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ACCA September exam tips

28 August 2018

YOUR TOP TIPS FOR THE SEPTEMBER 2018 EXAM SITTING...

Performance Management (PM)
When it comes to section C expect to see 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 this is a performance management paper you would be advised to be prepared to evaluate some performance! The exam is approximately 40% calculation and 60% discussion, meaning that it is not sufficient to be able to perform all of the calculations. Interpretation and application are crucial, especially in section C.


Taxation (TX)
Section A will see a wide range of topics. Expect at least a couple of the OTQs to be devoted to the administration of income tax and corporation tax. So you need to be comfortable with due dates, filing dates and penalties and interest for late payments and returns.
Other areas to look out for:
*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 expect similar questions to those in section A – just longer!
You know the two longest questions in section C will focus on income tax and corporation tax. These are likely to include:
*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)
In section A expect several questions on consolidation and interpretation of financial statements. Also expect a few questions on non-core areas (inflation, specialised entities).
In section C expect one question to cover 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. Any accounts preparation questions may include extracts or stand-alone calculations or full statement of profit or loss and other comprehensive income and/or statement of financial position. This may include a short separate part with a statement of changes in equity, or a statement of cash flows extract, earnings per share calculation, or linked written topic. When it comes to consolidation expect 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 trial balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/deferred tax, plus a mix of adjustments on other syllabus areas (leases, substance over form, financial instruments, share issues, grants, inventory, revenue recognition or construction contracts).


Audit & Assurance (AA)
Remember to pay attention to the verbs used in questions as these indicate the number of marks available. The verb ‘explain’ requires a sentence and will score one mark, whereas the verb ‘list’ simply requires you to list out information with no further explanation and will score 0.5 mark per point. The majority of marks for section B will test syllabus areas B, C and/or D. Areas expected to be tested in Q16 & 18 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).


Financial Management (FM)
In section A a big 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 likely to be tested here too.
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 (method), and financial risk management (currency risk, interest rate risk). The two questions in section C will mainly focus on sections C, D (NPV with inflation and tax) and E. So think either an evaluation of financing options (interest coverage and gearing ratios) or a cost of capital and analysis.


Strategic Business Leader (SBL)
As with all ACCA exams the SBL is a closed book exam. Unlike the other strategic professional level exams, which are 3 hours 15 minutes long this one is 4 hours.The exam builds on the knowledge gained at the ‘applied knowledge’ and ‘applied skills’ levels and the pass mark is 50%. Everything you require will be made available in the exam, and will focus on one main organisation, with all the question requirements related to this organisation. All questions are compulsory and will consist of 80 technical marks and 20 professional skills marks. The 20 professional skills marks are awarded for displaying the following skills and behaviours: communication, commercial acumen, analysis, scepticism and evaluation. While 4 hours (240 minutes) may sound like a lot of time it is important to manage your time effectively. The ACCA recommend you send around 40 minutes reading, planning and interpreting the requirements and the information/exhibits provided. That means allocating 2.5 minutes per mark on offer.
Remember the requirements will test your ability to apply your understanding of the subjects covered in the syllabus in the context of the question scenario.


Strategic Business Reporting (SBR)
The ACCA ABR format is two questions worth a total of 50 marks in section A and two questions worth 25 marks each in section B. All questions are compulsory.
The first question in section A will be based on the financial statements of group entities and may include a foreign subsidiary, discontinued activities, disposals and/or acquisitions. You will be expected to prepare a calculation from any aspect of group accounting and discuss or explain accounting principles behind the calculation. The first question is also likely to require consideration of some financial reporting issues such as financial instruments, pensions, share-based payment and impairments. Again you will be expected to explain the accounting principles underlying any calculations. The second question will require consideration of the reporting and ethical implications of specific events ion a given scenario. Remember when considering ethical issues you will need to apply the fundamental principles of the ACCA’s Code of Ethics.Section B will include a question or part-question involving the analysis or appraisal of financial or non-financial information from the perspective of a stakeholder. This may include the use of additional performance measures. There are two professional marks available for this question. Current issues could be examined in either section A or section B, but is likely to form part of a question, rather than a full one. Timings are important. It is 1.95 minutes per mark (or 1.8 minutes per mark if you allocate 15 minutes to read the paper).


Advanced Financial Management (AFM)
From September both section A and B of the exam will be ‘compulsory’ – the will be no optional questions! Also, from September every exam will have questions which have a focus on section B of the syllabus (advanced investment appraisal) ands 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. In section A questions are often 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 ion a number of different ways. For example, value at risk, real options, hedging and risk mapping. Section B Q2 and Q3 expect risk management (currency or interest rate), dividend policy and general financing issues, and real options.


Advanced Performance Management (APM)
Again, no optional questions in section B.
From September Q1 will focus on a range of issues from syllabus section A (strategic planning & control), section C (performance measurement systems & design), and section D (strategic performance measurement). For section A Q1 has often requirement linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. Improvement recommendations could be key here. Building blocks, performance pyramid or the balanced scorecard are also commonly tested in Q1. Understand the purpose and limits of these models. From September one of the section B questions 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).


Advanced Taxation (ATX) (UK)
For section A expect one question focusing on personal tax issues and the other on corporate tax issues. Don’t forget your four professional marks and five ethics marks available in section A too.
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.
*Takeovers.
*VAT – partial exemption or land and buildings or transfer of a going concern or overseas transactions.
*Transfer of trade v sale of subsidiary.
*Disincorporation relief.
*Pension contributions.
*Patent box, research and development expenditure.


Advanced Audit & Assurance (AAA)
This is the first sitting of AAA. Section A will comprise of a case study worth50 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 area. 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. So, read the ones on ethics, and risk and accounting issues.


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