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ACCA exam tips for June 2019
28 May 2019
HOT TIPS FOR THE JUNE 2019 APPLIED SKILLS EXAMS...
As all of the syllabus areas can be tested in sections A&B the best advice is to study all areas of the syllabus. Sorry about that – but you knew that already!
Areas expected to be tested by the examiner in section C include (but are not limited to): 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). Given that this is a performance management paper you would be advised to be prepared to evaluate some performance.
Candidates are told to expect the unexpected, and since the introduction of MCQs this advice is even more critical because more topics can be tested.
The exam will be approximately 40% calculation and 60% discussion, meaning it is not sufficient to be able to perform all the calculations to get a pass here.
Expect a couple of the OTs in section A to be devoted to the administration of income tax and corporation tax. That means you have to be comfortable with the following:
*Due dates for payment of income tax (payments on account).
*Due dates for the payment of corporation tax (instalments for large companies).
*Filing dates for the income tax and corporation tax returns.
*Penalties and interest for late payments and returns.
Also likely to be tested in section A are the following:
*VAT rules on registration, impairment loss (bad debt) relief, and the 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 those of section A – only longer! This means you need a slightly different exam skill-set here. Section C will have much more open requirements. Your answers will need to show not just sound technical knowledge but also the application of that knowledge. The examiner has also asked for more logical presentation, so markers can follow your thought progress.
Spend at least 50% of your revision time on answering section C questions in the practice and revision kits.
Learn your income tax and corporation tax pro formas. Any calculations which require no more than 2/3 entries into your calculator can be included on the face of your proforma (eg, time apportioning a salary). Calculations which are more complex (eg, company car benefits) need separate workings, which are properly referred (W1, W2, etc) and have a heading.
We know the two longest questions will focus on income tax and corporation tax. These are likely to include:
*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.
Section A’s OTs will test a wide range of topics, including several on consolidation and interpretation of financial statements. Expect a few questions on non-core areas (inflation, specialised entities).
In section B each scenario could be a mix of topic areas or focused on one topic and will usually consist of 2/3 calculations and 2/3 narratives. Questions are not dependent on each other and can be answered in any order.
Section C consists of two 20 mark questions, one covering interpretations and the other preparation of financial statements. One Q 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 interpretation and a groups preparation or visa versa.
Accounts preparation Qs may include extracts or stand alone calculations or full statements of profit or loss and other comprehensive income and/or statement of financial position. Both Qs will cover the accounting for items from other areas of the syllabus.
They may also include a short separate part, eg with a statement of changes in equity, statement of cash flows extract, earnings per share calculation or linked written topic.
A consolidated Q would include one subsidiary and often an associate, with adjustments, eg fair values, deferred/contingent consideration, PUP on inventories/PPE, intragroup trading and balances, goods/cash in transit.
A single entity question could be preparation from a trail 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 mixture of adjustments on other syllabus areas, eg leases, substance over form issues, financial instruments (charge in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition or construction contracts.
Section A – each mini-case question will test single topic areas of the syllabus and so will test syllabus area A, B, C D or E. You should particularly expect questions in section A to focus on syllabus areas A and E.
For Section B Q16 to Q18 expected areas to include:
*Audit risk (identification and explanation of audit risk form a scenario and explanation of the auditor’s response to each risk).
*Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or description of tests of controls).
*Audit procedures (both substantive procedures and tests of control).
Try to use a tabular format in your solutions where relevant as the examining team has said students who do this score better.
In section A OTs will often be knowledge based (testing your knowledge of key technical terms) and will balance out the questions in section B and C. So expect a good number of these Qs to 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.
Areas to expect 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 (currency risk, or interest rate risk).
The two Qs in section C will focus mainly on syllabus sections C, D and E. That’s working capital management, investment appraisal(think NPV with inflation and tax here), and business finance; either an evaluation of financing options (interest coverage and gearing ratios are likely), or cost of capital and analysis are most likely. Whichever of these topics does not feature in section C is likely to appear in section B.
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