oct pq

PQmagazineOctober 2014 www.pqmagazine.co.uk / www.pqjobs.co.uk

BRIBERY AND CORRUPTION

MEET JAMES A PQ STAR

We launch our search for the2015 winners. Get nominating

FARAGE vACCOUNTANCYAll the fun of the fair can be found in this issue!

ACCOUNTANTAND AUTHORWe speak toAnna Belfrage

THE VOICE OF PQs

NEW DATEFOR CIMA

RESULTS P8Christmas not cancelled after all

as results date is moved

P IS FORPROBLEM P21

ACCA admits to big problemswith the options papers

Contact usemail: graham@pqaccountant

twitter: @pqmagazinefacebook: pqmagcall 020 7216 6444

FABULOUSGIVEWAYS!WIN HOLIDAYVOUCHERS OR AN AATSTUDY PACK P36

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comment PQ

News08CIMA results Date changemeans Christmas not cancelled!10ACCA annual report Concernat dip in satisfaction levels12CIPFA new syllabus Detailsto be unveiled after consultation

Features, etc06Mind your Ps&Qs Joining anexclusive club; ACCA not playingfair; and our Twitter updates14Bribery and corruption Spotthe danger signals at work

16ACCA P7 Our guide to passingthis toughest of tough papers19International standards #1The new IFRS 9 explained; anda guide to the work of the FRC

21ACCA optional papers Howto deal with the P papers

24International standards #2IFRS 13 all you need to know

26Lets get technical Tacklingquestions on the Trial Balance

28CIMA 2010 syllabus Voyagethrough the managerial level

29Capital move University ofSouth Wales sets up in London

30PQ Awards 2015 We launchthe finest and most fun awardsin accountancy; and we caughtup with our PQ of the Year32ACCA F4 How the examinerviews the changes to this paper33CIPFA focus IPSAS explained

34CIMA PEGs More highlightsfor the Post Exam Guides35CIMA 2015 syllabus Newexams will differ but how?36Great giveaways Win holidayvouchers and a great AATtraining pack from First Intuition37Profile Meet Anna Belfrage, anaccountant with a successfulsecond career as an author38Careers #1Skills you will need39Careers #2 Life at BPP; andwhat employers expect from you42Fun time Accountancys lighterside; and more great giveways

The columnistsRobert Bruce The financedirectors lot is not a happy one 8Prem Sikka Exploding the myth ofshareholder ownership 10Carl Lygo European tour broughtaccountancy past to life 12

Subscribe to PQ magazineIts FREE see page 40 or go to

www.pqmagazine.co.uk

ABC July 2012June 2013

32,463

Publishers statement: We have adigital issue of the magazine whichis sent to 11,462 requested readers

The power of the press?Well, who would believe it we have helped save Christmas!In August, we exclusively revealed that CIMA had pushed its

November results release date from early January to 23 December2014. That didnt please everyone. I even met someone who felt CIMAwould ruin Christmas for many of its PQs. It was suggested that a farbetter day would be Thursday 18 December and what do you know?CIMA has announced a new release date Thursday 18 December.Hey, we are good!

This month sees the launch of our search for the next winners of thenow-legendary PQ awards. This year we have some new sponsors, inthe form of the ACCA, CIMA, CIPFA and the ICAEW. We also have anew venue for the awards night Caf de Paris, in the heart ofLondons West End. It is just as well we have launched them this monthas we have already had some entries! The nomination form can now bedownloaded at www.pqmagazine.com. Just click on the pqawards tab the form is just a click away. And remember, as we always say, youhave to be in it to win it so come, on get nominating.

We know how exciting it can be to get shortlisted. PQ magazine wasrecently announced as a finalist for the AIA Award for AccountancyMedia. We will tell you how we got on next month, but win or lose weare happy for the nomination and will be celebrating either way.

Dont forget our giveaways. There is still time to enter our holidaycompetition thats 750 worth of Thomas Cook vouchers, courtesy ofHome Learning College. We are also giving you the chance to receive aFirst Intuition Complete Study Pack for one of the key AAT papers(page 36). And theres the Daily Telegraph Tax Guide 2014 and BoostYour Brain books up for grabs on page 42. See how much we love you!Finally, I just wanted to thank Ed Sheeran for making Graham trendyagain. I am just a little upset that his cat, called Graham, has moretwitter followers than me 101,000 when we last looked.

Graham Hambly, PQ magazine editor ([email protected])

CONTENTS October 2014

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PQ have your say

ACCA not playing fairI feel I am being victimised by theACCA repeatedly and Im reachingbreaking point. All they areinterested in is money, money,money.

I write to express my utter disgustabout my June 2014 results. I am a38-year-old man with a family tocare for. It is difficult to study andcare for a family, but I have beentrying very hard. But I must say thatI feel very bitter with the markingteam.

For P7 I was given 46 marks outof 100, and for P5 just 43 out of100. I was expecting to clear myfinal papers, or at least P7. I know Imanaged my time better in thissitting than any other I can recall. Ispent weeks of sleepless nights. Mywife complained that I lost weightchannelling all my energies intothese two final papers. I practised,practised and practised and in aneffort to finish my studies I evenpaid for online tuition, which costme over $2,000. At my exam centreout of the 10 people who sat P5only one passed, and this was herfourth or fifth attempt. Everyonefailed P5.

I now believe what many studentson the online forum have beensaying, that ACCA has a fail rate tomaintain. We students are notstupid and we are getting wisereach and every day. If thistreatment continues the ACCA will

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PQ Magazine Fourth floor, Central House, 142 Central Street, London EC1V 8AR | Phone: 020 7216 6444 | Email: [email protected]: www.pqmagazine.co.uk | Editor/publisher: Graham Hambly [email protected] | Advertising manager: Polly Thrasivoulou [email protected]

Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: [email protected] | Contributors: Robert Bruce, Prem Sikka, Carl Lygo, Tony Kelly, Phil Gammon, Jo Daley | Origination and print services by Classified Central Media

If you have any problems with delivery, or if you want to change your delivery address, please email [email protected] by PQ Publishing PQ Publishing 2014

An exclusive clubI passed my final CIMA exam thisyear but was struggling to getaround to starting the work-basedportfolio. Then I noticed in thelatest issue of PQ magazine astory stating there are just 745members of UK accountancybodies worldwide under the age of25, of which CIMA has just 59. Sowith six months until my 25thbirthday I want to make this veryexclusive club!

Anyway, what Id really like toknow is where thisinformation came fromas its something Idlove to use even if Im

only in the club for a few monthsI can say I was in it! Is there anyway the information can beverified, Im shocked its so low?Mark, LiverpoolThe editor says:The statistics which are onpage 13 of ourSeptember issue come from theFinancial Reporting Councils KeyFacts and Trends in AccountancyProfession report, which isreleased each year in June. Itspacked full of interestingnumbers and is well worthseeking out.

The writer of the star letter each month wins a fantastic I PQ mug!

Hot & TweetPQ magazinerecently travelledto south London,to see some AAT studentsreceive their certificates. It wasa great afternoon, reaffirmingour belief that accountancyqualifications can provideeveryone with an opportunity toget on. So, we said: Well

done Julie Agbowu and her AllInclusive team great AATceremony in Croydon today.

We also tweeted our shockthat a US firm really wasreviving the Andersen name!From today WTAS in SanFrancisco becomes AndersenTax, we wrote. And PQreminded you that paper taxdiscs will come to an end on1st October.

Follow us @PQmagazine

email [email protected]

fail in years to come. Another observation is that I

dont usually get in the 40s in myexams. If I sit a bad exam I usuallyget in the 30s, other than that Ipass.

The honest truth is that I reallyfeel ripped off and I dont feel lovedby ACCA at all.Concerned overseas PQ, by emailThe editor says: We wouldwelcome a response from theACCA on the issues raised here.

Thank you PQ!Thank you so very much for thepower box, tax tables and much-loved PQ mug! It turned up onFriday and it was such a lovelysurprise. I have been reading PQmagazine each month for the pastfive years from cover to cover and Ihave found it useful, not only whileI was preparing for the CIMAexams but also after I qualified.

Thank you so much once again.Zsuzsi, by email

Great exam articlesI really enjoyed two articles in theSeptember issue of PQ Magazine.The one on ACCA F9 paper Management issues by ZoeRobinson provided distinctiveenlightenment about the elementsof the syllabus as well as theexpectations for the exam paperbased on the new format takingeffect in December 2014 examsession. The other one I reallyenjoyed was Are you ready for F7?by Danusia Wysocki. Although Ipassed the ACCA paper F7 in June2014, I found this article reallyinsightful. Financial Reporting isone of my favourite subjects andthe article was a form of revision forme, testing the strength of myknowledge retention. The questionthemes are things one should knowwithout a second thought.

Thank you for such articles. Itwould be nice if one could seemore of these.Olayinka Lawal, by email

PQ oct 14 p6_pq aprl08 p04 11/09/2014 12:12 Page 1

2014 BPP Holdings - BPP Professional Education - Part of the Apollo Global Education Network.

*Pass Assurance terms and conditions apply - See http://www.bpp.com/terms/l/pass-assurance for details.**To qualify for ten Professional Development Courses as part of the Career Development Guarantee with BPP Professional Education Limited (BPP PE) free of charge, two ACCA or CIMA papers must be booked at the same time. This ofer does not apply to our Basics courses. Only certain online Professional Development Courses apply, the list is available at http://www.bpp.com/terms/l/bpp-career-development-guarantee. To qualify for a further online Professional Development Course with BPP PE of up to 500 in value; two years must have lapsed since you attended the tenth free PD course, all ten PD courses must have been attended, you must have passed the two CIMA or ACCA papers purchased as part of the ofer within that 2 year period and you will be required to demonstrate that your career has not developed in that 2 year period. Further conditions apply. The ACCA and CIMA Career Development Guarantee ofer will be available between 08.00am on 2 June 2014 and midnight of 31 December 2014. See http://www.bpp.com/terms/l/bpp-career-development-guarantee for full terms and conditions. Calls will be charged at a local rate.

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8 PQ Magazine October 2014

PQ news

New role for Sir WinSir Win Bischoff (pictured)

has been hire by JP Morgan Chaseas chairman of its main Europeanholding company. In May, he wasappointed chairman ofthe Financial ReportingCouncil (FRC) and therehave been a few raisedeyebrows over this latestappointment. The FRChas said that his new role iscompatible with the work he doesfor them as both positions are parttime.

Reshaping FRSSEThe Financial Reporting

Councils existing FinancialReporting Standard for SmallerEntities (FRSSE) has been

withdrawn. Following changesin EU law, small companiesneed to include less informationin their accounts and fewermandatory disclosures. TheFRC is proposing to issue a

new accounting standard formicro-entities, companies typicallyturning over less than 632,000 ayear. The Financial Reporting

Standard for Micro-entities(FRSME) will make accounts forthese entities simpler.

Exemption problemsCIMAs P2 examiner is not a

happy bunny. Too many PQs arejust not studying the wholesyllabus, says the latest Post ExamGuide. More worrying is the claimof a knowledge gap because ofCIMAs exemption policy. Theexaminer says that this problemhas not been addressed by CIMA,and now students are suffering!

In brief

CIMA November results date brought forward

Are you addictedto your mobile?College students are putting theiracademic studies at risk by spendingup to 10 hours a day on theirmobiles, says new research from theUS. Baylor Universitys JamesRoberts explained that as mobilefunctions increase, addiction to thisseemingly indispensable piece oftechnology becomes an increasinglyrealistic possibility.

His said that 60% of collegestudents admit they may be addictedto their phones and some indicatedthey get agitated when it is not insight. Roberts was worried thatmobiles may wind up being anescape mechanism from theirclassrooms. And for some, phones inclass may provide a way to cheat.

Option papers causeheadache for ACCAsThe ACCA has acknowledged thatthere is a big problem with itsoption paper pass rates.

Commenting after the Juneresults were released, Alan Hatfield,director learning, revealed theACCA is now exploring new andinnovative ways to provide studentswith additional learning support,focusing particularly on the optionspapers.

The P5 paper stood out, evenamong the other poor optionalpaper pass rates it was 29%. TheACCA was disappointed with thisand felt it could be partly explainedby its analysis, which showed thatfewer students accessed tuition forthis paper than any other paper.

Looking at the June test, the P5

examiner is concerned that basicmanagement accounting conceptsare not clearly understood. Here weare talking fixed and variable costs,or comprehending an operatingstatement.

And if you come to the examexpecting to repeat memorisedmaterial then you can expect toscore only 20%30%. See page 21 for more on this.

ACCA EXAM RESULTS JUNE2014 WORLDWIDE

F1 80%; F2 60%; F3 63%;F4 45%; F5 39%; F6 53%;F7 47%; F8 40%; F9 40%;P1 52%; P2 47%; P3 46%;P4 35%; P5 29%; P6 39%;P7 36%

We should not feel too sorry forfinance directors and CFOs. They aregenerally well paid, though thestatistics show that their averagetenure in the role is shortening. Andlife is getting harder. They now facenew dilemmas that have nothing todo with their traditional work andthat takes them into the realm ofspeculation. The UKs corporategovernance code has eased aconcept into play whereby directorsneed to produce a strategic reportthat provides a fair, balanced andunderstandable assessment of thecompanys position and prospects.Nothing much, on the surface, toworry about there. Except for thatword prospects. This has been theFDs bugbear down the ages.Reporting on what the future mayhold has always been hard. And theanswer has generally been toprovide so much information thatsomewhere within that mass of infothere will be a nugget or two thatwill appear relevant when read withhindsight in a few months time.

But the cover-them-with-verbiageoption is harder now. The samecorporate governance code is tryingto limit the amount of voluminousdisclosure.

And this is where the FD is introuble. They will be damned if theydo, and damned if they dont. If whatthey report turns out to be over-optimistic then the likelihood is thatthey will lose their job. And if it turnsout to have been too pessimistic thecompany is likely to be taken overand they will lose their job. Not aneasy life, that of the FD.

ROBERTBRUCEThe FDs lot is not ahappy one

Robert Bruce is an award-winning writer onaccountancy for The Times

CIMA recently announced that the November resultswould not be released on Tuesday 23December 2014. But since PQfeatured the story on our August coverthats all changed instead it will beThursday 18 December. Thats fivewhole days earlier and four short weeksafter the exams have been sat. In onefell swoop CIMA Noels Tagoe hasturned himself from Grinch to Father Christmas!

There had been an outcry from tutors whenCIMA first put forward a results date just two daysbefore Christmas. Many were worried thatdistraught students would not get the immediateadvice they needed, and it seems CIMA has nowagreed.

PQ understands the real hero behind this latestannouncement is CIMAs Graham Eaton, who hassomehow convinced the examiners and markers

to put an extra shift in to get the results back early.

The search is on for those deservingof a PQ trophy. Yes, we are launchingthe PQ magazine Awards 2015. Wehave a new lush venue for you tolook forward to this year the Cafde Paris, in Londons West End.

We also have some new sponsorsyou may have heard of the ACCA,CIMA, CIPFA and ICAEW are all keysponsors this year,along with BPP,Kaplan Financialand many others.

Last yearsawards were amammothsuccess. Amongthe winners wereRotherham Colleges SamanthaHannigan, Birmingham MetropolitanCollege and Reed Business School.

Our Private Sector Lecturer of theYear winner, Jennifer Saywell(pictured), features in this monthsLife at feature (see page 39) and ourPQ of the Year James Field is a coverstar! Find out how to enter on page 31.

Win one ofour PQs!

Hatfield: working hard to make things better

PQ oct 14 p8_pq sept 12 p08 11/09/2014 10:55 Page 10

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PQ news

The ACCA is concerned. Its latestannual integrated report showsthere has been a big year-on-yearfall in overall student and membersatisfaction. The perceived valueof the ACCA to the two groups isdown from 76% last year to70.8% this time around.That said, 83% of studentsand 78% of members stillbelieve they are part of aworld-class organisation.

That global organisationachieved a 4.8% growth in incomefor 2013/14 to 159m. Fees andsubscriptions grew by 7.5%, and atthe end of the year the ACCA wasleft with a gross operating profit of25.9m, up by more than 3m.

The ACCA reveals that 80% of itsincome is derived from its 384,287students. These student numbersare again up, this time by 3.2%,due to a combination of increasedrecruitment and improvedretention. Qualification and examincome totalled 78m. Affiliates

and students also contributed37m in fees and subs to thecoffers. The cost of exam deliverywas 4.6m

The ACCAs report identified 25material issues, which it asked

external stakeholdersto rank in order ofimportance toACCAs strategy.The top two are theintegrity of thequalification andstudent/member

growth and retention. The report also reveals Helen

Brand is some way down theleague table of accountancy bodyCEO pay. Her 339,772 packageleaves her in fourth place, behindthe CIMA, ICAS and the ICAEWCEOs.Members: 169,602 (2012-13161,943)Students & affiliates: 435,824(425,897) Staff: 1,098 (1,061)

ACCA ANNUAL REPORTOUT FOR INSPECTION

MOTIVATIONIS THE KEYEmployers want PQs who aremotivated and have relevant workexperience, according to the latestIndustry Report from GAAPweb andLSBF. The survey of what employerswant also discovered soft skillsscored slightly higher than technicalskills. Employers put teambuilding andcommunication skills to the test wheninterviewing, as respondents felt thatmany PQs simply cant communicate,either verbally or in writing.

Communicating skills was then thetop of employers list of soft skills tohave, with 88% considering them tobe important or extremely important.These were followed closely bybusiness and personal ethics, peopleskills and teamwork, problem solvingand time management. See page 39 for more on this reportand details of how to download acopy.

Tax champ: Welldone to Kumuthra

Jeveendran thewinner of the Best

Taxation studentat Northampton

University Awards.PQ magazine

sponsors the prize.She is picturedhere with EwanTracey, subject

head foraccounting and

finance

PwC suspension PWCsregulatoryadvisory serviceshave beensuspended for

24 months from acceptingconsulting engagements atfinancial institutions regulated bythe New York State Department ofFinancial Services (NYDFS). Ontop of this it must make a $25mpayment to the State of New Yorkand implement a series of reformsafter improperly altering a reportsummited to the regulators

regarding sanctions and anti-money laundering compliance atthe Bank of Tokoyo Mitsubushi.

Deloitte resultsDeloitte has unveiled its results forthe year ended 31 May. Profitdistributed to partners for 2014was 554m. This means theaverage profit earned by eachpartner, after providing forpensions and annuities to retiredpartners was 750,000, down22,000 on the previous year.Some 3,400 people were hired,including 1,500 entry-level

positions taking total staffnumbers to 14,000.

Baby-faced fraudstersFraud cases totalling 317m wererecorded in the first half of 2014,says the latest KPMG FraudBarometer. The figure representsa 39% drop on the same periodlast year, but the number offrauds has risen. The researchshowed a marked increase infrauds committed by those under-35 years old. In fact fraud among26-35 showed a 285% increasecompared to the first half in 2013.

The world of the CIMA PQ ischanging. From January 2015, youwill be preparing for exams whereyou need to get70% right (for theOT tests).

Anticipating this,Kaplan Publishinghas been adding alot more resourceand support to thenew official studytexts, practice kitsand revision cards. CIMAs academicfaculty has also been heavily involvedin reviewing the new texts.

PQ magazine chatted recently toKaplans Ben Wilson about thechanges to the CIMA 2015 syllabusmaterial. He pointed out that therewill be lots of opportunity for studentsto practise what looks like the realthing in the new texts and exampractice kits. These question banksarent just simple multiple-choicequestions either we are talkingdrag-and-drops, data entry andlinked questions here.

For the case studies, Kaplan isalso producing an enormous amountof new material. This will helpstudents get up to speed on thetechnical knowledge as well as withthe specifics of the case study itself.

Kaplans official material is beinglaunched on 15 September.

You need70% toget a pass

The Parliamentary Commission onBanking Standards has recommendedthat company law should be changedto remove shareholder primacy inrespect of banks, and require directorsto ensure the financial safety andsoundness of the company ahead ofthe interests of its shareholders.

The myth of shareholder ownershipof companies is likely to thwartreforms. The ownership of shares in alarge company is very different fromthe privileges and duties associatedwith the ownership of other forms ofproperty, such as a pen or a car.

A company is a legal entity distinctfrom any individual shareholder.Shareholders elect directors, but thatdoes not give them the right tomanage corporate assets. At AGMs,shareholders can ask questions aboutcorporate practices but cannot binddirectors to a particular strategy. Mostvotes at AGMs are advisory rather thanbinding. Shareholders cannot forcedirectors to pay a dividend. Theycannot demand to see a companysbooks, or personally audit them.Anyone injuring someone by misusingtheir car can be held personally liable,but despite receiving incomeshareholders are not liable for theharmful practices of companies.

At best, the holding of sharesresults in a very weak notion ofownership. It does not giveshareholders the powers to manage,direct and control the company. Soany system of corporate governance oraccounting solely predicated on shareownership will fail.

PREMSIKKA

The myth ofshareholderownership ofcompanies

Prem Sikka is professor of accountancy at theUniversity of Essex

pq oct 14 P10_pq sept 12 p08 09/09/2014 14:24 Page 8

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PQ news

My holiday this year turned into anaccidental trip through accountinghistory. I visited Tuscany, in Italy, thebirthplace of Father Luca Bartolomeode Pacioli (the father ofbookkeeping), who is accredited withpopulising the double-entry system ofbook-keeping. His seminal work,published in Venice in 1494, touchedon ethics and cost accounting, andexplained the accounting cycle usedby Venetian merchants at the time,describing journals and ledgers,debits, credits, assets, liabilities,capital, income and expenses.

In Florence, the records of aFlorentine banker from 1211 areperhaps the earliest known evidenceof the double entry-system actuallybeing used in practice.

As you walk around the streets ofFlorence you see the influence of themedieval guilds that organised everyaspect of the Citys economic life andthe impact of the Medici family. TheFlorentine bankers of the 11th and12th centuries even developedbranches in France and England atthat time.

In Paris, I was trying to find a placeto park when I stumbled across theLouvres underground parkingcomplex (pricey but it had space).Visiting the Louvre with my children Istumbled across the Susa ClayAccounting Tokens used in the Urukperiod (4,000-3,100 BC).

As I tried to explain to my 11 yearold how the clay stones had anythingto do with accounting I was informedby a curator that the Elamites usedthe clay tokens to record transactionsand enable purchasers to check thatthey had the right amounts ofproduce. It looked as far away froman Excel spreadsheet as you can get!

CARLLYGO

Europeantour broughtthe past tolife

Professor Carl Lygo ischief executive of BPP

CIPFA is gearing itself up to unveila new professional qualification(PQ) syllabus, to be launched firstfor certificate entrants in 2015.

Chief executive Rob Whitemanwrote to all employers this summerwith the proposals, which he hopesbetter reflects the needs of UKpublic finance practitioners, inparticular for a wider range ofcommercial skills.

CIPFA explains that thequalification will remain both afinancial management and an auditqualification, with greater portabilitybetween the public and privatesectors.

The changes will also equip

students to meet the requirementsof the new local public act throughlocal audit RQB status and toreactivate CIPFAs companies actRQB status so it can uniquelyequip professionals with enhancedskills to sign off both public and

private sector accounts.Another key component of the

proposals is to provide easier andmore streamlined routes into bothCIPFA training and membership forholders of other qualifications.

Whiteman explains plans arealready advanced for an enhancedCIPFA Learning Hub.

The institute is also reviewing itsworkplace experience scheme, thePractical Experience Portfolio(PEP). It wants to help exam-qualified students complete theirportfolio and proceed quicker tomembership. This will place agreater emphasis on the role of theemployer, stressed Whiteman.

Complete package

CIPFA SET TO REVEALNEW 2015 SYLLABUS

GROWING CALLS TOTAKE STUDENTS OFFIMMIGRATION TARGETFirst Intuition has launched its new

Complete Study Pack for AATdistance learning and classroomstudents. To celebrate the new packcomes with a 25% discount.

Nine months in the making, thestudy packs have two study banksaccompanying the course notes. Thesecond set are more challenging andmirror what is seen in the realassessment. There are also severalmock assessments for students toattempt as they make their finalpreparation for the real thing.

Gareth John, MD of First IntuitionsAAT distance learning division, toldPQ: I am excited to see this materialgoing out to students. As well asthe range of practice examplesand mock assessments thatstudents will have, there arecomprehensive explanations andworkings for all tasks. This willmake it clear to them how to get tothe correct answer. PQ magazine has joined forceswith First Intuition for a greatgiveaway check out page 36.

Pressure is growing on the UKgovernment to exempt

foreign students from itsplans to cut netimmigrant.

Responding to newpolling for Universities

UK suggesting that thepublic do not see international

students as migrants, the Instituteof Directors DG Simon Walker hassuggested that the crack down isthe worst possible way to reduceimmigration. The UK is a worldleader in higher education, and thatit is one of our key exports, he said.

Deputy PM Nick Clegg (above)says he believes students shouldnot be counted in the immigrationfigures, while former cabinetminister Lord Heseltine saidstudents have to be excluded fromimmigration figures to preventdamage to university finances andthe maintain the 'life-long goodwill'the UK gets from foreign graduates.

A book in the handPQ studiers should take note

of recent research undertaken atFrench and Norwegian universities.It appears that those who readpaper copies of novels rather thanebooks remember more of theplots. Apparently, the physical actof holding a book in your handsand turning the pages allows youto retain the details of what you are

reading, say academics. If this istrue for accountancy studiers thenthe days of the study manualshould be far from numbered!

FRED 55The FRC has issued a new

exposure draft: FRED 55 DraftAmendments to FRS 102 Pension obligations. The draftshould clarify issues relating to

accounting for definedpension plans inadvance of the newUK GAAP, whichbecomes mandatoryfrom 1 January 2015.

ICAEW calls for volunteersICAEW wants volunteers to

support the next generation ofchartered accountants. There are

lots of ways you can getinvolved, from mentoring ateam of young people at theNational Business, Accountingand Skills Education

competition heats, to signing up forthe ICAEW careers advisor networkand visiting your old school,college or university to share yourexperiences as an ICAEW student.Visit icaew.com/careers for more.

In brief

Rob Whiteman

Most ICAEW advanced students stuck with the tried-and-tested at the latestexam session the Business Reporting and Business Change papers.

The ICAEW exams are in transition, so some students chose to sit thenew Corporate Reporting and Strategic Business management papers.Looking at the pass rates they may have wished they didnt! The pass ratefor Corporate Reporting was just 37.8%. Sitters of the Strategic BusinessManagement paper did better, with a 67.3% pass rate.

Meanwhile, back to the old syllabus and we have an 85% pass rate forBusiness Change and 83.8% for Business Reporting. Those sitting the casestudy test managed a 74.4% success rate.

ACA advanced stage results now in

PQ oct 14 p-12_pq sept 12 p08 09/09/2014 14:25 Page 8

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013_PQ 1014_PQ 1209 000 08/09/2014 14:01 Page 7


PQ ICAEW spotlight

David Stevens offers a guidefor the unwitting on thisdarkest of the dark arts

Bribes can be tricky to spot,whether someone is trying tosubtly but corruptly influenceyour behaviour, or a colleague hasalready succumbed to such influence,and is trying to obscure the receipt orpayment of a bribe from your eyes. Therecan be a fine line between a bribe and agenuine expense, making it easy for theformer to be disguised as the latter.

You may be faced with bribery andcorruption when you are at your mostvulnerable, whether due to commercialpressures, isolation or straightforwardflattery.

The relevant legislation is The BriberyAct 2010. It is broad in scope andapplies to UK citizens and UK companieswherever they do business. If you are anICAEW student you will be expected todemonstrate an understanding of TheBribery Act 2010 throughout your examsat all levels.

Penalties for bribery includeimprisonment and substantial fines.Consider the scenarios below:QDuring the audit of a luxury goodsdistributor, you are asked if youwould like to take a pen home with youas a gift. It seems there is some excessstock in the warehouse. How do yourespond?AIt is an offence to bribe anotherperson or to be bribed yourself. Thiscore offence is widely defined and coversall bribes, given or received in a personalcapacity as well as those made in acorporate setting for a businessadvantage.

The core offences relate to the givingor receipt of bribes to improperlyperform a function which is expected tobe carried out: in good faith. impartially. where the person involved is in aposition of trust.

Identify the purpose of the offer. It maybe innocent. It may be that you are oneof many recent visitors who have walkedaway with a pen and have no furtherexpectations placed upon them. Nodoubt your employer will have a policyregarding the acceptance of gifts; thisshould be adhered to.

While not the deciding factor, the valueof the pen may be an indicator of thepurpose of the offer. It is highly unlikely

that a disposable biro will raise anyeyebrows, but it is not unusual to paythousands of pounds for a Mont Blanc.Lets not put a price tag on a clean auditreport. QUpon landing at Erewhon Airport,the customs official informs youthat a standard processing fee of $20is required to allow you entry into thecountry. Should you hand over themoney?A You may be on the verge of bribinga foreign official. This specificoffence covers any financial advantagepaid, offered or promised where theintention is to: influence foreign officials, inperformance of their functions. obtain or retain business or a businessadvantage.

This situation could make you verynervous, particularly when travellingalone. But it is important to determinewhether the fee is genuine or not; itshould be accompanied with officialnotices and a receipt for payment. If thisis not the case, stand your ground. Youmay want to call your employer for adviceand assistance. Travellers can also calltheir local embassy.

QOne of your agents has just sentyou her invoice for approval.Included in her expenses is a large roundsum figure for client entertainment. Howshould you proceed?A Commercial organisations commitan offence if they, or any personassociated with them, bribes anotherperson intending to obtain or retainbusiness or a business advantage.

This offence can be committed not justby UK companies, but by any non-UKcommercial organisation which carries ona business, or part of a business, in anypart of the UK.

The purpose of the expenditure is key,not necessarily the amount or what isbeing purchased.

The extent to which the expenditure isincidental is also a factor. An itemisedinvoice providing a breakdown of theexpense will be useful, along with furtherenquiries of the agent.

If the response is unsatisfactory, andyou suspect the expense goes beyondgenuine entertainment, the matter shouldbe escalated within your organisation.

Further information available aticaew.com/bribery David Stevens is Integrity and LawManager at ICAEW

PQ

BRIBERY: A GUIDE

Smile for thecamera: Formula 1chief BernieEcclestone paid a60m settlementto end a briberycourt case inGermany,exploiting aloophole inGerman law that manycommentatorsviewed as peverse

pq oct 14 p-14_Layout 1 08/09/2014 16:38 Page 23

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F7 E3

F8

P2

015_PQ 1014_PQ 1209 000 08/09/2014 14:03 Page 7

Pass rate: 33% (December 2013) Technical difficulty: 9/10 Weighting of calculations: 5-10% Weighting of discursive

elements: 90%95% Exam technique: 8/10

The syllabus .P7, Advanced Audit and Assurance, can bebroken down into these key areas:

Regulatory environment: This covers theregulatory framework for audit and assuranceservices, money laundering and laws andregulations. These are examined from time totime but are more peripheral syllabus areas.

Professional and ethical considerations: Thisarea is usually tested in section B of the paper,but has also appeared in section A and may beexamined more than once in the same paper.Students are advised to spend sufficient timeunderstanding this area. In particular, rememberthat this is advanced audit and assurance, soanswers to this type of question need moreconsideration that those required for paper F8.

Practice management: This covers qualitycontrol, advertising, fees, tendering andacceptance of professional appointments. Qualitycontrol has been examined relatively frequentlyin recent years. Tendering has also beenexamined on several occasions. Students shouldmake sure they are comfortable with these areas.Those not working in practice may struggle alittle with these questions, therefore practisingexam questions on these topics is key.

Audit of historical financial information: Thissyllabus area is likely to represent a substantialproportion of the P7 exam. In particular, riskassessment and audit evidence will featureheavily. Being able to distinguish between auditrisk, risk of material misstatement and businessrisk is essential for scoring a good mark. Theability to write sufficiently detailed auditprocedures is also very important.

Other assignments: These include review offinancial information, due diligence, prospectivefinancial information, forensic audits, internalaudit and outsourcing. UK variant students maysee questions covering insolvency, and for INTvariant students the audit of performanceinformation in the public sector is a new topicfrom December 2014 onwards. There is often aquestion included in the exam that covers thisarea.

Reporting: Reporting typically appears as aquestion in section B of the paper, but it hasbeen known to appear in section A and couldappear more than once in the same exam. Thisis a core syllabus area.

There are usually two types of questions onaudit reports: Advise on the implications for the audit reportof the issues described in the scenario or Critically appraise the draft audit report

included in the scenario. Students should makesure they understand the elements of the auditreport and the different modifications that canbe made.

Sitting the P7 exam .The examiner has stated that the P7 exam willbe difficult to pass if students dont work in anaudit or assurance environment. So the rightpreparation is essential. Risk assessment make sure you know thedifference between the three types of risk thatcan be examined. Ensure you can explain theimpact of the risks on the audit. Revise your P2 accounting standards. Anauditor is providing an opinion on whether theclient has prepared their financial statements inaccordance with the financial reportingframework. Several types of questions requirethis knowledge: risk assessment, completion andaudit reporting. If you dont know the relevantaccounting treatment you are significantlyaffecting your chances of passing this paper. You are sitting an advanced paper. You needto include sufficient detail for an advancedanswer. Simply stating the same things youwould in an F8 exam will not be sufficient. Ensure you spend time reading model answersfrom past papers to see the full extent of whatcould be included in an answer. Yes, the modelanswers are far longer than you can produce inan exam but dont be scared of them. Use themto help you understand the issues and learnfrom them. Dont assume the exam is easy because it iswritten. Dont think you can waffle on and theanswers are given to you in the scenario. Thisisnt the case at all. You have to describe howthose issues affect the audit/assurance. You willhave to demonstrate understanding of theaudit/assurance process.

In summary, dont underestimate this paper.Preparation is key. Practise past exam papersand read the examiners reports to understandthe mistakes that students typically make so youcan avoid making those same mistakes. Use thetechnical articles available to help understandthe core topic areas. Past papers, examinerreports and technical articles are all available onthe ACCA website. Paula McGrath is the P7 Content Specialistat Kaplan Financial

PQ

16

PQ ACCA P7 paper

PQ Magazine October 2014

It might be a clich, but when itcomes to P7 practice really doesmake perfect, says Paula McGrath

Now do your reading

pq oct 14 p16_Layout 1 08/09/2014 16:41 Page 14

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PQ Magazine October 2014

Our mission .The FRC is the UKs independent regulatorresponsible for promoting high-quality corporategovernance and reporting to fosterinvestment. In our work we: Create a reportingframework that encouragestrustworthy behaviour bydirectors and professionals, andengagement with them by investors. Encourage companies to produce trustworthyinformation that contributes to informeddecisions. Build justified confidence internationally in theUK regulatory framework for corporategovernance and reporting, including across theEU and other major capital markets.

What we do . We set the UK corporate governance andstewardship codes as well as UK standards foraccounting, auditing and actuarial work. Weissue and maintain UK GAAP-simplifiedaccounting standards for SMEs. We represent UK interests in internationalstandard setting. We work closely with the EUand a range of international bodies to encourage

high-quality international standards. We monitor and take action to promote thequality of corporate reporting and auditing. We

inspect 100 audits and review around 399sets of reports and accounts annually.

We operate independent disciplinaryarrangements for accountants andactuaries. We undertake investigations

into potential cases of professionalmisconduct affecting the public interest.

We oversee the regulatory activities of theaccountancy and actuarial professional bodies.

Regulatory approach .The FRC seeks to act in the public interest.Investors, insurance policyholders, pensionscheme members, savers, employees, consumers,creditors, taxpayers, clients or professionalaccountancy and actuarial advice and othergroups are affected by the issues we addressthrough our work. High standards of governanceand reporting are essential to them all.

Parliament has conferred the privilege oflimited liability on the directors of listedcompanies. In return, shareholders and thepublic have the right to expect high standards ofaccounting and reporting, supported by effective

19

international standards PQ

PQ the Financial Reporting Council

FRC at a glance What is the Financial Reporting Council all about? We let them explain

independent audit. In the listed sector inparticular, investors provide equity without rightsover a companys assets but against anexpectation of high standards of governance andreporting to a level that enables them to takegood decisions as owners. Confidence in thissystem helps bring forward investments andunderpins growth.

Our structure .The FRC board has overall responsibility for thestrategic direction for the organisation, approvingthe plan and budget, and changes to codes andstandards. It is supported by: The executive committee, responsible forrecommending the strategic direction of the FRCand the FRC board, providing the day-to-dayoversight of the work of the FRC, implementingthe FRCs annual business plan and advising theboard on the FRCs budget. The codes & standards committee, primarilyresponsible for advising the FRC board onmaintaining an effective framework of UK codesand standards for corporate governancestewardship, accounting, auditing andassurance, and actuarial technical standards. The conduct committee responsible foroverseeing the review of corporate reports andaccounts, audit quality reviews, monitoring theprofessional bodies, professional discipline, andoversight of the regulatory responsibilities of theaccountancy/actuarial professional bodies. Contact details: Financial Reporting Council, 8thfloor, 125 London Wall, London EC2Y 5AS.Twitter: @FRCnews. Web: www.FRC.org

PQ

IFRS: REFORMING NUMBER NINE

The International Accounting StandardsBoard (IASB) has completed the finalelement of its comprehensive responseto the financial crisis by issuing IFRS 9 FinancialInstruments. The package of improvementsintroduced by IFRS 9 includes a logical modelfor classification and measurement, a single,forward-looking expected loss impairmentmodel and a substantially-reformed approach tohedge accounting. The new Standard will comeinto effect on 1 January 2018 with earlyapplication permitted.

Classification & Measurement .Classification determines how financial assetsand financial liabilities are accounted for infinancial statements and, in particular, how theyare measured on an ongoing basis. IFRS 9introduces a logical approach for theclassification of financial assets, which is drivenby cash flow characteristics and the businessmodel in which an asset is held. This single,principle-based approach replaces existing rule-based requirements that are generallyconsidered to be overly complex and difficult toapply. The new model also results in a singleimpairment model being applied to all financialinstruments, thereby removing a source of

complexity associated with previous accountingrequirements.

Impairment .During the financial crisis, the delayedrecognition of credit losses on loans (and otherfinancial instruments) was identified as aweakness in existing accounting standards. Aspart of IFRS 9, the IASB has introduced a new,expected-loss impairment model that will requiremore timely recognition of expected creditlosses. Specifically, the new Standard requiresentities to account for expected credit lossesfrom when financial instruments are firstrecognised and to recognise full lifetimeexpected losses on a more timely basis. The

IASB has already announced its intention tocreate a transition resource group to supportstakeholders in the transition to the newimpairment requirements.

Hedge accounting .IFRS 9 introduces a substantially-reformedmodel for hedge accounting, with enhanceddisclosures about risk management activity. Thenew model represents a significant overhaul ofhedge accounting that aligns the accountingtreatment with risk management activities,enabling entities to better reflect these activitiesin their financial statements. In addition, as aresult of these changes, users of the financialstatements will be provided with betterinformation about risk management and theeffect of hedge accounting on the financialstatements.

Own credit? .IFRS 9 also removes the volatility in profit or lossthat was caused by changes in the credit risk ofliabilities elected to be measured at fair value.This change in accounting means that gainscaused by the deterioration of an entitys owncredit risk on such liabilities are no longerrecognised in profit or loss. Early application ofthis improvement to financial reporting, prior toany other changes in the accounting for financialinstruments, is permitted by IFRS 9. PQ

The IASB completes the reform of financial instruments accountingwith the release of a new-look IFRS 9, which replaces IAS 39


020_PQ 1014_PQ 1209 000 08/09/2014 16:13 Page 7

PQ Magazine October 2014 21

ACCA optional exams PQ

HOW DO YOU IMPROVEOPTIONAL PASS RATES?BPP .

Choosing carefully: The first thing to consider ishow you choose. This is your opportunity tospecialise, with each of the papers focusing on aparticular area that feeds up from a related skillspaper, specifically F5 to P5; F6 to P6; F8 to P7;and F9 to P4. You should choose to sit thepapers you did well in at the skills module agood understanding of the assumed knowledge(the feeder knowledge leading up to the paper)will put you in a better position. If you reallyhated audit, and struggled to study and pass F8,then P7 is probably not the best choice for you.

If you are working in a particular area or haveexperience of it, then you will have beenpractising some of it in a real worldenvironment, which will help you when it comesto learning about the topics.Getting a head start on study: As mentioned,the papers have assumed knowledge from theskills papers, so it is worth spending some timebefore your course/studies start to review thesetopics. Having a solid foundation on which tobuild will result in much stronger higher-levelknowledge. You could buy the textbook or othermaterials to recap, or some learning providerswill give you free access to the requiredknowledge when you buy your options course.

It will also be important to read around thepapers in more detail, to see how they work inreal life. Your lecturers should give yourecommended articles; the ACCA website willinclude useful resources; and you can look outfor articles in the business press or accountingpublications. Being able to relate the topics toreal life will help to cement ideas in your mind.

Overall, these final level papers require morethan just doing the question practice, as it isyour opportunity to prove you are ready to jointhe elite group of professionals that are theACCA members.

Not sure which options paper to choose orwhat they cover? You can get access to day oneof each course for free, including a paperoverview video, lectures and course notes for thefirst day with a Free BPP Options starter pack,sign up here: http://accountancy.bppeloqua.com/starter-pack#!/acca Thanks to Davinia McGann and her team

LSBF .The F4-F9 papers usually average 45% passrates, and P1-P3 average 50%. But the optionsaverage a lot less only 35%. Given thatstudents reaching the final papers must surelybe relatively strong on average, what is going on?Heres six of the issues:1. Very few marks are given for knowledge or

calculations, most marks are for analysis andapplication and most students rely too muchon memorising facts rather than practice ofscenario-based questions.2. Technical knowledge from lower level papershas been lost (or was never there in the firstplace).3. There are fewer questions on the paper butthey are for a larger numbers of marks and withlonger scenarios. This means those with timemanagement problems are more likely to getfound out.4. A lot of marks are available for the quality ofexplanations, but too few students are willing towrite a sentence that includes the wordbecause.5. These papers require students to understandwhat the examiner is looking for it cannot belearned out of a book. This means distancelearning students struggle more than on otherpapers.6. Students must understand what the examineris looking for, yet a worryingly large proportion ofPQs dont read the Examiner Report after eachsitting, so are at risk of making all the usualmistakes when attempting the paper.

It must also be noted that students on thefinal papers will be older, with more

responsibilities at work (and at home), and sohave less time available to study. Some lowerlevel papers can be covered by last-minutecramming (not advisable, of course), but theoptions papers need an approach built onstudying over a period of time. Time that a lot ofstudents at this level do not seem to have. Thanks go to Paul Merison, Director of ACCACourses at the London School of Business &Finance

Becker .At P level you are expected to demonstrate theability to apply your knowledge to life-likeproblems, which the examiners test using casestudies. You need to develop these higher skillsof application and analysis by practising pastexam questions. Also read widely to improveyour knowledge of the real business world quality newspapers and technical articles arehighly recommended.

If possible, only select the paper if your markin the underlying F level paper was good (thatis 60%+) and you love the subject.

Understand how the examiner thinks. Thismeans working through all the recent past examquestions under exam conditions and readingthe examining teams articles and reports.

Clear and structured presentation is vital foranswers at the professional level. If you producean unstructured jungle of calculations andrambling irrelevant discussion then little creditwill be given and you will probably lose the fourprofessional marks, too.

In numerical questions, make it easy for themarker of your script state your approach torequirements and insert a short commentarybetween your steps.

It is crucial to understand the meaning of theverb in the requirement (assess, discuss, etc)and to ensure your answer follows therequirements faithfully.

After attempting a past exam question,analyse your answer; compare it with thesuggested answer, consider if your answer iswell planned, and whether or not it adds value.Does it make reference to the scenario? Andread the examiners report relating to thatquestion.

Do not leave your studies to the last minute being properly prepared means at least sixweeks (evenings and weekends) of solid work,perhaps eight. Finally, attempt two mock examsunder exam conditions; and get them marked bya tutor who can give you feedback. Then youcan learn from your mistakes. Thanks to Beckers optional paper specialisttutors for this advice PQ

Something has gone wrong with the optional papers and the ACCA is looking to provide additional learningsupport. In the meantime, heres what the experts suggest you do to help yourself with the dreaded P papers


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You will receive individual and personalised coaching over two full days, online or in class, ending with a mock exam. Revision Plus will help you to learn how to interpret questions, eliminate distractors and perform quick workings to ensure the answer is completed within the allowed time. The course is structured around online questions sat at a computer that have the same look and feel as the real exams. Tutors will access live reports and performance indicators throughout the day so they can personalise their debriefs and feedback to your specific needs.

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What the exams and courses look like

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We know that the new case study exams are one of your biggest

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023_PQ 1014_PQ 1209 000 09/09/2014 10:53 Page 7

Prior to the introduction of IFRS 13Fair Value Measurement, manydifferent standards each gavetheir own guidance on how to measure fairvalue (FV). This led to inconsistenciesbetween entities. To improve comparability,FV measurement was added to the IASBsagenda in 2005 and IFRS 13 was issued in2011 (effective from 1 January 2013).

FV is defined as: the price that would bereceived to sell an asset, or paid to transfer aliability, in an orderly transaction betweenmarket participants at the measurement date. The price, often referred to as the exit price. An orderly transaction, ie not a forcedtransaction. Market participants buyers and sellers inthe principal (or advantageous) market that are:independent; knowledgeable; able and willing.

FV measurement assumes transactionhappen in the principal market for example,the market with the greatest volume/level ofactivity for that asset/liability.

In the absence of the principal market, usethe most advantageous market for example,the market that produces the highest net receipt

per unit after considering all costs to sell.Note: FV is not adjusted for transaction costs.

Example 1 .An asset is sold in two countries at two differentprices:

Country A Country BPrice per unit 100 105Transaction costs 5 3Delivery costs 2 2

If Country A is the principal market, FV per unit,after deducting delivery but not transactioncosts, would be 98.

If neither country is the principal market, lookat the most advantageous market. Country Bproduces a higher net receipt, 100, thanCountry A, 93.

Country B would therefore be used tocalculate FV of 103 (ignoring transactioncosts).


PQ international standards

Lynne Woolley explains all youneed to know about IFRS 13

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A sense of fair play Example 2 .When calculating FV, alternative uses of theasset/liability should be considered: A factory site is acquired for 5m. Nearby sites, recently developed for residential

purposes, have a value of 6m. Factory demolition costs 0.2m

The FV would be 5.8m based onthe highest and best use of the land: Current use, 5m; vs Alternative use, after demolitioncosts, 5.8m.

When calculating FV, an entityshould use valuation techniques thatare appropriate in the circumstances

and for which sufficient data are available maximising use of observable inputs andminimising use of unobservable inputs.

Observable inputs are developed usingmarket data.Level 1 inputs: quoted prices in active marketsfor identical assets/liabilities, eg equity shares ina listed company.Level 2 inputs: are observable, directly orindirectly, eg quoted prices for similarassets/liabilities.Level 3 inputs: are unobservable inputs, forexample discounted future cash flows using theentities own financial information.

The standard gives highest priority to Level 1inputs.

While Historic Cost is still deemed to be morereliable and less subjective, FV produces a morerelevant value to users for decision making. Lynne Woolley, Reed Business School

PQ

pq oct 14 p 24_Layout 1 11/09/2014 09:30 Page 23

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025_PQ 1014_PQ 1209 000 08/09/2014 16:14 Page 7


PQ technical update

Its my birthday in early October. Isay that not because I expect lots ofpresents from eager readers(although PQ magazine will be quitehappy to pass them on) but because itmeans that my star sign is Libra. I amnot a big believer in astrology andhoroscopes (although now I think aboutit, there was a full moon when I met mywife) but I do sometimes wonder if beinga Libran, the sign of balance which isrepresented by a set of scales, played apart in leading me into a career as anaccountant.

Double entry, the fundamentallanguage of accountancy, has to involvebalance; the total of the debits beingposted must equal the total of the creditsbeing posted. And if every single doubleentry posted in a period balances, thenno matter how many transactions areprocessed the total of the debits in thegeneral ledger should always equal thetotal of the credits. This is exactly what isshown in the Trial Balance. It is literally atrial to see if the debits and the creditsbalance.

Making entries in a trial balanceEntering account balances into a trialbalance is essentially a test of basicdouble entry principles. I use thecommon DEAD CLIC mnemonic toremind myself which side of the trialbalance different types of ledger accountwill go on.

DEAD stands for:Debits can beExpenses, such as rent or salariesAssets, such as cash or trade receivablesDrawings, when a sole trader takesmoney out of the business

CLIC stands for:Credits can beLiabilities, such as a bank loan or tradepayablesIncome, such as sales or interestreceivedCapital, when a sole trader puts moneyinto the business

Lets say that we have the followingledger account balances in the generalledger at the end of a period: cash9,000, capital 5,000, purchases3,500, sales 4,500 and bank loan3,000. The trial balance will look likethis:

And you can see that this trial balancedoes indeed balance.

You should be able to follow thesesame basic rules no matter how manyledger account balances you are dealingwith.

A few ledger account balances to be careful with!Lets consider some account balancesthat students often have problems with:Returns: Returns can be thought of asthe opposite of the transaction that theyrelate to.

Sales are a form of income so go onthe credit side of the trial balance. Salesreturns will reduce the income generatedfrom sales (as some of the customers

Birthday boy Gareth John explains all you need to know about the Trial Balance concept as befitting a Libran

sent the goods back) so go on the debitside.

Purchases are an expense whichwould go on the debit side of the trialbalance. Purchases returns will reducethe expense so go on the credit side.Discounts: Discounts allowed tocustomers reduce the actual incomereceived and will reduce the profit of thebusiness. They are therefore an expenseof the business so would go on the debitside of the trial balance.

Discounts received from suppliers willreduce the expense suffered forpurchases and will increase the profit ofthe business. This reduction to anexpense would therefore go on the creditside of the trial balance.VAT: The balance on the VAT controlaccount can potentially be on the debit orthe credit side of the trial balancedepending upon whether output VAT isgreater than input VAT or vice versa.

VAT owed to HMRC (a net paymentposition) is a liability which would be onthe credit side of the trial balance.

VAT owed from HMRC (a net reclaimposition) is an asset (similar to tradereceivables) so should be on the debitside.Sundry income: Although sales made tocustomers are normally the main form ofincome that a business will generatethere may also be income from othersources. Whether it is rent received,interest received, commission receivedor birthday money received (hint, hint!)it is income for the business andtherefore goes in the credit column of thetrial balance.

Heres one for you to attempt. Once youhave had a go watch me working throughmy solutions atwww.firstintuition.co.uk/blog/aat-blog.htmlDraw up a trial balance for the followingledger account balances; sales 12,000,purchases 5,000, rent 2,000, salaries1,000, cash 1,500, machinery 3,500,sales returns 500, purchases returns400, discounts received 200,discounts allowed 300, capital 1,000,rent received 150, VAT owed to HMRC1,500, sales ledger control account3,000, purchases ledger controlaccount 1,200, bank loan 350. Gareth John is a tutor/director withFirst Intuition andhelps to manage theirAAT distance learningprogramme. He was PQMagazine AccountancyLecturer of the Year in2011

PQ

LETS GET TECHNICAL

LEDGER ACCOUNT DEBIT CREDIT

Cash (an asset so part of DEAD) 9,000Capital (capital so part of CLIC) 5,000Purchases (an expense so part of DEAD) 3,500Sales (income so part of CLIC) 4,500Bank loan (a liability so part of CLIC) 3,000

12,500 12,500

pq oct 14 p-26_Layout 1 09/09/2014 14:36 Page 23

027_PQ 1014_PQ 1209 000 08/09/2014 14:02 Page 7


PQ CIMA 2010 syllabus

FINANCIAL MANAGEMENT.When it comes to F2, the verbs tendto be evenly split when it comes tomark allocation. So explain,calculate, prepare, analyse,compare and contrast anddiscuss will all be seen in thispaper in equal measure.

The examiner revealed thatsection A generally scores highermarks overall than section B, withQ6 scoring higher than Q7.

Sitters need a betterunderstanding of the principles ofconsolidation. They also dont seem tounderstand ROCE, said the examiner.

Another real concern for the examiner is therote learning by tutors in areas such as ratioanalysis, group accounting and consolidation.Unless students understand why they are doingsomething they will never learn.

PQs are told they need to continue to tailortheir answers to the specific scenario and theintended reader be it an investor, entity, bankor colleague.

F2 MARKS PER QUESTION

QUESTION 1 (10 MARKS)All UK Africa

May 2012 76% 75% 74%November 2012 40% 41% 35%May 2013 69% 70% 65%November 2013 76% 77% 71%













MANAGERIAL LEVELENTERPRISE MANAGEMENT .

The hot verbs in this paper are discuss andexplain. The examiner is, however, concernedabout the poor planning in the exam hall. Manycandidates are just not writing enough and theirapplication of models is poor.

It was stressed that it is not the case thatbullet points are absolutely forbidden. In fact,they can sometimes be useful as they drawattention to important information. But most E2exams require the development of concepts,ideas and theories.

The examiner pointed out that mereregurgitating the definition of theories will not getyou through this test.

There are also worries about students lack ofknowledge when it comes to the important topicof ethics. Do you know what makes an ethicalorganisation? You should also be able to answerwhy being socially responsible does not conflictwith responsibilities to shareholders.

E2 MARKS PER QUESTION















The figures for P2 Performance Managementappeared in PQ magazine, page 30, August 2014

Which questions are you doing well and which ones are a problem? Our statistics unveil the unequivocal truth

pq oct 14 p28_pq oct 09 p12,13 11/09/2014 09:31 Page 12

The University of South Wales has a richheritage of delivering highly respectedaccounting and finance programmesthat provide industry-ready students.

It is the only university to win the PQmagazine Public Sector Accountancy College ofthe Year twice, in 2010 and 2012. In 2013, itcelebrated 40 years of ACCA tuition at itsNewport campuses, and it has a trio of topaccreditations for its Newport-basedprofessional courses ACCA Platinum ApprovedLearning Partner, CIMA Quality Partner andICAEW Partner in Learning.

The university works closely with localemployers and professional bodies. Forexample, it runs industry-focused work-basedlearning programmes (such as the MSc inFinancial Services, delivered for a consortium oflocal firms including Admiral and Atradius); canaccredit experience gained in the workplace viathe APEL scheme and hence provide fast-trackprogrammes to groups of employees withinorganisations; provides bespoke CPD forprofessional body networks and individualorganisations; runs a Legal and Financial AdviceClinic that dispenses free advice to individualsand businesses while providing work experiencefor students; and hosts an investment society forstudents in conjunction with a local trading firm.

In London, the university is expanding itsaccounting ad finance offer into London,providing students with a truly metropolitanexperience and the opportunity to study andwork in the heart of the worlds financialmarkets. Students will be able to immerse

themselves in both the academic and practicalsides of global professional services.

The London centre is located at DocklandsAcademy. It provides students with first-classfacilities (including a trading room) and aninspirational environment to learn and growprofessionally.

It offers a number of postgraduate accountingand finance courses, taught by professionallyqualified accountants and specialists with awealth of teaching experience.

These include two innovative newprogrammes an MSc Trading & Risk,developed with a number of trading firms to

oct pq

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