The Institute of Chartered Secretaries and Administrators in Zimbabwe

Examiners Final Report

May 2015 Examination

Advanced Accounting and Financial Reporting

General Comments
A total of 415 candidates sat for the May 2015 examination in respect of the
above mentioned subject. The overall performance was very bad compared to
the previous sitting. Only 2 candidates scored 50% and the pass rate was 0.48,
that is: less than 1%. Many students failed to attain 50% and above on question
1 which was a compulsory question. The area examined was not new and it was
surprising that the majority of candidates did not prepare for this examination
session. The overall performance was very bad.
The performance in this examination revealed that the candidates had not
prepared for this examination.
The comments for each of the questions are covered below.
Question 1
This question had five parts testing the candidates ability to apply consolidation
techniques.
The first part required candidates to prove the goodwill at acquisition taking into
consideration the full goodwill method. Candidates spent a lot of their time doing
analysis work sheets which were not necessary. This should have taken most of
their valuable time which was not rewarded. This was not necessary as all
available information required was to show that the proof was given in the
question.
The candidates failed to factor in fair value adjustments at acquisition. They also
failed to factor in the tax for these fair value adjustments.
It was also noted that the candidates did not have a clue on how to deal with
goodwill because they did not know the different treatment requirements for
partial goodwill method and full goodwill method.
At face value the question seemed as if it was easy taking into consideration that
IFRS 3 has been in operation for a long time.
The second part required the candidates to establish whether there was a
consolidation gain or loss on disposal on part of the shareholding in the
subsidiary. This proved to be very difficult to all the students. This question
required candidates to establish the percentage of disposal based on the net
assets disposed off. Candidates did not take into account the goodwill which was
lost on disposal as part of disposed investment. Candidates also failed to come
up with goodwill which related to Non Controlling Interest.
The consolidated goodwill which had been established in part (a) included the
non controlling interest shares.

The third part required the remeasurement of the remaining interest after losing
control. After control had been lost the investment became an associate. This
remeasurement was the difference between the fair value based on the prices of
the shares on date of disposal and the value of the net assets and goodwill.
Candidates failed to correctly identify that the investment had become an
associate and therefore had difficulties in coming up with the correct figures.
The forth part of the question was done relatively well but certain candidates
failed to consolidate the first three month before control was lost. The time
apportionment was not effected and hence this showed that candidates did not
understand the basic consolidation principles.
The candidates failed to realise that this was a clear consolidation question which
was just broken down to particular sections. These questions were related and it
required students to use correct judgement and application.
The last part of the question required candidates to establish the amount which
was to be disclosed as cash generated from operating activities. Many
candidates spent a lot of time trying to come up with Net cash flow from
operating activities. Many candidates did not know how use the direct method
presentation in terms of IAS7.
This question was a mixed group question, which started with group formation
through acquisition, followed by disinvestment at a profit and thereby losing
control but resulting in the formation of an associate and that required
remeasurement. After having done that candidates were required to consolidate
and also disclose a cash flow statement item.
The candidates failed to indentify this flow and hence they thought that the
question was fragmented when in fact it was one question which tested the
students analytical and application ability.
The highest mark obtained on this question was 20 while the lowest was zero
and many candidates did not attempt this question.
Question 2
This question had two parts dealing with contracts and intangibles. The contract
section was fairly done and the intangibles was badly done. Candidates had
difficulties in coming up with the journal entries as well.
The majority of the candidates had not read on intangibles and hence the
performance on this section was poor.

Overall performance on question 2 was better than what the candidates did on
question one.
The highest mark which was obtained on this question was 14/20 while the
lowest was zero.
Question 3
(a) On section (i), the calculation of consolidated goodwill was a nightmare. Very
few candidates provided the right answer. The major problem was that a lot of
candidates did not know how to calculate unrecorded deferred tax.
The calculation of plant and equipment on section (ii) was fairly tackled. A large
number of candidates knew what the question was getting at. A handful of
candidates struggled to get additional depreciation.
The calculation of non-controlling interest on section (iii) was not well attempted.
A handful of candidates managed to provide the correct answer.
The calculation of (share capital and reserves) was a challenge to all students as
none of them got all the marks.
(b) The preparation of statement of profit and loss and other comprehensive
income was a nightmare. The approach and presentation varied from candidate
to candidate.
The preparation of the statement of financial position was generally well
attempted.
Notes to the financial statements were generally satisfactory. However, a number
of candidates thought that the effect of the destroyed inventory was going to be
reduced in 2013.

Question 4
Part (a) of this question was very simple. However, some candidates thought that
the mine and factory should be regarded as two cash generating units.
On Part (b), the accounting implications for the operating lease were not well
mastered. Very few candidates knew that the lease payment, insurance and
maintenance costs were going to be the same for 2014 and 2015. The payment
of rent at $8,000 was well mastered by the majority of candidates.

The carrying amount of the loan in 2011 was satisfactorily calculated. The
interest charged and exchange rate difference that was recognized in 2011 was
well calculated.
The determination of the diluted earnings and shares of the diluted earnings for
the year proved to be difficult for many candidates. However, profit and opening
balance of the shares were well mastered.
Question 5
On Part (a), the profits for comparative years were fairly provided. However, a lot
of candidates did not provide correct answers for the retained earnings.
On Part (b), the preparation of non-current assets and non-current liabilities and
current liabilities was the most difficult part of this question. Very few candidates
provided satisfactory answers. Those who provided correct answers did not
provide the totals. The layout and presentation in majority of cases indicated lack
of preparedness on the part of the candidates.
On Part (c), the treatment of a grant using reduction of cost and deferred income
approach methods was fairly understood although a few candidates did not add
up the totals.
Conclusion
The overall performance was below that of November 2014. The presentations of
the answers generally were poor. There was a tendency of providing answers
that were not solicited and this indicated that the preparation for this examination
was poor. The colleges are encouraged to teach the candidates on how to
answer and present their answers.
Thank you

P Matungamire (FCIS)