In this guide we will look at how to prepare for the Corporate Reporting exam. We will cover what to expect and what to look out for when preparing.
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Throughout the ACA you have been developing the skill sets that will be needed in the work place once you qualify. The Corporate Reporting exam has a very real world focus enabling you to demonstrate the corporate reporting, audit and ethical skill sets that whether provided externally in an audit context or internally as a member of the finance function are vital to the success of an organisation.
Through the calculation of numbers, you are demonstrating your technical knowledge of the accounting standard and the ability to apply that knowledge to a real life situation. Through the presentation of journals, you are demonstrating an understanding of how the required adjustments will impact the financial statements – a fundamental aspect of communication with shareholders and other relevant stakeholders. Through providing explanations, you are demonstrating the ability to communicate complex and technical matters to those without a technical background – a key skill set for a chartered accountant who wishes to act as a strategic business partner to others in the organisation. Through the assessment of risk, interpretation of data and application of audit skills you are demonstrating the ability to prevent things from going wrong, identify where things have gone wrong and ultimately make the changes needed for the future success of the organisation.
The Corporate Reporting exam incorporates a data set into one of the questions which you must interrogate using the data analytics software. You will be provided with advance information approximately four weeks prior to the exam containing background information on the client and 11 months of financial information. During the exam you will receive the full year financial information. The requirements will form a series of tasks for you to complete. The use of the data analytics software and client data set is designed to replicate the actual environment and tool sets that contemporary chartered accountants work with.
From a technical perspective the exam covers many of the real world issues facing organisations. For example, the prevention of front loading of revenue, the recognition of lease liability, the recognition of financing instruments as debt or equity, accounting treatments to reflect the long term, medium term and short term business models for investments, the recognition of foreign exchange gains and losses in either profit or loss or reserves as appropriate, the recognition of share based payments as either debt or equity, the recognition of current, past and future tax obligation and the correct initial and subsequent classification of investments as subsidiary, associate or joint venture. However, these are not just examined as technical areas. The scenarios and practical contexts of the exam replicate the challenges facing the contemporary organisation: compliance with financial reporting regulations whilst managing the commercial pressures to achieve financial results and the requirement to provide a balanced and understandable view to both shareholders and stakeholder.
What to expect when sitting the Corporate Reporting exam
The Corporate Reporting exam is three and a half hours with a 50% pass mark in an exam containing three questions. Question one is approximately 40 marks in the form of a mini case with a scenario based in the context of auditing but with significant corporate reporting emphasis. Question two is approximately 30 marks focused on financial reporting. Question three is approximately 30 marks covering audit and corporate reporting.
The challenge for students is to provide an answer that is balanced across all aspects of the requirement, in line with the total marks available and within the time permitted. Successful time management must be broken down into its component parts. To finish the exam on time each question must be completed on time. With 210 minutes to complete the exam, it is recommended students spend around 2.1 minutes per mark. Therefore, within a 40 mark question a recommended time allocation would be 84 minutes. Within this approximately a third of the time should be spent planning - reading the scenario and deciding on how the balance of narrative, numbers and journals will deliver the 40 marks. Planning within this 28 minutes makes the efficient and effective delivery of a 40 mark answer within the remaining 56 minutes very achievable.
What to look out for
A common mistake in the exam is not to practise core processes. Under prepared students spend too long generating the numbers and do not have enough time to use the numbers generated to access the higher level marks. Students also tend to over focus on the numerical aspect of the exam whilst underplaying the narrative aspects thus restricting access to the full marks available. Students tend not to provide a comprehensive consideration of accounting treatments failing to include both initial recognition and subsequent measurement and failing to consider the implications of the transaction across the three core documents of position, performance and cash flow.
Perhaps one of the areas that students struggle with most is financial instruments. It is vital to see beyond the terminology and understand what each related standard is trying to achieve. For example, IAS 32 is conveying risk exposure through debt and equity allocation of financing. IFRS nine is reflecting the long term, medium term and short term nature of investments and using measurement and presentation techniques to achieve this. In hedge accounting, IFRS nine is simply using derivative movement to protect either current or future volatility.
Preparing for the CR exam
When preparing for this exam you must become efficient and effective at individual calculations. More practise makes it easier to integrate a number of these techniques within a question when revising for the exam. Students must practise producing narrative answers – the ability to structure a response in an efficient and effective paragraph is not an inherent skill set - it must be developed. Finally, when preparing for this exam you must practise questions under timed conditions to develop a style and pace that allows for a balanced answer across all aspects of the requirement within the time permitted.
There are many resources available on in the exam resources area of our website to help you prepare for your Corporate Reporting exam. There’s a syllabus guide so you can appreciate how your existing financial reporting and audit knowledge is developed at the advanced stage. There is an illustrative advanced information with examiner’s commentary. There are detailed guidance documents on how to use the data analytics software together with practise data sets and questions. The Corporate Reporting question bank is available in the software. Familiarity and practise from an early stage will make the data analytics and exam software a real asset when answering exam requirements.