PQ magazine is for part qualified accountants.
Read the latest web issue here – if you like what you see sign up today
ACCA December exam tips
30 November 2018
Our tips for the December 2018 sitting...
Performance Management (PM)
PQs will now be used to the advice that any syllabus area can be tested in sections A and B – so study all areas!
The areas expected to be tested in section C are budgetary systems, planning and operational variances, mix and yield variances and evaluation of the company performance (either, as a whole or on a divisional basis). Also expect to evaluate some performance.
You must plan answers to section C before you start to write, and ensure you make reference to the scenario in your answer.
Sitters are told to expect the unexpected. That said, the exam will be about 40% calculation and 60% discussion, which means you won’t pass if all you can do is calculations. Interpretation and application are crucial, especially in section C.
Expect at least a couple of the OTQs to be devoted to the administration of income and corporation tax. You need to be comfortable with:
• Due dates for payment of income tax (including payments on account).
• Due dates for payment of corporation tax (including instalments for large companies).
• Filing dates for income tax and corporation tax returns.
Also, likely to be tested in section A are:
• VAT rules on registration, impairment loss (bad debt) relief, and SME schemes relating to cash accounting, annual accounting and flat-rate schemes.
• Inheritance tax due on lifetime transfers both in the donor’s life and on death.
• Statutory residence tests for individuals.
• Identification of groups of companies for corporation tax loss reliefs and gains.
• Trading loss reliefs for both companies and sole traders.
In section B, the exam questions will be similar to section A, only longer!
Spend 50% of your revision time answering section C questions in practice and revision kits to build up your confidence and speed to maximise your marks.
You know the two longest questions will focus on income tax and corporation tax. These are likely to include the following:
• Employment benefits.
• Property income (possibly including relief for finance costs).
• Relief for pension contributions.
• Adjustments to profit to arrive at trading income for both companies and sole traders – in past sittings we have seen a number of questions whereby you have to correct errors in computations included in the scenario.
• Capital allowance computations.
Financial Reporting (FR)
For the 15 two-mark MCQs in section A expect several questions on consolidation and interpretation of financial statements. Non-core areas such as inflation and specialised entities could also come up.
Section C will have two 20 markers, one covering interpretations and the other preparation of financial statements. One question is likely to be in the context of a single company and one in the context of a group. So, you could have a single company comprehensive income and/or statement of financial position.
Accounts preparation questions may include extracts or standalone calculations or full statement of profit or loss and other comprehensive income and/or statement of financial position. Both questions will cover the accounting for items from other areas of the syllabus.
Section C may include a short separate part, for example with a statement of changes in equity, statement of cash flows extracts, earnings per share calculation, or linked written topic.
Consolidation questions would include one subsidiary and often an associate, with adjustments, eg fair values, deferred/contingent consideration, PUP on inventories/ PPE, intragroup trading and balances, or goods/cash in transit.
A single entity question could be preparation from a trial balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/deferred tax (including deferred tax on revaluation), plus a mix of adjustments on other syllabus areas, for example leases, substance over form issues, financial instruments (change in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition or construction contracts.
Audit & Assurance (AA)
Each mini-case in section A will test single topic areas of the syllabus and so will either test syllabus areas A, B, C, D or E. However, expect questions to focus on syllabus areas A and E.
Most of marks for section B’s three questions will test syllabus areas B, C and/or D.
Areas expected to be tested in Q16 and Q18 will include:
• Audit planning.
• Audit risk (identification and explanation of audit risks from a scenario and explanation of the auditor’s response to each risk).
• Internal audit.
• Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or descriptions of tests of control).
• Audit procedures (both substantive procedures and tests of control).
Think about how you will present your answer – try to use a tabular format in your solutions where relevant as the examining team have said candidates who do this score better.
Pay attention to the verbs as these indicate the number of marks available. For example, ‘explain’ requires a sentence and will score one mark if properly explained. The verb ‘list’ simply requires you to list out the information out with no further explanation and will score a half-mark per point.
Financial Management (FM)
Section A questions will often be knowledge based – testing your key knowledge of key technical terms and will balance out the questions in section B and C. It is likely that a good number of questions will test your understanding of financial management and objectives (ratio analysis, the concept of shareholder wealth), as well as the economic environment and financial institutions topics (financial intermediation, fiscal and monetary policies). The efficient market hypothesis is also likely to be tested here.
Areas expected to be commonly tested in section B are working capital management (operating cycle, the impact of a change in credit period, or accepting a factor’s offer), business or security valuations (methods of valuation), and financial risk management (mainly in the form of currency risk, but possibly an aspect of interest rate risk).
The two questions in section C will mainly focus on sections C, D and E. Section C is working capital management, section D is investment appraisal and is likely to feature NPV with inflation and tax. Section E is business finance – either an evaluation of financing options (interest coverage and gearing ratios) or a cost of capital and analysis are most likely. Whichever of these three topics that does not feature in section C is likely to appear in Section B of the exam.
Check out the new article on behavioural finance on the ACCA website.
Strategic Business Leader (SBL)
You have four hours for this exam, not the usual three hours 15 minutes, and it builds on the knowledge you gained at the ‘Applied Knowledge’ and ‘Applied Skills’ levels. Remember that it has its own distinct syllabus content.
The SBL exam will focus on one main organisation, and all of the question requirements will relate to this organisation. You may have to take on a variety of roles, which can be internal or external. You will also be required to respond to a variety of people within the organisation.
All questions are compulsory and will consist of 80 technical marks and 20 professional marks.
Although you have 240 minutes, you still have to use your time wisely. ACCA is advising you spend around 40 minutes reading, planning and interpreting the requirements and information/ exhibits provided. You should then allocate 2.5 minutes per mark on offer. You should earn the professional skills marks by the virtue of attempting the 80 technical marks on offer.
Requirements will not specifically ask you to use a particular model in answering the question.
Professional skills marks are awarded for displaying the following skills and behaviour: communication; commercial acumen; analysis; scepticism; and evaluation.
Strategic Business Reporting (SRB)
This is only the second sitting of SBR and we know the September pass rate was 47%.
Section A has two questions worth 50 marks. The first question will be based on group accounting and may include complications such as a foreign subsidiary, discontinued activities, disposals and/or acquisitions. You will be expected to prepare and explain one or more calculations from any aspect of the group accounts. You must then explain the underlying principles.
The first question is also likely to require consideration of some financial reporting issues, such as financial instruments, pensions and share-based payment.
The second question will cover the reporting and ethical implications in a given scenario. You may be asked to consider these issues from the perspective of a particular stakeholder – an investor, lender or customer. Make sure you consider any threats to the fundamental principles of ACCA’s Code of Ethics and Conduct in your answer.
Section B can cover any area of the syllabus, and may be based on a short scenario, a case study with several parts, or an essay.
There will always be a question or part-question on the analysis or appraisal of financial and non-financial information. This may include the use of additional performance measures as seen in September 2018.
Current issues could be examined in either section A or B, but is likely to form part of a question rather than a full question. In the September 2018 exam current issues featured in both Q1 and Q3, so don’t be surprised if this is also the case in December.
Advanced Financial Management (AFM)
It is worth repeating that from September both section A and B of the exam became ‘compulsory’ – there are now no optional questions.
Also from September, every exam will have questions that have a focus on section B of the syllabus (advanced investment appraisal) and section E (treasury and advanced risk management techniques). These syllabus areas are therefore high priority areas for your revision.
Another change is the fact that no question will be entirely a discussion question.
Expect section A questions to be based on core syllabus areas such as project appraisal (domestic or overseas), business valuations and business/financial reorganisations. These areas often include cost of capital calculations.
Risk management may also feature in a number of different ways. For example, value at risk, real options, hedging and risk mapping.
In section B Q2 and Q3, expect risk management (currency or interest rate), dividend policy and general financing issues, and real options.
Remember this is not a maths paper – in all questions the examiner is interested in your ability to communicate well and to give good management advice that relates to the scenario.
Keep checking the ACCA website for articles written by the examining team in the lead up to the exam.
Advanced Performance Management (APM)
Remember, there are no longer optional questions in section B.
Q1 will focus on a wide range of issues from syllabus section A (strategic planning and control); section C (performance measurement systems and design); and section D (strategic performance measurement).
In recent exams, Q1 (50 marks) has often requirement linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. You may well also have to critique and recommend improvements to performance reports.
Performance management frameworks (for example building blocks, performance pyramid or the balanced scorecard) are also commonly tested in Q1. It is vital you understand the purpose and limits of these models. There are lots of past exam papers you can use for practice here.
One section B question will come from the syllabus section E (performance evaluation and corporate failure). Commonly tested areas in section B are quality management, information reporting (big data, lean information), the application of strategic models (such as PEST, Porter’s 5 Forces, the Value Chain), HR frameworks (reward & appraisal systems), risk management, and environmental management accounting.
Recent key articles have been on complex business structures, big data, integrated reporting and performance management models (BCG and 5 forces), and are often tested so are an important read.
Advanced Taxation (ATX) (UK)
The two compulsory questions in section A will both be a case study style. The first is worth 35 marks and the second 25 marks. One of these questions will focus on personal tax issues and the other on corporate tax issues. Don’t forget your four professional marks and five marks on ethics.
Topics you should expect to see:
• Group of companies involving overseas aspects and losses.
• Unincorporated business particularly loss relief or involving a partnership or basis period rules.
• Capital gains tax versus inheritance tax, including availability of reliefs.
• Overseas aspects of income tax, capital gains tax, IHT or corporate tax.
• Personal service company.
• Share schemes.
• Company purchase of own shares or liquidations.
• Enterprise investment schemes/ seed EIS/venture capital trusts.
• VAT – partial exemption or land and buildings or transfer of a going concern or overseas transactions.
• Transfer of trade versus sale of subsidiary.
• Disincorporation relief.
• Pension contributions.
• Patent box, research and development expenditure.
Advanced Audit & Assurance (AAA)
This is the second sitting of AAA and the pass rate isn’t going up! The September 2018 exam contained no real surprises for tutors, although the embedded email and the supporting exhibits in Q1 were presented slightly differently to the way they appeared in the specimen exam.
Section A will comprise of a case study worth 50 marks, set at the planning stage of the audit, for a single company, a group of companies or potentially several audit clients.
Candidates will be provided with detailed information, and is likely to include extracts of financial information, strategic, operational and other relevant information, as well as extracts from audit working papers, including the results of analytical procedures. You will need to address requirements from syllabus sections A, B C and D. Think planning, risk assessment, evidence gathering, and ethical and professional considerations.
Don’t forget the professional marks available in section A.
There are no optional questions in AAA’s section B. One question will always predominantly come from section E, so think completion, review and reporting here. That might mean assessing a going concern, the impact of subsequent events, evaluating identified misstatements, and the effects on all these on the auditor’s report. A critique of the audit report may also be asked for.
The other question can be drawn from any other syllabus areas. Section G on current issues is unlikely to form the basis of any question on its own.
In the past, this exam tested areas covered by the examiner’s technical article.
You are strongly advised to read the five recent articles on exam techniques and you must read the ones covering ethics, risk and accounting issues. Check out the technical article on the evaluation of misstatements.
Subscribe to RSS