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Straight from the horse’s mouth

23 February 2018

The December ACCA Examiner Reports for P5, P4, F8 & F5...

P5 Advance Performance Management
December 2017 pass rate – 29%
The examiner says you need the “right attitude” to pass P5 and to remember that the standard is intended to lie at a post-graduate level.
In the December Examiner’s Report there is concern that candidates have been clearly taught that they should define in their answer any jargon terms in the question requirement. But you are usually wrong to assume that this alone will provide students with a passing answer at P5. This paper all about application and evaluation in a business scenario.
To pass P5 candidates need to be capable of analysing and evaluating the situation in the scenario, using their technical knowledge. The marker needs to see a competent accountant on the paper. That means justifying your opinions and going beyond mere calculations by explaining the implications of their results.
In December candidates were particularly weak when it came to the questions on the introduction of the balanced scorecard at a manufacturing business, the threat of new entrants, and value for money framework.
So what was in the December exam? Well, Q1 required candidates to consider issues around the introduction of the balanced scorecard at a manufacturing business. Q2 dealt with issues of performance measurement and management at a retailer. Q3 examined performance measurement and management at a not-for-profit hospital. This was the most popular question in section B. Q4 considered the issues around risk and uncertainty at a manufacturer on the size of a new factory.

P4 Advanced Financial Management
December pass rate – 33%
So why did candidates perform less well in December? The examiner says it doesn’t help when candidates leave whole or parts of questions unanswered because of their lack of detailed knowledge. Too much time in the exam room is also spent in carrying out relatively simple calculations.
The examiner said Q1 in section A tested a candidate’s ability to provide sound advice supported by relevant computations in a coherent report on the impact of a change in the company’s capital structure by increasing the proportion of debt. It asked candidates to perform calculations of the debt instruments, estimates the impact on earnings and financial position of the company, and discuss the impact on the company and the key stakeholders. This shows the level that candidates are expected to be at by P4.
For Q2 candidates were asked to use net present value, internal rate of return, modified internal rate of return and value of risk. There was also some Monte Carlo simulation method and assumptions involved.
The length of December’s Q3, on financial performance evaluation using ratios and trends, meant this was the least popular question. However, the performance of candidates who attempted this question was good.
By contrast Q4’s currency hedge using future contracts and looking at option contracts was a popular choice. That didn’t mean students didn’t have difficulty calculating the profit/loss on the futures market.

F8 Audit & Assurance
December 2017 pass rate 40%
F8 students siting the CBE exam have been told by the examiner they need to write longer answers, especially in the provided pre-formatted tables. For December 2017 we are told candidates tended to submit answers that were often ‘quite brief, almost note like’.
The examiner said that while bullet points are acceptable, answers must be sufficiently detailed to maximise marks.
Sitters were reminded that 70% of the F8 exam marks will be for written answers. So lots of exam practice is a key to success here.
The examiner was pleased to see many students structure their answer in columns, especially for audit risk and internal control questions. This makes papers easier to mark and easier for students to review their answer, it was suggested.
However, as in September, many December 2017 sitters did not attempt all the question requirements. This tended to be in knowledge areas, substantive testing questions and some auditor’s report questions.
Some exam answers were also too generic, particularly those requiring a description of substantive procedures. The examiner wants to see exactly ‘how’ the procedure should be performed. And there must be an appropriate number of procedures. A four-mark question should have at least four well described procedures to maximise candidates’ marks.
For section A it is imperative you enter the exam room with knowledge of all the International Standards on Auditing (ISAs) and important areas of the syllabus such as audit procedures.
The Examiner’s Report explains that section A in December 2017 included questions on the following areas:
Professional ethics and application of ACCA’s code of ethics and conduct.
Substantive testing including testing on wages and salaries, revenue, and tangible assets.
Subsequent events.
Audit finalisation and the final review.
Auditors reports.
The constructive response questions in section B tested candidates understanding of:
Audit framework and regulation.
Planning and risk assessment.
Internal control.
Audit evidence.
Review and reporting.

F5 Performance Management
December 2017 pass rate 42%
The examiner picked out two areas that students seemed to have difficulty with In section A - calculating the margin of safety, and a target cost and cost gap.
The range of topics covered in section B in December were:
Learning curve.
Short-term decisions.
The examiner stressed the list above shows just how large the F5 syllabus is. For section B it is also vital that you can apply the logic of the concept or theory to the problem you are presented with.
In section C candidates were presented with questions drawn from the following areas of the syllabus:
Performance management and measurement (in two questions in December).
Divisional performance measurement and transfer pricing (two questions on this area).
Budget and control (again two questions covering this area).
Risk and uncertainty.
The F5 examiner is worried about the number of candidates who couldn’t calculate a percentage accurately. The report says students often provide too many calculations for the marks available and have a pre-determined list of ratios they try to trot out on every occasion.
There also appears to be a lack of knowledge of the requested variances – candidates often prove price and volume variance instead of mix and quantity. They also use selling prices when asked for profit variances.
The examiner told CBE sitters that it takes a little more effort to make sure that requirements are properly broken down when reading them as they can be split over several screens. The advice is to do a small plan and ask yourself how many things you are being asked to do. However, it was felt that it is easier to be more focused when answering questions using word processing skills and spreadsheets. It is also easier to go back and insert missed points in the correct place too!

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