P2 Corporate Reporting Exam Resources - ACCA Global Accountancy Discussion Forums

kam · 04-14-2008, 07:06 PM

Exam Resources for P2 Corporate Reporting can be accessed at

P2 Corporate Reporting Exam Resources

jazib · 04-16-2008, 08:23 AM

Paper P2, Corporate Reporting will examine technical issues and practices. Professional and ethical issues will be thematic, and students will be expected to evaluate proposed accounting practices and utilize their professional judgment within differing scenarios.

The exam for Paper P2 will comprise two sections. Section A will be a compulsory question worth 50 marks. Section B will consist of three 25-mark questions of which students must attempt two. Section A will be based on a scenario, and will deal with the preparation of consolidated financial statements, including group cash flow statements and issues in financial reporting. Section B will normally comprise two questions based on a scenario or case study, and usually one essay-style question. The questions in this section will deal with all aspects of the syllabus.

Students will be examined on concepts, theories, principles, and practices including proposed accounting treatments. Students should be capable of critically evaluating, identifying, and prioritizing issues. Professional judgement will be needed as well as the ability to demonstrate technical knowledge. Global issues will be addressed via the ‘current issues’ questions on the paper.

Students will be expected to appraise ethical and professional issues and situations when advising clients. This element of the syllabus could be examined in any question on the paper and could include social responsibility issues. An understanding of the financial reporting framework is an important aspect of the paper, and students will be asked to evaluate the consistency and clarity of corporate reports, and comment on the move towards a global accounting framework. Students should be able to produce reports relating to corporate performance and to evaluate proposed changes to reporting financial performance. Exposure drafts will be examined but only in terms of the key areas of change, and there will not be a complete question on a single exposure draft. Discussion papers will be examined on a principles basis, and detailed knowledge of such will not be required. Students will have to identify the issues and deficiencies which have led to proposed change to accounting standard.

Group accounting – including cash flow statements – will be an important aspect of the syllabus, and will be examined at every exam session in Question 1. If group cash flow statements are examined, then the principles of group accounting may or may not be examined in Section B. Financial reporting in specialised, not-for-profit and public sector entities will be examined in general terms; students will be expected to apply their knowledge of the syllabus to straightforward transactions and events arising in these entities. Detailed knowledge of the industry, or specialised accounting knowledge, will not be required but students will have to apply their accounting knowledge to the scenario set out in the question.

The application of accounting standards will be an extremely important element of this paper, both in Section A and B. Students will have to advise a client on suitable accounting practices, based on existing accounting standards, as well as analysing and interpreting financial information and performance. Current issues will always be foremost in the mind of the examiner when writing the paper. These questions will often be driven by convergence issues and the work programme of the International Accounting Standards Board (IASB). New accounting standards will be examined as soon as is feasibly possible – but not within six months of their issue.

In the past, students have tended to spend a disproportionate amount of time on Question 1, with the result that they become short of time when answering the remaining questions. Paper P2 will attempt to ensure that students do not experience time pressure on either Question 1 or in the paper in general. Question 1 will normally comprise a technical and a discursive element which could be based on professional, social, or ethical issues.

There will be an increasing emphasis on the conceptual framework which underpins the standards, and the examiner's approach will be to examine several standards at each diet. The key standards are those related to group accounting, cash flow, impairment, provisioning, non-current assets, taxation, employee benefits, leases, foreign exchange, intangibles, financial instruments, and reporting financial performance (including discontinued operations). The other standards are also important and will figure in exam questions. Environmental, social, and cultural considerations are important, although questions on these issues will not be as frequent as those on other topics. Financial instruments will be dealt with at a relatively simple level.

Students will be expected to read more widely than just their tutor’s manuals. Such manuals are often very good but students need to supplement their reading in order to consolidate their knowledge. Reading accountancy journals, if only on a selective basis, will enhance students’ chances of success.

The same topic can appear in more than one question. For example, impairment of assets or financial instruments can be issues to consider in several questions in the paper. Thus, the subject matter can be examined in a number of contexts, rather than in just a single question on the subject. For example, many questions will contain elements relating to financial instruments and therefore the standards in this area become very important.

Questions will also be based on specific subjects or particular themes. For example, deferred tax and pensions would be a subject-based question; a theme-based question could consider a liquidity problem within an entity. If an area is generating consistently poor answers then it may also become the subject of a question. In this context, it is important to look at examiner’s feedback and the reports from the teachers’ conferences in order to identify such problem areas, but also to understand the examiner’s views on various issues.

Corporate governance has been taken out of the syllabus because of overlap with other papers, but general governance issues will still appear in the paper. Similarly, share valuations have been eliminated from the syllabus.

Marks (between four and six) will be awarded for professional skills in this paper. These skills encompass the creation, analysis, evaluation and synthesis of information, problem solving, decision making, and communication skills.

Graham Holt is examiner for Paper P2

jazib · 04-16-2008, 08:45 AM

Examiners Report Paper P2 Corporate Reporting December 2007 Attempt

Introduction
Overall, candidates performed quite well on the paper. There were some centres where the performance was excellent and others where the performance was quite poor. This variation probably reflects the nature and quality of the preparation for the examination.

General Paper Comments
The paper required candidates to answer the compulsory question1 which carried 50 marks and then to chose 2 questions out of the remaining three questions which carried 25 marks each. There was some evidence that candidates spent too much time on question 1 with the result that the remaining questions were not given sufficient time allocation. Additionally some candidates did not write in sufficient detail on the discursive parts of the paper and others wrote too much in question 1 on the computational part. This part of the paper is designed to test candidates’ computational skills and brief explanations are often useful to the marker but a detailed discussion of the relevant standard is not normally required. A significant part of the paper comprises discursive elements and candidates need to develop skills in this area.
Candidates should where possible make sure that they show all workings and start each question on a new page. Time management is critical and candidates should not spend a disproportionate amount of time on a single question. When the time allocated to a question is over, candidates should move on and start a new question, leaving sufficient space to come back and finish the question if time allows. It is not a good idea to spread the answer to the question across the whole answer booklet.

Question 1
This question required candidates to prepare a consolidated balance sheet, to describe the advantages to the company in question of an environmental report and to discuss the ethical and social responsibilities of the company, discussing whether a change in the company’s attitude in this regard could improve business performance .The preparation of the group balance sheet involved dealing
with:
i. a step by step acquisition,
ii. an associate company,
iii. eliminating inter group profit,
iv. with foreign currency transactions,
v. factored trade receivables
vi. share options
vii. environmental provisions
viii. operating leases

Thus there was a significant amount of detail in the question. The above elements could nearly all be dealt with in isolation from the group accounting aspects of the question so that candidates could score quite well even if the step acquisition was poorly answered. Candidates generally answered the step acquisition quite well. However the effect of the above on the group reserves was poorly answered .Many candidates did not correctly deal with the elimination of inter group profit between the associate and the holding company generally taking out the whole of the profit rather than 30% thereof. Several candidates did not consider the impairment of the associate. Many candidates did not realise that ifa payment to the supplier is a deposit and is refundable, then the amount is deemed to be a monetary amount which should be retranslated at the year end. Similarly, the factored trade receivables should not have been derecognised and therefore should remain on the balance sheet. This point was not recognised by many candidates. The calculation of the share options was generally well done but the calculation of the minority interest was surprisingly poorly done considering that there was relatively little adjustment required to the subsidiary’s closing reserves. Candidates often had differing views as to the nature of the environmental provision and markers were instructed to give credit for a well argued case. This is a good example of a case where a brief discussion of the issues would have been useful. Many candidates did not realise that leasehold improvements should be capitalised and depreciated and that a provision for the conversion of the building back to its original state was required.
Parts b/c required the use of the information in the question to discuss the advantages to the company of an environmental report and to discuss the ethical and social responsibilities of the company. The question was quite well answered although many candidates did not spend long enough on this part of the question, only writing a few lines. The main problem with the answers to this part was that many candidates did not consider the ethical issues involved. Two professional marks were awarded for the quality of the appraisal and analysis of the position of the company in respect of its environmental and social policy. This would mean not simply regurgitating the facts of the case but having the ability to conceptualise the facts and produce key conclusions from those facts.

Question 2
This question required candidates to discuss the differences between a defined benefit and defined contribution scheme, to show the accounting entries for such schemes and to discuss the principles and accounting for warranty claims. The question examined the fundamental principles behind certain employee benefits and provisioning. It was surprising that several candidates confused the two types of scheme. Also at this level, it is important that candidates have an in depth knowledge of the differences between the two schemes rather than just a general view of the differences. The question was quite well answered and candidates often produced good quality answers. Professional marks were awarded for the structure of the report and consideration of certain factors, that is:

I. the intended purpose of the document
II. its intended users and their needs
III. the appropriate type of document
IV. logical and appropriate structure/format
V. nature of background information and technical language
VI. detail required
VII. clear, concise and precise presentation

Question 3
This question required candidates to discuss the accounting treatment of certain items and set out the impact that these adjustments would have on ROCE.
The first part of the question dealt with IFRS 5 ‘Non current assets held for sale’. Candidates were required to discuss the accounting for a disposal group in a situation where there had been impairment and an increase in the value of the impaired disposal group. This part of the question was not well answered as many candidates did not realise that there was a disposal group as the two manufacturing units were being sold in a single transaction. The second part of the question dealt with deferred tax and the impact of a revaluation of property and vehicles for tax purposes. The question was quite well answered although many did not realise that the resultant balance was a deferred tax asset with the recognition issues that this represents. The third part of the question dealt with the impairment of equipment and the calculation thereof. Many candidates calculated the ‘value in use’ correctly of the equipment but failed to apply the principles which often had correctly been described earlier in the answer. The answers to the final part were quite good with candidates realising that the operating lease was now a finance lease but several candidates then could not outline the accounting treatment of an operating lease. The adjustments to ROCE were poorly done; in fact many candidates did not even attempt this part of the question. The issues required a degree of thought and understanding of the impact on the financial statements of the adjustments and ROCE.For example there were instances (deferred tax) where profit before tax was not affected but the capital employed was affected. The professional marks were awarded for analysing the impact of the information, drawing conclusions and considering the implications for ROCE.

Question 4
This question required candidates to discuss the need for an agreed conceptual framework and the key issues to be addressed in determining the components of such a framework. Considering that the IASB and FASB, and the ASB see the current conceptual framework project as being a key current development, it was surprising that more candidates did not answer this question better as there has been a significant amount of coverage in the accountancy press. It is important that candidates read the accountancy press in order to gain an insight into current issues. The answers to part a) were often quite narrow with little discussion of the practical use of a framework. Candidates who considered the reasons for differences in accounting practice often produced a reasonable answer. The answers to part b) generally did not consider the key elements of a conceptual framework such as the objectives, recognition and derecognition, measurement etc.These key issues are those of all frameworks both local and international .The professional marks were awarded for considering, discussing and combining ideas and information to arrive at a broader understanding of the issues. Candidates found this process quite difficult

jazib · 11-14-2008, 09:56 PM

The ACCA P2 International Corporate Reporting supplement, covering Chapters 13 and 14 of the Study Text, is now available.

Check the link below

Hidden Block (for usergroups: VIP Dec 2008 :: 10) The contents of this post are only visible after you Upgrade your Membership check the membership benefits here:

You do not have sufficient rights to see the hidden data contained here.