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Examiner tips for SBR

11 February 2019

The examiner wants candidates to make the connection between textbook reading and any supplementary reading and published financial statements.

It is important to remember too that the specimen exams are not blueprints for future exams, they are simply examples of the style of the exam that they can expect. Each SBR exam will have a unique set of questions. And remember previous P2 exams do not reflect the nature of future SBR questions these are two very different exams.

The exam does test a certain amount of technical knowledge and some calculation is required, but most of the examination is based around the application of that knowledge.

Candidates should be familiar with the content of published financial statements of multi-national companies and should be able to explain that content to third party users such as investors. There is also a significant ethical content in each paper and sitters will be asked to demonstrate their understanding of the professional and moral judgements that accounts need to make in practice.

In December some candidates spent a disproportionate amount of time on Q1, which seems to indicate that they have not made the transition from P2 to SBR.

Q1 looked at statement of cash flow. The first part of the question required candidates to draft an explanatory note to the directors, which should have included a calculation of cash generation. The second part of the question asked for an explanation of how changes to the group structure and dividend would impact upon the consolidated statement of cash flows. The final part of the question wanted candidates to discussion (with illustrations) how the probability criteria could be applied across different standards.

Q2 required a discussion of specific accounting issues and the ethical implications of certain events. Candidates had to show how a property should be accounted for and explain the implications of the accounting treatment for the financial statements and a debt covenant.

Q3 tested IFRS standards and the application of the Conceptual Framework. The second part of the question tested the treatment of reconditioning costs and whether the decline in the price of coal was an impairment indicator.

Q4 wanted sitters to look at the arguments for and against issuing the IFRS practice statement management commentary as a non-binding framework. Candidates were also asked to discuss the qualitative characteristics of understandability, relevance and comparability.

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