ti corporate reporting study guide 2013

7/29/2019 ti Corporate Reporting Study Guide 2013

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The Institute of Chartered Accountants in England and Wales

CORPORATE REPORTINGAdvanced Stage

www.icaew.com

Study Guide

For exams in 2013


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Contents

1 Introduction 1

2 Aim of the papers & specification grid 3

3 Study guide 4

4 Skills assessment guide 31

5 Technical knowledge 34

6 Key resources 37


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Study guide 1

1 Introduction

1.1 What is the Advanced Stage?

Structure and progression

The Advanced Stage of the ACA qualification is designed to ensure that candidates are able to integrate

and apply their technical, professional and ethical skills in a variety of business environments.

The diagram below shows the five modules which form the basis of the Advanced Stage. The AdvancedStage is comprised of two technical integration modules and the Case Study. The two technical

integration modules will be examined in a business scenario context which draws together a number of

different areas of technical knowledge.

The Professional Stage consists of knowledge modules and application modules. The knowledge

modules introduce the core technical knowledge and skills required by a chartered accountant. The

application modules further develop and assess practical application of technical knowledge and skills.

The technical knowledge acquired at the Professional Stage is developed to an advanced level and

integrated in a broader range of business scenarios in the Advanced Stage technical integration

modules. The application of technical knowledge in these modules requires an appreciation of thetypical issues and problems facing businesses and their relationship to corporate reporting, assurance

and taxation. A greater depth of business and financial analysis will be required to understand the

implications and risks arising from the business issues.

New technical topics are introduced in the technical integration modules, that are not dealt with

elsewhere in the syllabus. A deeper level of technical ability is expected of candidates across the entire

ACA syllabus to reflect the greater financial and business awareness needs of trainee chartered

accountants approaching qualification. This is reflected particularly in assessing candidates proficiency

and ability to integrate knowledge and skills both within and across technical subjects in a range of

complex business scenarios.

Candidates will also be required to apply professional knowledge using more advancedskills in the

technical integration modules. These professional skills are then examined to a greater extent in the final


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Corporate Reporting2

ACA module: the Case Study. This module requires higher level cognitive skills, analytical and evaluative

skills and emphasises the importance of communication and articulation skills.

Assessment

The two technical integration modules will be examined using traditional paper based assessments. Each

paper based exam will be 3.5 hours in length. These exams will contain questions requiring the

integration of knowledge both within technical disciplines and across technical disciplines. Questions

integrated across all subject streams are an essential step towards the Case Study but will generally have

more structure and guidance than those at the Case Study.

The Case Study will continue in its present format of a four hour written exam with advance

information provided to candidates ahead of the exam and impact information issued in the exam,

containing the Case Study requirements.

Flexibility

There are no regulations stipulating the order in which candidates must attempt the technical

integration modules. The Case Study must be the final module attempted and can only be attempted in

the final year of a training contract.

There is no restriction on the number of attempts permitted at each advanced stage module.

Open Book Policy

Candidates may take any written or printed material into the exam hall subject to practical space

restrictions.


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Study guide 3

2 Aim of the papers and specification grid

2.1 Module aim

The aim of the Business Reporting paper is:

To ensure that candidates can apply analysis techniques, technical knowledge and professional

skills to resolve real-life compliance issues faced by businesses.Candidates may be put, for example, in the role of a preparer of financial statements, or other corporate

reports such as on sustainability and corporate responsibility, an advisor or in an assurance role facing

business issues where there are reporting implications. Compliance issues relating to taxation will also

feature in this module.

Candidates will be required to use professional judgement to identify and evaluate alternatives and

determine the appropriate solution(s) to compliance issues, giving due consideration to the commercial

impact of their recommendations.

The aim of the Business Change paper is:

To ensure that candidates can provide technical advice in respect of issues arising in business

transformations, mergers, acquisitions, alliances and disposals.

Candidates will be required to analyse and interpret both external and internal financial and non-

financial data in order to plan for change and provide advice. In undertaking this analysis candidates will

be expected to evaluate the impact of stakeholder influences on the data, including the impact of

choice of reporting policies.

Taxation and practical business techniques are particularly important in this module, where business

techniques include aspects of business strategy, business finance, performance management and

costing. There will also be financial reporting, assurance, ethical and legal implications to be considered

when developing and assessing strategic and business plans.

2.2 Specification grid

This grid is a general guide as to the subject matter within this module and assessment coverage over aperiod of time.

BR BCWeighting (%) Weighting (%)

Ethics and law 5 10 5 10Taxation 20 30 25 35

Audit and assurance 30 40 10 20Corporate reporting 30 40 15 25Business analysis 0 30 35


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3 Study guide

3.1 Help yourself study for your ACA exams

The right approach

1 Develop the right attitude

Believe in yourself Yes, there is a lot to learn. But thousands have succeededbefore and you can too.

Remember why you're doing it You are studying for a good reason: to advance your

career.

2 Focus on the exam

Read through the Syllabus in this

guide

This tells you what you are expected to know.

3 The right method

See the whole picture Keeping in mind how all the detail you need to know fitsinto the whole picture will help you understand it better.

The Practical significance and Working context to

each chapter in the study guide put the material into

context.

The Learning objectives and Section overviews in

the Study Manual show you what you need to grasp.

Use your own words To absorb the information (and to practise your written

communication skills), you need to put it into your own

words.

Take notes. Answer the questions in each chapter.

Draw mindmaps.

Try 'teaching' a subject to a colleague or friend.

Give yourself cues to jog your

memory

The Study Manual uses bold to highlight key points.

Try colour coding with a highlighter pen.

Write key points on cards.

4 The right recap

Review, review, review Regularly reviewing a topic in summary form can fix it in

your memory. The Study Manual helps you review in manyways.

Each Chapter Summary will help you to recall that

study session.

The Self-test actively tests your grasp of the essentials.

Go through the Examples in each chapter a second or

third time.


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Study guide 5

3.2 Study cycle

The best way to approach the Study Manual is to tackle the chapters in order. We will look in detail at

how to approach each chapter below but as a general guide, taking into account your individual

learning style, you could follow this sequence for each chapter.

Key study steps Activity

Step 1

Topic list

This topic list is shown in the contents for each chapter and helps you navigate

each part of the book; each numbered topic is a numbered section in thechapter.

Step 2

Introduction

The practical significance and working context sections for each chapter set

out in this study guide give you the big picture in terms of the context of the

chapter. The Examination context guidance shows what the examiners are

looking for and tells you why the topics covered in the chapter need to be

studied.

Step 3

Section overviews

Section overviews give you a quick summary of the content of each of the

main chapter sections. They can also be used at the end of each chapter to

help you review each chapter quickly.

Step 4

Explanations

Proceed methodically through each chapter, particularly focusing on areas

highlighted as significant in the chapter introduction or study guide.

Step 5

Note taking

Take brief notes, if you wish. Don't copy out too much. Remember that being able

to record something yourself is a sign of being able to understand it. Your notes

can be in whatever format you find most helpful lists, diagrams, mindmaps.

Step 6

Examples

Work through the examples very carefully as they illustrate key knowledge and

techniques.

Step 7

Answers

Check yours against the suggested solutions, and make sure you understand

any discrepancies.

Step 8

Chapter summary

Review it carefully, to make sure you have grasped the significance of all the

important points in the chapter.

Step 9

Self-test

Use the Self-test to check how much you have remembered of the topics

covered.

Step 10

Learning objectives

Ensure you have ticked off the Learning objectives.

Moving on...

When you are ready to start revising, you should still refer back to the Study Manual.

As a source ofreference (you should find the index particularly helpful for this).

As a way to review (the Section Overviews, Examination Context, Chapter Summaries and Self-test

questions help you here).

Remember to keep careful hold of the Study Manual you will find it invaluable in your work.


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Studyguide

7

Study

Period

Pract

ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

1

Financialmarketsconstantlyrequire

up-to-datecorporateinformation.

Reportingfrequencyhasincrea

sed,

withinterim

reportingplayingan

importantroleinthecorporate

reportingcycle.

Thepreparationofinterim

financial

statementsmaypresentanum

berof

challenges.Itiscommonforso

me

businessarrangements,suchassupply

pricingagreements,bonusschemes,

taxationandoverheadallocatio

n,tobe

basedonannualisedapproaches.The

measurementandpresentation

ofsuch

informationmaythereforebec

omplex.

Stopan

dthink

Whatisthepurposeofpresentinga

statementofcomprehensivein

come?

Whatarethechallengespresen

tedin

thepreparationofinterim

finan

cial

reporting?

Asaprofessionalaccoun

tant,youwill

needtopreparebothye

arendand

interim

financialreports.

Chapter1addresse

stwostandards:

IAS1Presen

tationo

fFinancia

l

Statemen

tsandIAS

34Interim

Financia

lReport

ing.

YouhavestudiedIA

S1indepthin

yourearlierstages.

IAS1wasrevised

in2011,andabrie

fdiscussionofthe

revisionisincluded

forcompleteness,

althoughthestand

ardcameoutto

latetobeexaminablein2012.

IAS34Interim

Finan

cia

lReport

ing(a

newtopicatAdvan

cedLevel)lays

downtheprinciplesandguidelines

fortheproduction

ofinterim

reports.

Youshouldnoteth

attheguiding

principleofIAS34

isthatanentity

shouldusethesam

erecognitionand

measurementprinc

iplesinitsinterim

statementsasitdoesinitsannual

financialstatements.

Essentialpoints

IAS1terminology

Presentationo

fother

comprehensiv

eincome

Amendedpurposeof

statementofc

hangesinequity

Form

andcon

tentofinterim

reports,useofestimates

Guidingprinciplesinthe

preparationo

finterim

statements

UKGAAPislargelyonitsway

outexceptforverysmall

companies


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Studyguide

9

Study

Period

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ica

lsign

ificance

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ingcon

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ints

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3

IAS10

EventsAftertheReporting

Period

Regardlessofhowquicklythef

inancial

statementsarepublishedaftertheend

oftheyearsubsequenteventsand

transactionscanbesosignificantthat

theyneedtobeconsideredfor

either

disclosureoradjustmentor(in

extreme

situations)fortheireffectonth

e

underlyingprincipleofgoingc

oncern.

IAS37

Provisions,Contingent

LiabilitiesandContingentAss

ets

IAS37hasstrengthenedtherequired

treatmentofprovisionsinthisarea

whichisnowmoreobjectiveand

restrictive.Provisionsneedtob

e

recognisedonthebasisofobligations

ratherthanmanagementinten

tions.

Stopan

dthink

Whattypeofeventscouldbec

lassified

asadjustingornon-adjusting

respectively?

Whattypeofeventscouldaffectthe

underlyingprincipleofgoingc

oncern?

Whyshouldthedateonwhich

the

financialstatementswereauthorisedbe

disclosed?

Inaworkingenvironmentyouwill

havetoassesstransactio

nsand

eventstakingplaceafter

the

reportingperiodandadvisehow

theseshouldbeaccountedforor

disclosed.Youwillneed

toidentify

theappropriatecut-offd

atewhich

willdependontheprocessof

authorisationandthereporting

entity'sjurisdiction.

Youwillberequiredtoidentify

circumstancesinwhichprovisionswill

berequiredandwhencontingent

liabilitiesorcontingenta

ssetsshould

berecognised.

Chapters2and3g

iveabriefrevision

ofstandardscovere

dingreatdetailin

termsofcontentan

dapplicationat

professionallevel.

Theyaddressthere

portingofassets,

impairment,liabilities,provisionsand

contingenciesandeventsafterthe

reportingperiod(p

reviouslyknown

aspostbalanceshe

etevents).These

arelikelytobeexaminedinan

integratedwaywithotherareasat

AdvancedLevel.

Revisethemainprinciplesand

attempttheinterac

tivequestions.Go

backtoyourearlierstudiesifyou

haveaproblem

answeringthese.Use

theSelf-testquestio

nsforfurther

revision.

Youshouldbe

awareofthe

interrelationsh

ipsbetween

standardswhicharesignificant

inansweringquestions.

Youwillhavecoveredtheseat

Professionalle

velandwill

encounterthe

m

throughthe

illustrationsan

dquestionsin

thischapter.


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lsign

ificance

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ingcon

tex

t

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Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

Howshouldanerrorthatishig

hlighted

intheperiodofreviewuptoth

e

authorisationdatebedealtwith?

Howshouldanentitydealwith

an

errorthatwasidentifiedafterthe

financialstatementshavebeen

authorised?

Underwhatcircumstancesshoulda

provisionberecognised?What

isthe

relationshipbetweenaprovisio

nanda

contingentliability?

Whenshouldacontingentasse

tbe

recognised?


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5

Thedetailedqualitativeand

quantitativedisclosuresrequire

dby

IFRS7areintendedtoprovide

tothe

usersoffinancialstatementsan

understandingofthesignifican

ceof

financialinstrumentsfortheen

tity's

positionandperformanceand

an

analysisoftheriskstowhichth

eentity

isexposedandhowitmanagesthem.

Stopan

dthink

Whatisthesignificanceofthe

classificationofconvertiblestock

betweendebtandequity?

Whywasitnecessarytoissuea

detailed

standardondisclosures?

Youwillneedtoprepare

detailed

disclosuresforfinancialinstruments

andestablishthecorrectpresentation

ofpreferencesharesand

convertible

instrumentsbetweende

btand

equity.

Chapter5coversth

epresentation

anddisclosurerequ

irementsofIAS32

andIFRS7.

Althoughyouwillh

aveadetailed

knowledgeofIAS3

2from

earlier

studies,theimportanceofthistopic

cannotbeunderestimated.Makesure

youunderstandtheissuesrelatingto

theaccountingofc

ompound

financialinstrumen

ts.

Lookinparticulara

tthequalitative

disclosuresrequired

byIFRS7for

eachtypeofrisk.

AllareasofIAS32were

examinableat

Professional

levelalthough

onlythebasic

areasofIFRS7

werecoveredat

thatstage.

Thischapterp

rovidesan

overviewofIA

S32and

addressesinm

oredetailthe

requirementsofIFRS7.

Essentialpoints

Accountingfo

rcompound

financialinstru

ments

Accountingfo

rdifferenttypes

ofpreferenceshares

Significanceoffinancial

instrumentsdisclosuresor

financialpositionand

disclosure

Quantitatived

isclosures

Qualitativedis

closures

Creditriskand

changeinvalue


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lpo

ints

Due

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te

7

Mostentitieswhichareexpose

dto

variousfinancialrisksemployhedging

techniquestore

duce

fluctuationsin

thevalueorcashflowsoffinan

cial

instruments.Hedgeaccounting

attemptstoreflecttheeconom

ic

aspectsofhedgingintheaccounting

treatmentofsuchrelationships

.The

hedgeaccountingrequirement

softhe

internationalaccountingstandards

requiretherecordingofstrateg

iesand

measurementoftheeffectivenessof

thehedges.Entitiesmust,therefore,

developandmaintainsystems,

processesanddocumentation.

Entities

willnormallyundertakeacost/benefit

analysistodeterminewhetherornotto

undertakehedgingstrategiesand

hedgeaccounting

Stopan

dthink

Whatishedgeaccounting?

Whatisahedgeditem?

Whatisahedginginstrument?

Whatisthedifferencebetween

the

differenttypesofhedges?

Whatarethequalifyingcriteria

for

hedgeaccounting?

Howishedgingeffectiveness

measured?

Inaworkingenvironmentyoumay

havetotesthedgingtransactionsto

establishwhetherthesequalifyfor

hedgeaccounting,topr

eparethe

necessarydocumentatio

nand

implementtheaccountingtreatment.

Chapter7isperhapsthemost

complexanddema

ndinginthistext

andlikelytotakeyouthelongestto

study.

Studycarefullythe

threetypesof

hedgesandworkthroughallworked

examplesandinter

activequestions.

DotheSelf-testfor

furtherpractice.

Thehedgecriteriaareveryimportant

andcouldbetestedinanintegrated

questionaspartof

theauditingof

controlsanddocum

entationrelating

toderivatives.

Ensureyouareable

toassessand

explainhedgeeffec

tiveness.

(Thetreatmentofh

edgingwillbe

simplifiedwhenIFR

S9comesinto

force.)

Thecharacteristicsof

derivativesreferredtointhis

chapterhavebeencoveredin

theBusinessA

nalysisStudy

Manual.

Essentialpoints

Typesofhedg

ingrelationships

Cashflowhedge

Fairvaluehe

dge

Hedgeofanetinvestmentin

aforeignop

eration

Hedgecriteria

Hedgeeffectiv

eness


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ingcon

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t

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lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

Stopan

dthink

Whatarethemaintypesofsho

rt-term,

long-term

andpost-employment

benefits?

Whatisthedifferencebetween

defined

benefitanddefinedcontributio

n

schemesforpost-employment

benefits?

Whyistheaccountingforthed

efined

benefitschemefarmoredifficu

ltthan

thedefinedcontributionschem

e?

Whydowehavetodisclosekey

assumptionsandmethodsused

inthe

accountingfordefinedbenefit

pension

schemes?

Whyistheconceptofexpense

smoothingallowedbyIAS19

consideredcontroversial?

Whataretheaccountingcomp

lications

ofpost-retirementbenefitsotherthan

pensions?

IAS16Propert

y,

Plan

tan

d

Equ

ipmen

tallo

wsdirectly

attributablecostsofemployee

benefitsarisingdirectlyfrom

theconstructionoracquisition

ofproperty,p

lantand

equipmentto

beincludedin

thecostofinitialrecognition.

IFRS3Business

Com

bina

tions

requiresthatinabusiness

combination,

anentity

recognisesass

etsandliabilities

arisingfromp

ost-employment

benefitsinacc

ordancewith

IAS19.

IAS19contain

soffsetcriteria

foremployers

withmorethan

oneplanwheresomearein

surplusandothersindeficit

whichclosely

followthoseof

IAS32Financia

lInstrumen

ts:

Presen

tation.

IAS19require

splanassetsto

bevaluedattheirfairvalue

whichisdefinedasinIAS39

Financia

lInstru

men

ts:

Recogn

itionan

dMeasuremen

t.

IAS19hasbeenrevisedyou

wontbeteste

donthedetail

butshouldhaveanoverview


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lla

bus

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dessen

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lpo

ints

Due

Da

te

Essentialpoints

Shorttermem

ployeebenefits

Postemploym

entbenefits

Definedcon

tributionplans

Definedben

efitplans

Definedbenefitplans

Investmentrisk

Actuarialrisk

Pensionsurp

lusordeficit

Currentserv

icecost

Interestcost

Actuarialgainsandlosses

Planassets

Corridorme

thodtobe

abolishedand

soless

importantfor

theexam

than

previously.

IAS19revisionsasacurrent

issue


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ints

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te

9

Inmajorcapitalmarketsthepo

tential

gainsthatseniormanagement

can

achievethroughshare-basedpayment

transactionsaresosignificantthatthey

maydwarfotherelementsof

remunerationpackages.

BeforethepublicationofIFRS2

there

wasnorequirementtoinclude

an

expenseinprofitorlossforthiskindof

remuneration.Thisresultedinentities

thatofferedlowcashsalariesbutlarge

quantitiesofshare-based

compensationrecordinglowcostsin

theirperformancestatements.By

comparison,entitiesoperating

ina

morestableandmatureindustrywhere

cash-basedremunerationwast

he

norm

recordedhigheremploye

ecosts

intheperformancestatement.

Stopan

dthink

Ifthegrantingofequityinstrum

ents

doesnotrequiretheentitytop

artwith

assetswhyshouldachargebe

recognisedinprofitorloss?

Whyhasthisbeenacontrovers

ial

standardpolarisingviewsatthe

highestpoliticallevel?

Whatistheimpactofshare-based

paymentsonearningspershare?

Inaworkingenvironmentyoumay

havetoassesstheeffect

ofgranting

stockoptionsasaremuneration

policyontheentitysfin

ancial

statementsandadviseonhowthese

shouldbereportedand

disclosed.

Chapter9Share-ba

sedPaymen

tis

anothernewtopic

atAdvancedLevel.

Itishighlytopicala

nditsadoption

hasnotbeenwitho

utcontroversy.

Itisimportantforitsimpacton

performanceandthepotential

dilutionofEPS.

Notethethreetypesofshare-based

paymentrecognise

dbythestandard

andtheimportanceofvesting

conditions.

Toestimateth

efairvalueof

options,IFRS2requiresthe

useofanoptionpricing

model,althou

ghtheStandard

doesnotspecifywhichmodel

shouldbeused.Option

pricing,suitab

lemodelsand

theinputsorparametersto

thesemodelsarecoveredin

yourBusiness

AnalysisStudy

Manual.

IAS24Re

lated

Party

Disclosures

requiresanen

titytodisclose

theconsiderationgiventokey

management

personnelin

termsofallsh

are-based

transactions.

UnderIAS12Income

Taxes,the

cumulativeexp

enseassociated

withshare-basedpayment

transactionsgivesrisetoa

deductibletem

porarydifference

asitisfullyexp

ensedinadvance

ofbeingrecog

nisedfortax

purposes.

Essentialpoints

Share-basedp

ayment

transactions

Equity-settle

d

Cash-settled

Withachoic

eofsettlement


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19

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Period

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ica

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ificance

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ingcon

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t

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lla

bus

lin

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dessen

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lpo

ints

Due

Da

te

Whatistheimpactinthestatementof

financialposition?

Vestingconditions

Marketbase

d

Non-market

based

Modifications

toequity

instruments

Determiningt

hefairvalueof

equityinstrumentsuseof

models


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10

Businesscombinationsarebecoming

increasinglycomplex.Thenatu

reof

purchaseconsiderationandthe

legal

form

ofsuchtransactionsareoften

drivenbyfinancialandtaxfeatures.

Structuresarecarefullymodelle

dto

ensurethattransactionsoptimisepost-

acquisitionearningsaswellasmeeting

corporatestrategicobjectives.

Usersshouldcarefullyreviewth

e

disclosuresincludedinthefinancial

statementsregardingbusiness

combinations.Intheyearthata

businesscombinationhastakenplace,

thefinancialresultsoftheacqu

ired

entitywillbe.Extensivedisclosures

allowusersofthefinancialstatements

tounderstandtheeffectofthe

combinationonthegroup'sop

erations

duringtheperiod.Thisimprovesthe

predictivevalueofthefinancial

information.

Stopan

dthink

Whyarebusinesscombinations

becomingincreasinglycomplex?

Inaworkingcontextyouwillhaveto

accountforacquisitions,disposals

andbusinesscombinatio

nssuchas

investmentsinassociates,joint

ventures,orconsolidatio

nsof

subsidiaries.

Youmayalsoberequiredtoprepare

consolidatedstatements

ofcash

flows,whicharelikelyto

includethe

effectofacquisitionsand

disposals.

Youwillhavecove

redthestandards

revisedinthischap

terinyourearlier

studies.Payparticu

larlyattention

calculationofgood

willincludingthe

non-controllinginterest

Workthroughtheexamplesand

interactivequestion

stoensureyou

understandthekey

principles.

Youmustalsoensu

rethatyou

understandthecalculationsrequired

forstepacquisitionsanddisposals

againthesedifferfrom

thoseseen

previously.

Revisetheprinciple

srelatingto

consolidatedstatem

entsofcashflows

andreturntoyour

earlierstudiesif

necessary.

IFRSs10to12revisethedefinitionof

controlandthetreatmentofjoint

arrangements,and

alsochangethe

requireddisclosures.Asummaryis

givenforcompleteness,butthey

werepublishedtoo

lateforthe2012

examination.

Youwillhavecoveredallthe

Standardsrevisedinthis

chapteratPro

fessionalStage,

althoughnotnecessarilyinthe

levelofdetail

requiredfor

CorporateRep

orting.

Essentialpoints

Subsidiaries

Associates

JointVentures

Investments

Stepacquisitio

ns

Part-disposals

Consolidatedstatementsof

cashflows

IFRSs10to12

asacurrent

issue


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te

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ing

22

Study

Period

Pract

ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

Stopan

dthink

Whataretheprimaryandsecondary

indicatorsoffunctionalcurrenc

y?

Atwhatrateareforeigncurrency

transactionsrecognisedinitially

and

howareoutstandingmonetary

and

non-monetaryitemsatthereporting

datetranslated?

Whatistheaccountingtreatmentof

exchangedifferencesonmonetaryand

non-monetaryitems?

Howareanentity'sfinancialstatements

translatedfrom

itsfunctionalin

toa

presentationcurrency?

Howisthestatementof

comprehensiveincometranslatedfor

consolidationpurposesandwh

ereare

exchangedifferencesreported

inthe

consolidatedfinancialstatemen

ts?

Howareforeigncashflowsrep

ortedin

thestatementofcashflows?

Howareinflationarypricerises

managedandreportedinthef

inancial

statements?

Re-state

Monetaryas

sets/liabilities

Non-monetary

assets/liabilities

Itemsofincome/expenses

Gain/lossonn

etmonetary

items

Foreigncurren

cycashflows

Transactions

inforeign

currency

Foreignsubsidiaries

Reportingtranslation

differences


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23

Study

Period

Pract

ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

12

Taxationisamajorexpensefor

businessentitiesandhasadirecteffect

oncashflowandperformance.

Corporateincometaxesaream

eans

bywhichgovernmentsprovide

incentivesforcompaniestoact

ina

particularway,forexamplebeneficial

taxcreditstoencourageresearchand

developmentandallowancesto

encourageinvestment.Therefo

re,

althoughtaxableprofitisbased

on

accountingprofit,thereareoften

importantdifferences.Account

ingfor

thesetypesofdifferencesisthe

major

emphasisofthischapter.

Stopan

dthink

Howdoesdeferredtaxarisean

dhowis

itmeasured?

Howmaydeferredtaxariseingroup

accountingorwhennon-currentassets

arerevalued?

Inaworkingcontextyoumayhave

toidentifydeferredtaxassetsand

liabilitiesarisingoutofd

eductible

andtaxabledifferencesandreport

andpresenttheseasappropriatein

thefinancialstatements.

Chapter12Income

Taxesgivesabrief

overviewofthema

terialthatyou

havecoveredatprofessionallevelon

currenttaxandgoesontoaddress

thecomplexandnewtopicof

deferredtax.

Youmustunderstandtheconceptof

temporarydifferencesandhowthese

giverisetodeferredtax.Gothrough

theexamplesverycarefully.

Ensurethatyoufollowthesteps

relatingtothereco

gnitionand

measurementofde

ferredtax.

Studythepresentationanddisclosure

requirements

Therecognitio

nofabusiness

combinationinaccordance

withIFRS3Bu

siness

Com

bina

tions

mayleadto

temporarydifferencesarising.

IAS27Consol

ida

tedan

d

Separa

teFinan

cia

lStatemen

ts

canleadtode

ferredtax

balancesintheconsolidated

financialstatementswherethe

accountingtreatmentmay

differfromthetaxtreatment

intheindividu

alcompany

financialstatementsofthe

subsidiaries.

Therevaluatio

nofproperty,

plantandequ

ipmentunder

theallowedalternative

treatmentofIAS16Property,

Plan

tan

dEquipmen

tleadsto

temporarydifferencesarising.

Essentialpoints

Taxabletemporarydifferences

Deductibletemporary

differences

Taxbaseofas

setsand

liabilities

Determiningt

hedeferredtax

balance


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Period

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ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

Deferredtaxa

ndrevalued

asset

Deferredtaxa

ndbusiness

combinations


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Study

Period

Pract

ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

IFRS4InsuranceContracts

IFRS4Insurance

Con

tractsattem

ptsto

provideaframeworkwithinwh

icha

commonsetofreportingprinciplesare

setouttoproviderelevantinformation

thatwillassistauser'sundersta

ndingof

theentity'sfinancialstatements.

IAS26AccountingandRepo

rting

byRetirementBenefitPlans

Retirementbenefitplans(otherwise

called'pensionschemes',

'superannuationschemes'or

'retirementbenefitschemes')are

collectively,financiallysignificantas

majorsuppliersoffundsforcorporate

financing.

Stopan

dthink

Whydoentitiesholdinvestment

properties?

Whatarethefinancialreporting

challengesintherecognitionand

continuedmeasurementofinvestment

properties?

Howdowedistinguishbetwee

n

biologicalassetsandagricultural

produce?


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Studyguide

27

Study

Period

Pract

ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

Whataretheissuesrelatingto

insurancecontractsthatneedt

obe

consideredinsettingoutthere

porting

principles?

Whyisthereportingofrelevan

tand

timelyinformationbyretirement

benefitplansimportant?


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Period

Pract

ica

lsign

ificance

Work

ingcon

tex

t

Approach

Sy

lla

bus

lin

ksan

dessen

tia

lpo

ints

Due

Da

te

14

Earningspershare(EPS)isone

ofthe

mostcommonlyusedperformance

measuresworldwide.Moreover,itis

alsoacomponentinthepriceearnings

ratiowhichisakeysummarystatisticin

businessvaluation.IAS33Earn

ingsper

Shareseekstoprovideguidanceto

ensureaconsistentbasisisfollo

wedso

thatameaningfulcomparisoncanbe

madeovertime.

InadditiontobasicEPS,IAS33

requiresadilutedfigurewhich

takes

intoaccounttheexistenceof

convertibleinstrumentsalready

issued

thatcouldincreasethenumberof

shares.AdditionalEPSfiguresa

reoften

reportedbyentitiesbasedonw

hat

theyconsidertobesustainable

earnings.Theseareintendedto

provideamorerealisticmeasureof

futureperformance.

Stopan

dthink

Whatistheimpactofbonusiss

ues,

rightsissuesandshareconsolid

ations

onEPS?

Whatistheimpactofconvertib

les,

optionsandcontingentlyissuable

sharesonEPS?

WhyareadditionalEPSmeasur

esoften

disclosed?


tant,youwill

needtocalculatebasice

arningsper

shareanddilutedearnin

gspershare

whereapplicable.Youw

illalsoneed

toappreciatethesignificanceof

additionalEPSfiguresan

dhowthese

maybecalculatedtoprovideamore

stableperformancemea

sure.

Chapter14addressesIAS33Earn

ings

per

Share.Youwillhavehada

workingknowledgeofIAS33from

earlierstudiesinclu

dingthe

calculationofbasic

anddiluted

earningspershare(EPS).

Advancedleveladd

ressesfurther

aspectsofdilutionincludingthe

effectofoptions.

Whereanentityhaspreference

sharesinissue

thesewillbe

classifiedasdebtorequity

accordingtot

heirtermsas

requiredbyIA

S32Financia

l

Instrumen

ts:Presen

tationwhich

youwillhavealreadystudied

atProfessionallevel.

Employeeshareoptionswhich

canleadtodilutionofEPSare

coveredbyIFRS2Share-base

d

Paymen

t.Thesearebriefly

addressedint

hischapterand

coveredinmo

redetailin

Chapter9.

Essentialpoints

BasicEPS

Impactofpreferenceshares

DilutedEPS

Convertiblesa

nddilutedEPS

Optionsandd

ilutedEPS

Contingentlyissuableshares


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ints

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Da

te

16

Theinformationthatisprovide

dbya

companytoitsshareholdersformsthe

basisfortheformationofideas

about

theprospectsofthecompany.

Financialanalysisassessestheq

ualityof

thisinformationandhelpsstakeholders

makedecisions.

Stopan

dthink

Whatarethemaintypesofcreative

accounting,andhowcanaccountsbe

restated?

Whatarethemainfinancialrat

iosand

whatarethemainaccountingissues

involvedintheirconstructiona

nd

application?

Howdoweforecastfinancial

statementsandanalysetheimpactof

businessdecisionsonthevalue

ofa

company?


tantyou

needtoappreciatetheimportanceof

disaggregatedinformationasabasis

forfinancialanalysis,performance

evaluationanddecision

making.You

shouldbeawareofthedifficultiesin

interpretingfinancialinformationasa

resultoftheflexibilityaffordedby

certainstandardsandth

epotential

misrepresentationofsuc

h

information.

Thischapterbrings

together

elementsofyourst

udyfrom

your

wholetext,aspects

ofBusiness

Analysisandasignificantamountof

yourearlierstudyo

nfinancialratios.

Makesureyouarefamiliarwiththe

financialrationscoveredinearlier

studies.

Notethesignificanceoffinancial

analysisinassessing

thequalityof

informationprovidedtostakeholders

andinhelpingform

decisions.

Section10hasanu

mberof

miscellaneouscurre

ntissues,included

forcompleteness

Thematerialisbasedonthe

ratios,financia

lanalysisaswell

asallthestandardsandtheir

applicationas

coveredat

professionalle

vel.Italsodraws

ontheadditionalaspectsof

IFRScoveredinthisbookand

buildsonknowledgegainedin

theBusinessA

nalysisStudy

Manual.

Essentialpoints

Financialratio

s

Businessstrate

gyanalysis

Industryanaly

sis

Accountingan

alysis

Accountingdistortions

Creativeaccounting

Howwecanimprovethe

qualityoffinancialinformation

forecasting


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Study guide 31

4 Skills assessment guide

4.1 Introduction

As a Chartered Accountant in the business world, you will require the knowledge and skills to interpret

financial and other numerical and business data, and communicate the underlying issues to your clients.

In a similar way to the required knowledge, the ACA syllabus has been designed to develop your

professional skills in a progressive manner. These skills are broadly categorised as:

Assimilating and using information

Structuring problems and solutions

Applying judgement

Drawing conclusions and making recommendations

4.2 Assessing your professional skills

The work experience requirements for students provide a framework to develop appropriate work

experience, completion of which is essential in order to qualify for membership. Work experience is also

an essential component for examination preparation.

The work experience framework is built aroundfive key skills:

Business awareness being aware of the internal and external issues and pressure for change facingan organisation and assessing an organisations performance.

Technical and functional expertise applying syllabus learning outcomes and where appropriate,further technical knowledge to real situations.

Ethics and professionalism recognising issues, using knowledge and experience to assessimplications, making confident decisions and recommendations.

Professional judgement making recommendations and adding value with appropriate, targetedand relevant solutions.

Personal effectiveness developing, maintaining and exercising skills and personal attributesnecessary for the role and responsibilities.


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The examinations, and in particular the Advanced Stage, embrace all of these skills.

The link between work experience and the examinations is demonstrated by the skills development

grids produced by the examiners.

This will help students see that their practical knowledge and skills gained in the workplace feed back

into the exam room and vice-versa.

4.3 Assessment gridsThe following pages set out the learning outcomes for Corporate Reporting that are addressed under

each of the four skills areas. In addition, for each skills area, there is a description of:

The specific skills that are assessed

How these skills are assessed

Using these grids will enable you to determine how the examination paper will be structured and to

consider whether your knowledge of Corporate Reporting is sufficiently strong to enable you to apply it

in the required manner.


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Study guide 33


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5 Technical knowledgeThe table contained in this section shows the technical knowledge covered in the ACA Syllabus by

module.

For each individual standard the level of knowledge required in the relevant Professional Stage module

and at the Advanced Stage is shown.

The knowledge levels are defined as follows:

Level D

An awareness of the scope of the standard.

Level C

A general knowledge with a basic understanding of the subject matter and training in its application

sufficient to identify significant issues and evaluate their potential implications or impact.

Level B

A working knowledge with a broad understanding of the subject matter and a level of experience in the

application thereof sufficient to apply the subject matter in straightforward circumstances.

Level A

A thorough knowledge with a solid understanding of the subject matter and experience in the

application thereof sufficient to exercise reasonable professional judgement in the application of the

subject matter in those circumstances generally encountered by Chartered Accountants.

Key to other symbols:

the knowledge level reached is assumed to be continued


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Study guide 35

FINANCIAL REPORTING

Professional Stage

Title

Accou

nting

Fina

ncial

Accou

nting

Fina

ncial

Repo

rting

Advan

ced

Stage

Preface to International Financial Reporting Standards A

Conceptual Framework for Financial Reporting C A

IAS 1 Presentation of Financial Statements B A

IAS 2 Inventories C A

IAS 7 Statement of Cash Flows B B

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors A

IAS 10 Events after the Reporting Period A

IAS 11 Construction Contracts A

IAS 12 Income Taxes C AIAS 16 Property, Plant and Equipment C A

IAS 17 Leases A

IAS 18 Revenue A

IAS 19 Employee Benefits A

IAS 20 Accounting for Government Grants and Disclosure of

Government Assistance

A

IAS 21 The Effects of Changes in Foreign Exchange Rates A

IAS 23 Borrowing Costs A

IAS 24 Related Party Disclosures A

IAS 26 Accounting and Reporting by Retirement Benefit Plans D

IAS 27 Consolidated and Separate Financial Statements B A

IAS 28 Investments in Associates B A

IAS 29 Financial Reporting in Hyperinflationary Economies D

IAS 31 Interests in Joint Ventures A

IAS 32 Financial Instruments: Presentation C A

IAS 33 Earnings per Share B A

IAS 34 Interim Financial Reporting A

IAS 36 Impairment of Assets B A

IAS 37 Provisions, Contingent Liabilities and Contingent Assets A

IAS 38 Intangible Assets C B A

IAS 39 Financial Instruments: Recognition and Measurement C B A

IAS 40 Investment Property A

IAS 41 Agriculture DIFRS 1 First-Time Adoption of IFRS A

IFRS 2 Share-based Payment A

IFRS 3 Business Combinations B B A

IFRS 4 Insurance Contracts D

IFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

B A

IFRS 6 Exploration for and Evaluation of Mineral Resources D

IFRS 7 Financial Instruments: Disclosures B A

IFRS 8 Operating Segments A

IFRS 9 Financial Instruments C

IFRS for SMEs C


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Current issues

A number of the Chapters in this Study Manual cover current developments in the relevant financial

reporting area. For example, IAS 39 is being replaced by IFRS 9, and there are proposals for changes to

the rules on revenue recognition.

These areas are not examinable because they were not in force at the April 2012 cut-off date for

examinations in 2013. However, as a professional you need to be aware of what these issues are, and of

the problems with current accounting treatments.


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Study guide 37

6 Key Resources

STUDENT SUPPORT TEAM

T +44 (0)1908 248 250

E [email protected]

STUDENT WEBSITE

icaew.com/studentsstudent homepage

icaew.com/examsexam applications, deadlines, regulations and more

icaew.com/cplcredit for prior learn/exemptions

icaew.com/examresourcesexaminer's comments, syllabus, past papers, study guides and more

icaew.com/examresultsexam results

TUITION

If you are receiving structured tuition, make sure you know how and when you can contact your tutors

for extra help.

If you arent receiving structured tuition and are interested in classroom, online or distance learning

tuition, take a look at our tuition providers in your area on icaew.com/exams

ONLINE STUDENT COMMUNITY

The online student community allows you to ask questions, gain study and exam advice from fellow

ACA and CFAB students and access our free webinars. There are also regular Ask an Expert and Ask a

Tutor sessions to help you with key technical topics and exam papers. Access the community at

icaew.com/studentcommunity

THE LIBRARY & INFORMATION SERVICE (LIS)

The Library & Information Service (LIS) is ICAEW's world-leading accountancy and business library. You

have access to a range of resources free of charge via the library website, including the catalogue,

LibCat. icaew.com/library


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ti corporate reporting study guide 2013

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