Many students choose to sit Financial Accounting and Reporting as one of the earlier Professional Level exams. Logically it’s not difficult to see why, with the module aim being “To enable you to prepare complete single entity and consolidated financial statements, and extracts from those financial statements, covering a wide range of International Financial Reporting Standards (IFRS® Standards)”. Here the examiners share an overview and advice.
The good news is that the syllabus has been relatively static over the last couple of years with few changes in financial reporting standards. The learning materials cover everything that is examinable and as such should be the focus for your studies, and the question bank includes exam standard questions across the syllabus for you to practice.
There are no changes in the exam format for the 2023 exams. However, financial statement proformas have been added to the spreadsheet area of the exam software for Questions 1, 3 and 4. These can be copied and edited as you wish. These are not pre-populated proformas containing question information, they are instead standard financial statement proformas that are available for you to copy and edit. They have been introduced to better reflect the fact that software is generally used in practice when preparing financial statements. Presentation marks are still available and if you choose to use the proformas you should edit them to reflect the question content and the requirement, for example, by removing redundant line items.
Our advice to students is to practice individual questions from the question bank and then move onto practising complete past exams, some of which are included at the back of the question bank. It is important to not only get a feel for the style of questions that will be featured in the exam, but also to practice doing a complete exam within the time allowed. Allocating your time across the four questions is imperative – the first 50% of marks is the easiest to achieve on all of the questions, so attempting all the questions is key to passing. In previous exam sessions there were a significant number of students who failed to attempt all of the questions – instantly meaning that their performance on the other three questions had to be at a much higher standard. Students who have studied all of the learning materials, completed a good number of practice questions and completed practice and mock exams will do well at the Financial Accounting and Reporting exam, with many gaining very high marks, even as high as 100%. You need to remember that markers can only see answers that have been transferred to the word processing area of the exam software, so that is the area that will be marked.
Exam hints and tips
Questions 1 and 4 – Preparation of single entity and consolidated financial statements (proformas available)
- Copy the proforma financial statements that are required and prepare any standard workings.
- Then start posting figures from the question into those proformas and workings.
- Set out workings underneath the financial statements rather than side by side with them.
- Space out your workings and clearly label them.
- Finish off the financial statements and delete any unused headings from the proformas as appropriate.
No additional marks are available for writing out explanations of the financial reporting treatment or showing double entries in these questions, unless explicitly required.
Finally, check that you have transferred everything across from the spreadsheet area to the word processing area and that they are referenced and that they are clear and understandable to the markers. It is quite common for markers to see references to workings in the financial statements but with no workings shown.
Question 2 – Explain the financial reporting treatment
The key to this question is to have a go at every issue and to link calculations to written explanations. .There are marks available for both written explanations and calculations; doing only one or the other will not generally be enough to pass this question. Make sure that explanations are focused on the scenario rather than just setting out everything you know about that topic. We recommend that answers are well spaced out, with line spaces between short paragraphs as this allows marks to be allocated more easily during marking.
Question 3 – Mixed or single topic question
This question will almost always contain extracts from a statement of cash flows or a complete statement so this is not an area that students can afford to ignore. This question tends to attract the highest number of non-responses but, with good technique, is often the most straightforward. We recommend the use of T-accounts for workings as this is the clearest way to show whether amounts are added or subtracted and whether they result in an inflow or outflow.
Copy the proforma statement of cash flows and set up T-accounts. Transfer figures from the question to the T-accounts – eg, opening and closing figures or the movement from the statement of profit or loss. Balance off T-accounts and transfer the correct figures to the face of the statement of cash flows. Make sure that it is clearly shown as a cash inflow or outflow – use brackets or a negative sign to represent outflows. Spend a few seconds performing a logic check, eg, if the heading is ‘dividends paid’ then it should be a cash outflow, whereas proceeds from a share issue will be a cash inflow.
Finally, check that you have transferred and referenced your workings across from the spreadsheet area to the word processing area and that they support your calculations. Markers often find no workings in answers to this question.
Finally, across the whole exam it is important that you make sure that you transfer workings from the spreadsheet area to the word processing area but also set out full workings. It is not enough to say, eg, “W2 x 20%” / “B23 x 25%” / “PAT + b/fwd” – actual figures need to be written out in full. Follow through marks are awarded in this exam, so it is imperative that full workings are shown to gain these marks.
So, remember to practice questions to time and within the exam software, and that transferring workings from the spreadsheet area becomes second nature. You can access the practice software and other exam resources at icaew.com/examresources.