In this guide we will introduce you to the Financial Accounting and Reporting: IFRS exam. We will cover what the Financial Accounting and Reporting: IFRS exam is, what to expect when sitting the exam, what to look out for and how to prepare for the exam.
Introducing the Financial Accounting and Reporting (IFRS Standards) exam
The Financial Accounting and Reporting exam is 3 hours long and has a pass mark of 55%.
It is made up of four questions. To date, exams have generally followed this pattern:
- Question one requires the preparation of single entity financial statements from a trial balance, incorporating a number of adjustments to the figures.
- Question two will present a number of issues, requiring an explanation of the correct financial reporting treatment of each one according to the relevant accounting standard(s).
- Question three is a mixed topic question, some or all of which will test the Statement of Cash Flows.
- Question four requires the preparation of consolidated financial statements from the financial statements of the individual group companies.
Within the four questions, the following topics will always be tested:
- Differences between UK GAAP treatment and IFRS treatment of a particular issue
- Application of the Ethical Code
- Application of the Conceptual Framework
The exam contains both numerical and written tasks. Questions one and four are both very numerical, with the majority (or all) of the marks being awarded for the calculations. Often no explanation is needed. Question two is a predominantly written task – some calculations will be included but an explanation of why you are doing the calculation is the key requirement. Question three is generally a mixture of numerical and written tasks.
What to expect when sitting the Financial Accounting and Reporting (IFRS Standards) exam
The exam is time pressured, so it is key to have a well-rehearsed approach to each type of question. Learning the proforma financial statements and workings for questions one and four is essential for success, as is a robust, concise approach to the written questions.
As a guide, you should allow yourself 1.8 minutes to gain each of the 100 marks available. For example, you should spend 45 minutes on a 25-mark question. Sticking to this time limit is more important than completing each question in full – you will be more likely to pick up marks by moving on to the next question than trying to complete the one you are on.
For this exam, you can take in the International Financial Reporting Standards (Blue Books).
What to look out for
Common mistakes students make in this exam are:
- Not attempting all the four questions in the exam
- Failing to reference workings or label figures in the numerical questions.
- Adding too many explanations in the numerical questions (one and four) or not enough explanation in questions two and three
- Failing to be concise in the written questions
- Not using the IFRS open book effectively
- Neglecting the Ethics and Conceptual Framework parts of the questions
- In the “Explain” question, failing to apply the guidance from the accounting standard to the scenario in the question.
- Not practising using the exam software prior to the exam
- Failing to attempt the questions in order of their strengths
- Not using the recommended standard workings expected by the marker
Preparing for the Financial Accounting and Reporting (IFRS Standards) exam
The key to passing this exam is practise. Using the exam software, practise as many exam style questions from the ICAEW question bank and past exams as you can.
Try not to worry about time pressure at first, it will be more important to identify and fill in knowledge gaps using the ICAEW Study Manual.
As you progress you should attempt the questions under timed conditions to improve your time management.
Once you have completed a question, debrief it thoroughly, remembering that the model answer will often contain more marks than are available for the question (do not be disheartened if your answer is not exactly the same) but identify and learn from your mistakes.
During your practise you should develop a clear approach to each question type – in particular you should learn the proformas and standard workings for the numerical questions.