APRIL 2011

EXAM ADVICE AND GUIDANCE FOR TRAINEES INCLUDING EXAMINERS FEEDBACK AND EXAMINABLE DOCUMENTS

L. 11 20 LOBA RIL G AP CCA EGS 5 .A _R E1 IN WWWXAM DL EA LES ES/E L Y D RU TR AM S/RU EN X T M A E EN A C D EX AC TU /S ST TE COM LA

THE ESSENTIAL GUIDE

ALL YOU NEED TO KNOW FOR THE JUNE 2011 EXAMS

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 04/2011

03

EDITORS CHOICE
Welcome to the Student Accountant Essential Exam Guide. This issue is packed with over 51,000 words of advice and guidance from examiners, examinable documents, and essential information to help you prepare for the June 2011 exams, including how to enter, deadlines, and exam rules. We strongly recommend that you read the examiner feedback relevant to the papers you are planning on taking in June. Reading the examiner feedback together with the published questions and answers from the latest exam session can help you identify where students have gone wrong in the past, and how to develop your answers to achieve the best marks possible. In addition to the examiner feedback, this issue also includes the examinable documents relevant to A the International papers for nancial infor ccess t reporting and audit, and the tax h mati on o e latest rates for the UK tax papers. These n in are essential reading for the June www Accoun Foundati ons t .acc 2011 exams. aglo ancy at bal.c The Noticeboard section includes om/ the exam timetable for June 2011, a information on how to apply for exams by the deadline of 15 April 2011 and exam rules and regulations. We also include information on the key aspects of Foundations in Accountancy, ACCAs new suite of entry-level qualications, and explain how applying for membership might be easier than you think. I hope that you nd this essential guide useful in helping you prepare fully for the June 2011 exams. Email me at studentaccountant@accaglobal.com with your thoughts feedback on this issue. Victoria Morgan Editor, Student Accountant magazine

04 CONTENTS

KEY DATES FOR THE JUNE 2011 EXAM SESSION

Exam entry deadline 15 April 2011 Exams start 6 June 2011 For a full list of the latest ACCA exam rules, go to page 73 of this issue

CAT EXAM DOCUMENTS ONLINE

Examinable documents relevant to CAT Papers 3, 6, 8 and 9 are available at www.accaglobal.com/students/pass/ examinable_documents

INTERACTIVE

Email us studentaccountant@ accaglobal.com your details if you would like to be profiled in Student Accountant

Welcome to the STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 04/2011

Please email studentaccountant@accaglobal.com with your feedback on this issue

EXAMS
12 ACCA QUALIFICATION FEEDBACK Feedback for variant papers is available online at www.accaglobal.com/students 12 Paper F1 13 Paper F2 14 Paper F3 16 Paper F4 (Global) 18 Paper F5 20 Paper F6 (UK) 22 Paper F7 25 Paper F8 29 Paper F9 32 Paper P1 34 Paper P2 36 Paper P3 38 Paper P4 39 Paper P5 43 Paper P6 (UK) 47 Paper P7 51 CAT QUALIFICATION FEEDBACK 51 CAT Paper 3 53 CAT Paper 4 55 CAT Paper 5 57 CAT Paper 6 58 CAT Paper 7 60 CAT Paper 8 61 CAT Paper 9 (UK) 63 CAT Paper 10 EXAM TECHNIQUE 06 Command words and revision tips 08 How to approach multiple-choice questions 10 A close look at question verbs 65 EXAMINABLE DOCUMENTS Relevant to ACCA Qualification financial reporting, audit and tax papers for the June 2011 exam sitting STUDENT ACCOUNTANT TECHNICAL ARTICLE ARCHIVE All technical content from Student Accountant is on ACCAs website at www.accaglobal.com/students/student_accountant/archive Answers to frequently-asked questions about ACCAs qualifications can be found at www.accaglobal.com/learningproviders/tuition_provider/faq

EDITORIAL TEAM Victoria Morgan Editor Glen Patterson Deputy editor Jackie Dollar Art editor Richard Gooding Designer Rhian Lewis Editorial executive WWW.ACCAGLOBAL.COM Jamie Ambler Digital publishing editor 29 Lincolns Inn Fields London WC2A 3EE United Kingdom tel: +44 (0)20 7059 5700 email: info@accaglobal.com www.accaglobal.com PUBLISHING AND ADVERTISING Adam Williams Head of publishing Anthony Kay Production manager For all advertising-related matters please contact Lisa Peake: tel: +44 (0)20 7902 1224 email: lisa@educate-direct.com Published by the Certified Accountants Educational Trust in cooperation with ACCA. The Council of ACCA and the publishers do not guarantee the accuracy of statements made by contributors or advertisers, or accept any responsibility for any statement which they may make in this publication. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without prior written permission of the publishers. CAET 2011 ISSN 1473-0979

RESOURCES
69 NOTICEBOARD ESSENTIAL INFORMATION TO HELP WITH YOUR EXAM ADMINISTRATION 70 ACCA Connect contact details and the latest ACCA and CAT Qualification and Foundations in Accountancy fees 71 Detailed exam timetable for the June 2011 exam session to help with your diary planning 72 Answers to your frequently-asked questions about exams and myACCA 73 Essential advice and rules that you should be aware of before you take your June 2011 exams

FOUNDATIONS IN ACCOUNTANCY

ACCAs new suite of entry-level qualifications will be first examined in the December 2011 exam session. Find out more on page 73 of this issue

STUDENT ACCOUNTANT to a new In addition to this twice-yearly printed issue, we also email an alert

issue of Student Accountant every two weeks. Make sure youre keeping up to date with the latest issue at www.accaglobal.com/sa

06

TECHNIQUE TIPS

EXAM TECHNIQUE
UNDERSTANDING COMMAND WORDS
Examiners frequently complain that students do not read exam questions properly, not just misunderstanding the requirement but also ignoring the question structure. As a result, students often lose marks because of poor exam technique even if their syllabus knowledge is faultless. Understanding command words is the key. Examiners choose these words with care, and use them to show how they want the question to be answered, and to indicate how they will be awarding marks. For example, in a discursive question you might be asked to explain or discuss. This means you have to demonstrate in-depth knowledge (so you can explain), or show your understanding of related issues (so you can discuss); if you simply provide a list of statements then you are unlikely to gain all the marks on offer. However, if you are asked to list key points, then extra explanation is unnecessary, wont gain extra marks and crucially will waste valuable exam time. Go through past papers and identify all the different command words used and ask for help if youre not sure what youre being asked to do, as command words are signposts to a successful answer.

IDENTIFY ALL THE DIFFERENT COMMAND WORDS

DEMONSTRATE IN-DEPTH KNOWLEDGE OR EXPLAIN

LIST KEY POINTS

SUCCESSFUL ANSWERS

See page 8 for a list of common question verbs

REVISION TIPS IMPROVE YOUR TECHNIQUE

JUNE 2011 MON

Its easy to feel overwhelmed when starting the revision phase so much work to get through and so little time. But by stepping back and planning strategically, revision can be easier, quicker and more effective. Start by drafting a revision timetable. This provides a perspective on what needs to be done, sets targets, and breaks down the workload into more manageable chunks. You can also use the timetable to prioritise those areas needing extra attention. Reading notes and study texts are all part of the process, but active revision is more engaging from simply highlighting key words, to

creating diagrams to help you understand and remember key concepts. Note cards are another useful device, especially as they are portable enabling revision wherever you go. Past paper practice is another must, helping you test both knowledge and exam technique. Schedule time for at least one mock exam before you take the real thing, so you can get a feel for the exam process, and practise your time management skills. And finally, make sure you take enough breaks, eat healthily and save some time for family and friends balance is important if you want to be in the best shape possible when you finally take your exam.

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08

TECHNIQUE TIPS

EXAM TECHNIQUE
MULTIPLE-CHOICE QUESTIONS THE GOLDEN RULES
Multiple-choice questions (MCQs) are not easy. Demanding both syllabus knowledge and the right technique, good MCQ performance can mean the difference between pass and fail. So what should you remember? First, prepare thoroughly, revising across the syllabus. Although some material is clearly more suitable for MCQs calculations for example, or definitions of terms dont try to predict which syllabus areas MCQs will cover. In the exam, think clearly and read carefully. Much time and effort goes into preparing MCQs, and especially into the distractors the wrong answers. These wrong choices replicate common mistakes and so will seem very plausible, especially under exam conditions. Always make a considered choice when choosing your answer. Good time management is crucial, although its better to allocate time to groups of MCQs rather than individual questions. Youll probably find some MCQs take less time to answer than others by completing these questions first youll know how much time is left to answer the more difficult MCQs. And finally answer all the questions. There are no penalties for wrong answers, but definitely no marks for an unanswered question. Try not to guess, but if youre running out of time or knowledge make an educated choice.

MULTIPLE-CHOICE QUESTIONS AND TOP TIPS ON STRESS MANAGMENT

STRESS MANAGEMENT

EXAM SUCCESS

Exam stress affects even the most experienced ACCA student, and although it can keep you focused and alert, it can also affect your exam performance. Keeping stress under control is, therefore, crucial. To combat stress, plan ahead as much as possible. Create a revision schedule and if you start to slip behind, then work out how to catch up before it becomes a real problem. Above all, avoid the panic that prompts last minute, late night cramming guaranteed to raise stress levels. And dont forget exam technique when you enter the exam hall you need to feel confident, knowing both the syllabus and the structure of the exam paper. Exercise and healthy eating can keep stress levels low. A 10-minute walk will help get things in perspective, and refresh you for more effective revision. Avoid too much caffeine, sugary drinks and junk food eaten at your desk these can affect your overall wellbeing, making things worse, not better. And practise some quick and easy relaxation techniques for the day of the exam, such as slow breathing, or tensing then relaxing muscles. See what works for you and use it to counter any stress that could build up while you wait for the exam to start.

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10

TECHNIQUE TIPS

EXAM TECHNIQUE
INTELLECTUAL LEVELS AND QUESTION VERBS
We take a look at the intellectual levels for the ACCA Qualification papers, which should help you know how to answer questions at different levels that you might be asked to do in an exam. It is particularly important to consider INTELLECTUAL LEVELS Knowledge and comprehension Papers F1F3 retention and recall of knowledge understanding of major accounting and business ideas, techniques and theories use of knowledge and techniques in new but familiar situations recognition of fundamental cause and effect in accounting. the question requirements carefully to make sure you understand exactly what is being asked, and whether each question part has to be answered in the context of the scenario or is more general. You also need to be sure that Application and analysis Papers F4F9 analysis of unfamiliar situations to prepare reports and solve problems using relevant concepts and theories recognition of subtle or hidden information patterns and trends within financial and other information, and the ability to interpret these the ability to infer from given information and draw conclusions. tips Clearly explain the resemblances or differences. Conclusion Intellectual level 2 ,3 Actual meaning The result or outcome of an act or process or event, final arrangement or settlement Key tips End your answer well, with a clear decision. Criticise Intellectual level 3 Actual meaning Present the weaknesses/ problems; evaluate comparative worth Dont explain the situation; instead analyse it Key tips Criticism often involves analysis. Define Intellectual level 1 Actual meaning Give the meaning; usually a meaning specific to the course or subject Key tips Also explain the exact meaning because usually definitions are short. Describe Intellectual level 1, 2 Actual meaning Give a detailed account or key features. List characteristics, qualities and parts Key tips Make a picture with words; identification is not sufficient. Discuss Intellectual level 3 Actual meaning Consider and debate/argue about the pros and cons of an issue. Examine in-detail by using arguments in favour or against Key tips Write about any conflict, compare and contrast. Evaluate Intellectual level 3 Actual meaning Determine the scenario in the light of the arguments for and against Key tips Mention evidence/case/point/ issue to support evaluation. Explain Intellectual level 1, 2 Actual meaning Make an idea clear. Show logically how a concept is developed. you understand all the tasks that the question is asking you to perform. The different levels of the ACCA Qualification each address different intellectual levels. See table below for further information. Evaluation and synthesis Papers P1P7 generalisation, comparison and discrimination using complex and unstructured information assessment and evaluation of complex information use of reasoned argument to infer and make judgments presentation and justification of valid recommendations. Give the reason for an event Key tips Dont just provide a list of points, add in some explanation of the points youre discussing. Illustrate Intellectual level 2 Actual meaning Give concrete examples. Explain clearly by using comparisons or examples Key tips Add in some description. Interpret Intellectual level 3 Actual meaning Comment on, give examples, describe relationships Key tips Include explanation and evaluation. List Intellectual level 1 Actual meaning List several ideas, aspects, events, things, qualities, reasons, etc Key tips Dont discuss; only make a list. Outline Intellectual level 2 Actual meaning Describe main ideas, characteristics, or events Key tips Briefly explain the highlighted points. Recommend Intellectual level 3 Actual meaning Advise the appropriate actions to pursue in terms the recipient will understand Key tips Give advice or counsel. Relate Intellectual level 2, 3 Actual meaning Show the connections between ideas or events Key tips Relate to real time examples. State Intellectual level 2 Actual meaning Explain precisely Key tips Focus on the exact point. Summarise Intellectual level 2 Actual meaning Give a brief, condensed account Include conclusions. Avoid unnecessary details Key tips Remember to conclude your explanation.

ACCA examiners have highlighted the lack of understanding of the requirements of question verbs as the most serious weakness in many candidates scripts. Given below are some common question verbs used in exams. QUESTION VERBS Analyse Intellectual level 2, 3 Actual meaning Break into separate parts and discuss, examine, or interpret each part Key tips Give reasons for the current situation or what has happened. Apply Intellectual level 2 Actual meaning To put into action pertinently and/or relevantly Key tips Properly apply the scenario/case. Assess Intellectual level 3 Actual meaning To judge the worth, importance, evaluate or estimate the nature, quality, ability, extent, or significance Key tips Determine the strengths/weaknesses/importance/ significance/ability to contribute. Calculate Intellectual level 2, 3 Actual meaning To ascertain by computation, to make an estimate of; evaluate, to perform a mathematical process Key tips Provide description along with numerical calculations. Comment Intellectual level 3 Actual meaning To remark or express an opinion Key tips Your answer should include an explanation, illustration or criticism. Compare Intellectual level 2 Actual meaning Examine two or more things to identify similarities and differences Key

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12

EXAMS

ACCA FEEDBACK
PAPER F1 ACCOUNTANT IN BUSINESS
The December 2010 exam saw a more even performance by candidates across all syllabus areas than in previous sessions. It appears that candidates are now preparing for questions on as many subject areas as possible, and this has resulted in few questions having very low pass rates. This is in contrast to earlier papers, when candidates scored higher pass rates on accounting and finance questions than those relating to organisations and human resources management. While pass rates on the latter were generally high, candidates also performed well on topics that have presented major difficulties in the past. The highest pass rates were on questions relating to the relative advantages of computerised systems and manual systems, the use of spreadsheets at work, time management, purchase ledger, organisational concepts (scalar chain and span of control) and the Blake and Mouton managerial grid. Lower pass rates were achieved on questions relating to control, International Accounting Standards, training assessment, the contribution of the accounting function to marketing activities, data protection, security and Belbins team roles theory. It should be noted that some of these questions were worth a single mark, confirming that such questions can still present as many problems to some candidates as those worth two marks. Over 70% of candidates answered questions on job description, selection, outsourcing and leadership styles successfully, which is encouraging given the historically lower pass rates on questions relating to human resources management. The majority of candidates also answered questions on leadership theory, organisational culture, Honey and Mumfords learning styles and multi-skilling successfully. Inevitably, some candidates guessed the answers to certain questions, witnessed by the choice of option D for questions with only A, B and C as available answers, and option C or D for questions with two choices of A or B. SAMPLE QUESTIONS Question 23 required an understanding of the contribution of the accounting function to the activities of the marketing department. Analysis of costs and revenues of different products would assist the marketing department in respect of which activity? A Differentiating the technical features of products from those of competitors B Calculating the maximum discounts that sales personnel are permitted to offer C Targeting sales efforts towards the most appropriate socio-economic groups D Determining production bonuses to be paid The correct answer is B. By analysing costs and revenues through the use of marginal costing or related techniques, the marketing department will know the extent to which discounts will erode profit margin or contribution. Analysis of costs and revenues cannot help the marketing department to differentiate the technical features of products from those of competitors, as the accounting information provided does not identify such information either for competitors or the company itself. Likewise, analysis of costs and revenues serves little purpose in relation to targeting socio-economic groups, as this requires qualitative assessment of customer needs and buyer motivation. Production bonuses are not ordinarily decided by the marketing department. Only 36% of candidates answered this question correctly. Question 24 related to data protection. Which of the following principles is usually recommended for inclusion in legislation on data protection? A The data user should provide the data subject with regular and detailed information on the data held B All personal data held by data users should be updated by checking this data with the subject at regular intervals C All personal data held by data users should be adequate for the purposes of the data user but not excessive D All personal data held by data users should be reviewed regularly and automatically deleted after a specified period of time The correct answer is C. It is a generally accepted principle that organisations should hold only data that is necessary for operational purposes, and should not store data that goes beyond such purposes. It is impractical for most organisations to provide regular detail updates on personal data held, and arguably of little importance to most data subjects, who in many jurisdictions have a statutory right of access if they wish to obtain such information from a data user. It is also impractical for data users to enter into regular dialogue with data subjects in order to check and update the data, though many organisations do so for the purpose of marketing. It is undesirable for organisations to automatically delete all data after a specified period of time, as it is usually appropriate that some data is held for long periods while other many be retained for just a single transaction. Only 36% of candidates answered this question correctly. Question 45 related to different types of control in relation to management of accounting information. DEF Co has decided to include in each customers account number a check digit which will have an arithmetical relationship to other digits in the account number. This is an example of which of the following types of control? A Input control B Back-up control C Output control D Contingency control The correct answer is A. Most candidates eliminated distractor C, but responses were evenly spread across the other three choices. In this context, a check digit is usually a number included in an account number that is calculated from the other numbers in it. For example, it could be digit 2 plus digit 5 divided by digit 3. If an operative makes a transcribing error, the check digit helps to identify the input error. Check digits are not used for the other three purposes. Only 36% of candidates answered this question correctly. CONCLUSIONS The ability of many candidates to answer questions across all areas of the syllabus confirms that prospects of success in Paper F1 are enhanced by a sound knowledge and good understanding across all areas of the syllabus. The questions ask candidates to demonstrate their knowledge and apply knowledge at a basic level. None of the learning objectives are examined in great depth, so it is unnecessary to spend many hours on each topic. There is no evidence to suggest that this paper is time pressured, so

STUDENT ACCOUNTANT ESSENTIAL EXAM GUIDE 04/2011

13

candidates will always benefit from reading the requirement carefully in order to arrive at the right answer. In order to maximise use of the time available, candidates should avoid selecting answers too quickly or spending too long persuading themselves that their choice is appropriate. It is especially important to give due consideration to all answer options, as the distractors are all usually quite plausible, but incorrect alternatives. Candidates may sometimes underestimate the amount of thought they should give to a question, and this seems to be backed up by performance on certain questions in December, where the pass rate was comparatively low on topics that previously caused little difficulty. Examples include Porters value chain, procurement and assessment of the effectiveness of training. Candidates are encouraged to answer every question on the paper. Even if the correct answer is not known, it may be possible to arrive at it by ruling out the distractors as incorrect. This process of deduction can be practised using the Pilot Paper and materials produced by learning providers.

was weak in each case less than 40% of the candidates selected the correct answer. Each of these questions carried two marks and each related to a mainstream topic in the Study Guide. SAMPLE QUESTIONS FOR DISCUSSION EXAMPLE 1 A company which operates a process costing system had workinprogress at the start of last month of 400 units (valued at $3,000) which were 40% complete in respect of all costs. Last month 1,500 units were completed and transferred to the finished goods warehouse. The cost per equivalent unit for output produced last month was $20. The company uses the FIFO method of cost allocation. What is the total cost of the 1,500 units transferred to the finished goods warehouse last month? A $26,800 B $28,200 C $29,800 D $30,000 The correct answer was C. This question tested Section D6(g) and (h) in the Study Guide. If 1,500 units were completed in the month then 1,100 units (1,500400) must have been started and finished in the month. These are valued at $22,000 (1,10020). The 400 units from opening workinprogress (WIP) were already 40% complete so last month would have had 60% of work done to complete them. The total value of the 400 units is, therefore, calculated as: $3,000+$(4000.620) = $7,800. The total value of the months output was $(22,000+7,800) = $29,800. Each of the three wrong answers was selected by at least 17% of the candidates. Candidates selecting answer A had simply failed to add in the $3,000 opening WIP value. Answer B could have been obtained by valuing the 400 units as follows: $3,000+$(4000.420) = $6,200. This had taken the percentage

to complete the WIP as 40% instead of 60%. Answer D was simply 1,500 units valued at $20 per unit and made no adjustment for WIP . EXAMPLE 2 A company uses standard marginal costing. Last month the budgeted contribution was $20,000 and the only variances that occurred were as follows: Sales price Sales volume contribution Fixed overhead expenditure $ 3,000 5,000 1,000 Adverse Favourable Adverse

What was the actual contribution last month? A $18,000 B $19,000 C $21,000 D $22,000 The correct answer was D. This question tested Section E5(b) of the Study Guide the reconciliation of budgeted and actual contribution under marginal costing. The fixed overhead expenditure variance is not relevant to a reconciliation of budgeted and actual contributions. Fixed costs are deducted afterwards from contribution to arrive at profit. Therefore, the correct calculation of actual contribution was: (20,0003,000 + 5,000) = $22,000. Answer A was obtained by adding the adverse sales price variance and subtracting the favourable sales volume contribution variance to the budgeted profit. Answer B could have been obtained in two (wrong) ways. First, by simply deducting the adverse fixed overhead expenditure variance from the budgeted contribution. Second, by netting the three variances listed in the question and then deducting this net figure from the budgeted contribution there were two errors made in this case. The most popular wrong answer was C (chosen by a third of the candidates) which added the net of all three variances listed to the budgeted contribution. EXAMPLE 3 Are the following statements, which refer to different types of budgets, true or false? STATEMENT 1 An annual budget that can be broken

PAPER F2 MANAGEMENT ACCOUNTING

This was the seventh exam under the current syllabus. The two-hour paper, as usual, contained 50 multiple-choice questions 40 carried two marks each and the other 10 carried one mark each. This mix continues to be exactly in line with the Pilot Paper. The overall general performance of candidates improved at this sitting compared with recent sittings. The performance on an individual question basis also improved on this occasion, on only a very few questions was the correct answer not selected by at least 40% of the candidates. The following questions taken from the December 2010 exam are ones where the performance of candidates

PAPER F1 CANDIDATES ARE ENCOURAGED TO ANSWER EVERY QUESTION ON THE PAPER. EVEN IF THE CORRECT ANSWER IS NOT KNOWN, IT MAY BE POSSIBLE TO ARRIVE AT IT BY RULING OUT THE DISTRACTORS AS INCORRECT. THIS PROCESS OF DEDUCTION CAN BE PRACTISED USING THE PILOT PAPER AND MATERIALS PRODUCED BY LEARNING PROVIDERS.

14 EXAMS

PAPER F2 CANDIDATES SHOULD READ PREVIOUS PAPER F2 EXAMINERS REPORTS THEY ARE ALL STILL VERY RELEVANT AND HELPFUL. EACH CONTAINS THREE MULTIPLE-CHOICE QUESTIONS. ACCESS THESE ON THE ACCA WEBSITE.
down into monthly budgets, which differ depending on the number of working days in each month, is called a flexible budget. STATEMENT 2 An annual budget set before the start of a year based on estimated sales and production volumes is called a fixed budget. A B C D Statement 1 Statement 2 True True False False True False False True Read previous Paper F2 examiners reports they are all still very relevant and helpful. Each contains three multiple-choice questions. Access these on the ACCA website.

Cash flows from financing: Issue of share capital (120+60)(80+40) Repayment of bank loan (100150) Net cash inflow from financing

$000 60 (50) 10

The most common answer selected was D which included retained earnings in the calculation which is incorrect. Candidates need to spend more time learning the format and technique for answering questions on this topic. 2 Smith and Jones commenced in partnership on 1 December 2009 sharing profits equally. Smith paid cash of $40,000 into the partnership. Jones paid in cash of $25,000 and brought in a motor vehicle, computer and furniture worth $15,000. The partners maintain both capital and current accounts. The partnership pays interest on capital at 4% per annum. What should the balance be on the capital accounts of Smith and Jones at 30 November 2010? A B C D Smith $41,600 $40,000 $40,000 $41,600 Jones $41,600 $40,000 $25,000 $26,000 (2 marks) The correct answer is B. Only 33% of candidates selected B, with the majority selecting option A. Partnership accounts is another area that seems to consistently show poor performance. It is a large part of the Paper F3 syllabus so it is surprising that candidates perform so badly. This question required knowledge of what should be included in the capital accounts of a partnership. There were no complicated calculations to perform, so this shouldnt have caused any problems. The correct answer of B shows both partners contributing an equal amount of capital the only difference being that Jones has paid cash and other assets into the partnership. Most candidates selected A which meant that they correctly identified the capital balance, but then added on the interest on capital, which should be included in the current account balance. 3 The statement of financial position of Cartwright, a limited liability company, shows closing retained earnings of $320,568. The income statement showed profit of $79,285. Cartwright paid last years final dividend of

PAPER F3 FINANCIAL ACCOUNTING

The correct answer was D. This question tested section E3(a) in the Study Guide the explanation of fixed, flexible and flexed budgets. A flexible budget is one which recognises different cost behaviour patterns and is designed to change to reflect different volumes of activity. Therefore, statement 1 is false. Statement 2 describes a fixed budget and is, therefore, true. All three incorrect answers were selected by significant numbers of candidates even the least popular choice (Answer C the exact opposite to the correct answer) was chosen by nearly 16% of the candidates. This seems to indicate that this part of the Study Guide is generally not well understood. Future candidates are advised to: Study the whole syllabus. The exam will always cover all sections of the Study Guide. Use the Pilot Paper questions for practice. The Pilot Paper is also a very good guide to the styles of questions that will continue to be set and to the coverage of the topics in the Study Guide. It is also gives a good indication of the approximate split between calculation and non-calculation questions that will continue in exams up to and including the June 2011 sitting. Practise as many multiple-choice questions as possible in preparing for the exam. Read questions carefully in the exam.

The following three questions have been taken from the International variant of the paper and were the three questions with the lowest pass rates on the paper. The aim of reviewing these questions is to give future candidates an indication of the types of questions asked and guidance on dealing with exam questions. SAMPLE QUESTIONS FOR DISCUSSION 1 The following extract is from the financial statements of Pompeii, a limited liability company at 31 October: Equity and liabilities Share capital Share premium Retained earnings Non-current liabilities Bank loan 2010 $000 120 60 85 265 100 365 2009 $000 80 40 68 188 150 338

What is the cash flow from financing activities to be disclosed in the statement of cash flows for the year ended 31 October 2010? A $60,000 inflow B $10,000 inflow C $110,000 inflow D $27,000 inflow (2 marks) The correct answer is B. Only 32% of candidates answered this correctly. In terms of difficulty this question was not particularly complicated, but statements of cash flows have been consistently answered badly in each sitting of the paper. In this question, the answer can be derived as follows:

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EXAMS

$12,200 during the current year and proposed a dividend of $13,500 at the year end. This had not been approved by the shareholders at the end of the year. What is the opening retained earnings balance? A $241,283 B $387,653 C $254,783 D $253,483 (2 marks) The correct answer is D and almost 36% of candidates selected this option. This question required knowledge of how dividends are treated in the financial statements and then working backwards to obtain the opening retained earnings balance. The solution is calculated as follows: Opening retained earnings + profit prior year final dividend = closing retained earnings Opening retained earnings = $79,285 $12,200$320,568 Opening retained earnings = $253,483 The most frequently selected incorrect answer was B. This distracter took closing retained earnings as the opening balance and then added profit less the final dividend ($320,568+$79,285 $12,200). This is a careless error from not reading the question carefully enough. CONCLUSION It has been surprising that these questions were the worst answered on the paper at this sitting. They cover key exam topics and all are relatively straightforward. Partnerships and statements of cash flows are consistently amongst the worst answered questions in the paper, which seems to highlight that candidates are not preparing sufficiently in these areas. At the risk of repeating the conclusion of previous reports, candidates must focus on the breadth of the syllabus as this exam will examine the whole range of the Study Guide and candidates need to prepare for this.

PAPER F4 (GLO) CORPORATE AND BUSINESS LAW

As usual, this paper was made up of 10 compulsory questions, each of 10 marks, although many of them were subdivided into distinct parts. I have previously stated that this format seems to have settled down

and to meet with candidates approval from way they tackle it. That seems still to be the case and some learning providers commented positively on the format. However, it should be said that a number of candidates did not follow the structure and provided general and obviously prepared answers to specific topics. This is a point I will return to on a number of occasions in my report. It has to be recognised that the performance of candidates was unsatisfactory. This paper should have been tackled much better than it was by the generality of candidates. As I have said many times the syllabus is wide and it has to be fully examined over time. While it is recognised that some aspects of the syllabus are less central than others and hence are examined less frequently, they nonetheless have to be examined at some time. However, when these areas are examined they are generally presented in the context of a paper that provides more than ample opportunity to reach a pass standard through an adequate treatment of more obvious, not to say easier topics. I strongly suggest that such is the case in the paper under consideration. I hope to demonstrate this when I consider the individual questions. Consider Question 5 on registers and accounting records. When this question was asked before, some time ago, I had assumed it would be an easy question for people doing an accountancy qualification. In the event I was wrong and it was done inadequately as it has been again. However, the subject is on the syllabus and has to be examined over time. Moreover, I still maintain it is not only relevant, but important for students to be aware of the interface between law and other more obviously accountancy-based modules. Even if Question 5 was not expected, it should equally be noted that both Questions 3 and 6 were extremely generous in the breadth of approach they allowed candidates. These questions could have been much narrower, but were deliberately written to afford candidates as much scope as possible to answer them. This paper was far more accountancy focused than previous papers and gave candidates the opportunity to use their core basic accountancy knowledge. Questions 4, 5 and 9 should have been answered extremely well but answers varied considerably. Candidates seemed to completely forget anything else and did not have the ability to draw on brought forward knowledge to answer

the questions. Candidates do not seem able to recognise how the various different topics from their studies fit together. It would appear that in preparing answers rather than topics, candidates fail to come to terms with the underlying law and struggle when a topic is examined in a way that they have not prepared for. I will return to this aspect in the detailed consideration below. This also relates to the issue of question spotting and the structure of the paper. For some time now the paper has adopted a fairly standard structure. Thus, Question 1 will always be on legal systems, Question 3 on the UN Convention on Contracts for the International Sale of Goods (CISG) with Questions 46 usually being on company law. The problem questions always start with a contract question, although the actual topic covered changes. Question 9 is usually a company question. While it is good that learning providers can give candidates an indication of the likely structure of the paper, it is becoming apparent that some candidates are no longer actually engaging with the question set, but are simply adopting the approach that says This is Question 8, it must be about contract here is everything I know about contract law, from offer to remedies. Question 10 is where insider dealing has turned up, so here is an answer on insider dealing. Some candidates clearly prepare answers to topics and deliver them, even if they are not relevant. Such action merely indicates that the candidates do not actually understand the underlying legal concepts or principles. It is apparent that some candidates prepare answers based on questions from the previous paper and submit them as answers to completely different questions. What follows is an analysis of the way in which question were attempted by candidates, although as usual, the emphasis tends to be on the negative aspects rather than focusing on the sound work that many candidates produced. SPECIFIC COMMENTS QUESTION 1 This question required candidates to answer a question on the separation of powers. It is pleasing to report that the question was dealt with well by the vast majority of candidates. Part (a) was generally done well with most candidates being able to

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WHILE IT IS RECOGNISED THAT SOME ASPECTS OF THE PAPER F4 SYLLABUS ARE LESS CENTRAL THAN OTHERS AND HENCE ARE EXAMINED LESS FREQUENTLY, THEY NONETHELESS HAVE TO BE EXAMINED AT SOME TIME. WHEN THESE AREAS ARE EXAMINED THEY ARE GENERALLY PRESENTED IN THE CONTEXT OF A PAPER THAT PROVIDES MORE THAN AMPLE OPPORTUNITY TO REACH A PASS STANDARD THROUGH AN ADEQUATE TREATMENT OF MORE OBVIOUS TOPICS.
explain the meaning and purpose of the doctrine. It was especially pleasing to see some candidates taking advantage of the possibility of considering their own political systems in their analysis of the concept. Part (b) was done fairly well, with some answers even considering the impact of the UKs membership of the European Union. QUESTION 2 This question referred to the possibility of setting aside arbitration decisions under the UN Convention. Given the fact that it has been examined on a number of times, it has to be said that it was not done as well as expected. This question was the first example of the prepared answer. Arbitration has been examined as Question 2 in many recent papers and candidates appeared to have prepared the generic arbitration answer. As such these generic answers considered everything relating to arbitration and some fortunately gained some marks by eventually stumbling on to the actual topic of the question. However, the relevant content tended to be too little too late, and time would have been much better spent focusing on the actual issue. In relation to the actual topic, although many candidates were able to deal with it very well indeed, a significant number confused setting aside with the right to appeal against an arbitral decision. QUESTION 3 This was a wide-ranging question on the remedies available for breach of contract, so it did not require answers about the formation of contracts, consideration or terms. However, those candidates who had prepared general answers provided such details, but got no marks for them. The standard of answers produced on this question varied in standard quite considerably. Often full marks were awarded to candidates who explained the definition of a breach of contract, addressed different types of breach and in particular fundamental breach, and fully explained the remedies available to the buyer with reference to the convention. However, a substantial number of candidates produced answers that were unstructured and lacking in focus, which was disappointing given the centrality of remedies in the syllabus. QUESTION 4 This question related to share issue and the rights of shareholders. Although it had never been examined before, it was deliberately worded in a way to afford candidates the possibility to use their wider business/accountancy knowledge within the context of specific legal provisions. On the whole it was done at least fairly well. Part (a): this should have been done very well. The types of share and the rights of shareholders are a basic concept for any candidate studying accountancy. However, answers to this were extremely confused. Pre-emption rights were confused with promoters of companies and companys first issue of shares, which was simply incorrect. Only a small number of candidates were able to describe pre-emption rights and where this was the case, full marks were often awarded. Part (b): this was generally well done with most candidates being able to define what a rights issue was. Answers scored full marks where candidates described that rights issues could be made at less than market value, rights did not have to be taken, and that the purpose was to raise more capital for the company. Part (c): again, this was generally well done but some candidates thought that a bonus issue was a payment to employees for good work.

QUESTION 5 This question related to company registers and charges and has already been referred to in the introduction to this report. Part (a) referred to registers. Answers were mixed. A high number of candidates approached the question from a company constitution angle and described the Memorandum of Association and Articles. Some candidates misinterpreted the question and described the role of the company secretary and the documents needed to form a company in the first place. No marks were awarded for these types of answers. The suspicion is that as these topics have been examined in the recent past candidates expected that they would not be examined again. Some were fortunate that registration documents and registers both refer to members and directors. Part (b) related to company accounts. Surprisingly, not many candidates scored full marks in this part. Sometimes candidates took an extremely complex view of the question and explained corporate governance procedure. Again, corporate governance must be examined somewhere so prepare and provide a general answer on that topic. But once again the generic prepared answer was not appropriate. Some answers focused on the actual records and documents which need to be kept. Answers were succinct and to the point and mentioned receipts and purchase invoices, records of cash, assets and liabilities. Credit was also awarded for discussion of the income statement, statement of financial position and cashflows. QUESTION 6 This question related to company directors duties. There can be no more central concept in company law and one that has been examined on many occasions and in many different ways. As has been said in the introduction, this formulation was deliberately chosen as the widest way of examining the topic. Candidates were either extremely knowledgeable in this area and were awarded full marks or answers were inadequate. Where candidates did not know the statutory duties, credit was given for relevant points which demonstrated a basic understanding. For example, promoting the success of the company was interpreted by some as making the company perform to the best of its ability and ensuring

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success. The benefit of the doubt was given to candidates and marks were awarded accordingly. Some candidates explained in great detail the different types of directors, and the process of appointment and removal and the concept of corporate governance. This type of answers received no marks. Directors duties are a common topic, so it was surprising to note that some candidates did so poorly, but once again it is symptomatic of the prepared answer syndrome, built on no real underpinning of understanding. Corporate governance is an important part of the syllabus, it has been examined in a particular way in the past, so any question on directors must relate to corporate governance and of course the Directors Disqualification Act 1986, which must always be mentioned together with fraudulent and wrongful trading, because there is a really good chance that they will turn up except when they dont. QUESTION 7 This question related to the UNCITRAL model law on credit transfers, and it was inadequately answered. This was clearly a topic for which candidates had not prepared any standard answers and such lack of preparation clearly caused confusion amongst those attempting the question, and many did not even attempt to do this question. As a result the best that some candidates could do was to repeat the question in their answer. Part (b) was done even less well. QUESTION 8 This first scenario question, as usual referred to contractual issues under the UN CISG, specifically the requirement as to quality under Article 35. As a topic that is central to the syllabus and one that has been examined on a number of times previously, if in different forms, it might have been thought that this was a question that could have been answered fairly well. However, although some candidates were well prepared on the specifics, a significant number of

candidates prepared generic answers on CISG, starting from offer and ending with remedies, which is not the same thing at all, and merely evidences a lack legal knowledge and analytical skill. QUESTION 9 This question related to the rules governing the payment of company dividends, particularly in relation to a plc. The topic has been examined on numerous occasions previously, but this was the first time that it had appeared in the form of a problem scenario. The way in which candidates dealt with this question perfectly encapsulates the main point of this report, that those who understand the underlying legal principles can deal with the questions no matter how they are presented, but that those who are simply learning rote answers get lost quickly and too easily. Part (a): answers varied in standard quite dramatically. Some candidates were able to discuss that a dividend can only be paid out of accumulated realised profits less accumulated realised losses. They also recognised that a public company may only make a distribution if, following the distribution, the amount of its net assets is not less than the aggregate of its called-up share capital and undistributable reserves. This was extremely encouraging and showed a good understanding of the subject. Answers concluded that the dividend was illegal as the revaluation reserve is undistributable. At the other end of the scale, other candidates thought that the revaluation was distributable and that the dividend was legal. Others did not even approach the legality of the dividend at all and instead went down the route of resolutions and procedures needed for the declaration of dividends. Furthermore, some candidates concluded that all shareholders were entitled to a dividend and if one had been declared, and then one should be paid. Part (b): some sound answers in relation to the liability of directors,

shareholders and auditors also were produced. Some candidates ignored this part of the question altogether or concluded that Dee and Eff had done nothing wrong and as the shareholders had approved the dividend, it should be paid. This conveyed a complete lack of understanding of the principles and indeed of the question as a whole. QUESTION 10 This question required candidates to compute the amounts for distribution between the partners. Answers were mixed. Some answers understood that partners had unlimited liability, that the partnership could be wound up at the wish of the partners, that external creditors needed to be paid before partners and that, as the partnership agreement outweighs the Partnership Act 1890, the remainder was to be spilt in accordance with the CSR. A lot of marks were available for merely calculating the final distributions, so this question gave the opportunity for lots of marks to be awarded. Where the approach to the question was correct as outlined above, seven marks were often awarded. The point of the question was once again to place accountancy practice in a legal context and vice versa. Some candidates believed that the question related to voluntary winding of a company and wrote at length about preferential creditors. Whilst some similarities can be drawn, this was an incorrect approach and demonstrated a fundamental lack of basic understanding between how a company operates compared to a partnership. Others wrote everything they knew about partnerships and the different ways in which a partnership could be dissolved including death of a partner, etc. This was not relevant and further displayed a general lack of application skills.

PAPER F5 PERFORMANCE MANAGEMENT

This was my first paper as the new examiner for Paper F5 but the syllabus remained

SOME PAPER F4 CANDIDATES CLEARLY PREPARE ANSWERS TO TOPICS AND DELIVER THEM, EVEN IF THEY ARE NOT RELEVANT. SUCH ACTION MERELY INDICATES THAT THE CANDIDATES DO NOT ACTUALLY UNDERSTAND THE UNDERLYING LEGAL CONCEPTS OR PRINCIPLES. IT IS APPARENT THAT SOME CANDIDATES PREPARE ANSWERS BASED ON QUESTIONS FROM THE PREVIOUS PAPER AND SUBMIT THEM AS ANSWERS TO COMPLETELY DIFFERENT QUESTIONS.

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exactly the same as in previous sittings. The structure of the paper also remained the same five questions worth 20 marks each although, in this paper, there was a 20-mark discussion question. The purpose of this was to balance the paper; there was quite a lot of information to absorb in Question 2 and there were quite a few calculations to perform in Question 3, albeit basic ones. By the time candidates got to Question 5, it was felt that they would benefit from a chance to display their understanding of budgeting without having to absorb much information. As accountants, we often have to write reports that include little or no numerical analysis. This need for clarity of expression is explicitly required at the Professional level papers, so it seems a good idea to start preparing candidates more for this now. The pass rate on this paper saw a drop from previous recent sessions. I believe that the reason for this is primarily that candidates tried to question spot. So, for example, because linear programming came up in June 2010, the belief was that it would not come up again in December 2010. The lesson to be learnt is that you cant question spot in these exams. You have to make sure that you are comfortable with every area of the syllabus; otherwise you may be caught out. Anyone who watched the Examiners Special Student Engage event in September should have got this message This is still availlable on ACCA.TV. The paper was 54% computational and 46% narrative, since within Question 2 there were a certain number of marks available for the calculations. On the whole, Question 4 was the best answered, although there were still a surprising number of candidates uncomfortable with the area of activitybased costing (ABC). In every question, candidates had the opportunity to earn some easy marks quickly, and wellprepared candidates attempted these parts first. SPECIFIC COMMENTS QUESTION 1 This question covered the fundamental area of variance analysis. Part (a) started off with some basic calculations for sales variances and materials variances, followed by some more tricky calculations on labour variances. There were plenty of easy marks in this question, but if anyone didnt understand variances properly, they would have struggled with the labour variances, which required a little bit of thought. The sales and materials

variance calculations were thankfully well performed by candidates, but the attempts at the labour variances were poor. The question clearly stated that the labour variance related solely to the temporary workers. This meant that it was necessary to work out exactly how many hours the temporary workers had worked for. The calculation was not particularly difficult, but it did require an understanding of the scenario. Since permanent workers only had the capacity to work 2,200 hours and a total of 2,475 hours was needed for production, the initial calculation required was that there was a shortfall of 275 hours. However, the question stated that temporary workers took twice as long as permanent workers and, therefore, the temporary workers would be needed for 550 hours. Approximately 20% of candidates worked this out and went on to calculate the variances correctly. Part (b) was the written part of the question, asking for an explanation of the reasons why Carad Co would be interested in the material price planning and the material price operational variance. The most common error was that candidates didnt read the requirement properly. They expected it to be asking them how the manager had performed and this was what they wrote about. Every exam sitting, this proves a problem candidates preempting the question and not reading it properly. It should not be assumed that every single variance question will give you some variances, maybe ask you to calculate some more, and then ask for a discussion of managements performance. Exam papers cannot be allowed to become that predictable as candidates would then start to only partly prepare for them, on the basis that they know what will be examined, more or less. Candidates who did read the question, however, tended to make a reasonable attempt at this part. QUESTION 2 This was a typical performance measurement question. There was quite a lot of information to absorb but I strongly believe that, unless you are given plenty of information to work with, it is only possible to make very generalised, insipid comments. This is not what Paper F5 is all about. I want candidates to be able to handle information and make some quality analysis about it. It requires common

sense and ability to link information. This should not be too much to ask of a partqualified accountant, who would have to exhibit these qualities in the workplace. Needless to say, answers were poor. Anyone who had read my technical article on this area, or indeed my predecessors article on this area, would know that comments such as turnover decreased by 8.3%, which is poor will score only a calculation mark, for working out the 8.3%. Is this decrease in turnover poor? Well, it depends on the market in which the company is operating. You have to read the scenario. When you take into account the fact that there has been a 20% decline in the demand for accountancy training, AT Cos 8.3% looks relatively good. You must link information; this is an essential skill for any accountant. Nothing is ever what it seems. Let me also take the opportunity to distinguish between an acceptable comment, which might earn one mark, compared to a good point, which might earn two marks. Cost of sales fell by $10.014m in the year. Part of this reduction was down to a fall in freelance lecture costs. A good candidate would have commented that, whilst the company requested that freelance lecturers reduce their fees by 10%, the actual fee reduction gained was 15%, a strong performance. A comment such as this would have earned two marks. A less observant comment, earning one mark, would have been that the reduction in cost of sales was partly due to the fact that the company requested freelance lecturers to reduce their fees by 10%. I hope that this question will serve as a good revision question to future Paper F5 candidates. The information given is there to help you make worthwhile comments. It is not there to trip you up. When planning the question, you should annotate it carefully, crossreferencing different parts of the question, linking financial and nonfinancial information etc. QUESTION 3 It was this question that probably made students fall down on Paper F5 in December 2010. Why? Was it difficult? No. Was it time pressured? Perhaps a little, but the calculations were routine. Was it expected? No! It was obvious that many candidates hadnt even looked at this area at all. They took a gamble and it didnt pay off.