Financial Reporting FR

Feb 28th 2023

Financial Reporting FR

Section A:
• 15 two-mark OTQs on a wide range of topics
including several on consolidation and interpretation of financial statements that will be covered in detail in section C.
• Expect a few questions on non-core areas (e.g. inflation, specialised entities).
• Read the scenario, requirement and answer options carefully and ensure you capture the correct information from the scenario to answer the requirement.
• Don’t leave any questions unanswered – there is no harm in guessing if you are unsure of the correct answer.


Section B (case questions):
• Three separate scenarios with five OTQs on each scenario; each question is worth 2 marks.
• Each scenario could be a mix of topic areas (for example revenue and receivables are often related, as are PPE and leases) or focused on one topic and will usually consist of two/three calculations and two/three narratives.
• Questions are not dependant on each other and can be answered in any order.


Section C (constructed response questions):
 
PQ Magazine March 2023
Two 20-mark questions, one covering interpretations of financial statements
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 be faced with a single company interpretation and a groups preparation or vice versa.
Accounts preparation questions may include extracts or standalone calculations or full
statements. Students expect statement of profit or loss and other comprehensive
income and statement of financial position to be asked, but don't forget about the statement of changes in equity and the
statement of cash flows too.
Both questions will require knowledge from other areas of the syllabus, particularly
the accounts preparation question which will have a range of adjustments covering various areas.
•A single entity accounts preparation question from a trail balance or restatement of given financial statements with common adjustments being for depreciation, revaluation and current/deferred tax (including deferred tax on revaluations) plus a mixture of adjustments on other syllabus areas .e.g. leases, substance over form issues, financial instruments (change in
fair value or amortised cost), share issues, government grants, inventory valuation, and revenue recognition.
Group accounts preparation questions will provide the separate financial statements (or extracts thereof) of the parent and relevant subsidiary(ies) and associate. Candidates should be prepared to set
out the standard workings for goodwill, non-controlling interests, movements in
net assets, retained earnings as those
are commonly examined. Other common adjustments are intragroup sales of goods, intragroup sales of assets, dividends and fair value adjustments.
ACCA has clarified in the 2022-23 syllabus that a consolidation accounts preparation question could include up to two subsidiaries and one associate (previously
it was one subsidiary and one associate) which allows additional scope for examining the disposal of a subsidiary (including as
a discontinued operation). Candidates should be prepared for such a question from September 2022 onwards.
Candidates continue to find the interpretations question challenging. In
both single entity and group interpretation questions, candidates must avoid making generic statements about the movement
in ratios and instead focus on using the information in the question to, for example: identify key changes in the period (e.g. change in sales mix, closed down an operation, purchased a new subsidiary); identify transactions that would cause inconsistencies between periods or between balances (e.g. revaluation of assets for the first time, particularly if the revaluation
was at the end of the period); identify any changes in accounting policies or estimates, or classification (e.g. one company presents expenses as part of cost of sales whereas another presents as part of administrative
expenses).
• ACCA has clarified wording in the 2022-23
syllabus to emphasise the importance of the statement of cash flows in interpreting financial statements. Candidates should be prepared for such a question from September 2022 onwards.