3]

c) Discuss why entities might include disclosuresrelating to the environment and society.[3]


a) Evaluate the implications of worldwideconvergence with International FinancialReporting Standards.[3]

b) Discuss the influence of national regulators oninternational financial reporting.[2]


a) Discuss current issues in corporate reporting.[3]


NOTE OF SIGNIFICANT CHANGES TO STUDYGUIDE PAPER P2 INT



stakeholders such as employers, students,regulatory and advisory bodies and learningproviders.

The main areas to be added or deleted from thesyllabus from that date are shown in Tables 1 and 2below:

Table 1 – Additions to P2 INT

There have not been any additions to the 2011 study guide for 2012. However there have been minoramendment to the wording of some of the study guide outcomes corresponding to changes within examinabledocuments.

Table 2 – Deletions to P2 INT

There have not been any deletions to the 2011 study guide for 2012. However there have been minoramendments to the wording of some of the study guide outcomes corresponding to changes within examinabledocuments.


Corporate Reporting (UK)(P2)

AIM

To apply knowledge, skills and exercise professionaljudgement in the application and evaluation offinancial reporting principles and practices in arange of business contexts and situations.

MAIN CAPABILITIES


A Discuss the professional and ethical duties ofthe accountant

B Evaluate the financial reporting frameworkC Advise on and report the financial

performance of entitiesD Prepare the financial statements of groups of

entities in accordance with relevantaccounting standards

E Explain reporting issues relating tospecialised entities

F Discuss the implications of changes inaccounting regulation on financial reporting

G Appraise the financial performance andposition of entities

H Evaluate current developments


FA (F3)

FR (F7)

CR(P2)

AAA(P7)

The appraisal of financialperformance and position of

entities (G)

Financial statements ofgroups of entities (D)

Current developments(H)

The financialreporting framework (B)

The professional andethical duty of the

accountant (A)

Reportingthe financial

performance of entities (C)

Implications of changes inaccounting regulation on

financial reporting (F)

Specialisedentities (E)


RATIONALE

The syllabus for paper P2, Corporate Reporting,assumes knowledge acquired at the Fundamentalslevel including the core technical capabilities toprepare and analyse financial reports for single andcombined entities.

The Paper P2 syllabus takes the subject into greaterdepth and contextualises the role of the accountantas a professional steward and adviser/analyst byinitially exploring the wider professional duties andresponsibilities of the accountant to the stakeholdersof an organisation.

The syllabus examines the financial reportingframework within which the accountant operatesand examines detailed financial reportingrequirements for entities leading to the preparationof group financial reports in accordance withgenerally accepted accounting practice and relevantstandards.

The syllabus then deals with the nature of reportingfor specialised entities including not-for-profit andsmall and medium-sized enterprises.

The final sections of the syllabus explore – in moredepth – the role of the accountant as financialanalyst and adviser through the assessment offinancial performance and position of entities, andthe accountant’s role in assessing and advising onthe implications of accounting regulation oncorporate reporting.

Finally, the syllabus covers the evaluation of currentdevelopments and their implications for financialreporting.For the purpose of this exam, International FinancialReporting Standards (IFRS) are the main accountingstandards examined in the preparation of financialinformation. The key differences between UK GAAPand International Financial Reporting Standards arelooked at on a subject by subject basis.

DETAILED SYLLABUS

A The professional and ethical duty of theaccountant


2. Ethical requirements of corporate reporting andthe consequences of unethical behaviour

3. Social responsibility

B The legal and financial reporting framework



3. The legal requirements relating to thepreparation of single entity financial reportingstatements

C Reporting the financial performance of entitiesincluding key differences between IFRS andUK GAAP



3. Financial instruments

4. Leases

5. Segment reporting

6. Employee benefits

7. Taxation


9. Related parties

10. Share-based payment



D Financial statements of groups of entitiesincluding key differences between IFRS andUK GAAP

1. Group accounting including cash flowstatements




E Specialised entities and specialisedtransactions

1. Financial reporting in specialised, not-for-profitand public sector entities

2. Entity schemes of arrangement andreconstructions

F Implications of changes in accountingregulation on financial reporting



G The appraisal of financial performance andposition of entities



H Current developments






The syllabus is assessed by a three-hour paper-based examination. It examines professionalcompetences within the corporate reportingenvironment.

Students will be examined on concepts, theories,and principles, and on their ability to question andcomment on proposed accounting treatments.

Students should be capable of relating professionalissues to relevant concepts and practical situations.The evaluation of alternative accounting practicesand the identification and prioritisation of issues willbe a key element of the paper. Professional andethical judgement will need to be exercised,together with the integration of technical knowledgewhen addressing corporate reporting issues in abusiness context.

Global issues will be addressed via the currentissues questions on the paper. Students will berequired to adopt either a stakeholder or an externalfocus in answering questions and to demonstratepersonal skills such as problem solving, dealing withinformation and decision making.The paper also deals with specific professionalknowledge appropriate to the preparation andpresentation of consolidated and other financialstatements from accounting data to conform withaccounting standards.

The paper will comprise two sections.

Section A Compulsory question 50 marksSection B 2 from 3 questions of

25 marks each 50 marks100 marks

Section A will consist of one scenario-basedquestion worth 50 marks. It will deal with thepreparation of consolidated financial statementsincluding group cash flow statements and withissues in financial reporting.

Students will be required to answer two out of threequestions in Section B, which will normallycomprise two questions which will be scenario orcase-study based and one essay question whichmay have some computational element. Section Bcould deal with any aspects of the syllabus.


Study GuideA THE PROFESSIONAL AND ETHICAL DUTIES

OF THE ACCOUNTANT


a) Appraise and discuss the ethical andprofessional issues in advising on corporatereporting.[3]

b) Assess the relevance and importance of ethicaland professional issues in complying withaccounting standards.[3]


a) Appraise the potential ethical implications ofprofessional and managerial decisions in thepreparation of corporate reports.[3]

b) Assess the consequences of not upholdingethical principles in the preparation ofcorporate reports.[3]

3. Social Responsibility

a) Discuss the increased demand for transparencyin corporate reports, and the emergence ofnon-financial reporting standards.[3]

b) Discuss the progress towards a framework forenvironmental and sustainability reporting.[3]

B THE FINANCIAL REPORTING FRAMEWORK


a) Evaluate the “balance sheet” and “fair value”models adopted by standard setters.[3]

b) Discuss the use of an accounting framework inunderpinning the production of accountingstandards.[3]

c) Assess the success of such a framework inintroducing rigorous and consistent accountingstandards.[3]


a) Identify the relationship between accountingtheory and practice.[2]

b) Critically evaluate accounting principles andpractices used in corporate reporting.[3]


a) Recognise and apply the laws, regulations,accounting standards and other requirementsto the preparation of statutory financialstatements of an entity, including thecircumstances where an entity is required toprepare and present statutory financialstatements.[2]

C REPORTING THE FINANCIALPERFORMANCE OF ENTITIES


a) Prepare reports relating to corporateperformance for external stakeholders.[3]

b) Discuss the issues relating to the recognition ofrevenue

c) Evaluate proposed changes to reportingfinancial performance. [3]


a) Apply and discuss the timing of the recognitionof non-current assets and the determination oftheir carrying amounts including impairmentsand revaluations.[3]

b) Apply and discuss the treatment of non-currentassets held for sale.[3]

c) Apply and discuss the accounting treatment ofinvestment properties including classification,recognition and measurement issues.[3]

d) Apply and discuss the accounting treatment ofintangible assets including the criteria forrecognition and measurement subsequent toacquisition and classification.[3]


3) Discuss and apply the key differences betweenUK GAAP and IFRS in accounting and non-current assets including revaluation,impairment and investment property. [3]

3. Financial Instruments

a) Apply and discuss the recognition and de-recognition of financial assets and financialliabilities.[2]

b) Apply and discuss the classification of financialassets and financial liabilities and theirmeasurement. [2]

c) Apply and discuss the treatment of gains andlosses arising on financial assets and financialliabilities.[2]

d) Apply and discuss the treatment ofimpairments of financial assets.[2]

e) Account for derivative financial instruments,and simple embedded derivatives.[2]

f) Outline the principles of hedge accounting andaccount for fair value hedges and cash flowhedges including hedge effectiveness.[2]

4. Leases

a) Apply and discuss the classification of leasesand accounting for leases by lessors andlessees.[3]

b) Account for and discuss sale and leasebacktransactions.[3]

c) Discuss and apply the key differences betweenUK GAAP and IFRS in accounting for leases. [3]

5. Segment Reporting

a) Determine the nature and extent of reportablesegments.[3]

b) Specify and discuss the nature of segmentinformation to be disclosed. [3]

c) Discuss and apply the key differences betweenUK GAAP and IFRS in accounting forsegments. [3]

6. Employee Benefits

a) Apply and discuss the accounting treatment ofshort term and long term benefits.[3]

b) Apply and discuss the accounting treatment ofdefined contribution and defined benefitplans.[3]

c) Account for gains and losses on settlementsand curtailments.[2]

d) Account for the “Asset Ceiling” test and thereporting of actuarial gains and losses.[2]

e) Discuss the key differences between UK GAAPand IFRS in accounting for Employee Benefits.[3]

7. Taxation

a) Apply and discuss the recognition andmeasurement of deferred tax liabilities anddeferred tax assets.[3]

b) Determine the recognition of tax expense orincome and its inclusion in the financialstatements.[3]

c) Discuss and apply the key differences betweenUK GAAP and IFRS in accounting for taxation.[3]


a) Apply and discuss the recognition, de-recognition and measurement of provisions,contingent liabilities and contingent assetsincluding environmental provisions.[3]

b) Calculate and discuss restructuringprovisions.[3]

c) Apply and discuss the accounting for eventsafter the reporting date.[3]

d) Determine and report going concern issuesarising after the reporting date.[3]


9. Related parties

a) Determine the parties considered to be relatedto an entity.[3]

b) Identify the implications of related partyrelationships and the need for disclosure. [3]

c) Discuss and apply the key differences betweenUK GAAP and IFRS in accounting for relatedparties. [3]

10. Share based payment

a) Apply and discuss the recognition andmeasurement criteria for share-based paymenttransactions.[3]

b) Account for modifications, cancellations andsettlements of share based paymenttransactions.[2]


a) Outline the principal considerations indeveloping a set of accounting standards forSMEs.[3]

b) Discuss solutions to the problem of differentialfinancial reporting.[3]

c) Discuss the reasons why the IFRS for SME’sdoes not address certain topics. [3]

d) Discuss the accounting treatments notallowable under the IFRS for SME’s includingthe revaluation model for certain assets , [3]

e) Discuss and apply the simplificationsintroduced by the IFRS for SME’s includingaccounting for goodwill and intangible assets,financial instruments, defined benefit schemes,exchange differences and associates and jointventures. [3]

f) Discuss the key differences in principlebetween IFRS and UK GAAP. [2]

D FINANCIAL STATEMENTS OF GROUPS OFENTITIES

1. Group accounting including cash flowstatements

a) Apply the method of accounting for businesscombinations including complex groupstructures. [3]

b) Apply the principles in determining the cost ofa business combination.[3]

c) Apply the recognition and measurement criteriafor identifiable acquired assets and liabilitiesand goodwill including step acquisitions.[3]

d) Apply and discuss the criteria used to identify asubsidiary and an associate.[3]

e) Determine and apply appropriate procedures tobe used in preparing group financialstatements.[3]

f) Identify and outline (using relevant legislation,accounting standards and other applicableregulation):- the circumstances in which a group is

required to prepare consolidated financialstatements.[2]

- the circumstances when a group may claimand exemption from the preparation ofconsolidated financial statements.[2]

- why directors may not wish to consolidate asubsidiary and where this is permitted.[2]

g) Apply the equity method of accounting forassociates.[3]

h) Outline and apply the key definitions andaccounting methods which relate to interests injoint arrangements.[3]

i) Prepare and discuss group cash flowstatements.[3]

j) Discuss and apply the key differences betweenUK GAAP and IFRS in accounting for businesscombinations



a) Prepare group financial statements whereactivities have been discontinued, or have beenacquired or disposed of in the period.[3]

b) Apply and discuss the treatment of a subsidiarywhich has been acquired exclusively with aview to subsequent disposal.[3]


a) Discuss the reasons behind a groupreorganisation.[3]

b) Evaluate and assess the principal terms of aproposed group reorganisation.[3]


a) Outline and apply the translation of foreigncurrency amounts and transactions into thefunctional currency and the presentationalcurrency.[3]

b) Account for the consolidation of foreignoperations and their disposal.[2]

E SPECIALISED ENTITIES AND SPECIALISEDTRANSACTIONS

1. Financial reporting in specialised, not-for-profit and public sector entities

a) Apply knowledge from the syllabus tostraightforward transactions and events arisingin specialised, not-for-profit, and public sectorentities. [3]

2. Entity schemes of arrangement andreconstructions

a) Identify when an entity may no longer beviewed as a going concern or uncertainty existssurrounding the going concern status. [2]

b) Identify and outline the circumstances in whicha scheme of arrangement or reconstructionwould be an appropriate alternative to acompany liquidation.[2]

c) Outline the appropriate accounting treatmentand relevant disclosures required relating toschemes of arrangement and reconstructions.[2]

F IMPLICATIONS OF CHANGES INACCOUNTING REGULATION ON FINANCIALREPORTING


a) Apply and discuss the accounting implicationsof the first time adoption of a body of newaccounting standards.[3]


a) Identify issues and deficiencies which have ledto a proposed change to an accountingstandard.[2]

G THE APPRAISAL OF FINANCIALPERFORMANCE AND POSITION OFENTITIES


a) Develop accounting policies for an entity whichmeet the entity’s reporting requirements.[3]

b) Identify accounting treatments adopted infinancial statements and assess their suitabilityand acceptability.[3]


a) Select and calculate relevant indicators offinancial and non-financial performance.[3]

b) Identify and evaluate significant features andissues in financial statements.[3]

c) Highlight inconsistencies in financialinformation through analysis and application ofknowledge.[3]

d) Make inferences from the analysis ofinformation taking into account the limitationof the information, the analytical methods usedand the business environment in which theentity operates.[3]


H CURRENT DEVELOPMENTS


a) Appraise the impact of environmental, social,and ethical factors on performancemeasurement. [3]

b) Evaluate current reporting requirements in thearea.[3]

c) Discuss why entities might include disclosuresrelating to the environment and society.[3]


a) Evaluate the implications of worldwideconvergence with International FinancialReporting Standards.[3]

b) Discuss the influence of national regulators oninternational financial reporting.[2]


a) Discuss current issues in corporate reporting.[3]


NOTE OF SIGNIFICANT CHANGES TO STUDYGUIDE PAPER P2 UK



stakeholders such as employers, students,regulatory and advisory bodies and learningprovidersThe main areas to be added or deleted from thesyllabus from that date are shown in Tables 1 and 2below:

Table 1 – Additions to P2 UK

There have not been any additions to the 2012 study guide. However there have been minor amendments tothe wording of some of the study guide outcomes corresponding to changes within examinable documents.

Table 2 – Deletions to P2 UK

There have not been any deletions to the 2012 study guide. However there have been minor amendments tothe wording of some of the study guide outcomes corresponding to changes within examinable documents.


Business Analysis (P3)

AIM

To apply relevant knowledge, skills, and exerciseprofessional judgement in assessing strategicposition, determining strategic choice, andimplementing strategic action through beneficialbusiness process and structural change;coordinating knowledge systems and informationtechnology and by effectively managing processes,projects, and people within financial and otherresource constraints.

MAIN CAPABILITIES


A Assess the strategic position of an organisationB Evaluate the strategic choices available to an

organisationC Discuss how an organisation might go about its

strategic implementationD Evaluate and redesign business processes and

structures to implement and support theorganisation’s strategy taking account ofcustomer and other major stakeholderrequirements

E Integrate appropriate information technologysolutions to support the organisation’s strategy

F Advise on the principles of project managementto enable the implementation of aspects of theorganisation’s strategy with the twin objectivesof managing risk and ensuring benefitsrealisation

G Analyse and evaluate the effectiveness of acompany’s strategy and the financialconsequences of implementing strategicdecisions

H Assess the role of leadership and peoplemanagement in formulating and implementingbusiness strategy.


AB (F1)

BA (P3)

PM (F5)

APM (P5)

FR (F7)

Strategic Position (A) Strategic Choices (B) Strategic Action (C)

Businessprocesschange

(D)

Informationtechnology

(E)

Projectmanagement

(F)

Financialanalysis

(G)

People (H)

Strategic position (A) Strategic choices (B) Strategic action (C)


RATIONALE

The syllabus for Paper P3, Business Analysis, isprimarily concerned with two issues. The first is theexternal forces (the behaviour of customers, theinitiatives of competitors, the emergence of newlaws and regulations) that shape the environment ofan organisation. The second is the internalambitions and concerns (desire for growth, thedesign of processes, the competences of employees,the financial resources) that exist within anorganisation. This syllabus looks at both of theseperspectives, from assessing strategic position andchoice to identifying and formulating strategy andstrategic action. It identifies opportunities forbeneficial change that involve people, finance andinformation technology. It examines how theseopportunities may be implemented through theappropriate management of programmes andprojects.

The syllabus begins with the assessment of strategicposition in the present and in the future usingrelevant forecasting techniques, and is primarilyconcerned with the impact of the externalenvironment on the business, its internalcapabilities and expectations and how theorganisation positions itself under these constraints.It examines how factors such as culture, leadershipand stakeholder expectations shape organisationalpurpose. Strategic choice is concerned withdecisions which have to be made about anorganisation’s future and the way in which it canrespond to the influences and pressures identified inthe assessment of its current and future strategicposition.

Strategic action concerns the implementation ofstrategic choices and the transformation of thesechoices into organisational action. Such action takesplace in day-to-day processes and organisationalrelationships and these processes and relationshipsneed to be managed in line with the intendedstrategy, involving the effective coordination ofinformation technology, people, finance and otherbusiness resources.

Companies that undertake successful businessprocess redesign claim significant organisationalimprovements. This simply reflects the fact thatmany existing processes are less efficient than theycould be and that new technology makes it possibleto design more efficient processes. Strategic

planning and strategy implementation has to besubject to financial benchmarks. Financial analysisexplicitly recognises this, reminding candidates ofthe importance of focusing on the key managementaccounting techniques that help to determinestrategic action and the financial ratios andmeasures that may be used to assess the viability ofa strategy and to monitor and measure its success.

Throughout, the syllabus recognises that successfulstrategic planning and implementation requires theeffective recruitment, leadership, organisation andtraining and development of people.

DETAILED SYLLABUS

A Strategic position

1. The need for, and purpose of, strategic andbusiness analysis

2. Environmental issues affecting the strategicposition of an organisation

3. Competitive forces affecting an organisation

4. Marketing and the value of goods and services

5. The internal resources, capabilities andcompetences of an organisation

6. The expectations of stakeholders and theinfluence of ethics and culture

B Strategic choices

1. The influence of corporate strategy on anorganisation

2. Alternative approaches to achievingcompetitive advantage

3. Alternative directions and methods ofdevelopment

C Strategic action

1. Organising and enabling success

2. Managing strategic change

3. Understanding strategy development


D Business process change

1. The role of process and process changeinitiatives

2. Improving the processes of the organisation

3. Software solutions

E Information technology

1. Principles of e-business

2. E-business application: upstream supply chainmanagement

3. E-business application: downstream supplychain management

4. E-business application: customer relationshipmanagement

F Project management

1. The nature of projects

2. Building a business case

3. Managing and leading projects

4. Planning, monitoring and controlling projects

5. Concluding a project

G Financial Analysis

1. The link between strategy and finance

2. Finance decisions to formulate and supportbusiness strategy

3. The role of cost and management accounting instrategic planning and implementation

4. Financial implications of making strategicchoices and of implementing strategic actions

H People

1. Strategy and people: leadership

2. Strategy and people: job design

3. Strategy and people: staff development



Section ASection A contains one multi-part question based ona case study scenario. This question is worth 50marks.

Section BSection B will consist of three discrete questionseach worth 25 marks. Candidates must answer twoquestions from this section.

Total: 100 marks


Study GuideA STRATEGIC POSITION

1. The need for, and purpose of, strategic andbusiness analysis

a) Recognise the fundamental nature andvocabulary of strategy and strategicdecisions.[2]

b) Discuss how strategy may be formulated atdifferent levels (corporate, business level,operational) of an organisation.[2]

c) Explore the Johnson, Scholes and Whittingtonmodel for defining elements of strategicmanagement – the strategic position, strategicchoices and strategy into action.[3]

d) Analyse how strategic management is affectedby different organisational contexts.[3]

e) Compare three different strategy lenses(Johnson, Scholes and Whittington) for viewingand understanding strategy and strategicmanagement.[3]

f) Explore the scope of business analysis and itsrelationship to strategy and strategicmanagement in the context of the relationaldiagram of this syllabus.[3]

2. Environmental issues affecting the strategicposition of an organisation

a) Assess the macro-environment of anorganisation using PESTEL. [3]

b) Highlight the key drivers of change likely toaffect the structure of a sector or market. [3]

c) Explore, using Porter’s Diamond, the influenceof national competitiveness on the strategicposition of an organisation.[2]

d) Prepare scenarios reflecting differentassumptions about the future environment ofan organisation.[3]

e) Evaluate methods of business forecasting usedwhen quantitatively assessing the likelyoutcome of different business strategies.[3]

3. Competitive forces affecting an organisation

a) Discuss the significance of industry, sector andconvergence.[3]

b) Evaluate the sources of competition in anindustry or sector using Porter’s five forcesframework.[3]

c) Assess the contribution of the lifecycle model,the cycle of competition and associated costingimplications to understanding competitivebehaviour. [3]

d) Analyse the influence of strategic groups andmarket segmentation.[3]

e) Determine the opportunities and threats posedby the environment of an organisation.[2]

4. Marketing and the value of goods and services

a) Analyse customers and markets [2]

b) Establish appropriate critical success factors(CSF) and key performance indicators (KPI) forproducts and services[2]

c) Explore the role of the value chain in creatingand sustaining competitive advantage.[2]

d) Advise on the role and influence of valuenetworks.[3]

e) Assess different approaches to benchmarkingan organisation’s performance.[3]

5. The internal resources, capabilities andcompetences of an organisation

a) Discriminate between strategic capability,threshold resources, threshold competences,unique resources and core competences.[3]

b) Discuss from a strategic perspective, thecontinuing need for effective cost managementand control systems within organisations.[3]

c) Discuss the capabilities required to sustaincompetitive advantage.[2]


d) Explain the impact of new product, process,and service developments and innovation insupporting business strategy.[2]

e) Discuss the contribution of organisationalknowledge to the strategic capability of anorganisation.[2]

f) Identify opportunities for managing thestrategic capability of an organisation.[2]

g) Determine the strengths and weaknesses of anorganisation and formulate an appropriateSWOT analysis.[2]

6. The expectations of stakeholders and theinfluence of ethics and culture

a) Advise on the implications of corporategovernance on organisational purpose andstrategy.[2]

b) Evaluate, through stakeholder mapping, therelative influence of stakeholders onorganisational purpose and strategy.[3]

c) Assess ethical influences on organisationalpurpose and strategy.[3]

d) Explore the scope of corporate socialresponsibility.[3]

e) Assess the impact of culture on organisationalpurpose and strategy.[3]

f) Prepare and evaluate a cultural web of anorganisation.[2]

g) Advise on how organisations can communicatetheir core values and mission.[3]

B STRATEGIC CHOICES

1. The influence of corporate strategy on anorganisation

a) Explore the relationship between a corporateparent and its business units.[2]

b) Assess the opportunities and potentialproblems of pursuing different corporatestrategies of product/market diversification from

a national, international and globalperspective.[3]

c) Assess the opportunities and potentialproblems of pursuing a corporate strategy ofinternational diversity, international scaleoperations and globalisation.[3]

d) Discuss a range of ways that the corporateparent can create and destroy organisationalvalue.[2]

e) Explain three corporate rationales for addingvalue – portfolio managers, synergy managersand parental developers.[3]

f) Explain and assess a range of portfolio models(the growth/share (BCG) matrix, the publicsector portfolio matrix, market attractiveness/SBU strength matrix, directional policy matrix,Ashridge Portfolio Display) that may assistcorporate parents manage their businessportfolios.[3]

2. Alternative approaches to achievingcompetitive advantage

a) Evaluate, through the strategy clock, genericstrategy options available to an organisation.[3]

b) Advise on how price-based strategies,differentiation and lock-in can help anorganisation sustain its competitiveadvantage.[3]

c) Explore how organisations can respond tohypercompetitive conditions. [2]

d) Assess opportunities for improvingcompetitiveness through collaboration. [3]

3. Alternative directions and methods ofdevelopment

a) Determine generic development directions(employing an adapted Ansoff matrix and aTOWS matrix) available to an organisation.[2]

b) Assess how internal development, mergers,acquisitions, strategic alliances and franchisingcan be used as different methods of pursuing achosen strategic direction.[3]


c) Establish success criteria to assist in the choiceof a strategic direction and method (strategicoptions).[2]

d) Assess the suitability of different strategicoptions to an organisation.[3]

e) Assess the feasibility of different strategicoptions to an organisation.[3]

f) Establish the acceptability of strategic optionsto an organisation through analysing risk andreturn on investment.[3]

C STRATEGIC ACTION

1. Organising and enabling success

a) Advise on how the organisation can bestructured to deliver a selected strategy.[3]

b) Explore generic processes that take placewithin the structure, with particular emphasison the planning process.[3]

c) Discuss how internal relationships can beorganised to deliver a selected strategy.[2]

d) Discuss how external relationships(outsourcing, strategic alliances, networks andthe virtual organisation) can be structured todeliver a selected strategy.[2]

e) Explore (through Mintzberg’s organisationalconfigurations) the design of structure,processes and relationships. [3]

2. Managing strategic change

a) Explore different types of strategic change andtheir implications.[2]

b) Determine and diagnose the organisationalcontext of change using Balogun and HopeHailey’s contextual features model and thecultural web.[3]

c) Establish potential blockages and levers ofchange.[2]

d) Advise on the style of leadership appropriate tomanage strategic change.[2]

e) Specify organisational roles required to managestrategic change.[2]

f) Discuss levers that can be employed tomanage strategic change.[2]

3. Understanding strategy development

a) Discriminate between the concepts of intendedand emergent strategies.[3]

b) Explain how organisations attempt to put anintended strategy into place.[2]

c) Highlight how emergent strategies appear fromwithin an organisation.[3]

d) Discuss how process redesign, and e-businesscan contribute to emergent strategies.[2]

e) Assess the implications of strategic drift andthe demand for multiple processes of strategydevelopment.[3]

D BUSINESS PROCESS CHANGE

1. The role of process and process changeinitiatives

a) Advise on how an organisation can reconsiderthe design of its processes to deliver a selectedstrategy.[3]

b) Appraise business process change initiativespreviously adopted by organisations.[3]

c) Establish an appropriate scope and focus forbusiness process change using Harmon’sprocess-strategy matrix.[3]

d) Explore the commoditisation of businessprocesses.[3]

e) Advise on the implications of business processoutsourcing.[3]

f) Recommend a business process redesignmethodology for an organisation.[2]

2. Improving the processes of the organisation

a) Evaluate the effectiveness of currentorganisational processes.[3]


b) Describe a range of process redesignpatterns.[2]

c) Establish possible redesign options forimproving the current processes of anorganisation.[2]

d) Assess the feasibility of possible redesignoptions.[3]

e) Assess the relationship between processredesign and strategy.[3]

3. Software solutions

a) Establish information system requirementsrequired by business users.[2]

b) Assess the advantages and disadvantages ofusing a generic software solution to fulfil thoserequirements.[2]

c) Establish a process for evaluating, selectingand implementing a generic softwaresolution.[2]

d) Explore the relationship between genericsoftware solutions and business processredesign.[2]

E INFORMATION TECHNOLOGY

1. Principles of e-business

a) Discuss the meaning and scope of e-business. [2]

b) Advise on the reasons for the adoption of e-business and recognise barriers to itsadoption.[3]

c) Evaluate how e-business changes therelationships between organisations and theircustomers.[3]

d) Discuss and evaluate the main business andmarketplace models for delivering e-business.[3]

e) Advise on the hardware and softwareinfrastructure required to support e-business.[3]

f) Advise on how the organisation can utiliseinformation technology to help it deliver aselected strategy.[3]

2. E-business application: upstream supply chainmanagement

a) Analyse the main elements of both the pushand pull models of the supply chain.[2]

b) Discuss the relationship of the supply chain tothe value chain and the value network.[2]

c) Assess the potential application of informationtechnology to support and restructure thesupply chain.[3]

d) Advise on how external relationships withsuppliers and distributors can be structured todeliver a restructured supply chain.[3]

e) Discuss the methods, benefits and risks of e-procurement.[2]

f) Assess different options and models forimplementing e-procurement.[2]

3. E-business application: downstream supplychain management

a) Define the scope and media of e-marketing.[2]

b) Highlight how the media of e-marketing can beused when developing an effective e-marketingplan.[2]

c) Explore the characteristics of the media of e-marketing using the ‘6I’s of Interactivity,Intelligence, Individualisation, Integration,Industry structure and Independence oflocation.[2]

d) Evaluate the effect of the media of e-marketingon the traditional marketing mix of product,promotion, price, place, people, processes andphysical evidence. [3]

e) Describe a process for establishing a pricingstrategy for products and services thatrecognises both economic and non-economicfactors.[2]


f) Assess the importance of on-line branding in e-marketing and compare it with traditionalbranding.[2]

4. E-business application: customer relationshipmanagement

a) Define the meaning and scope of customerrelationship management.[2]

b) Explore different methods of acquiringcustomers through exploiting electronicmedia.[2]

c) Evaluate different buyer behaviour amongst on-line customers.[3]

d) Recommend techniques for retainingcustomers using electronic media. [2]

e) Recommend how electronic media may beused to increase the activity and value ofestablished, retained customers.[2]

f) Discuss the scope of a representative softwarepackage solution designed to support customerrelationship management.[2]

F PROJECT MANAGEMENT

1. The nature of projects

a) Determine the distinguishing features ofprojects and the constraints they operate in.[2]

b) Discuss the implications of the triple constraintof scope, time and cost.[2]

c) Discuss the relationship between organisationalstrategy and project management. [2]

d) Identify and plan to manage risks. [2]

e) Advise on the structures and information thathave to be in place to successfully initiate aproject.[3]

f) Explain the relevance of projects to process re-design and e-business systems development.[2]

2. Building the business case

a) Describe the structure and contents of abusiness case document.[2]

b) Analyse, describe, assess and classify benefitsof a project investment.[3]

c) Analyse, describe, assess and classify the costsof a project investment[3]

d) Evaluate the costs and benefits of a businesscase using standard techniques

e) Establish responsibility for the delivery ofbenefits[2]

f) Explain the role of a benefits realisationplan[2]

3. Managing and leading projects

a) Discuss the organisation and implications ofproject-based team structures.[2]

b) Establish the role and responsibilities of theproject manager and the project sponsor.[2]

c) Identify and describe typical problemsencountered by a project manager whenleading a project.[2]

d) Advise on how these typical problems might beaddressed and overcome.[3]

4. Planning, monitoring and controlling projects

a) Discuss the principles of a product breakdownstructure [2]

b) Assess the importance of developing aproject plan and discuss the work required toproduce this plan.[3]

c) Monitor the status of a project and identifyproject risks, issues, slippage and changes.[2]

d) Formulate responses for dealing with projectrisks, issues, slippage and changes.[2]

e) Discuss the role of benefits management andproject gateways in project monitoring.[2]


5. Concluding a project

a) Establish mechanisms for successfullyconcluding a project.[2]

b) Discuss the relative meaning and benefits of apost-implementation and a post-projectreview.[2]

c) Discuss the meaning and value of benefitsrealisation.[2]

d) Evaluate how project management softwaremay support the planning and monitoring of aproject.[3]

e) Apply 'lessons learned' to future business casevalidation and to capital allocation decisions.[3]

G FINANCIAL ANALYSIS

1. The link between strategy and finance

a) Explain the relationship between strategy andfinance [3]

i) Managing for valueii) Financial expectations of stakeholdersiii) Funding strategies

2. Finance decisions to formulate and supportbusiness strategy

a) Determine the overall investment requirementsof the business.[2]

b) Evaluate alternative sources of finance for theseinvestments and their associated risks.[3]

c) Efficiently and effectively manage the currentand non-current assets of the business from afinance and risk perspective.[2]

3. The role of cost and management accountingin strategic planning and decision-making

a) Explain the role, advantages and possiblelimitations of a budgetary process.[2]

b) Explain the principles of standard costing, itsrole in variance analysis and suggest possiblereasons for identified variances.[3]

c) Evaluate strategic and operational decisionstaking into account risk and uncertainty usingdecision trees.[3]

d) Evaluate the following strategic options usingmarginal and relevant costing techniques.[3]

i) Make or buy decisionsii) Accepting or declining special contractsiii) Closure or continuation decisionsiv) Effective use of scarce resources

4. Financial implications of making strategicchoices and of implementing strategic actions

a) Apply efficiency ratios to assess how efficientlyan organisation uses its current resources.[2]

b) Apply appropriate gearing ratios to assess therisks associated with financing and investmentin the organisation.[2]

c) Apply appropriate liquidity ratios to assess theorganisation’s short-term commitments tocreditors and employees.[2]

d) Apply appropriate profitability ratios to assessthe viability of chosen strategies.[2]

e) Apply appropriate investment ratios to assistinvestors and shareholders in evaluatingorganisational performance and strategy.[2]

H PEOPLE

1. Strategy and people: leadership

a) Explain the role of visionary leadership andidentify the key leadership traits effective in thesuccessful formulation and implementation ofstrategy and change management.[3]

b) Apply and compare alternative classical andmodern theories of leadership in the effectiveimplementation of strategic objectives.[3]

2. Strategy and people: job design

a) Assess the contribution of four differentapproaches to job design (scientificmanagement, job enrichment, Japanesemanagement and re-engineering).[3]


b) Explain the human resource implications ofknowledge work and post-industrial jobdesign.[2]

c) Discuss the tensions and potential ethicalissues related to job design.[2]

d) Advise on the relationship of job design toprocess re-design, project management and theharnessing of e-business opportunities.[3]

3. Strategy and people: staff development

a) Discuss the emergence and scope of humanresource development, succession planningand their relationship to the strategy of theorganisation.[2]

b) Advise and suggest different methods ofestablishing human resource development.[3]

c) Advise on the contribution of competencyframeworks to human resource development.[3]

d) Discuss the meaning and contribution ofworkplace learning, the learning organisation,organisation learning and knowledgemanagement.[3]


NOTE OF SIGNIFICANT CHANGES TO STUDYGUIDE PAPER P3

ACCA periodically reviews its qualificationsyllabuses so that they fully meet the needs ofstakeholders including employers, students,regulatory and advisory bodies and learningproviders.

There are no changes to the syllabus.


Advanced FinancialManagement (P4)

AIM

To apply relevant knowledge, skills and exerciseprofessional judgement as expected of a seniorfinancial executive or advisor, in taking orrecommending decisions relating to the financialmanagement of an organisation.

MAIN CAPABILITIES


A Explain and evaluate the role and responsibilityof the senior financial executive or advisor inmeeting conflicting needs of stakeholders

B Evaluate the impact of macro economics andrecognise the role of international financialinstitutions in the financial management ofmultinationals

C Evaluate potential investment decisions andassessing their financial and strategicconsequences, both domestically andinternationally

D Assess and plan acquisitions and mergers asan alternative growth strategy

E Evaluate and advise on alternative corporatere-organisation strategies

F Apply and evaluate alternative advancedtreasury and risk management techniques

G Identify and assess the potential impactof emerging issues in finance and financialmanagement.


FM (F9)

AFM (P4)

MA (F2)

PA (P1) CR (P2)

Treasury and advanced risk managementtechniques (F)

Corporate reconstruction and re-organisation (E)

Role and responsibility towards stakeholders (A)

Advanced investment appraisal (C)Economic

environment formultinationals (B) Acquisition and mergers (D)

Emerging issues in finance and financial management (G)


RATIONALE

This syllabus develops upon the core financialmanagement knowledge and skills covered in theF9, Financial Management, syllabus at theFundamentals level and prepares candidates toadvise management and/or clients on complexstrategic financial management issues facing anorganisation.

The syllabus starts by exploring the role andresponsibility of a senior executive or advisor inmeeting competing needs of stakeholders within thebusiness environment of multinationals. Thesyllabus then re-examines investment and financingdecisions, with the emphasis moving towards thestrategic consequences of making such decisions ina domestic, as well as international, context.Candidates are then expected to develop furtheradvisory skills in planning strategic acquisitions andmergers and corporate re-organisations.

The next part of the syllabus covers the role of atreasury function in large complex corporatestructures. It re-examines, in the broadest sense,the existence of risk in business and thesophisticated strategies which are employed in orderto manage such risks. This is a build-up on whatcandidates would have covered in the F9, FinancialManagement, syllabus and the P1,Governance,Risk and Ethics, syllabus. The syllabus finishes byexamining the impact of emerging issues in finance.

DETAILED SYLLABUS

A Role and responsibility towards stakeholders

1. The role and responsibility of senior financialexecutive/advisor

2. Financial strategy formulation

3. Conflicting stakeholder interests

4. Ethical issues in financial management

5. Impact of environmental issues on corporateobjectives and on governance

B Economic environment for multinationals

1. Management of international trade and finance

2. Strategic business and financial planning formultinationals

C Advanced investment appraisal

1. Discounted cash flow techniques and the useof free cash flows

2. Application of option pricing theory ininvestment decisions and valuation

3. Impact of financing on investment decisionsand adjusted present values

4. International investment and financingdecisions

D Acquisitions and mergers

1. Acquisitions and mergers versus other growthstrategies

2. Valuation for acquisitions and mergers

3. Regulatory framework and processes

4. Financing acquisitions and mergers

E Corporate reconstruction and re-organisation

1. Financial reconstruction

2. Business re-organisation

F Treasury and advanced risk managementtechniques

1. The role of the treasury function inmultinationals

2. The use of financial derivatives to hedgeagainst forex risk

3. The use of financial derivatives to hedgeagainst interest rate risk

4. Dividend policy in multinationals and transferpricing

G Emerging issues in finance and financialmanagement

1. Developments in world financial markets


2. Developments in international trade andfinance


The P4, Advanced Financial Management, paperbuilds upon the skills and knowledge examined inthe F9, Financial Management, paper. At thisstage candidates will be expected to demonstrate anintegrated knowledge of the subject and an ability torelate their technical understanding of the subject toissues of strategic importance to the company. Thestudy guide specifies the wide range of contextualunderstanding that is required to achieve asatisfactory standard at this level.

Examination Structure

The examination will be a three-hour paper in twosections:

Section A:

Section A will contain two compulsory questions,comprising between 50 and 70 marks in total.

Section A will normally cover significant issuesrelevant to the senior financial manager or advisorand will be set in the form of a short case study orscenario. The requirements of the section Aquestions are such that candidates will be expectedto show a comprehensive understanding of issuesfrom across the syllabus. Each question will containa mix of computational and discursive elements.Each question in section A will comprise of between25 and 40 marks. Candidates will be expected toprovide answers in a specified form such as a shortreport or board memorandum commensurate withthe professional level of the paper.

Section B:

In section B candidates will be asked to answer twofrom three questions, comprising of between 15 and25 marks each.

Section B questions are designed to provide a morefocused test of the syllabus with, normally, onequestion being wholly discursive.

Total 100 marks


Study GuideA ROLE AND RESPONSIBILITY TOWARDS

STAKEHOLDERS

1. The role and responsibility of senior financialexecutive/advisor

a) Develop strategies for the achievement of thecompany’s goals in line with its agreed policyframework. [3]

b) Recommend strategies for the management ofthe financial resources of the company suchthat they are utilised in an efficient, effectiveand transparent way. [3]

c) Advise the board of directors of the company insetting the financial goals of the business andin its financial policy development [2] withparticular reference to:i) Investment selection and capital resource

allocationii) Minimising the company’s cost of capitaliii) Distribution and retention policyiv) Communicating financial policy and

corporate goals to internal and externalstakeholders

v) Financial planning and controlvi) The management of risk.

2. Financial strategy formulation

a) Assess corporate performance using methodssuch as ratios, trends, EVATM and MVA.[3]

b) Recommend the optimum capital mix andstructure within a specified business contextand capital asset structure.[3]

c) Recommend appropriate distribution andretention policy.[3]

d) Explain the theoretical and practical rationalefor the management of risk. [3]

e) Assess the company’s exposure to businessand financial risk including operational,reputational, political, economic, regulatoryand fiscal risk.[3]

f) Develop a framework for risk managementcomparing and contrasting risk mitigation,

hedging and diversification strategies, anddemonstrate risk diversification through theapplication of portfolio theory. [3]

g) Establish capital investment monitoring andrisk management systems.[3]

3. Conflicting stakeholder interests

a) Assess the potential sources of the conflictwithin a given corporate governance/stakeholder framework informed by anunderstanding of the alternative theories ofmanagerial behaviour. [3]

Relevant underpinning theory for thisassessment would be:i) The Separation of Ownership and Controlii) Transaction cost economics and

comparative governance structuresiii) Agency Theory.

b) Recommend, within specified problemdomains, appropriate strategies for theresolution of stakeholder conflict and advise onalternative approaches that may be adopted. [3]

c) Compare the emerging governance structuresand policies with respect to corporategovernance (with particular emphasis upon theEuropean stakeholder and the US/UKshareholder model) and with respect to the roleof the financial manager. [3]

4. Ethical issues in financial management

a) Assess the ethical dimension within businessissues and decisions and advise on bestpractice in the financial management of thecompany. [3]

b) Demonstrate an understanding of theinterconnectedness of the ethics of goodbusiness practice between all of the functionalareas of the company.[2]

c) Establish an ethical financial policy for thefinancial management of the company which isgrounded in good governance, the higheststandards of probity and is fully aligned withthe ethical principles of the Association. [3]


d) Recommend an ethical framework for thedevelopment of a company’s financial policiesand a system for the assessment of theirethical impact upon the financial managementof the company. [3]

e) Explore the areas within the ethical frameworkof the company which may be undermined byagency effects and/or stakeholder conflicts andestablish strategies for dealing with them.[3]

5. Impact of environmental issues on corporateobjectives and on governance

a) Assess the issues which may impact uponcorporate objectives and governance from: [3]

i) Sustainability and environmental riskii) The carbon-trading economy and emissionsiii) The role of the environment agencyiv) Environmental audits and the triple bottom

line approach.

B ECONOMIC ENVIRONMENT FORMULTINATIONALS

1. Management of international trade andfinance

a) Advise on the theory and practice of free tradeand the management of barriers to trade. [3]

b) Demonstrate an up to date understanding ofthe major trade agreements and commonmarkets and, on the basis of contemporarycircumstances, advise on their policy andstrategic implications for a given business.[3]

c) Discuss the objectives of the World TradeOrganisation.[2]

d) Discuss the role of international financialinstitutions within the context of a globalisedeconomy, with particular attention to theInternational Monetary Fund, the Bank ofInternational Settlements, The World Bank andthe principal Central Banks (the Fed, Bank ofEngland, European Central Bank and the Bankof Japan).[2]

e) Assess the role of the international financialmarkets with respect to the management ofglobal debt, the financial development of the

emerging economies and the maintenance ofglobal financial stability.[2]

2. Strategic business and financial planning formultinationals

a) Advise on the development of a financialplanning framework for a multinational takinginto account:[3]

i) Compliance with national governancerequirements (for example the LondonStock Exchange admission requirements)

ii) The mobility of capital across borders andnational limitations on remittances andtransfer pricing

iii) The pattern of economic and other riskexposures in the different national markets

iv) Agency issues in the central coordination ofoverseas operations and the balancing oflocal financial autonomy with effectivecentral control.

C ADVANCED INVESTMENT APPRAISAL

1. Discounted cash flow techniques and the useof free cash flows

a) Evaluate the potential value added to acompany arising from a specified capitalinvestment project or portfolio using the netpresent value model.[3]

Project modelling should include explicittreatment and discussion of:i) Inflation and specific price variationii) Taxation including capital allowances and

tax exhaustioniii) Multi-period capital rationing to include the

formulation of programming methods andthe interpretation of their output

iv) Probability analysis and sensitivity analysiswhen adjusting for risk and uncertainty ininvestment appraisal.

b) Outline the application of Monte Carlosimulation to investment appraisal.[2]

Candidates will not be expected to undertakesimulations in an examination context but willbe expected to demonstrate an understandingof:i) Simple model designii) The different types of distribution

controlling the key variables within thesimulation


iii) The significance of the simulation outputand the assessment of the likelihood ofproject success

iv) The measurement and interpretation ofproject value at risk.

c) Establish the potential economic return (usinginternal rate of return and modified internalrate of return) and advise on a project’s returnmargin.[3]

d) Forecast a company’s free cash flow and itsfree cash flow to equity (pre and post capitalreinvestment). [2]

e) Advise, in the context of a specified capitalinvestment programme, on a company’scurrent and projected dividend capacity.[3]

f) Advise on the value of a company using its freecash flow and free cash flow to equity underalternative horizon and growth assumptions.[3]

2. Application of option pricing theory ininvestment decisions and valuation

a) Apply the Black-Scholes Option Pricing (BSOP)model to financial product/asset valuation:[3]

i) Determine, using published data, the fiveprincipal drivers of option value (value ofthe underlying, exercise price, time toexpiry, volatility and the risk-free rate)

ii) Discuss the underlying assumptions,structure, application and limitations of theBSOP model.

b) Evaluate embedded real options within aproject, classifying them into one of the realoption archetypes.[3]

c) Assess and advise on the value of options todelay, expand, redeploy and withdraw usingthe BSOP model.[3]

d) Apply the BSOP model to estimate the value ofequity of a company and discuss theimplications of the change in value. [3]

3. Impact of financing on investment decisionsand adjusted present values

a) Assess the appropriateness and price of therange of sources of finance available to a

company including equity, debt, hybrids, leasefinance, venture capital, business angelfinance, private equity, asset securitisation andsale.[3]

b) Assess a company’s debt exposure to interestrate changes using the simple Macaulayduration method. [3]

c) Discuss the benefits and limitations of durationincluding the impact of convexity. [3]

d) Assess the company’s exposure to credit risk,including: [2]

i) Explain the role of, and the risk assessmentmodels used by the principal ratingagencies

ii) Estimate the likely credit spread over riskfree

iii) Estimate the company’s current cost of debtcapital using the appropriate term structureof interest rates and the credit spread.

e) Explain the role of BSOP model in theassessment of default risk, the value of debtand its potential recoverability. [2]

f) Assess the impact of financing and capitalstructure upon the company with respect to:[3]

i) Pecking order theoryii) Static trade-off theoryiii) Agency effects.

g) Apply the adjusted present value technique tothe appraisal of investment decisions thatentail significant alterations in the financialstructure of the company, including their fiscaland transactions cost implications.[3]

h) Assess the impact of a significant capitalinvestment project upon the reported financialposition and performance of the companytaking into account alternative financingstrategies.[3]

4. International investment and financingdecisions

a) Assess the impact upon the value of a projectof alternative exchange rate assumptions.[3]

b) Forecast project or company free cash flows inany specified currency and determine the


project’s net present value or company valueunder differing exchange rate, fiscal andtransaction cost assumptions.[2]

c) Evaluate the significance of exchange controlsfor a given investment decision and strategiesfor dealing with restricted remittance.[3]

d) Assess the impact of a project upon acompany’s exposure to translation, transactionand economic risk. [3]

e) Assess and advise upon the costs andbenefits of alternative sources of financeavailable within the international equity andbond markets.[3]

D ACQUISITIONS AND MERGERS

1. Acquisitions and mergers versus other growthstrategies

a) Discuss the arguments for and against the useof acquisitions and mergers as a method ofcorporate expansion.[2]

b) Evaluate the corporate and competitive natureof a given acquisition proposal.[3]

c) Advise upon the criteria for choosing anappropriate target for acquisition.[3]

d) Compare the various explanations for the highfailure rate of acquisitions in enhancingshareholder value.[3]

e) Evaluate, from a given context, the potential forsynergy separately classified as:[3]

i) Revenue synergyii) Cost synergyiii) Financial synergy.

2. Valuation for acquisitions and mergers

a) Outline the argument and the problem ofovervaluation.[1]

b) Estimate the potential near-term andcontinuing growth levels of a company’searnings using both internal and externalmeasures.[3]

c) Assess the impact of an acquisition or mergerupon the risk profile of the acquirerdistinguishing:[3]

i) Type 1 acquisitions that do not disturb theacquirer’s exposure to financial or businessrisk

ii) Type 2 acquisitions that impact upon theacquirer’s exposure to financial risk

iii) Type 3 acquisitions that impact upon theacquirer’s exposure to both financial andbusiness risk.

d) Advise on the valuation of a type 1 acquisitionof both quoted and unquoted entities using:[3]

i) ‘Book value-plus’ modelsii) Market relative modelsiii) Cash flow models, including EVATM, MVA.

e) Advise on the valuation of type 2 acquisitionsusing the adjusted net present value model.[3]

f) Advise on the valuation of type 3 acquisitionsusing iterative revaluation procedures.[3]

g) Demonstrate an understanding of theprocedure for valuing high growth start-ups.[2]

3. Regulatory framework and processes

a) Demonstrate an understanding of the principalfactors influencing the development of theregulatory framework for mergers andacquisitions globally and, in particular, be ableto compare and contrast the shareholder versusthe stakeholder models of regulation.[2]

b) Identify the main regulatory issues which arelikely to arise in the context of a given offer andi) assess whether the offer is likely to be in

the shareholders’ best interestsii) advise the directors of a target company on

the most appropriate defence if a specificoffer is to be treated as hostile. [3]

4. Financing acquisitions and mergers

a) Compare the various sources of financingavailable for a proposed cash-basedacquisition. [3]

b) Evaluate the advantages and disadvantages ofa financial offer for a given acquisition proposalusing pure or mixed mode financing and


recommend the most appropriate offer to bemade.[3]

c) Assess the impact of a given financial offer onthe reported financial position and performanceof the acquirer. [3]

E CORPORATE RECONSTRUCTION AND RE-ORGANISATION

1. Financial reconstruction

a) Assess a company situation and determinewhether a financial reconstruction is the mostappropriate strategy for dealing with theproblem as presented.[3]

b) Assess the likely response of the capital marketand/or individual suppliers of capital to anyreconstruction scheme and the impact theirresponse is likely to have upon the value of thecompany. [3]

c) Recommend a reconstruction scheme from agiven business situation, justifying the proposalin terms of its impact upon the reportedperformance and financial position of thecompany. [3]

2. Business re-organisation

a) Recommend, with reasons, strategies forunbundling parts of a quoted company.[3]

b) Evaluate the likely financial and other benefitsof unbundling. [3]

c) Advise on the financial issues relating to amanagement buy-out and buy-in.[3]

F TREASURY AND ADVANCED RISKMANAGEMENT TECHNIQUES

1. The role of the treasury function inmultinationals

a) Describe the role of the money markets in:[1]

i) Providing short-term liquidity to industryand the public sector

ii) Providing short-term trade financeiii) Allowing a multinational company to

manage its exposure to FOREX and interestrate risk.

b) Explain the role of the banks and otherfinancial institutions in the operation of themoney markets.[2]

c) Explain the characteristics and role of theprincipal money market instruments:[2]

i) Coupon bearingii) Discount instrumentsiii) Derivative products.

d) Discuss the operations of the derivativesmarket, including:[3]

i) The relative advantages and disadvantagesof exchange traded versus OTC agreements

ii) Key features, such as standard contracts,tick sizes, margin requirements and margintrading

iii) The source of basis risk and how it can beminimised.

iv) Risks such as delta, gamma, vega, rho andtheta, and how these can be managed.

e) Explain the role of the treasurymanagement function within:[2]

i) The short term management of thecompany’s financial resources

ii) The longer term maximisation ofshareholder value

iii) The management of risk exposure.

2. The use of financial derivatives to hedgeagainst forex risk

a) Assess the impact on a company to exposure intranslation, transaction and economic risks andhow these can be managed. [2]

b) Evaluate, for a given hedging requirement,which of the following is the most appropriatestrategy, given the nature of the underlyingposition and the risk exposure:[3]

i) The use of the forward exchange marketand the creation of a money market hedge

ii) Synthetic foreign exchange agreements(SAFE’s)

iii) Exchange-traded currency futurescontracts

iv) Currency swapsv) FOREX swapsvi) Currency options.

c) Advise on the use of bilateral and multilateralnetting and matching as tools for minimising


FOREX transactions costs and the managementof market barriers to the free movement ofcapital and other remittances.[3]

3. The use of financial derivatives to hedgeagainst interest rate risk

a) Evaluate, for a given hedging requirement,which of the following is the mostappropriate given the nature of theunderlying position and the risk exposure:[3]

i) Forward Rate Agreementsii) Interest Rate Futuresiii) Interest rate swapsiv) Options on FRA’s (caps and collars),

Interest rate futures and interest rateswaps.

4. Dividend policy in multinationals and transferpricing

a) Determine a company’s dividend capacity andits policy given:[3]

i) The company’s short- and long-termreinvestment strategy

ii) The impact of any other capitalreconstruction programmes on free cashflow to equity such as share repurchaseagreements and new capital issues

iii) The availability and timing of centralremittances

iv) The corporate tax regime within the hostjurisdiction

b) Develop company policy on the transfer pricingof goods and services across internationalborders and be able to determine the mostappropriate transfer pricing strategy in a givensituation reflecting local regulations and taxregimes.[3]

G EMERGING ISSUES

1. Developments in world financial markets

Discuss the significance to the company, oflatest developments in the world financialmarkets such as the causes and impact of therecent financial crisis, growth and impact ofdark pool trading systems, the removal ofbarriers to the free movement of capital, andthe international regulations on moneylaundering. [2]

2. Developments in international trade andfinance

Demonstrate an awareness of newdevelopments in the macroeconomicenvironment, establishing their impact uponthe company, and advising on the appropriateresponse to those developments both internallyand externally. [2]



ACCA periodically reviews its qualification syllabuses so that they fully meet the needs of stakeholders such asemployers, students, regulatory and advisory bodies and learning providers.

There are no changes to the syllabus:


Advanced PerformanceManagement (P5)

AIM

To apply relevant knowledge, skills and exerciseprofessional judgement in selecting and applyingstrategic management accounting techniques indifferent business contexts and to contribute to theevaluation of the performance of an organisationand its strategic development.

MAIN CAPABILITIES



A Use strategic planning and control modelsto plan and monitor organisational performance

B Assess and identify relevant macro economic,fiscal and market factors and key externalinfluences on organisational performance

C Identify and evaluate the design features ofeffective performance management informationand monitoring systems

D Apply appropriate strategic performancemeasurement techniques in evaluating andimproving organisational performance

E Advise clients and senior management onstrategic business performance evaluation andon recognising vulnerability to corporate failure

F Identify and assess the impact of currentdevelopments in management accounting andperformance management on measuring,evaluating and improving organisationalperformance


PM (F5)

APM (P5)

MA (F2)

BA (P3)

Strategic planning and control (A)

Performancemeasurement

systems and design (C)

Strategic performancemeasurement

(D)

Performance evaluation and corporate failure(E)

Current developments and emerging issues in management accounting andperformance management

(F)

Economic, fiscal, market and environmental factors (B)


RATIONALE

The Advanced Performance Management syllabusfurther develops key aspects introduced in PaperF5, Performance Management, at the skills leveland draws on aspects of the material covered from amore strategic and operational planning perspectivein Paper P3, Business Analysis.

The syllabus introduces candidates to the strategicrole of management accounting as a discipline forplanning and controlling performance so thatstrategic objectives can be set, monitored andcontrolled. It also covers the impact of externalfactors on strategic management issues, such asmacro economic, fiscal, market and environmentalimpacts on performance. From appreciating thestrategic context of performance management andthe impact of wider factors, the syllabus examines,at an operational level, the issues relating toperformance measurement systems and theirdesign.

The syllabus then moves from performancemanagement systems and their design to the scopeand application of high-level performancemeasurement techniques in a variety of contexts,including not-for-profit organisations and multi-national businesses. Having covered the strategicaspects of performance management andoperational systems for the measurement andcontrol of performance in a variety of contexts,candidates are then expected to synthesise thisknowledge in the role of an advisor to seniormanagement or independent clients on how toassess and control the performance of an entity,including the recognition of whether a business isfacing difficulties or possibly failure.

Finally, the syllabus deals with currentdevelopments in performance management andwith emerging issues as they might affect orinfluence the management of performance withinorganisations.

DETAILED SYLLABUS

A. Strategic planning and control

1. Introduction to strategic managementaccounting

2. Performance management and control of theorganisation

3. Changes in business structure andmanagement accounting

4. Effect of Information Technology (IT) onstrategic management accounting

5. Other environmental and ethical issues

B. External influences on organisationalperformance

1. Changing business environment

2. Impact of external factors on strategy andperformance

C. Performance measurement systems anddesign

1. Performance management information systems

2. Sources of management information

3. Recording and processing methods

4. Management reports

D. Strategic performance measurement

1. Performance hierarchy

2. Strategic performance measures in privatesector

3. Divisional performance and transfer pricingissues

4. Strategic performance measures in not-for-profit organisations


5. Non- financial performance indictors

6. The role of quality in management informationand performance measurement systems

7. Performance measurement and strategichuman resource management issues

8. Performance measurement and the rewardsystems

9. Other behavioural aspects of performancemeasurement

E. Performance evaluation and corporate failure

1. Alternative views of performance measurementand management

2. Strategic performance issues in complexbusiness structures

3. Predicting and preventing corporate failure

F. Current developments and emerging issuesperformance management

1. Current developments in managementaccounting techniques

2. Current issues and trends in performancemanagement


Paper P5 builds on paper F5, PerformanceManagement, and candidates are expected to have athorough understanding of the paper F5 syllabus. Inaddition, candidates will also be required to applythe principles and techniques covered in paper F2,Management Accounting.

Paper P5 has a link with Paper P3, BusinessAnalysis, in the areas of strategic planning andcontrol and performance measurement

EXAMINATION STRUCTURE

The examination will be a three hour paper in twosections:

Section A

Section A will comprise two compulsory questionscomprising between 50 and 70 marks in total. Eachquestion will comprise of between 25 and 40 marks

Section B

In section B candidates will be asked to answer twofrom three questions comprising of between 15 and25 marks each

Total 100 marks


Study GuideA STRATEGIC PLANNING AND CONTROL

1. Introduction to strategic managementaccounting

a) Explain the role of strategic performancemanagement in strategic planning and control.[2]

b) Discuss the role of corporate planning inclarifying corporate objectives, making strategicdecisions and checking progress towards theobjectives. [2]

c) Compare planning and control between thestrategic and operational levels within abusiness entity. [2]

d) Assess the use of strategic managementaccounting in the context of multinationalcompanies. [3]

e) Discuss the scope for potential conflictbetween strategic business plans and short-term localised decisions. [2]

f) Evaluate how SWOT analysis may assist in theperformance management process. [2]

g) Evaluate the methods of benchmarkingperformance. [3]

2. Performance management and control of theorganisation

a) Evaluate the strengths and weaknesses ofalternative budgeting models and comparesuch techniques as fixed and flexible, rolling,activity based, zero based and incremental. [3]

b) Assess how budgeting may differ in not-for-profit organisations from profit-seekingorganisations. [3]

c) Evaluate the impact to an organisation of amove beyond budgeting [3]

3. Changes in business structure andmanagement accounting

a) Identify and discuss the particular informationneeds of organisations adopting a functional,divisional or network form and the implicationsfor performance management. [2]

b) Assess the influence of Business Process Re-engineering on systems development andimprovements in organisational performance. [3]

c) Discuss the concept of business integration andthe linkage between people, operations,strategy and technology. [2]

d) Analyse the role that performance managementsystems play in business integration usingmodels such as the value chain andMcKinsey’s 7S’s [3]

e) Identify and discuss the required changes inmanagement accounting systems as aconsequence of empowering staff to managesectors of a business. [3]

4. Effect of Information Technology (IT) onstrategic management accounting

a) Assess the changing accounting needs ofmodern service orientated businessescompared with the needs of traditionalmanufacturing industry. [3]

b) Discuss how IT systems provide theopportunity for instant access to managementaccounting data throughout the organisationand their potential impact on businessperformance. [2]

c) Assess how IT systems facilitate the remoteinput of management accounting data in anacceptable format by non-finance specialists. [2]

d) Explain how information systems provideinstant access to previously unavailable datathat can be used for benchmarking and controlpurposes and help improve businessperformance (for example, through the use ofenterprise resource planning systems and datawarehouses). [2]


e) Assess the need for businesses to continuallyrefine and develop their managementaccounting and information systems if they areto maintain or improve their performance in anincreasingly competitive and global market. [3]

5. Other environmental and ethical issues

a) Discuss the ways in which stakeholder groupsoperate and how they effect an organisationand its strategy formulation andimplementation (e.g. using Mendelow’smatrix). [2]

b) Discuss the ethical issues that may impact onstrategy formulation and businessperformance. [3]

c) Discuss the ways in which stakeholder groupsmay influence business performance. [2]

B EXTERNAL INFLUENCES ONORGANISATIONAL PERFORMANCE

1. Changing business environment

a) Assess the continuing effectiveness oftraditional management accounting techniqueswithin a rapidly changing businessenvironment. [3]

b) Assess the impact of the different risk appetitesof stakeholders on performance management [3]

c) Evaluate how risk and uncertainty play animportant role in long term strategic planningand decision-making that relies upon forecastsof exogenous variables.[3]

d) Apply different risk analysis techniques inassessing business performance such asmaximin, maximax, minimax regret andexpected values.[3]

2. Impact of external factors on strategy andperformance

a) Discuss the need to consider the environmentin which an organisation is operating whenassessing its performance using models suchas PEST and Porter’s 5 forces, includingareas: [2]

i) Political climateii) Market conditionsiii) Funding

b) Assess the impact of governmental regulationsand policies on performance measurementtechniques used and the performance levelsachieved (for example, in the case of utilityservices and former state monopolies). [3]

C PERFORMANCE MEASUREMENT SYSTEMSAND DESIGN

1. Performance management informationsystems

a) Identify the accounting informationrequirements and describe the different typesof information systems used for strategicplanning, management control and operationalcontrol and decision-making. [2]

b) Discuss, with reference to performancemanagement, ways in which the informationrequirements of a management structure areaffected by the features of the structure. [2]

c) Evaluate the compatibility of the objectives ofmanagement accounting and managementaccounting information. [3]

d) Discuss the integration of managementaccounting information within an overallinformation system, for example the use ofenterprise resource planning systems. [2]

e) Evaluate whether the management informationsystems are lean and value of the informationthat they provide. [3]

f) Define and discuss the merits of, and potentialproblems with, open and closed systems withregard to the needs of performancemanagement. [2]

g) Highlight the ways in which contingent(internal and external) factors influencemanagement accounting and its design anduse. [3]

h) Evaluate how anticipated human behaviour willinfluence the design of a managementaccounting system. [3]

i) Assess the impact of responsibility accountingon information requirements. [3]


2. Sources of management information

a) Identify and discuss the principal internal andexternal sources of management accountinginformation. [2]

b) Demonstrate how these principal sources ofmanagement information might be used forcontrol purposes. [2]

c) Identify and discuss the direct data captureand process costs of management accountinginformation . [2]

d) Identify and discuss the indirect costs ofproducing information. [2]

e) Discuss the limitations of using externallygenerated information. [2]

f) Demonstrate how the information might beused in planning and controlling activities e.g.benchmarking against similar activities. [2]

g) Discuss those factors that need to beconsidered when determining the capacity anddevelopment potential of a system. [2]

3. Recording and processing methods

a) Demonstrate how the type of business entitywill influence the recording and processingmethods. [2]

b) Discuss how IT developments e.g. unifiedcorporate databases, RFIDs and networktechnology may influence managementaccounting systems. [2]

c) Discuss the difficulties associated withrecording and processing data of a qualitativenature. [2]

4. Management reports

a) Discuss the principal controls required ingenerating and distributing internalinformation. [2]

b) Discuss the procedures that may be necessaryto ensure security of highly confidentialinformation that is not for externalconsumption. [2]

c) Evaluate the output reports of an informationsystem in the light of best practice andavoiding the problem of informationoverload. [3]

D STRATEGIC PERFORMANCEMEASUREMENT

1. Performance hierarchy

a) Discuss how the purpose, structure andcontent of a mission statement impacts onbusiness performance. [2]

b) Discuss the ways in which high-level corporateperformance objectives are developed. [2]

c) Identify strategic objectives and discuss howthey may be incorporated into the businessplan. [2]

d) Discuss how strategic objectives are cascadeddown the organisation via the formulation ofsubsidiary performance objectives. [2]

e) Discuss social and ethical obligations thatshould be considered in the pursuit ofcorporate performance objectives. [2]

f) Explain the performance ‘planning gap’ andevaluate alternative strategies to fill that gap.[3]

g) Apply critical success factor analysis indeveloping performance metrics from businessobjectives. [3]

h) Identify and discuss the characteristics ofoperational performance. [2]

i) Discuss the relative significance of planning asagainst controlling activities at different levelsin the performance hierarchy. [3]

2. Strategic performance measures in privatesector

a) Demonstrate why the primary objective offinancial performance should be primarilyconcerned with the benefits to shareholders. [2]

b) Justify the crucial objectives of survival andbusiness growth. [3]


c) Discuss the appropriateness of, and applydifferent measures of performance,including: [3]

i) Return on Capital Employed (ROCE)ii) Return on Investment (ROI)iii) Earnings Per Share (EPS)iv) Earnings Before Interest, Tax,

Depreciation and Amortisation (EBITDA)v) Residual Income (RI)vi) Net Present value (NPV)vii) Internal rate of return and modified

internal Rate of Return (IRR, MIRR)viii) Economic Value Added (EVA TM)

d) Discuss why indicators of liquidity and gearingneed to considered in conjunction withprofitability. [3]

e) Compare and contrast short and long runfinancial performance and the resultingmanagement issues. [3]

f) Explore the traditional relationship betweenprofits and share value with the long-termprofit expectations of the stock market andrecent financial performance of new technologycompanies. [3]

g) Assess the relative financial performance of theorganisation compared to appropriatebenchmarks. [3]

3. Divisional performance and transfer pricingissues

a) Describe, compute and evaluate performancemeasures relevant in a divisionalisedorganisation structure including ROI, RI andEconomic value added (EVA). [3]

b) Discuss the need for separate measures inrespect of managerial and divisionalperformance. [2]

c) Discuss the circumstances in which a transferpricing policy may be needed and discuss thenecessary criteria for its design. [2]

d) Demonstrate and evaluate the use ofalternative bases for transfer pricing. [3]

e) Explain and demonstrate issues that requireconsideration when setting transfer prices inmultinational companies. [2]

4. Strategic performance measures in not-for-profit organisations

a) Highlight and discuss the potential for diversityin objectives depending on organisation type. [3]

b) Discuss the need to achieve objectives withlimited funds that may not be controllable. [2]

c) Identify and discuss ways in whichperformance may be judged in not-for profitorganisations. [2]

d) Discuss the difficulties in measuring outputswhen performance is not judged in terms ofmoney or an easily quantifiable objective. [2]

e) Discuss how the combination of politics andthe desire to measure public sectorperformance may result in undesirable serviceoutcomes. [3]

f) Assess ‘value for money’ service provision as ameasure of performance in not-for-profitorganisations and the public sector. [3]

5. Non-financial performance indicators

a) Discuss the interaction of non-financialperformance indicators with financialperformance indicators. [2]

b) Discuss the implications of the growingemphasis on non-financial performanceindicators. [3]

c) Discuss the significance of non-financialperformance indicators in relation toemployees. [2]

d) Identify and discuss the significance of non-financial performance indicators in relation toproduct/service quality e.g. customersatisfaction reports, repeat business ratings,customer loyalty, access and availability. [3]

e) Discuss the difficulties in interpreting data onqualitative issues. [2]


f) Discuss the significance of brand awarenessand company profile and their potential impacton business performance. [3]

6. The role of quality in management informationand performance measurement systems

a) Discuss and evaluate the application ofJapanese business practices and managementaccounting techniques, including: [3]

i) Kaizen costing,ii) Target costing,iii) Just-in-time, andiv) Total Quality Management.

b) Discriminate between quality, qualityassurance, quality control and qualitymanagement.[2]

c) Assess the relationship of quality managementto the performance management strategy of anorganisation. [3]

d) Advise on the structure and benefits of qualitymanagement systems and qualitycertification. [3]

d) Justify the need and assess the characteristicsof quality in management informationsystems[3]

e) Discuss and apply Six Sigma as a qualityimprovement method using tools such asDMAIC for implementation. [2]

7. Performance measurement and strategicHuman Resource Management issues

a) Explain how the effective recruitment,management and motivation of people arenecessary for enabling strategic and operationalsuccess. [3]

b) Discuss the judgemental and developmentalroles of assessment and appraisal and theirrole in improving business performance. [3]

c) Advise on the relationship of performancemanagement to performance measurement(performance rating) and determine theimplications of performance measurement toquality initiatives and process redesign. [3]

8. Performance measurement and the rewardsystems

a) Explore the meaning and scope of rewardsystems. [2]

b) Discuss and evaluate different methods ofreward practices. [2]

c) Explore the principles and difficulty of aligningreward practices with strategy. [2]

d) Advise on the relationship of rewardmanagement to quality initiatives, process re-design and harnessing of e-businessopportunities. [3]

e) Assess the potential beneficial and adverseconsequences of linking reward schemes toperformance measurement, for example, how itcan affect the risk appetite of employees. [3]

9 Other behaviour aspects of performancemeasurement

a) Discuss the accountability issues that mightarise from performance measurementsystems. [3]

b) Evaluate the ways in which performancemeasurements systems may send the wrongsignals and result in undesirable businessconsequences. [3]

c) Demonstrate how management style needs tobe considered when designing an effectiveperformance measurement system. [3]

E PERFORMANCE EVALUATION ANDCORPORATE FAILURE

1. Alternative views of performancemeasurement and management

a) Evaluate the ‘balanced scorecard’ approach asa way in which to improve the range andlinkage between performance measures. [3]

b) Evaluate the ‘performance pyramid’ as a way inwhich to link strategy, operations andperformance. [3]


c) Evaluate the work of Fitzgerald and Moon thatconsiders performance measurement inbusiness services using building blocks fordimensions, standards and rewards. [3]

d) Discuss and apply the Performance Prism. [2]

e) Discuss and evaluate the application ofactivity-based management. [3]

f) Evaluate and apply the value-basedmanagement approaches to performancemanagement. [3]

2. Strategic performance issues in complexbusiness structures

a) Evaluate the use and the application ofstrategic models in assessing the businessperformance of an entity, such as Ansoff,Boston Consulting Group and Porter. [3]

b) Discuss the problems encountered in planning,controlling and measuring performance levels,e.g. productivity, profitability, quality andservice levels, in complex businessstructures. [3]

c) Discuss the impact on performancemanagement of the use of business modelsinvolving strategic alliances, joint ventures andcomplex supply chain structures. [3]

3. Predicting and preventing corporate failure

a) Assess the potential likelihood of corporatefailure, utilising quantitative and qualitativeperformance measures. [3]

b) Assess and critique quantitative and qualitativecorporate failure prediction models. [3]

c) Identify and discuss performance improvementstrategies that may be adopted in order toprevent corporate failure. [3]

d) Discuss how long-term survival necessitatesconsideration of life-cycle issues. [3]

e) Identify and discuss operational changes toperformance management systems required toimplement the performance improvementstrategies. [3]

F. CURRENT DEVELOPMENTS ANDEMERGING ISSUES IN PERFORMANCEMANAGEMENT

1. Current developments in managementaccounting techniques

a) Discuss the ways through which managementaccounting practitioners are made aware ofnew techniques and how they evaluatethem. [3]

b) Discuss, evaluate and apply environmentalmanagement accounting using for examplelifecycle costing, input/output analysis andactivity-based costing. [3]

c) Discuss the use of benchmarking in publicsector performance (league tables) and itseffects on operational and strategicmanagement and client behaviour. [3]

d) Discuss the issues surrounding the use oftargets in public sector organisations. [3]

2. Current issues and trends in performancemanagement

a) Assess the changing role of the managementaccountant in today’s business environment asoutlined by Burns and Scapens. [3]

b) Discuss contemporary issues in performancemanagement. [2]

c) Discuss how changing organisation’s structure,culture and strategy will influence the adoptionof new performance measurement methods andtechniques. [3]




The main areas that have been clarified in thesyllabus (all were implicitly included previously) areshown in Table 1 below:

Table 1 – Amendments to P5

Section and subject area Syllabus contentA3d) Changes in business structure and managementaccounting

Analyse the role that performance managementsystems play in business integration using modelssuch as the value chain and McKinsey’s 7S’s [3]

B1b and B1d) Changing business environment b) Assess the impact of different risk appetites ofstakeholders on performance management

d) Apply different risk analysis techniques inassessing business performance such asmaximin, maximax, minimax regret andexpected values.[3]

Other changes:

Inclusion of models/methods in A4d, A5a, B2a,C2b,D2c, F1b and D6e.

Changes in level descriptors in A3c, C1h and C1i,

D2h is moved to D6 .

NOTE:

There are no addition to and deletions from the syllabus


Advanced Taxation (UK)(P6)

AIM

To apply relevant knowledge and skills and exerciseprofessional judgement in providing relevantinformation and advice to individuals andbusinesses on the impact of the major taxes onfinancial decisions and situations..

MAIN CAPABILITIES


A Apply further knowledge and understandingof the UK tax system through the study offurther capital taxes, together with moreadvanced topics within the taxes studiedpreviously

B Evaluate and explain the importance oftaxation to personal and corporate financialmanagement

C Identify and evaluate the impact of relevanttaxes on various situations and courses ofaction, including the interaction of taxes

D Provide advice on minimising and/or deferringtax liabilities by the use of standard taxplanning measures

E Communicate with clients, HM Revenue andCustoms and other professionals in anappropriate manner.


TX (F6)

ATX (P6)

Communication with clients, H M Revenue and Customs andother professionals in an appropriate manner (E)

Taxation aspectsof personal andcorporate financialmanagement (B)

Impact of relevant taxeson various situations and

courses of action,including the interaction

of taxes (C)

Minimising and/ordeferring tax

liabilities by the useof standard tax

planning measures(D)

Understanding of the tax system through the study of further capital taxes,together with more advanced topics within the taxes studied previously

(A)


RATIONALE

The Advanced Taxation syllabus further developsthe key aspects of taxation introduced in thecompulsory Taxation syllabus within the Skillsmodule and extends the candidates’ knowledge ofthe tax system, together with their ability to applythat knowledge to the issues commonly encounteredby individuals and businesses, such that successfulcandidates should have the ability to interpret andanalyse the information provided and communicatethe outcomes in a manner appropriate to theintended audience.

The syllabus builds on the basic knowledge of coretaxes from the earlier taxation paper and introducescandidates to additional capital taxes in the form ofinheritance tax, stamp duty and stamp duty landtax. As this is an optional paper, aimed at thoserequiring/desiring more than basic tax knowledge fortheir future professional lives, the syllabus alsoextends the knowledge of income tax, corporationtax and capital gains, to encompass, furtheroverseas aspects of taxation, the taxation of trustsand additional exemptions and reliefs.

Computations will normally only be required insupport of explanations or advice and not inisolation.Candidates are not expected to concentrate on thecomputational aspects of taxation. Instead thispaper seeks to develop candidates’ skills of analysis,interpretation and communication. Candidates areexpected to be able to use established tax planningmethods and consider current issues in taxation.

DETAILED SYLLABUS:

A Knowledge and understanding of the UK taxsystem through the study of further capitaltaxes, together with more advanced topicswithin the taxes studied previously.

1. Income and income tax liabilities in situationsinvolving further overseas aspects and inrelation to trusts, and the application ofadditional exemptions and reliefs.

2. Corporation tax liabilities in situations involvingfurther overseas and group aspects and inrelation to special types of company, and the

application of additional exemptions andreliefs.

3. Chargeable gains and capital gains taxliabilities in situations involving furtheroverseas aspects and in relation to closelyrelated persons and trusts, and the applicationof additional exemptions and reliefs.

4. Inheritance tax

5. Stamp duty and stamp duty land tax

6. National Insurance, value added tax and taxadministration

B The importance of taxation to personal andcorporate financial management

1. The principles underlying personal financialmanagement.

2. How an individual’s personal financialobjectives may differ depending on theircircumstances and expectations.

3. The common forms of personal finance andinvestment products in a given set ofcircumstances, including ethicalconsiderations.

4. How a business’ financial objectives may differdepending on its circumstances and thebusiness environment.

5. How taxation can affect the financial decisionsmade by businesses (corporate andunincorporated) and by individuals.

6. Other considerations, personal andcommercial, which might affect a financialdecision.

C The impact of relevant taxes on varioussituations and courses of action, including theinteraction of taxes

1. Taxes applicable to a given situation or courseof action and their impact.


2. Alternative ways of achieving personal orbusiness outcomes may lead to different taxconsequences.

3. Tax advantages and/or disadvantages ofalternative courses of action.

4. Statutory obligations imposed in a givensituation, including any time limits for actionand the implications of non-compliance.

D Minimising and/or deferring tax liabilities bythe use of standard tax planning measures

1. Types of investment and other expenditure thatwill result in a reduction in tax liabilities for anindividual and/or a business.

2. Legitimate tax planning measures, by whichthe tax liabilities arising from a particularsituation or course of action can be mitigated.

3. The appropriateness of such investment,expenditure or measures, given a particulartaxpayer’s circumstances or stated objectives.

4. The mitigation of tax in the mannerrecommended, by reference to numericalanalysis and/or reasoned argument.

5. Ethical and professional issues arising from thegiving of tax planning advice.

6. Current issues in taxation.

E Communicating with clients, HM Revenue andCustoms and other professionals

1. Communication of advice, recommendationsand information in the required format.

2. Presentation of written information, in languageappropriate to the purpose of thecommunication and the intended recipient.

3. Conclusions reached with relevant supportingcomputations.

4. Assumptions made or limitations in theanalysis provided, together with anyinadequacies in the information availableand/or additional information required toprovide a fuller analysis.

5. Other non-tax factors that should beconsidered.



The paper consists of two sections:

Section A consists of two compulsory questions for atotal of between 50 and 70 marks. Marks may notbe allocated evenly between the two questions.

Section B consists of three questions, two of whichmust be answered. Each question will have thesame number of marks, ranging from 15 markseach to 25 marks each.

Questions will be scenario based and will normallyinvolve consideration of more than one tax, togetherwith some elements of planning and the interactionof taxes. Computations will normally only berequired in support of explanations or advice andnot in isolation.

The examination is a three hour paper, with 15minutes additional reading and planning time.

Tax rates, allowances and information on certainreliefs will be given in the examination paper.


Study GuideA APPLY FURTHER KNOWLEDGE AND

UNDERSTANDING OF THE UK TAX SYSTEMTHROUGH THE STUDY OF FURTHERCAPITAL TAXES, TOGETHER WITH MOREADVANCED TOPICS WITHIN THE TAXESSTUDIED PREVIOUSLY

1. Income and income tax liabilities in situationsinvolving further overseas aspects and inrelation to trusts, and the application ofexemptions and reliefs

a) The contents of the Paper F6 study guide forincome tax, under headings: [2]

B1 The scope of income tax B2 Income from employment B3 Income from self employment B4 Property and investment income B5 The comprehensive computation of

taxable income and the income tax liability B6 The use of exemptions and reliefs in

deferring and minimising income taxliabilities

The following additional material is alsoexaminable:

b) The scope of income tax: [3]

i) Explain and apply the concepts ofresidence, ordinary residence and domicileand advise on the relevance to income tax

ii) Advise on the availability of the remittancebasis to UK resident individuals [2]

iii) Advise on the tax position of individualscoming to and leaving the UK

iv) Determine the income tax treatment ofoverseas income

v) Understand the relevance of the OECDmodel double tax treaty to given situations

vi) Calculate and advise on the double taxationrelief available to individuals

c) Income from employment: [3]

i) Advise on the tax treatment of share optionand share incentive schemes

ii) Advise on the tax treatment of lump sumreceipts

iii) Advise on the overseas aspects of incomefrom employment, including travelling andsubsistence expenses

iv) Identify personal service companies andadvise on the tax consequences of providingservices via a personal service company

d) Income from self employment:i) Recognise the tax treatment of overseas

travelling expenses [3]

ii) Advise on the allocation of the annualinvestment allowance between relatedbusinesses

iii) Identify the enhanced capital allowancesavailable in respect of expenditure on greentechnologies [2]

iv) Recognise the tax treatment of theinvestment income of a partnership [2]

e) Property and investment income: [3]

i) Assess the tax implications of pre-ownedassets

ii) Recognise income subject to the accruedincome scheme

iii) Advise on the tax implications of jointlyheld assets

iv) Income from trusts and settlements:Understand the income tax position of trustbeneficiaries

f) The comprehensive computation of taxableincome and the income tax liability:[3]

i) Advise on the income tax position of theincome of minor children

g) The use of exemptions and reliefs in deferringand minimising income tax liabilities:i) Understand and apply the rules relating to

investments in the enterprise investmentscheme [3]

ii) Understand and apply the rules relating toinvestments in venture capital trusts [3]

iii) Explain the conditions that need to besatisfied for pension schemes to beregistered by HM Revenue and Customs [2]

Excluded topics

The scope of income tax: Details of specific anti-avoidance

provisions, except as stated in thestudy guide.

Income from employment: Explanation of the PAYE system.


The calculation of a car benefit whereemission figures are not available.

Income from self employment: The 100% first year allowance for

renovating business premises indisadvantaged areas and flats aboveshops.

Capital allowances for industrialbuildings, agricultural buildings,patents, scientific research and knowhow.

Enterprise zones. The allocation of notional profits and

losses for a partnership. Farmers averaging of profits. The averaging of profits for authors

and creative artists. Details of specific anti-avoidance

provisions, except as stated in thestudy guide.

Property and investment income: The deduction for expenditure by

landlords on energy-saving items

Income from trusts and settlements: The computation of income tax

payable by trustees. Overseas aspects.

The comprehensive computation of taxableincome and the income tax liability:

The blind person’s allowance and themarried couple’s age allowance.

Tax credits Maintenance payments Charitable donations. Social security benefits apart from the

State Retirement Pension.

2. Corporation tax liabilities in situationsinvolving further overseas and group aspectsand in relation to special types of company,and the application of additional exemptionsand reliefs

a) The contents of the Paper F6 study guide, forcorporation tax, under headings: [2]

C1 The scope of corporation tax C2 Taxable total profits C3 The comprehensive computation of

corporation tax liability

C4 The effect of a group structure forcorporation tax purposes

C5 The use of exemptions and reliefs indeferring and minimising corporation taxliabilities


b) The scope of corporation tax: [3]

i) Identify and calculate corporation taxfor companies with investment business.

ii) Close companies: Apply the definition of a close

company to given situations Conclude on the tax implications of

a company being a close companyor a close investment holdingcompany

iii) Identify and evaluate the significance ofaccounting periods on administration orwinding up

iv) Conclude on the tax treatment of returns toshareholders after winding up hascommenced

v) Advise on the tax implications of apurchase by a company of its own shares

vi) Identify personal service companies andadvise on the tax consequences of servicesbeing provided via a personal servicecompany

c) Taxable total profits: [3]

i) Identify qualifying research anddevelopment expenditure, both capital andrevenue, and determine the amount of reliefby reference to the size of the individualcompany/group

ii) Identify the enhanced capital allowancesavailable in respect of expenditure on greentechnologies, including the tax creditavailable in the case of a loss makingcompany

iii) Determine the tax treatment of non tradingdeficits on loan relationships

iv) Recognise the alternative tax treatments ofintangible assets and conclude on the besttreatment for a given company

v) Advise on the impact of the transferpricing and thin capitalisation rules oncompanies

vi) Advise on the restriction on the use oflosses on a change in ownership of acompany


d) The comprehensive calculation of thecorporation tax liability: [3]

i) Assess the impact of the OECD modeldouble tax treaty on corporation tax

ii) Evaluate the meaning and implications of apermanent establishment

iii) Identify and advise on the tax implicationsof controlled foreign companies

iv) Advise on the tax position of overseascompanies trading in the UK

e) The effect of a group structure for corporationtax purposes: [3]

i) Advise on the allocation of the annualinvestment allowance between groupor related companies

ii) Advise on the tax consequences of atransfer of intangible assets

iii) Advise on the tax consequences of atransfer of a trade and assets where there iscommon control

iv) Understand the meaning of consortiumowned company and consortium member [2]

v) Advise on the operation of consortiumrelief

vi) Determine pre-entry gains and losses andunderstand their tax treatment

vii) Determine the degrouping charge where acompany leaves a group within six years ofreceiving an asset by way of a no gain/noloss transfer

viii) Determine the effects of the anti-avoidanceprovisions, where arrangements exist for acompany to leave a group

ix) Advise on the relief for trading lossesincurred by an overseas subsidiary

f) The use of exemptions and reliefs in deferringand minimising corporation tax liabilities:

No additional material at this level.

Excluded topics

The scope of corporation tax: Details of specific anti-avoidance

provisions, except as stated in theStudy Guide.

The comprehensive calculation of thecorporation tax liability:

Corporation tax rates for companies inthe process of winding up.

Relief for overseas tax as an expense. Detailed knowledge of specific double

taxation agreements. Migration of a UK resident company. Mixer companies. Detailed computational questions on

the carry back and carry forward ofunrelieved foreign tax.

Quarterly accounting for income tax.

3. Chargeable gains and capital gains taxliabilities in situations involving furtheroverseas aspects and in relation to closelyrelated persons and trusts together with theapplication of additional exemptions andreliefs

a) The contents of the Paper F6 study guidefor chargeable gains under headings:[2]

D1 The scope of the taxation of capitalgains

D2 The basic principles of computinggains and losses

D3 Gains and losses on the disposal ofmovable and immovable property

D4 Gains and losses on the disposal ofshares and securities

D5 The computation of capital gainstax payable by individuals

D6 The use of exemptions and reliefs indeferring and minimising tax liabilitiesarising on the disposal of capital assets


b) The scope of the taxation of capital gains: [3]

i) Determine the tax implications ofindependent taxation and transfers betweenspouses

ii) Identify the concepts of residence, ordinaryresidence and domicile and determine theirrelevance to capital gains tax

iii) Advise on the availability of the remittancebasis to non-UK domiciled individuals [2]

iv) Determine the UK taxation of foreigngains, including double taxation relief

v) Conclude on the capital gains tax positionof individuals coming to and leaving theUK


vi) Identify the occasions when a capital gainwould arise on a partner in a partnership

c) Capital gains tax and trusts:i) Advise on the capital gains tax implications

of transfers of property into trust. [3]

ii) Advise on the capital gains tax implicationsof property passing absolutely from a trustto a beneficiary.[2]

d) The basic principles of computing gains andlosses: [3]

i) Identify connected persons for capital gainstax purposes and advise on the taximplications of transfers between connectedpersons

ii) Advise on the impact of dates of disposaland conditional contracts

iii) Evaluate the use of capital losses in theyear of death

e) Gains and losses on the disposal of movableand immovable property: [3]

i) Advise on the tax implications of a partdisposal, including small part disposals ofland

ii) Determine the gain on the disposal ofleases and wasting assets

iii) Establish the tax effect of appropriations toand from trading stock

iv) Establish the tax effect of capital sumsreceived in respect of the loss, damage ordestruction of an asset

v) Advise on the tax effect of makingnegligible value claims

vi) Determine when capital gains tax can bepaid by instalments and evaluate when thiswould be advantageous to taxpayers

f) Gains and losses on the disposal of shares andsecurities: [3]

i) Extend the explanation of the treatment ofrights issues to include the small partdisposal rules applicable to rights issues

ii) Determine the application of the substantialshareholdings exemption

iii) Define a qualifying corporate bond (QCB),and understand what makes a corporatebond non-qualifying. Understand the capitalgains tax implications of the disposal ofQCBs in exchange for cash or shares

iv) Apply the rules relating to reorganisations,reconstructions and amalgamations and

advise on the most tax efficient optionsavailable in given circumstances

v) Establish the relief for capital losses onshares in unquoted trading companies [3]

g) The use of exemptions and reliefs in deferringand minimising tax liabilities arising on thedisposal of capital assets: [3]

i) Understand and apply enterpriseinvestment scheme reinvestment relief

ii) Advise on the availability of entrepreneurs’relief in relation to associated disposals

iii) Understand the capital gains taximplications of the variation of wills

Excluded topics

The scope of the taxation of capital gains: Detailed knowledge of the statements

of practice on partnership capitalgains.

Capital gains tax and trusts: Overseas aspects of capital gains tax

and trusts The computation of capital gains tax

payable by trustees Transfers of property to or from

trustees prior to 22 March 2006 Knowledge of situations where property

is transferred between trusts or wherethe terms or nature of the trust isaltered.

Knowledge of situations where propertywithin a trust with an immediate post-death interest passes to the spouse orcivil partner of the settlor on the deathof the life tenant.

Knowledge of the special rulesconcerning trusts for the disabled,trusts for bereaved minors, transitionalserial interest trusts and age 18 to 25trusts.

The basic principles of computing gains andlosses:

Assets held at 31 March 1982. Relief for losses on loans made to

traders.

Gains and losses on the disposal of movableand immovable property:


Chattels where the cost or proceedsare less than £6,000.

Sets of chattels in relation to thechattels exemption.

The grant of a lease or sub-lease out ofeither a freehold, long lease or shortlease.

Gains and losses on the disposal of shares andsecurities:

Computation of cost and indexed costwithin the s.104 TCGA 1992 sharepool

4. Inheritance tax

Note: From June 2011 some aspects ofinheritance tax (IHT) are examinable at paper F6(UK). However, the paper P6 (UK) syllabus will notchange to reflect this until June 2013. This isintended to allow the majority of those studentswho have not covered IHT at paper F6 (UK) tofinish their exam training.

a) The scope of inheritance tax: [2]

i) Identify and explain the personschargeable

ii) Explain the concepts of domicile anddeemed domicile and understand theapplication of these concepts to inheritancetax

b) The basic principles for computing transfers ofvalue: [3]

i) State, explain and apply the meaning oftransfers of value, chargeable transfers andpotentially exempt transfers

ii) Demonstrate the fall in value principleiii) Demonstrate the seven year accumulation

principle taking into account changes in thelevel of the nil rate band.

iv) Identify excluded property [2]

v) Identify and advise on the tax implicationsof the location of assets

vi) Identify and advise on gifts with reservationof benefit

vii) Identify and advise on the tax implicationsof associated operations

c) The liabilities arising on chargeable lifetimetransfers and death transfers by individuals: [3]

i) Advise on the tax implications of chargeablelifetime transfers

ii) Advise on the tax implications of transferswithin seven years of death

iii) Compute the death estate [2]

iv) Advise on the relief for the fall in value oflifetime gifts

v) Advise on the operation of quick successionrelief

vi) Advise on the operation of double tax relieffor inheritance tax

vii) Advise on the inheritance tax effects andadvantages of the variation of wills

d) Computing transfers of value: [3]

i) Advise on the principles of valuationii) Advise on the availability of business

property relief and agricultural propertyrelief

iii) Identify exempt transfers [2]

e) The liabilities arising in respect of transfers toand from trusts and on property withintrusts: [3]

i) Define a trust [2]

ii) Distinguish between different types oftrust

iii) Advise on the inheritance tax implicationsof transfers of property into trust

iv) Advise on the inheritance tax implicationsof property passing absolutely from a trustto a beneficiary [2]

v) Identify the occasions on whichinheritance tax is payable by trustees

f) The use of exemptions and reliefs in deferringand minimising inheritance tax liabilities: [3]

i) Advise on the use of reliefs and exemptionsto minimise inheritance tax liabilities, asmentioned in the sections above

g) The system by which inheritance tax isadministered, including the instalment optionfor the payment of tax:i) Identify those responsible for the payment

of inheritance tax.[2]

ii) Identify the occasions on which inheritancetax may be paid by instalments.[2]

iii) Advise on the due dates, interest andpenalties for inheritance tax purposes.[3]

Excluded topics

The scope of inheritance tax: Pre 18 March 1986 lifetime transfers


Transfers of value by close companies

The liabilities arising on chargeable lifetimetransfers and on death: Double grossing up on death Post mortem reliefs Relief on relevant business property and

agricultural property given as exemptlegacies

Detailed knowledge of the double chargeslegislation

Computing transfers of value: Valuation of an annuity or an interest in

possession where the trust interest issubject to an annuity

Woodlands reliefConditional exemption for heritageproperty

Inheritance tax and trusts: IHT aspects of discretionary trusts prior to

27 March 1974 Computation of ten year charges and exit

charges Overseas aspects of inheritance tax and

trusts The conditions that had to be satisfied for

a trust to be an accumulation andmaintenance trust

Knowledge of situations where property istransferred between trusts or where theterms or nature of the trust is altered.

Knowledge of situations where propertywithin a trust with an immediate post-death interest passes to the spouse or civilpartner of the settlor on the death of thelife tenant.

Knowledge of the special rules concerningtrusts for the disabled, trusts for bereavedminors, transitional serial interest trustsand age 18 to 25 trusts.

5. Stamp duties (stamp duty and stamp dutyland tax)

a) The scope of stamp duty and stamp duty landtax: [3]

i) Identify the property in respect of whichstamp duty and stamp duty land tax ispayable.

b) Identify and advise on the liabilities arising ondocumented transfers. [3]

i) Advise on the stamp duties payable ontransfers of shares and securities

ii) Advise on the stamp duties payable ontransfers of land

c) The use of exemptions and reliefs in deferringand minimising stamp duties: [3]

i) Identify transfers involving noconsideration

ii) Advise on group transactions

d) Understand and explain the systems by whichstamp duties are administered. [2]

Excluded topics

The scope of stamp duty and stamp duty landtax: Leases

The liabilities arising on documentedtransfers: The contingency principle

The systems by which stamp duties areadministered: Detailed rules on interest and penalties

6. National insurance, value added tax, taxadministration and the UK tax system:

a) The contents of the Paper F6 study guide fornational insurance under headings:[2]

F1 The scope of national insurance F2 Class 1 and class 1A contributions

for employed persons F3 Class 2 and class 4 contributions

for self-employed persons

No additional material at this level.

b) The contents of the Paper F6 study guidefor value added tax (VAT) under headings:

G1 The scope of value added tax(VAT)

G2 The VAT registration requirements: G3 The computation of VAT liabilities: G4 The effect of special schemes



i) Advise on the impact of the disaggregationof business activities for VAT purposes [3]

ii) Advise on the impact of divisionalregistration [3]

iii) Advise on the VAT implications of thesupply of land and buildings in the UK

iv) Advise on the VAT implications of partialexemption

v) Advise on the application of the capitalgoods scheme

c) The contents of the Paper F6 study guide for theobligations of taxpayers and/or their agents underheadings:

H1 The systems for self assessmentand the making of returns

H2 The time limits for the submissionof information, claims and payment oftax, including payments on account

H3 The procedures relating tocompliance checks, appeals anddisputes

H4 Penalties for non-compliance

No additional material at this level

d) The contents of the Paper F6 study guide forthe UK tax system under headings:

A1 The overall function and purpose oftaxation in a modern economy

A2 Different types of taxes A3 Principal sources of revenue law

and practice A4 Tax avoidance and tax evasion

Excluded topics

National insurance: The calculation of directors’ national

insurance on a month by month basis Contracted out contributions The offset of trading losses against non-

trading income and capital gains

Value added tax: The determination of the tax point The contents of a valid VAT invoice Do it yourself builders Second hand goods scheme Retailers’ schemes

Schemes for farmers

B THE IMPORTANCE OF TAXATION TOPERSONAL AND CORPORATE FINANCIALMANAGEMENT

1. The principles underlying personal financialmanagement

a) Calculate the receipts from a transaction, net oftax and compare the results of alternativescenarios and advise on the most tax efficientcourse of action.[3]

2. How an individual’s personal financialobjectives may differ depending on theircircumstances and expectations

a) Understand and apply the effect of age, familycommitments, aspirations and the economy onpersonal financial objectives. [3]

3. The common forms of personal finance andinvestment products in a given set ofcircumstances, including ethicalconsiderations

a) Understand and be able to compare andcontrast the tax treatment of the sources offinance available to individuals.[3]

b) Understand and be able to compare andcontrast the tax treatment of investmentproducts: [3]

i) Deposit based investmentsii) Fixed interest securitiesiii) Packaged investmentsiv) Collective investmentsv) Equitiesvi) Enterprise investment schemevii) Venture capital trustsviii)Fixed interest securities

4. How a business’ financial objectives maydiffer depending on its circumstances and thebusiness environment

a) Understand and be able to explain the effect ofprofitability, future plans, actions ofcompetitors and the economy on a business’financial objectives. [3]


5. How taxation can affect the financialdecisions made by businesses (corporate andunincorporated) and by individuals

a) Understand and explain the tax implications ofthe effect of the raising of equity and loanfinance.[3]

b) Explain the tax differences between decisionsto lease, use hire purchase or purchaseoutright.[3]

c) Understand and explain the impact of taxationon the cash flows of a business.[3]

6. Other considerations, personal andcommercial, which might affect a financialdecision. [3]

C THE IMPACT OF RELEVANT TAXES ONVARIOUS SITUATIONS AND COURSES OFACTION, INCLUDING THE INTERACTION OFTAXES

1. Identifying and advising on the taxesapplicable to a given course of action andtheir impact. [3]

2. Identifying and understanding that thealternative ways of achieving personal orbusiness outcomes may lead to different taxconsequences. [3]

3. Assessing the tax advantages anddisadvantages of alternative courses ofaction. [3]

4. Understanding the statutory obligationsimposed in a given situation, including anytime limits for action and advising on theimplications of non-compliance.[3]

D MINIMISING AND/OR DEFERRING TAXLIABILITIES BY THE USE OF STANDARDTAX PLANNING MEASURES

1. Identifying and advising on the types ofinvestment and other expenditure that willresult in a reduction in tax liabilities for anindividual and/or a business.[3]

2. Advising on legitimate tax planning measures,by which the tax liabilities arising from aparticular situation or course of action can bemitigated. [3]

3. Advising on the appropriateness of suchinvestment, expenditure or measures given aparticular taxpayer’s circumstances or statedobjectives.[3]

4. Advise on the mitigation of tax in the mannerrecommended by reference to numericalanalysis and/or reasoned argument.[3]

5. Be aware of the ethical and professionalissues arising from the giving of tax planningadvice.[3]

6. Be aware of and give advice on current issuesin taxation. [3]

E COMMUNICATING WITH CLIENTS, HMREVENUE AND CUSTOMS AND OTHERPROFESSIONALS IN AN APPROPRIATEMANNER

1. Communication of advice, recommendationsand information in the required format:[3]

For example the use of:• Reports• Letters• Memoranda• Meeting notes

2. Presentation of written information, inlanguage appropriate to the purpose of thecommunication and the intended recipient. [3]

3. Communicating conclusions reached,together, where necessary with relevantsupporting computations.[3]

4. Stating and explaining assumptions made orlimitations in the analysis provided; togetherwith any inadequacies in the informationavailable and/or additional informationrequired to provide a fuller analysis.[3]

5. Identifying and explaining other, non-tax,factors that should be considered.[3]


SUMMARY OF CHANGES TO PAPER P6 (UK)


Amendments to P6 (UK)

Section and subject area AmendmentA1 – Excluded topics Industrial buildings allowances have been added to the excluded

topics list


Advanced Audit andAssurance (INT) (P7)

AIM

To analyse, evaluate and conclude on the assuranceengagement and other audit and assurance issues inthe context of best practice and currentdevelopments.

MAIN CAPABILITIES


A Recognise the legal and regulatoryenvironment and its impact on audit andassurance practice

B Demonstrate the ability to work effectively onan assurance or other service engagementwithin a professional and ethical framework

C Assess and recommend appropriate qualitycontrol policies and procedures in practicemanagement and recognise the auditor’sposition in relation to the acceptanceand retention of professional appointments

D Identify and formulate the work requiredto meet the objectives of audit assignmentsand apply the International Standards onAuditing

E Identify and formulate the work required tomeet the objectives of non-audit assignments

F Evaluate findings and the results of workperformed and draft suitable reports onassignments

G Understand the current issues anddevelopments relating to the provision of audit-related and assurance service


AA (F8)

AAA (P7)CR (P2)

Current issues and development (G)

Practice management (C)

Reporting (F)

Audit of historical financialinformation (D)

Regulatoryenvironment (A)

Professional and ethicalconsiderations (B)

Other assignments (E)


RATIONALE

The Advanced Audit and Assurance syllabus isessentially divided into seven areas.

The syllabus starts with the legal and regulatoryenvironment including money laundering, andprofessional and ethical considerations, includingthe Code of Ethics and professional liability. Thisthen leads into procedures in practice management,including quality control and the acceptance andretention of professional engagements.

The syllabus then covers the audit of financialstatements, including planning, evidence andreview. It then covers other assignments includingprospective financial information, and otherassurance assignments, as well as the reporting ofthese assignments.

The final section covers current issues anddevelopments relating to the provision of audit-related and assurance services.

DETAILED SYLLABUS

A Regulatory Environment

1. International regulatory frameworks for auditand assurance services

2. Money laundering

3. Laws and regulations

B Professional and Ethical Considerations

1. Code of Ethics for Professional Accountants

2. Fraud and error

3. Professional liability

C Practice Management

1. Quality control

2. Advertising, publicity, obtaining professionalwork and fees

3. Tendering

4. Professional appointments

D Audit of historical financial information

1. The audit of historical financial informationincluding;i) Planning, materiality and assessing the risk

of misstatementii) Evidenceiii) Evaluation and review

2. Group audits

E Other assignments

1. Audit-related services

2. Assurance services

3. Prospective financial information

4. Forensic audits

5. Internal audit

6. Outsourcing

F Reporting

1. Auditor’s reports

2. Reports to those charged with governance andmanagement

3. Other reports

G Current Issues and Developments

1. Professional and ethical

2. Information technology

3. Transnational audits

4. Social and environmental auditing

5. Other current issues



The examination is a three hour paper constructedin two sections. Questions in both sections will belargely discursive. However, candidates will beexpected, for example, to be able to assessmateriality and calculate relevant ratios whereappropriate.

Section A questions will be based on ‘case study’type questions. That is not to say that they will beparticularly long, rather that they will provide asetting within a range of topics, issues andrequirements can be addressed. Different types ofquestion will be encountered in Section B and willtend to be more focussed on specific topics, forexample ‘auditor’s reports’, ‘quality control’ andtopics of ISAs which are not examinable in PaperF8, Audit and Assurance. (This does not precludethese topics from appearing in Section A). Currentissues will be examined across a number ofquestions.

Section A: 2 compulsory questions 50-70 marks

Section B: Choice of 2 from 3 30-50 marksquestions 100


Study GuideA REGULATORY ENVIRONMENT


a) Explain the need for laws, regulations,standards and other guidance relating to audit,assurance and related services. [2]

b) Outline and explain the need for the legal andprofessional framework including:[2]

i) public oversight to an audit and assurancepractice

ii) the role of audit committees and impact onaudit and assurance practice.

2. Money laundering

a) Define ‘money laundering’.[1]

b) Explain how international efforts seek tocombat money laundering.[2]

c) Explain the scope of criminal offences ofmoney laundering and how professionalaccountants may be protected from criminaland civil liability.[2]

d) Explain the need for ethical guidance in thisarea. [2]

e) Describe how accountants meet theirobligations to help prevent and detect moneylaundering including record keeping andreporting of suspicion to the appropriateregulatory body.[2]

f) Explain the importance of customer duediligence (CDD).[2]

g) Recognise potentially suspicious transactionsand assess their impact on reporting duties. [2]

h) Describe, with reasons, the basic elements ofan anti-money laundering program.[2]


a) Compare and contrast the respectiveresponsibilities of management and auditorsconcerning compliance with laws and

regulations in an audit of financialstatements.[2]

b) Describe the auditors considerations ofcompliance with laws and regulations and planaudit procedures when possible non-compliance is discovered.[2]

c) Discuss how and to whom non-complianceshould be reported. [2]

d) Recognise when withdrawal from anengagement is necessary. [2]

B PROFESSIONAL AND ETHICALCONSIDERATIONS

1. Code of Ethics for Professional Accountants

a) Explain the fundamental principles and theconceptual framework approach.[1]

b) Identify, evaluate and respond to threats tocompliance with the fundamental principles.[3]

c) Discuss and evaluate the effectiveness ofavailable safeguards.[3]

d) Recognise and advise on conflicts in theapplication of fundamental principles.[3]

2. Fraud and error

a) Define and clearly distinguish between theterms ‘error’, ‘irregularity’, ‘fraud’ and‘misstatement’.[2]

b) Compare and contrast the respectiveresponsibilities of management and auditors forfraud and error.[2]

c) Describe the matters to be considered andprocedures to be carried out to investigateactual and/or potential misstatements in agiven situation. [2]

d) Explain how, why, when and to whom fraudand error should be reported and thecircumstances in which an auditor shouldwithdraw from an engagement. [2]


e) Discuss the current and possible future role ofauditors in preventing, detecting and reportingerror and fraud. [2]


a) Recognise circumstances in which professionalaccountants may have legal liability.[2]

b) Describe the factors to determine whether ornot an auditor is negligent in given situations.[2]

c) Explain the other criteria for legal liability to berecognised (including ‘due professional care’and ‘proximity’) and apply them to givensituations.[2]

d) Compare and contrast liability to client withliability to third parties.[3]

e) Evaluate the practicability and effectiveness ofways in which liability may be restricted. [3]

f) Discuss liability limitation agreements. [2]

g) Discuss and appraise the principal causes ofaudit failure and other factors that contribute tothe ‘expectation gap’ (e.g. responsibilities forfraud and error).[3]

h) Recommend ways in which the expectationgap might be bridged. [2]

C PRACTICE MANAGEMENT

1. Quality control

a) Explain the principles and purpose of qualitycontrol of audit and other assuranceengagements.[1]

b) Describe the elements of a system of qualitycontrol relevant to a given firm.[2]

c) Select and justify quality control proceduresthat are applicable to a given auditengagement.[3]

d) Assess whether an engagement has beenplanned and performed in accordance withprofessional standards and whether reportsissued are appropriate in the circumstances.[3]


a) Recognise situations in which specifiedadvertisements are acceptable. [2]

b) Discuss the restrictions on practicedescriptions, the use of the ACCA logo and thenames of practising firms.[2]

c) Discuss the extent to which reference to feesmay be made in promotional material.[2]

d) Outline the determinants of fee-setting andjustify the bases on which fees andcommissions may and may not be charged forservices. [3]

e) Discuss the ethical and other professionalproblems, for example, lowballing, involved inestablishing and negotiating fees for a specifiedassignment.[3]

3. Tendering

a) Discuss the reasons why entities change theirauditors/professional accountants.[2]

b) Recognise and explain the matters to beconsidered when a firm is invited to submit aproposal or fee quote for an audit or otherprofessional engagement.[2]

c) Identify the information to be included in aproposal.[2]


a) Explain the matters to be considered and theprocedures that an audit firm/professionalaccountant should carry out before accepting aspecified new client/engagement including:[3]

i) client acceptanceii) engagement acceptanceiii) establish whether the preconditions for an

audit are presentiv) agreeing the terms of engagement.

b) Recognise the key issues that underlie theagreement of the scope and terms of anengagement with a client.[2]


D AUDIT OF HISTORICAL FINANCIALINFORMATION

1(i) Planning, materiality and assessing the risk ofmisstatement

a) Define materiality and performance materialityand demonstrate how it should be applied infinancial reporting and auditing. [2]

b) Identify and explain business risks for a givenassignment.[3]

c) Identify and explain audit risks for a givenassignment.[3]

d) Identify and explain risks of materialmisstatement for a given assignment. [3]

e) Discuss and demonstrate the use of analyticalprocedures in the planning of an assignment.[3]

f) Explain how the result of planning proceduresdetermines the relevant audit strategy.[2]

g) Explain the planning procedures specific to aninitial audit engagement.

1(ii) Evidence

a) Identify and describe audit procedures toobtain sufficient audit evidence from identifiedsources.[2]

b) Identify and evaluate the audit evidenceexpected to be available toi) support the financial statement assertions

and accounting treatments (including fairvalues)

ii) support disclosures made in the notes tothe financial statements. [3]

c) Apply analytical procedures to financial andnon-financial data. [2]

d) Explain the specific audit problems andprocedures concerning related parties andrelated party transactions. [2]

e) Recognise circumstances that may indicate theexistence of unidentified related parties andselect appropriate audit procedures.[2]

f) Evaluate the use of written managementrepresentations to support other auditevidence.[2]

g) Recognise when it is justifiable to placereliance on the work of an expert (e.g. asurveyor employed by the audit client).[2]

h) Assess the appropriateness and sufficiency ofthe work of internal auditors and the extent towhich reliance can be placed on it. [2]

1(iii)Evaluation and review

a) Evaluate the matters (e.g. materiality, risk,relevant accounting standards, audit evidence)relating to:[3]

i) inventory and construction contractsii) standard costing systemsiii) statement of cash flowsiv) changes in accounting policyv) taxation (including deferred tax)vi) segmental reportingvii) non-current assetsviii) fair valueix) leasesx) revenue recognitionxi) employee benefitsxii) government grantsxiii) related partiesxiv) earnings per sharexv) impairmentxvi) provisions, contingent liabilities and

contingent assetsxvii) intangible assetsxviii) financial instrumentsxix) investment propertiesxx) share-based payment transactionsxxi) business combinationsxxii) assets held for sale and discontinued

operationsxxiii) events after the end of the reporting

periodxxiv) the effects of foreign exchange ratesxxv) borrowing costs.

b) Explain the use of analytical procedures inevaluation and review. [3]

c) Explain how the auditor’s responsibilities forcorresponding figures, comparative financialstatements, and ‘other information’, aredischarged.[3]


d) Apply the further considerations and auditprocedures relevant to initial engagements.[2]

e) Discuss the courses of action available to anauditor if an inconsistency or misstatement offact exists in relation to other information. [2]

f) Specify audit procedures designed to identifysubsequent events that may require adjustmentto, or disclosure in, the financial statements ofa given entity. [2]

g) Identify and explain indicators that the goingconcern basis may be in doubt and recognisemitigating factors.[2]

h) Recommend audit procedures, or evaluate theevidence that might be expected to beavailable and assess the appropriateness of thegoing concern basis in given situations.[3]

i) Assess the adequacy of disclosures in financialstatements relating to going concern andexplain the implications for the auditor’s reportwith regard to the going concern basis.[3]

2. Group audits

a) Recognise the specific matters to beconsidered before accepting appointment asprincipal auditor to a group in a givensituation.[3]

b) identify and explain the matters specific toplanning an audit of group financial statementsincluding assessment of group and componentmateriality, the impact of non-coterminous yearends within a group, and changes in groupstructure.

c) Justify the situations where a joint audit wouldbe appropriate. [2]

d) Recognise the audit problems and describeaudit procedures specific to a businesscombination, including goodwill, accountingpolicies, inter-company trading, theclassification of investments, equity accountingfor associates, changes in group structure, andaccounting for a foreign subsidiary. [3]

e) Identify and explain the audit risks, andnecessary audit procedures relevant to theconsolidation process.[3]

f) Identify and describe the matters to beconsidered and the procedures to be performedat the planning stage, when a principal auditorconsiders the use of the work of componentauditors.[3]

g) Consider how the principal auditor shouldevaluate the audit work performed by acomponent auditor.[2]

h) Explain the implications for the auditor’s reporton the financial statements of an entity wherethe opinion on a component is qualified orotherwise modified in a given situation.[2]

E OTHER ASSIGNMENTS


a) Describe the nature of audit-related services,the circumstances in which they might berequired and the comparative levels ofassurance provided by professionalaccountants and distinguish between:[2]

i) audit-related services and an audit ofhistorical financial statements

ii) an attestation engagement and a directreporting engagement.[2]

b) Plan review engagements, for example: [2]

i) a review of interim financial informationii) a ‘due diligence’ assignment (when

acquiring a company, business or otherassets).

c) Explain the importance of enquiry andanalytical procedures in review engagementsand apply these procedures.[2]


a) Describe the main categories of assuranceservices that audit firms can provide andassess the benefits of providing these servicesto management and external users. [3]

b) Justify a level of assurance (reasonable, high,moderate, limited, negative) for an engagementdepending on the subject matter evaluated, the


criteria used, the procedures applied and thequality and quantity of evidence obtained.[3]

c) Recognise the ways in which different types ofrisk (e.g. strategic, operating, information) maybe identified and analysed and assess howmanagement should respond to risk.[3]


a) Define ‘prospective financial information’ (PFI)and distinguish between a ‘forecast’, a‘projection’, a ‘hypothetical illustration’ and a‘target’.[1]

b) Explain the principles of useful PFI.[1]

c) Identify and describe the matters to beconsidered before accepting a specifiedengagement to report on PFI.[2]

d) Discuss the level of assurance that the auditormay provide and explain the other factors to beconsidered in determining the nature, timingand extent of examination procedures.[1]

e) Describe examination procedures to verifyforecasts and projections. [2]

f) Compare the content of a report on anexamination of PFI with reports made inproviding audit-related services.[2]

4. Forensic audits

a) Define the terms ‘forensic accounting’, ‘forensicinvestigation’ and ‘forensic audit’.[1]

b) Describe the major applications of forensicauditing (e.g. fraud, negligence, insuranceclaims) and analyse the role of the forensicauditor as an expert witness.[2]

c) Apply the fundamental ethical principles toprofessional accountants engaged in forensicaudit assignments.[2]

d) Plan a forensic audit engagement. [2]

e) Select investigative procedures and evaluateevidence appropriate to determining the loss ina given situation.[3]

5. Internal audit

a) Evaluate the potential impact of an internalaudit department on the planning andperformance of the external audit. [2]

b) Explain the benefits and potential drawbacks ofoutsourcing internal audit.[2]

c) Consider the ethical implications of the externalauditor providing an internal audit service to aclient.[2]

6. Outsourcing

a) Explain the different approaches to‘outsourcing’ and compare with ‘insourcing’.[2]

b) Discuss and conclude on the advantages anddisadvantages of outsourcing finance andaccounting functions.[3]

c) Recognise and evaluate the impact ofoutsourced functions on the conduct of anaudit.[3]

F REPORTING

1 Auditor’s reports

a) Critically appraise the form and content of anauditor’s report in a given situation.[3]

b) Recognise and evaluate the factors to be takeninto account when forming an audit opinion ina given situation and justify audit opinions thatare consistent with the results of auditprocedures.[3]

c) Assess whether or not a proposed audit opinionis appropriate.[3]

d) Advise on the actions which may be taken bythe auditor in the event that a modified auditreport is issued.

e) Recognise when the use of an emphasis ofmatter paragraph and other matter paragraphwould be appropriate.[3]



a) Critically assess the quality of a report to thosecharged with governance and management. [3]

b) Advise on the content of reports to thosecharged with governance and management in agiven situation.[3]

3. Other reports

a) Analyse the form and content of theprofessional accountant’s report for anassurance engagement as compared with anauditor’s report.[2]

b) Discuss the content of a report on examinationof prospective financial information.[2]

c) Discuss the effectiveness of the ‘negativeassurance’ form of reporting and evaluatesituations in which it may be appropriate toexpress a reservation or deny a conclusion.[3]

G CURRENT ISSUES AND DEVELOPMENTS

Discuss the relative merits and the consequences ofdifferent standpoints taken in current debates andexpress opinions supported by reasoned arguments.


a) Discuss the relative advantages of an ethicalframework and a rulebook.[2]

b) Identify and assess relevant emerging ethicalissues and evaluate the safeguards available.[3]

c) Discuss IFAC developments.[2]


a) Describe recent trends in IT and their currentand potential impact on auditors (e.g. the auditimplications of ‘cyberincidents’ and otherrisks).[2]

b) Explain how IT may be used to assist auditorsand discuss the problems that may beencountered in automating the audit process.[2]


a) Define ‘transnational audits’ and explain therole of the Transnational Audit Committee(TAC) of IFAC. [1]

b) Discuss how transnational audits may differfrom other audits of historical financialinformation (e.g. in terms of applicablefinancial reporting and auditing standards,listing requirements and corporate governancerequirements). [2]


a) Plan an engagement to provide assurance onperformance measures and sustainabilityindicators.[2]

b) Describe the difficulties in measuring andreporting on economic, environmental andsocial performance and give examples ofperformance measures and sustainabilityindicators.[2]

c) Explain the auditor’s main considerations inrespect of social and environmental mattersand how they impact on entities and theirfinancial statements (e.g. impairment of assets,provisions and contingent liabilities).[2]

d) Describe substantive procedures to detectpotential misstatements in respect of socio-environmental matters.[2]

e) Discuss the form and content of anindependent verification statement (e.g. on anenvironmental management system (EMS) anda report to society). [2]


a) Explain current developments in auditingstandards including the need for new andrevised standards and evaluate their impact onthe conduct of audits. [3]

b) Discuss other current legal, ethical, otherprofessional and practical matters that affectaccountants, auditors, their employers and theprofession. [3]




The main areas to be added to the syllabus areshown in Table 1 below:


Section and subject area Syllabus contentD1(i)d), g) Assignments Planning an auditD2b) Assignments Group audit planning issuesD2d) Assignments Audit impact of changes in group structureF1a) Reporting Appraisal of auditor’s reportF1d) Reporting Actions which may be taken by the auditor where a

modified report is issued


Advanced Audit andAssurance (UK) (P7)

AIM

To analyse, evaluate and conclude on the assuranceengagement and other audit and assurance issues inthe context of best practice and currentdevelopments.

MAIN CAPABILITIES


A Recognise the legal and regulatoryenvironment and its impact on audit andassurance practice

B Demonstrate the ability to work effectively onan assurance or other service engagementwithin a professional and ethical framework

C Assess and recommend appropriate qualitycontrol policies and procedures in practicemanagement and recognise the auditor’sposition in relation to the acceptanceand retention of professional appointments

D Identify and formulate the work requiredto meet the objectives of audit assignmentsand apply the InternationalStandards on Auditing (UK and Ireland)

E Identify and formulate the work required tomeet the objectives of non-audit assignments

F Evaluate findings and the results of workperformed and draft suitable reports onassignments

G Understand the current issues anddevelopments relating to the provision of audit-related and assurance services


AA (F8)

AAA (P7)CR (P2)

Current issues and developments (G)

Practice management (C)

Other assignments (E)

Audit of historical financialinformation (D)

Regulatory Environment (A) Professional and ethicalconsiderations (B)

Reporting (F)


RATIONALE

The Advanced Audit and Assurance syllabus isessentially divided into seven areas.

The syllabus starts with the legal and regulatoryenvironment including money laundering, andprofessional and ethical considerations, includingthe Code of Ethics and professional liability. Thisthen leads into procedures in practice management,including quality control and the acceptance andretention of professional engagements.

The syllabus then covers the audit of financialstatements, including planning, evidence andreview. It then covers other assignments includingprospective financial information, and otherassurance assignments, as well as the reporting ofthese assignments.

The final section covers current issues anddevelopments relating to the provision of audit-related and assurance services.

DETAILED SYLLABUS

A Regulatory Environment


2. Money laundering


B Professional and Ethical Considerations

1. Code of Ethics and Conduct

2. Fraud and error


C Practice Management

1. Quality control


3. Tendering


D Audit of historical financial information

1. The audit of historical financial informationincluding;i) Planning, materiality and assessing the risk

of misstatementii) Evidenceiii) Evaluation and review

2. Group audits

E Other assignments




4. Forensic audits

5. Internal audit

6. Outsourcing

7. Auditing aspects of insolvency (and similarprocedures)

F. Reporting

1. Auditor’s reports

2. Reports to those charges with governance andmanagement

3. Other reports

G Current Issues and Developments








The examination is a three hour paper constructedin two sections. Questions in both sections will bealmost laregly. However, candidates will beexpected, for example, to be able to assessmateriality and calculate relevant ratios whereappropriate.

Section A questions will be based on ‘case study’type questions. That is not to say that they will beparticularly long, rather that they will provide asetting within a range of topics, issues andrequirements can be addressed. Different types ofquestion will be encountered in Section B and willtend to be more focussed on specific topics, forexample ‘auditor’s reports’, ‘quality control’ andtopics of ISAs (UK and Ireland) which are notexaminable in Paper F8, Audit and Assurance.(This does not preclude these topics from appearingin Section A). Current issues will be examinedacross a number of questions.

Number of marks

Section A: 2 compulsory questions 50-70 marks

Section B: Choice of 2 from 3 30-50 marksquestions 100


Study GuideA REGULATORY ENVIRONMENT


a) Explain the need for laws, regulations,standards and other guidance relating to audit,assurance and related services. [2]

b) Outline and explain the legal and professionalframework including: [2]

i) public oversight to an audit and assurancepractice

ii) the role of audit committees and impact onaudit and assurance practice.

2. Money laundering

a) Define ‘money laundering’.[1]

b) Explain how international efforts seek tocombat money laundering.[2]

c) Explain the scope of criminal offences ofmoney laundering and how professionalaccountants may be protected from criminaland civil liability.[2]

d) Explain the need for ethical guidance in thisarea. [2]

e) Describe how accountants meet theirobligations to help prevent and detect moneylaundering including record keeping andreporting of suspicion to the appropriateregulatory body. [2]

f) Explain the importance of ‘know yourcustomer’ (KYC) information.[2]

g) Recognise potentially suspicious transactionsand assess their impact on reporting duties. [2]

h) Describe, with reasons, the basic elements ofan anti-money laundering program. [2]


a) Compare and contrast the respectiveresponsibilities of management and auditors

concerning compliance with laws andregulations in an audit of financialstatements.[2]

b) Describe the auditors’ considerations ofcompliance with laws and regulations and planaudit procedures when possible non-compliance is discovered.[2]

c) Discuss how and to whom non-complianceshould be reported. [2]

d) Recognise when withdrawal from anengagement is necessary. [2]

B PROFESSIONAL AND ETHICALCONSIDERATIONS

1. Code of Ethics and Conduct

a) Explain the fundamental principles and theconceptual framework approach.[1]

b) Identify, evaluate and respond to threats tocompliance with the fundamental principles.[3]

c) Discuss and evaluate the effectiveness ofavailable safeguards.[3]

d) Recognise and advise on conflicts in theapplication of fundamental principles.[3]

2. Fraud and error

a) Define and clearly distinguish between theterms ‘error’, ‘irregularity’, ‘fraud’ and‘misstatement’.[2]

b) Compare and contrast the respectiveresponsibilities of management and auditors forfraud and error.[2]

c) Describe the matters to be considered andprocedures to be carried out to investigateactual and/or potential misstatements in agiven situation. [2]

d) Explain how, why, when and to whom fraudand error should be reported and thecircumstances in which an auditor shouldwithdraw from an engagement. [2]


e) Discuss the current and possible future role ofauditors in preventing, detecting and reportingerror and fraud. [2]


a) Recognise circumstances in which professionalaccountants may have legal liability.[2]

b) Describe the factors to determine whether ornot an auditor is negligent in given situations.[2]

c) Explain the other criteria for legal liability to berecognised (including ‘due professional care’and ‘proximity’) and apply them to givensituations.[2]

d) Compare and contrast liability to client withliability to third parties.[3]

e) Evaluate the practicability and effectiveness ofways in which liability may be restricted. [3]

f) Discuss liability limitation agreements. [2]

g) Discuss and appraise the principal causes ofaudit failure and other factors that contribute tothe ‘expectation gap’ (e.g. responsibilities forfraud and error). [3]

h) Recommend ways in which the expectationgap might be bridged. [2]

C PRACTICE MANAGEMENT

1. Quality control

a) Explain the principles and purpose of qualitycontrol of audit and other assuranceengagements.[1]

b) Describe the elements of a system of qualitycontrol relevant to a given firm. [2]

c) Select and justify quality control proceduresthat are applicable to a given auditengagement. [3]

d) Assess whether an engagement has beenplanned and performed in accordance withprofessional standards and whether reportsissued are appropriate in the circumstances.[3]


a) Recognise situations in which specifiedadvertisements are acceptable. [2]

b) Discuss the restrictions on practicedescriptions, the use of the ACCA logo and thenames of practising firms.[2]

c) Discuss the extent to which reference to feesmay be made in promotional material.[2]

d) Outline the determinants of fee-setting andjustify the bases on which fees andcommissions may and may not be charged forservices. [3]

e) Discuss the ethical and other professionalproblems, for example, lowballing, involved inestablishing and negotiating fees for a specifiedassignment.[3]

3. Tendering

a) Discuss the reasons why entities change theirauditors/professional accountants.[2]

b) Recognise and explain the matters to beconsidered when a firm is invited to submit aproposal or fee quote for an audit or otherprofessional engagement.[2]

c) Identify the information to be included in aproposal.[2]


a) Explain the matters to be considered and theprocedures that an audit firm/professionalaccountant should carry out before accepting aspecified new client/engagement including:[3]

i) client acceptanceii) engagement acceptanceiii) establish whether the preconditions for an

audit are presentiv) agreeing the terms of engagement.

b) Recognise the key issues that underlie theagreement of the scope and terms of anengagement with a client.[2]


D AUDIT OF HISTORICAL FINANCIALINFORMATION

1(i) Planning, materiality and assessing the risk ofmisstatement

a) Define materiality and performance materialityand demonstrate how it should be applied infinancial reporting and auditing. [2]

b) Identify and explain business risks for a givenassignment.[3]

c) Identify and explain audit risks for a givenassignment.[3]

d) Identify and explain risks of materialmisstatement for a given assignment. [3]

e) Discuss and demonstrate the use of analyticalprocedures in the planning of an assignment.[3]

f) Explain how the result of planning proceduresdetermines the relevant audit strategy.[2]

g) Explain the planning procedures specific to aninitial audit engagement

1(ii) Evidence

a) Identify and describe audit procedures toobtain sufficient audit evidence from identifiedsources.[2]

b) Identify and evaluate the audit evidenceexpected to be available toi) support the financial statement assertions

and accounting treatments (including fairvalues)

ii) support disclosures made in the notes tothe financial statements. [3]

c) Apply analytical procedures to financial andnon-financial data. [2]

d) Explain the specific audit problems andprocedures concerning related parties andrelated party transactions. [2]

e) Recognise circumstances that may indicate theexistence of unidentified related parties andselect appropriate audit procedures.[2]

f) Evaluate the use of written managementrepresentations to support other auditevidence.[2]

g) Recognise when it is justifiable to placereliance on the work of an expert (e.g. asurveyor employed by the audit client).[2]

h) Assess the appropriateness and sufficiency ofthe work of internal auditors and the extent towhich reliance can be placed on it. [2]

1(iii)Evaluation and review

a) Evaluate the matters (e.g. materiality, risk,relevant accounting standards, audit evidence)relating to:[3]

i) inventory and construction contractsii) standard costing systemsiii) statement of cash flowsiv) changes in accounting policyv) taxation (including deferred tax)vi) segmental reportingvii) non-current assetsviii) fair valuesix) leasesx) revenue recognitionxi) employee benefitsxii) government grantsxiii) related partiesxiv) earnings per sharexv) impairmentxvi) provisions, contingent liabilities and

contingent assetsxvii) intangible assetsxviii) financial instrumentsxix) investment propertiesxx) share-based payment transactionsxxi) business combinationsxxii) assets held for sale and discontinued

operationsxxiii) events after the end of the reporting

periodxxiv) the effects of foreign exchange ratesxxv) borrowing costs.

b) Explain the use of analytical procedures inevaluation and review. [3]

c) Explain how the auditor’s responsibilities forcorresponding figures, comparative financialstatements, and ‘other information’, aredischarged.[3]


d) Apply the further considerations and auditprocedures relevant to initial engagements.[2]

e) Discuss the courses of action available to anauditor if an inconsistency or misstatement offact exists in relation to other information. [2]

f) Specify audit procedures designed to identifysubsequent events that may require adjustmentto, or disclosure in, the financial statements ofa given entity.[2]

g) Identify and explain indicators that the goingconcern basis may be in doubt and recognisemitigating factors.[2]

h) Recommend audit procedures, or evaluate theevidence that might be expected to beavailable and assess the appropriateness of thegoing concern basis in given situations.[3]

i) Assess the adequacy of disclosures in financialstatements relating to going concern andexplain the implications for the auditor’s reportwith regard to the going concern basis.[3]

2. Group audits

a) Recognise the specific matters to beconsidered before accepting appointment asprincipal auditor to a group in a givensituation. [3]

b) Identify and explain the matters specific toplanning an audit or group financial statementsincluding assessment of group and componentmateriality, the impact of non-coterminous yearends within a group, and changes in groupstructure.

c) Justify the situations where a joint audit wouldbe appropriate. [2]

d) Recognise the audit problems and describeaudit procedures specific to a businesscombination, including goodwill, accountingpolicies, inter-company trading, theclassification of investments, equity accountingfor associates, changes in group structure andaccounting for a foreign subsidiary. [3]

e) Identify and explain the audit risks, andnecessary audit procedures relevant to theconsolidation process.[3]

f) Identify and describe the matters to beconsidered and the procedures to be performedat the planning stage, when a principal auditorconsiders the use of the work of componentauditors.[3]

g) Consider how the principal auditor shouldevaluate the audit work performed by acomponent auditor.[2]

h) Explain the implications for the auditor’s reporton the financial statements of an entity wherethe opinion on a component is qualified orotherwise modified in a given situation. [2]

E OTHER ASSIGNMENTS

1 Audit-related services

a) Describe the nature of audit-related servicesand the comparative levels of assuranceprovided by professional accountants anddistinguish between: [2]

i) audit-related services and an audit ofhistorical financial statements

ii) an attestation engagement and a directreporting engagement.[2]

.b) Plan review engagements, for example: [2]

i) a review of interim financial informationii) a ‘due diligence’ assignment (when

acquiring a company, business or otherassets).

c) Explain the importance of enquiry andanalytical procedures in review engagementsand apply these procedures.[2]


a) Describe the main categories of assuranceservices that audit firms can provide andassess the benefits of providing these servicesto management and external users. [3]

b) Justify a level of assurance (reasonable, high,moderate, limited, negative) for an engagementdepending on the subject matter evaluated, the


criteria used, the procedures applied and thequality and quantity of evidence obtained.[3]

c) Recognise the ways in which different types ofrisk (e.g. strategic, operating, information) maybe identified and analysed and assess howmanagement should respond to risk.[3]


a) Define ‘prospective financial information’ (PFI)and distinguish between a ‘forecast’, a‘projection’, a ‘hypothetical illustration’ and a‘target’.[1]

b) Explain the principles of useful PFI. [1]

c) Identify and describe the matters to beconsidered before accepting a specifiedengagement to report on PFI.[2]

d) Discuss the level of assurance that the auditormay provide and explain the other factors to beconsidered in determining the nature, timingand extent of examination procedures.[1

e) Describe examination procedures to verifyforecasts and projections: [2]

f) Compare the content of a report on anexamination of PFI with reports made inproviding audit-related services.[2]

4. Forensic audits

a) Define the terms ‘forensic accounting’, ‘forensicinvestigation’ and ‘forensic audit’.[1]

b) Describe the major applications of forensicauditing (e.g. fraud, negligence, insuranceclaims) and analyse the role of the forensicauditor as an expert witness.[2]

c) Apply the fundamental ethical principles toprofessional accountants engaged in forensicaudit assignments.[2]

d) Plan a forensic audit engagement. [2]

e) Select investigative procedures and evaluateevidence appropriate to determining the loss ina given situation. [3]

5. Internal audit

a) Evaluate the potential impact of an internalaudit department on the planning andperformance of the external audit. [2]

b) Explain the benefits and potential drawbacks ofoutsourcing internal audit.[2]

c) Consider the ethical implications of the externalauditor providing an internal audit service to aclient.[2]

6. Outsourcing

a) Explain the different approaches to‘outsourcing’ and compare with ‘insourcing’.[2]

b) Discuss and conclude on the advantages anddisadvantages of outsourcing finance andaccounting functions.[3]

.c) Recognise and evaluate the impact of

outsourced functions on the conduct of anaudit. [3]

7. Auditing aspects of insolvency (and similarprocedures)

a) Explain the meaning of, and describe theprocedures involved in placing a company intovoluntary or compulsory liquidation oradministration.[2]

b) Explain the consequences of liquidation oradministration for a company and itsstakeholders.[2]

c) Advise on the differences between fraudulentand wrongful trading and the consequences forthe company directors.[2]

d) Examine the financial position of a companyand determine whether it is insolvent.[2]

e) Identify the circumstances whereadministration could be adopted as analternative to liquidation, and explain thebenefits of administration compared toliquidation..[2]

f) Explain and apply the priority for the allocationof company assets.[2]


.F REPORTING

1 Auditor’s reports

a) Critically appraise the form and content of anauditor’s report in a given situation.[3]

b) Recognise and evaluate the factors to be takeninto account when forming an audit opinion ina given situation and justify audit opinions thatare consistent with the results of auditprocedures. [3]

c) Assess whether or not a proposed audit opinionis appropriate.[3]

d) Advise on the actions which may be taken bythe auditor in the event that a modified auditreport is issued. [3]

e) Recognise when the use of an emphasis ofmatter paragraph and other matter paragraphwould be appropriate.[3]


a) Critically assess the quality of a report to thosecharged with governance and management. [3]

b) Advise on the content of reports to thosecharged with governance and management in agiven situation. [3]

3. Other reports

a) Analyse the form and content of theprofessional accountant’s report for anassurance engagement as compared with anauditor’s report.[2]

b) Discuss the content of a report on examinationof prospective financial information.[2]

c) Discuss the effectiveness of the ‘negativeassurance’ form of reporting and evaluatesituations in which it may be appropriate toexpress a reservation or deny a conclusion.[3]

G CURRENT ISSUES AND DEVELOPMENTS

Discuss the relative merits and the consequences ofdifferent standpoints taken in current debates andexpress opinions supported by reasoned arguments.


a) Discuss the relative advantages of an ethicalframework and a rulebook.[2]

b) Identify and assess relevant emerging ethicalissues and evaluate the safeguards available.[3]

c) Discuss IFAC and APB developments. [2]


a) Describe recent trends in IT and their currentand potential impact on auditors (e.g. the auditimplications of ‘cyberincidents’ and otherrisks).[2]

b) Explain how IT may be used to assist auditorsand discuss the problems that may beencountered in automating the audit process.[2]


a) Define ‘transnational audits’ and explain therole of the Transnational Audit Committee(TAC) of IFAC. [1]

b) Discuss how transnational audits may differfrom other audits of historical financialinformation (e.g. in terms of applicablefinancial reporting and auditing standards,listing requirements and corporate governancerequirements). [2]


a) Plan an engagement to provide assurance onperformance measures and sustainabilityindicators.[2]

b) Describe the difficulties in measuring andreporting on economic, environmental andsocial performance and give examples ofperformance measures and sustainabilityindicators.[2]


c) Explain the auditor’s main considerations inrespect of social and environmental mattersand how they impact on entities and theirfinancial statements (e.g. impairment of assets,provisions and contingent liabilities).[2]

d) Describe substantive procedures to detectpotential misstatements in respect of socio-environmental matters.[2]

e) Discuss the form and content of anindependent verification statement (e.g. on anenvironmental management system (EMS) anda report to society). [2]


a) Explain current developments in auditingstandards including the need for new andrevised standards and evaluate their impact onthe conduct of audits. [3]

b) Discuss other current legal, ethical, otherprofessional and practical matters that affectaccountants, auditors, their employers and theprofession.[3]




The main areas to be added to the syllabus areshown in Table 1 below:


Section and subject area Syllabus contentD1(i)d), g) Assignments Planning an auditD2b) Assignments Group audit planning issuesD2d) Assignments Audit impact of changes in group structureF1a) Reporting Appraisal of auditor’s reportF1d) Reporting Actions which may be taken by the auditor where a

modified report is issuedG1c) Current issues Current APB developmentsE 7a), b), c), d), e), f) Other assignments Auditing aspects of insolvency

acca syllabus june & december 2012 this is a narrative ...50-70 compulsory marks from two...

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