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Foundation level exams

Learning Objectives



Foundation level exams - overview

To offer a truly global accounting designation for strategic business leaders, CPA Australia have enhanced the
configuration and content of the CPA Program. The enhanced Program comprises 14 segments and a fully integrated
practical experience requirement, previously known as the Mentor Program.




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For the CPA Program foundation level, a series of exams will be available through CPA Australia from 2010. The
following are the eight foundation level exams:

IT and Business Processes
Economics and Markets
Foundations of Accounting
Fundamentals of Business Law
Business Finance
Financial Accounting and Reporting
Management Accounting
Accounting Concepts and Principles

The exams for the CPA Program foundation level focus on assessing candidates technical knowledge in ten core
knowledge areas. Each exam tests one or more core knowledge areas to determine candidates readiness to undertake
the professional level of the CPA Program. Candidates will need to demonstrate that they have met a set of identified
learning objectives developed for each exam.

The following are the core knowledge requirements and the corresponding exams:

Core knowledge requirements Foundation level exams
Information Systems Design and Development IT and Business Process
Economics
Quantitative Methods
Economics and Markets
Accounting Systems and Processes Foundations of Accounting
Commercial Law
Company Law
Fundamentals of Business Law
Finance Business Finance
Financial Accounting Financial Accounting and Reporting
Management Accounting Management Accounting
Accounting Theory Accounting Concepts and Principles






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Foundation level exams learning objectives

The following outlines the learning objectives for each foundation level exam. This information can be used to determine
what topics are generally covered in each exam as well as the approximate exam weightings associated with each topic.
Candidates will be assessed against each set of learning objectives to ensure that they meet the core knowledge
requirements each exam is designed to test.

IT and Business Processes

General overview
This exam covers a critical awareness of business processes in the context of information technology. It requires an
understanding of database concepts and data analysis tools, corporate networks and the design and operations of
business information and accounting systems. It also covers the key areas of information controls and processes and the
reporting of accounting information.

Topics:

1. Hierarchy of systems
1.1 Identify and explain the role of the core elements of an organisations information infrastructure
1.2 Explain the hierarchy of systems

2. Database concepts
2.1 Illustrate the application of database concepts for accounting information
2.2 Explain the need for data collection and storage
2.3 Explain database systems and data storage models
2.4 Explain data modelling, design and implementation
2.5 Analyse controls for data and databases and their effectiveness
2.6 Analyse the ethical issues related to data capture and storage

3. Data analysis tools
3.1 Identify and explain the role of application and data analysis tools
3.2 Illustrate the components of an enterprise-wide resource-management system, highlighting the centralised
database and workflow management aspects of these systems
3.3 Analyse different types of productivity software
3.4 Explain data mining and its uses

4. Corporate networks
4.1 Analyse the components of a corporate network
4.2 Illustrate typical corporate network configurations
4.3 Explain applications where client server and peer-to-peer architectures can be used
4.4 Analyse control issues relating to the choice of network architecture

5. Design, configuration and operations of information systems
5.1 Illustrate information systems design, configuration and operations
5.2 Distinguish between systems development and maintenance
5.3 Illustrate an overview of the systems development life cycle
5.4 Explain the activities undertaken during the review and maintenance stage of the systems development life cycle
5.5 Explain aspects of the operation and maintenance of the systems development life cycle
5.6 Identify and explain the role of typical controls used in project management
5.7 Illustrate typical controls used in systems design, development, and maintenance activities

6. Accounting information systems
6.1 Explain the role of accounting information systems in business
6.2 Define an accounting information system
6.3 Illustrate the types of accounting information systems and their roles
6.4 Analyse the evolution of accounting information systems and their importance to accountants
6.5 Distinguish between the various types of data processing techniques

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6.6 Analyse the relationship between ethics and accounting information systems

7. Information controls and processes
7.1 Describe and explain data quality principles
7.2 Explain the complementary roles of technical and procedural controls
7.3 Explain why a business system needs to use a mixture of preventive and detective controls
7.4 Analyse security and privacy issues relating to personal web pages maintained by employees
7.5 Analyse security and privacy issues relating to electronic communication methods used by employees
7.6 Construct an overview diagram of business processes
7.7 Produce an effective summary of business processes and systems
7.8 Explain the interrelationships between business processes and accounting information systems
7.9 Analyse the difference in the controls needed when a transaction is performed face-to-face compared with an
electronic communication channel, such as telephone, Internet, or mobile
7.10 Identify and explain the steps involved in changing business processes

8. Distribution and reporting of accounting information
8.1 Explain the importance of ensuring accounting information is reported and distributed appropriately
8.2 Compose a list of internal and external stakeholders
8.3 Explain the concepts of reliability and transparency
8.4 Distinguish between hard and soft accounting data
8.5 Describe and explain the use of XBRL (eXtensible Business Reporting Language)
8.6 Analyse the reasons for the problems encountered in trials of XBRL concerning the quality of externally reported
accounting information
8.7 Analyse the growth of corporate watchdogs and regulators

Topic exam weightings:

1. Hierarchy of systems 6%
2. Database concepts 6%
3. Data analysis tools 8%
4. Corporate networks 10%
5. Design, configuration and operations of information systems 10%
6. Accounting information systems 20%
7. Information controls and processes 20%
8. Distribution and reporting of accounting information 20%

TOTAL 100%













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Economics and Markets

General overview
This exam covers economics and quantitative methods. In economics, key microeconomics concepts of demand and
supply, elasticity, productivity, market structures, and market failure are covered. It also covers macroeconomic concepts
of income distribution and the structure of the financial economy including the calculation of key national economic
measures. In quantitative methods, key tools of statistical analysis are covered, such as descriptive statistics, frequency
distributions and probability, hypothesis testing, simple linear regression and correlation.

Topics:

Part 1: Economics
1. Defining economics and the market
1.1 Define economics and describe the characteristics of an economic perspective
1.2 Distinguish between wants and needs
1.3 Explain how consumers allocate resources
1.4 Define scarcity
1.5 Explain the practical application of the law of marginal utility
1.6 Explain the theory of markets
1.7 Explain and apply the theory of comparative advantage between products and countries
1.8 Analyse in practical terms the advantages and disadvantages of production on the basis of comparative
advantage
1.9 Identify and describe the factors of production
1.10 Explain production and productivity
1.10.1 Prepare and explain the production possibility frontier

2. Demand, supply, and the price mechanism
2.1 Explain the concepts of demand and supply
2.2 Relate consumer indifference to the substitution of goods
2.3 Prepare demand curves for normal and inferior goods
2.4 Explain the relationship between demand and supply
2.5 Distinguish between movement along the demand curve and a shift in the demand curve
2.5.1 Prepare a demand curve showing the impacts of shifts
2.6 Distinguish between individual and market demand
2.7 Distinguish between firm and industry demand and supply curves
2.7.1 Prepare a short run and a long run supply curve
2.8 Distinguish between movement along the supply curve and a shift in the supply curve
2.8.1 Prepare a supply curve showing the impacts of shifts
2.9 Define market equilibrium price and quantity
2.10 Explain the use of price legislation, including price ceilings and price floors
2.10.1 Illustrate the impact of price ceilings and price floors using the demand and supply curves
2.11 Evaluate the process of price stabilisation and price control mechanisms
2.12 Explain and illustrate how an equilibrium price is achieved

3. Elasticity of demand and supply
3.1 Explain the concepts of elasticity of demand and elasticity of supply
3.2 Calculate and interpret the elasticity of demand and elasticity of supply
3.3 Prepare demand curves for necessities and luxury goods

4. Cost, revenues and productivity
4.1 Explain the relationship between marginal cost, total cost, total revenue, marginal revenue, average revenue and
price in both the long terms and short term

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4.1.1 Demonstrate and apply the concept of MC = MR
4.2 Apply the concepts of marginal revenue product, marginal product, total product, total cost and marginal cost in
an analysis of productivity
4.2.1 Conduct a break-even analysis
4.3 Explain the demand for factors of production
4.4 Explain the concept of diminishing returns of factor of production
4.4.1 Calculate the diminishing returns
4.5 Explain how a firm can attain an optimal combination of factors of production
4.6 Explain the determinants of elasticity of a factor demand curve
4.7 Explain the causes of a shift of a factor demand curve
4.8 Distinguish between economies of scale and diseconomies of scale

5. Market structures
5.1 Distinguish between perfect competition, monopolistic competition, monopoly, oligopoly, duopoly, and oligopsony
5.1.1 Illustrate the relevant demand and supply curves
5.2 Evaluate why monopolistic firms are able to allocate or misallocate scarce resources
5.3 Explain the long term pricing approach for a monopolistic firm

6. Market failure, externalities and intervention
6.1 Distinguish between social goods and private goods
6.2 Evaluate the impact of tax, savings and subsidies on the pricing mechanism
6.3 Analyse the implications of spill-overs or externalities using a demand and supply analysis

7. National income accounting
7.1 Distinguish between economic growth and economic development
7.2 Calculate Gross Domestic Product (GDP) and Gross National Product (GNP)
7.3 Perform national accounting calculations

8. Determining national income
8.1 Calculate the National Income equation Y = C + G + I + M X
8.1.1 Present national income calculations using the IS-LM curve
8.1.2 Calculate marginal efficiency of capital
8.1.3 Apply the multiplier to determine national income
8.1.4 Apply the accelerator principle in the determination of national income
8.2 Evaluate the implications of the marginal propensity to save (MPS) and the marginal propensity to consume
(MPC) on National Income (Y)
8.3 Evaluate the impact of tax, savings and subsidies on National Income
8.4 Explain the relationship between full employment and National Income

9. Macroeconomic conceptsinflation and unemployment
9.1 Describe different types of unemployment
9.2 Describe the causes of inflation and its impact on an economy
9.3 Explain the relationship between rates of employment and the performance of an economy
9.3.1 Prepare a Phillips curve
9.4 Define money
9.5 Explain the structure of interest rates
9.6 Analyse the factors affecting the movement of interest rates
9.7 Explain the Keynesian and Classical theories of money

10. Macroeconomic policy
10.1 Explain government policy to address the redistribution of income
10.2 Analyse the impact of interest rates on base employment
10.3 Explain the purpose of monetary policy and the implications of holding cash balances
10.3.1 Calculate the credit multiplier

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10.4 Explain how fiscal policy relates to the stimulation of national income and rates of employment
10.4.1 Demonstrate how fiscal policy affects aggregate demand
10.5 Explain the relationship between interest rates, monetary policy, employment and national income
10.5.1 Prepare an expectations augmented Phillips curve
10.6 Analyse the role of the monetary authorities (Reserve Banks/Central Banks) in the control of money

11. Government intervention and income distribution
11.1 Explain how the government may intervene to reduce misallocation of resources
11.2 Analyse ways to redress income inequalities
11.3 Explain the concept of income distribution and describe the Lorenz curve
11.4 Measure income inequality

Part 2: Statistics
12. Statistical analysis, data, and methods of describing data
12.1 Explain the role of statistical analysis in decision making
12.2 Distinguish between quantitative and qualitative data
12.3 Explain and apply the different sampling methods
12.3.1 random sampling
12.3.2 cluster sampling
12.3.3 stratified sampling
12.4 Describe the different methods of collecting data and statistical information
12.4.1 survey
12.4.2 published source
12.5 Explain the different levels of data measurement
12.5.1 nominal-level data
12.5.2 ordinal-level data
12.5.3 interval-level data
12.5.4 ratio-level data
12.6 Construct a bar graph, a pie chart, a histogram, and a scatter diagram from a given set of data

13. Descriptive statistics
13.1 Distinguish between measures of central tendency and measures of variability
13.2 Distinguish between the shapes of a normal distribution, exponential distribution and binomial distribution
13.3 Explain the difference between grouped and ungrouped data
13.4 Calculate and interpret the mean, median, and mode from a given set of data
13.5 Calculate and interpret the range, standard deviation, and variance from a given set of data
13.6 Distinguish between the sample and population standard deviation and the sample and population variance
13.7 Distinguish between kurtosis and skewness

14. Frequency distributions and probability
14.1 Develop a frequency distribution from a given set of data
14.2 Distinguish between class range, class midpoint, relative frequency, and cumulative frequency
14.3 Define the concept of probability
14.4 Explain the different ways of assigning probability
14.5 Explain and apply marginal, union, joint, and conditional probabilities
14.6 Explain the use of probability matrices to solve probability problems

15. Hypothesis testing
15.1 Explain the concept of hypothesis testing
15.2 Construct null and alternative hypotheses
15.3 Distinguish between type I and type II errors
15.4 Test population mean using one-tail and two-tail tests.
15.5 Test population proportion
15.6 Calculate and interpret the probability value (p-value) in hypothesis testing


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16. Simple linear regression and correlation
16.1 Calculate the equation of a simple regression line from a sample of data
16.2 Explain and interpret the slope and intercept of the equation
16.3 Calculate and interpret estimated values of y using the regression line
16.4 Calculate and interpret the coefficient of correlation
16.5 Calculate and interpret the coefficient of determination


Topic exam weightings:

Part 1: Economics
1. Defining economics and the market 5%
2. Demand, supply and the price mechanism 8%
3. Elasticity of demand and supply 5%
4. Cost, revenues and productivity 8%
5. Market structures 4%
6. Market failures, externalities and intervention 5%
7. Macroeconomic concepts 5%
8. Macroeconomic policy 7%
9. Government intervention and income distribution 5%
10. National Income accounting 4%
11. Determining national income 4%
Part 2: Statistics
12. Statistical analysis, data, and methods of describing data 8%
13. Descriptive statistics 8%
14. Frequency distributions and probability 8%
15. Hypothesis testing 8%
16. Simple linear regression and correlation 8%

TOTAL 100%



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Foundations of Accounting

General overview
This exam covers the knowledge of fundamental accounting concepts for different types of business entities, including the
purpose of accounting, the users of accounting information and an introduction to recording transactional accounting data
in the double entry bookkeeping system. It also covers the acquisition and disposal of assets and the production of
financial statements.

Topics:

1. Introduction to accounting
1.1 Explain the role and purpose of accounting
1.2 Explain the meaning of generally accepted accounting principles
1.3 Define and apply accounting concepts
1.3.1 Cost principle
1.3.2 Monetary unit assumption
1.3.3 Economic entity assumption
1.3.4 Time period assumption recognition of income and expenses
1.3.5 Accrual basis of accounting
1.3.6 Going concern assumption
1.3.7 Fair presentation
1.3.8 Substance over form
1.4 Identify and explain the basic accounting equation
1.4.1 Prepare an accounting equation from given data
1.4.2 Define and identify assets, liabilities and owners equity
1.5 Identify the purpose of the Statement of Financial Position
1.6 Identify the purpose of the Statement of Comprehensive Income

2. Types of business entities sole trader, partnerships, companies
2.1 Identify and define a service entity and a retail entity
2.2 Compare and contrast a service entity and a retail entity
2.3 Identify and define types of business entities - sole trader, partnership, limited liability company
2.4 Identify the characteristics of a sole trader, a partnership and a company
2.5 Identify the advantages and disadvantages of operating as a sole trader, partnership and limited liability company
2.6 Identify the users of accounting information
2.7 Identify and differentiate the information needs of different users of financial statements

3. Double entry bookkeeping
3.1 Identify main data sources
3.1.1 cash transactions and credit transactions
3.1.2 quotations
3.1.3 sales orders
3.1.4 purchase orders
3.1.5 goods received note
3.1.6 goods despatched note
3.1.7 invoice
3.1.8 statement
3.1.9 credit note
3.1.10 debit note
3.1.11 remittance advice
3.1.12 receipt
3.1.13 bank statement
3.1.14 Identify the main types of business transactions
3.1.14.1 sales
3.1.14.2 purchases

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3.1.14.3 payments
3.1.14.4 receipts
3.2 Duality concept and the accounting equation
3.2.1 sales
3.2.2 purchases
3.2.3 payments
3.2.4 receipts
3.3 Understand the use of journals
3.3.1 sales
3.3.2 purchases
3.3.3 payments
3.3.4 receipts
3.4 Understand the use of ledgers
3.4.1 sales
3.4.2 purchases
3.4.3 payments
3.4.4 receipts

4. Trial balance
4.1 Illustrate how to balance and close a ledger
4.2 Identify the purpose of a trial balance
4.3 Extract ledger accounts into a trial balance
4.4 Understand the nature and purpose of an adjusted trial balance

5. Cash books, ledgers and subsidiary ledgers
5.1 Record sales and purchases in the books of prime entry (day books)
5.2 Record sales tax in the books of prime entry
5.3 Understand the nature and purpose of subsidiary ledgers for receivables and payables
5.4 Post the sales and purchases to the general ledger
5.5 Explain the nature and purpose of the cash receipts and cash payments book
5.6 Recognise the difference between trade discounts and settlement discounts
5.6.1 record settlement discounts received in the relevant cash book
5.6.2 record settlement discounts allowed in the relevant cash books
5.7 Post the cash books to the general ledger accounts and subsidiary ledger accounts

6. Sales tax
6.1 Understand the general principles of the operation of a general sales tax
6.2 Calculate sales tax on transactions
6.3 Record sales tax in the books of prime entry, the ledger and subsidiary ledger

7. Accruals and prepayments
7.1 Understand how the matching concept applies to accruals and prepayments
7.2 Identify the adjustments needed for accruals and prepayments
7.3 Calculate the amount of the adjustments required for accruals and prepayments
7.4 Prepare adjusting journal entries and explain why they are needed for
7.4.1 accruals
7.4.2 prepayments
7.5 Post the accruals and prepayments to the relevant ledger accounts

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8. Receivables and payables
8.1 Apply the principles of revenue recognition
8.2 Understand the meaning of an irrecoverable debt
8.3 Prepare a journal entry for an irrecoverable debt
8.4 Understand the meaning of an allowance for receivables
8.5 Prepare a journal entry to create or to adjust an allowance for receivables
8.6 Prepare a journal entry to account for adjustments between trade receivables and trade payables
8.7 Prepare journal entries to record settlement discounts allowed and received
8.8 Post the journal entries to the general ledger accounts and subsidiary ledger accounts
8.9 Prepare journal entries to account for annual leave entitlement of employees

9. Property, plant and equipment
9.1 Define non-current assets
9.2 Identify capital expenditure and revenue expenditure
9.3 Prepare journal entries for the purchase of non-current assets
9.4 Prepare journal entries for the revaluation of a non-current asset
9.5 Calculate the profit or loss on disposal of a non-current asset
9.6 Calculate the profit or loss on the disposal of a non-current asset given as a part exchange transaction
9.7 Calculate the profit or loss on disposal of a revalued asset
9.8 Prepare journal entries for the disposal of non-current assets
9.9 Understand and explain the purpose of depreciation
9.9.1 Calculate the charge for depreciation using the straight line method and reducing balance method
9.9.2 Identify the circumstances where the two different methods would be appropriate
9.9.3 Prepare journal entries for the annual depreciation expense
9.9.4 Calculate depreciation on a revalued asset
9.9.4.1 Prepare journal entries for the transfer of excess depreciation between revaluation reserve and
retained earnings
9.9.4.2 Calculate the adjustment to the depreciation charge where changes are needed to the estimated
useful life or residual value
10. Inventory
10.1 Understand the need for adjustments for opening and closing inventory
10.2 Understand the requirements for valuing inventory
10.3 Calculate the lower of cost and net realisable value
10.4 Calculate the cost of inventory using the first in, first out method (FIFO) and average cost method (AVCO)
10.5 Prepare journal entries for the adjustments for opening and closing inventory

11. Closing entries
11.1 Prepare journal entries to close off income ledger accounts to the statement of comprehensive income
11.2 Prepare journal entries to close off the expense accounts to the statement of comprehensive income
11.3 Prepare journal entries to carry forward asset accounts to the statement of financial position
11.4 Prepare journal entries to carry forward liability accounts to the statement of financial position
11.5 Prepare journal entries to carry forward capital accounts to the statement of financial position

12. Subsidiary ledgers and reconciliations
12.1 Explain what is meant by internal control
12.2 Outline methods of internal control that a business can use
12.3 Understand the purpose of control accounts for receivables and payables
12.4 Understand how control accounts relate to the double entry system
12.5 Prepare control accounts for receivables and payables from given information
12.6 Perform control account reconciliations for receivables and payables
12.7 Understand the need for a record of petty cash transactions and a separate petty cash book
12.8 Understand how an imprest system for petty cash operates

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12.9 Enter petty cash payments and receipts into the petty cash book
12.10 Post the petty cash book to the general ledger accounts
12.11 Understand the importance of controls and security over petty cash
12.12 Identify controls over the security of petty cash

13. Bank reconciliation
13.1 Understand the purpose of a bank reconciliation
13.2 Identify the main reasons for differences between the cash book balance and the bank statement balance
13.3 Correct any errors or omissions in the cash book

14. Statement of Financial Position
14.1 Show how the following items would appear in the Statement of Financial Position
14.1.1 non current assets
14.1.2 current assets
14.1.3 property, plant and equipment at carrying value
14.1.4 inventory
14.1.5 receivables balances
14.1.6 prepayments
14.1.7 cash and petty cash
14.1.8 current and non current liabilities
14.1.9 accounts payable balances including sales tax
14.1.10 current and non current liabilities

15. Statement of Comprehensive Income
15.1 Show how the following items would appear in the Statement of Comprehensive Income
15.1.1 revenue net of sales tax
15.1.2 opening and closing inventory
15.1.3 purchases net of sales tax
15.1.4 discounts allowed
15.1.5 discounts received
15.1.6 depreciation
15.1.7 accruals
15.1.8 prepayments
15.1.9 irrecoverable and doubtful debts

16. Use of an accounting package
16.1 Understand the uses of integrated accounting software packages
16.2 Be able to use an accounting package to record data

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Topic exam weightings:

1. Introduction to accounting 10%
2. Types of business entities sole trader, partnerships, companies 5%
3. Double entry bookkeeping 10%
4. Trial balance 5%
5. Cash books, ledgers and subsidiary ledgers 10%
6. Sales tax 5%
7. Accruals and prepayments 5%
8. Receivables and payables 5%
9. Property, plant and equipment 10%
10. Inventory 5%
11. Closing entries 5%
12. Subsidiary ledgers and reconciliations 10%
13. Bank reconciliation 5%
14-15. Statement of Financial Position & Statement of Comprehensive Income 5%
16. Use of an accounting package 5%

TOTAL 100%

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Fundamentals of Business Law
General overview
This exam covers general legal knowledge relating to the business environment, a basic knowledge of the law of
contracts, and an understanding of the responsibilities and risks that arise in business, with particular regard to the law
relating to corporate entities.

Topics:

1. Sources of law
1.1 Identify the sources of different types of law
1.2 Identify the features of the different legal systems
1.2.1 common law
1.2.2 civil law
1.2.3 sharia law

2. Common law and legislation: precedent and stare decisis and statutory interpretation
2.1 Identify how common law and relevant legislation are applied
2.2 Analyse and explain legal cases and principles in setting precedents
2.3 Specify how legal cases and principles set precedents
2.4 Identify how to deal with the doctrine of stare decisis (legal precedent)
2.5 Specify the rules and models for statutory interpretation

3. Legal framework
3.1 Describe the legal framework of statute law (legislation) and common law
3.2 Explain the court system
3.3 Explain different methods of alternative dispute resolution

4. Fundamental aspects of contracts and contract law
4.1 Describe the fundamental features and essential requirements (terms) of contracts.
4.2 Describe the law of contract
4.3 Describe the necessary elements in the formulation of a contract
4.4 Explain the importance of conditions and essential terms of contracts
4.5 Identify the nature and status of pre-contract representations
4.6 Explain the effect of valid exclusion clauses

5. Breaches of contract law
5.1 Recognise the different types of breach of contract and their effects
5.2 Specify relevant and available remedies for breach of contract
5.2.1 damages
5.2.2 specific performance

6. Specialised commercial contracts
6.1 Identify the characteristics of commercial contracts used in international trade
6.1.1 international sales of goods
6.1.2 international transportation of goods

7. Torts
7.1 Explain that the law of torts concerns a civil wrong which may mean a civil action for compensation arises
7.2 Explain the tort of negligence
7.3 Explain that tort law provides legal remedies for damages caused by negligence
7.4 Explain that negligence means failure to exercise reasonable care
7.5 Explain consumer protection law and negligence
7.6 Explain the implications under common law in relation to pre-incorporation contracts

8. Agency theory
8.1 Explain that agency is the relationship between principal and agent
8.2 Explain how agency theory underlies the principles of corporate governance
8.3 Explain that partnership is an agency relationship

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8.4 Explain the application of agency theory to companies

9. Incorporation and its effects
9.1 Recognise the nature and effect of a company having a separate legal personality
9.2 Explain the effects on incorporation
9.2.1 limited liability
9.2.2 perpetual succession
9.3 Distinguish the differences between public and proprietary companies
9.4 Identify the processes necessary in forming a company
9.5 Specify the elements of the constitution of a company
9.6 Describe the role of promoters in forming a company
9.7 Recognise the difficulties and implications of pre-incorporation contracts

10. Management of companies
10.1Identify the key legal issues that arise in the management and governance of companies
10.1.1 identify the impact of key business decisions on shareholders interests
10.1.2 identify the impact of key business decisions on the public
10.2 Specify the nature and role of company directors and other officers as agents of the company
10.3 Specify the nature, role and powers of the board of directors
10.3.1 specify the relationship between the board and the company in a general meeting
10.4 Identify the rules on directors remuneration and financial benefits to directors and other related parties
10.5 Identify the rules on appointment and removal of directors from office
10.6 Specify the extent of directors duties and powers
10.7 Recognise the issue that arises when there are related party transactions
10.8 Specify the rules on transfer of shares and refusal to register a transfer of shares
10.9 Identify the role and powers of the company secretary
10.10 Identify the role and powers of the registered company auditor

11. Membership and dividends
11.1 Identify the significance of the register of members
11.2 Identify the significance of the requirement for disclosure of interests in shares
11.3 Recognise the role of the general meeting of shareholders
11.4 Distinguish the rights and remedies of members of companies
11.4.1 appointing a registered company auditor
11.4.2 inspection of the books of the company
11.4.3 protection of the minority and the treatment for unfair or oppressive company practices
11.5 Specify the procedure for payment of dividends
11.6 Specify the rights of shareholders regarding dividends
11.7 Specify the company formalities in determining when dividends are payable to shareholders
11.8 Identify the rules governing the maximum amount for dividend distribution

12. Corporate insolvency and bankruptcy
12.1 Specify the grounds relating to the dissolution and winding up of companies and partnerships
12.2 Specify the procedures for dissolution and winding up of companies and partnerships
12.3 Specify the procedures for addressing corporate insolvency and bankruptcy, including stakeholders and the
rights of claimants
12.4 Identify the powers and duties of receivers and liquidators
12.5 Recognise administration as an appropriate alternative to winding up when a company is in financial difficulties


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Topic exam weightings:

1. Sources of law 5%
2. Common law and legislation 5%
3. Legal framework 5%
4. Fundamental aspects of contracts and contract law 10%
5. Breaches of contract law 6%
6. Specialised commercial contracts 5%
7. Torts 10%
8. Agency theory 10%
9. Incorporation and its effects 10%
10. Management of companies 12%
11. Membership and dividends 10%
12. Corporate insolvency and bankruptcy 12%

TOTAL 100%

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Business Finance

General overview
This exam covers the understanding of business finance and treasury function including the fundamental concepts of
capital, investment, funding and risk assessment and management. It also covers the analysis and management of an
entitys financial position, portfolio management, and short and long term financial management.

Topics:

1. Capital budgeting: payback, IRR, NPV
1.1 Explain the term financial mathematics
1.2 Calculate and interpret the future and present values of a series of single cash flows and of annuities
1.3 Explain the characteristics of major and long-term investments where a capital budgeting approach might be
required
1.4 Identify and apply the different quantitative methods used in project evaluation
1.5 Explain why investment decisions should be analysed using the NPV method
1.6 Apply the NPV method to investment project scenarios
1.7 Compare and contrast the NPV method with the IRR method of project evaluation
1.8 Calculate the weighted average cost of capital and apply it in capital budgeting
1.9 List the advantages and disadvantages of IRR, payback and NPV methods of investment appraisal
1.10 Undertake a sensitivity analysis of diverse projects using appropriate tools

2. Capital markets
2.1 Explain the structure of the capital market
2.2 Explain the economies of scale attached to financial intermediaries
2.3 Distinguish between official and unofficial money markets
2.4 In the context of capital markets distinguish between operating efficiency, allocative efficiency and pricing
efficiency
2.5 Explain the role of the government in regulating the capital markets
2.6 Explain the meaning of the term corporate securities
2.7 Distinguish between secondary and primary securities
2.8 Describe typical guidelines related to the operation of securities markets
2.9 Explain the term rights issue
2.10 Explain the benefits of a rights issue to equity holders
2.11 Explain the meaning of cum rights and ex-rights
2.12 Explain how the trading of options, futures and warrants work
2.13 Explain the benefits and costs associated with options, futures and warrants
2.14 Explain the advantages and disadvantages of different hedging strategies
2.15 Distinguish between American and European options

3. The Capital Asset Pricing Model
3.1 Demonstrate the relationship between systematic risk and expected return of individual securities and portfolios
using the CAPM and the security market line relationship

4. Cost of funds
4.1 Analyse capital rationing and draw appropriate conclusions
4.2 Analyse the various sources of short term finance
4.3 Explain the cost of short and medium term finance
4.4 Calculate and interpret the cost of various sources of finance
4.5 Describe sources of international finance and their merits or otherwise
4.6 Explain the different sources of long term finance
4.7 Calculate and interpret the cost of capital associated with leases; and debt and equity

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4.8 Demonstrate the link between working capital management and corporate cash flow
4.9 Describe the operating cycle in working capital management to explain inventory management, debtor
management and cash management

5. Efficient market hypothesis
5.1 Distinguish between the weak form test, the semi strong form test and the strong form test of the Efficient Market
Hypothesis (EMH)
5.2 Explain the implications of market efficiency for both investors and companies

6. Long term financing, investment appraisal and dividend policy
6.1 Calculate and interpret measures of expected return and risk using the probability distribution approach
6.2 Explain the factors which influence the dividend policy decision

7. Portfolio management
7.1 Calculate and interpret rates of return on financial investments
7.2 Calculate and interpret measures of expected return and risk for two-security portfolios
7.3 Explain the impact of portfolio leveraging and short selling on the risk and expected return of two-security
portfolios
7.4 Analyse and assess portfolio risk

8. Short term financial management
8.1 Prepare short term finance plans and strategies

9. Valuation of corporate securities
9.1 Calculate and interpret effective interest rates; and apply the concepts of financial mathematics to valuing home
mortgages and debt and equity securities
9.2 Calculate and interpret share price in both perfect and imperfect markets

10. Risk management and risk assessment
10.1 Define the term risk
10.2 Explain the different types of risk in international trade
10.3 Explain the different methods of risk assessment in international trade

Topic exam weightings:

1. Capital budgeting: payback, IRR, NPV 20%
2. Capital markets 20%
3. The Capital Asset Pricing Model 10%
4. Cost of funds 10%
5. Efficient market hypothesis 5%
6. Long term financing, investment appraisal and dividend policy 5%
7. Portfolio management 10%
8. Short term financial management 3%
9. Valuation of corporate securities 7%
10. Risk management and risk assessment 10%

TOTAL 100%

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Financial Accounting and Reporting

General overview
This exam covers an understanding of the format and function of financial statements, including analysis and
interpretation of financial statements. It also includes the production of financial statements for consolidated company
groups, and foreign currency translation.

Topics:

1. Financial reporting and the regulatory framework
1.1 Explain the meaning of generally accepted accounting principles and identify the key elements of the IASB
Framework and its relationship to accounting standards
1.2 Explain the objectives of financial reporting and general purpose financial reports
1.3 Analyse the qualitative characteristics of accounting information such as understandability, relevance, materiality,
reliability, comparability
1.4 Analyse and apply the criteria for identifying a reporting entity

2. Statement of comprehensive income
2.1 Explain and apply the provisions of IAS 1 Presentation of Financial Statements for the determination of profit
(loss) of an entity
2.2 Apply the provisions of IAS 1 for disclosures to be made in an income statement; statement of changes in equity;
statement of financial position
2.3 Analyse and apply the guidelines for the selection of accounting policies and the disclosures required about
changes in accounting policies (IAS 8 Accounting policies, changes in accounting estimates and errors)

3. Statement of financial position
3.1 Apply the provisions of IAS 1 for disclosures to be made in an income statement; statement of changes in equity;
statement of financial position
3.2 Analyse and apply the guidelines for the selection of accounting policies and the disclosures required about
changes in accounting policies (IAS 8 Accounting policies, changes in accounting estimates and errors)

4. Statements of cash flow
4.1 Examine the usefulness of the statements of cash flow
4.2 Explain and apply the definition of cash and cash equivalents
4.3 Distinguish among operating, investing and financing activities
4.4 Prepare a statement of cash flow using the indirect method

5. Ratio analysis and interpretation of financial statements
5.1 Prepare a comparative analysis of financial reports
5.2 Identify and apply the tools of financial statement analysis
5.3 Identify and calculate ratios, describe their purpose and use in analysing an entitys liquidity, profitability and
solvency
5.4 Explain ratio interrelationships
5.5 Analyse and interpret a set of accounts using ratios
5.6 Explain the limitations of financial statement analysis

6. Consolidated financial statements
6.1 Discuss the forms of business combinations
6.2 Explain how goodwill is measured and disclosed at date of acquisition
6.3 Explain how goodwill is measured subsequent to the date of acquisition including the requirements regarding
impairment
6.4 Apply the requirements of Accounting for Income Tax and prepare associated journal entries
6.5 Explain the concept of control and how the existence of control is determined
6.6 Explain and prepare consolidation worksheet entries where a parent has ownership interest in a subsidiary
6.7 Explain why transactions within a group must be eliminated
6.8 Explain when profit from transactions within a group will be considered to be realised
6.9 Prepare consolidation worksheet entries to eliminate transactions within a group
6.10 Define and explain the concept of minority interest

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7. Equity accounting
7.1 Define significant influence and briefly analyse the factors that may be used to determine whether significant
influence exists
7.2 Explain the underlying methodology of the equity method and outline its basic features
7.3 Calculate the investors share in an investee and explain why this concept is important
7.4 Prepare journal entries to account for the initial application of the equity method
7.5 Prepare equity accounting entries to record investee results and dividends
7.6 Outline the disclosure requirements for investments in associates (IAS 28)


8. Foreign currency translation
8.1 Explain and account for foreign currency transactions at transaction date and subsequent dates
8.2 Apply the requirements of IAS 21 to record foreign currency denominated transactions and exchange rate
differences that arise on foreign currency monetary items
8.3 Explain and apply the IAS 21 method for translating financial statements from a functional currency to a
presentation currency
8.4 Outline the disclosure requirements of IAS 21


Topic exam weightings:

1. Financial reporting and the regulatory framework 15 %
2. Statement of comprehensive income 10%
3. Statement of financial position 10%
4. Statements of cash flow 10%
5. Ratio analysis and interpretation of financial statements 20 %
6. Consolidated financial statements 25 %
7. Equity accounting 5 %
8. Foreign currency translation 5 %

TOTAL 100%

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Management Accounting

General overview
This exam covers an understanding of developments in management accounting and the tools management accountants
use to cost products and services, and to develop and manage budgets. It also covers performance management and
control; planning and assessment of project alternatives; and an understanding of the nature, functions, structures and
operations of management.

Topics:

1. Conceptual issues and behavioural implications
1.1 Explain the historical development of management accounting
1.2 Analyse the key differences between financial, cost and management accounting
1.3 Analyse the current influences on management accounting
1.4 Explain the range of theories that underpin management accounting and how they have an influence on practice
1.5 Outline the core parts of management accounting systems and how they enable strategic management
1.6 Analyse the roles of management accountants in cross-functional teams
1.7 Identify and explain appropriate internal controls for management and accounting systems in a range of
situations
1.8 Explain how organisational behaviour can impact the creation of organisational value
1.9 Describe the increasing awareness of sustainability and its relationship to management accounting

2. Decision making
2.1 Apply the steps in the decision making process
2.1.1 define the problem
2.1.2 identify the decision making criteria
2.1.3 develop alternatives
2.1.4 analyse alternatives
2.1.5 select an alternative
2.2 Apply relevant information guidelines for short-term alternative choice operating decisions
2.3 Identify the quantitative and qualitative criteria involved in accepting a project
2.4 Analyse the challenges posed by differences between a project and an organisations risk profiles
2.5 Explain the impact of cash flows and risks on project decision making

3. Budgeting
3.1 Identify and analyse the human behavioural challenges to the budgeting process in organisations
3.2 Explain the nature of budgets and the reasons that organisations use budgets
3.3 Prepare an operations budget
3.4 Prepare a cash budget

4. Cost behaviour
4.1 Apply the techniques to separate costs into their fixed and variable components

5. Overhead costing product and service costing
5.1 Explain three methods of departmental overhead allocation
5.2 Explain the concepts underpinning product costing in organisations
5.3 Develop different product costing statements involving production resource costs
5.4 Evaluate the difference between direct production costs and indirect overhead costs
5.5 Apply the principles of absorption and variable costing to product costing analysis

6. Overhead costing activity-based costing
6.1 Identify and apply the principles of activity-based costing to allocate overheads in organisations

7. Process and job costing
7.1 Explain the differences between job and process costing techniques

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7.2 Apply costing principles to job costing and process costing organisations

8. Standard costing
8.1 Explain how standard costing can be used to assist in cost control and efficient resource allocation

9. Variance analysis
9.1 Calculate and explain the causes of variances and associated corrective actions

10. Capital expenditure
10.1 Analyse capital expenditure decisions in organisations and apply related tools and techniques
10.2 Apply capital expenditure analysis to project planning and managing uncertain scenarios through scenario
analysis

11. Inventory, pricing decisions and cost-volume-profit analysis
11.1 Evaluate the principles of just-in-time
11.2 Apply the economic order quantity formula to determine order quantities for inventory management
11.3 Establish and apply the appropriate approach for long-term pricing decisions
11.4 Apply the principles of cost-volume-profit analysis in organisations

12. Performance measurement and evaluation
12.1 Describe how management accounting creates value
12.2 Explain the characteristics and purpose of performance measurement systems
12.3 Analyse the different types of financial performance measures and their limitations
12.4 Describe the key characteristics of the Balanced Scorecard and its advantages over traditional performance
measurement systems
12.5 Outline the characteristics of reward systems and the circumstances in which they can be tied to performance
measures


Topic exam weightings:

1. Conceptual issues and behavioural implications 7%
2. Decision making 13%
3. Budgeting 10%
4. Cost behaviour 12%
5. Overhead costing product and service costing 13%
6. Overhead costing activity-based costing 5%
7. Process and job costing 5%
8. Standard costing 5%
9. Variance analysis 5%
10. Capital expenditure 5%
11. Inventory, pricing decisions and cost-volume-profit analysis 8%
12. Performance measurement and evaluation 12%

TOTAL 100%





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Accounting Concepts and Principles

General overview
This exam covers a critical awareness of accounting issues in an international context. It requires an understanding of the
theoretical concepts within the regulatory and conceptual framework of corporate reporting. This includes recognition
criteria, methods of valuation, and reporting and disclosure of the financial performance of companies.

Topics:

1. Introduction to accounting
1.1 Define the need for accounting information for a wide variety of users
1.2 Identify the users of financial information and their information needs
1.3 Define the purpose and scope of financial reporting
1.4 Understand the need for financial accounting systems that enable entities to record and report financial
transactions
1.5 Describe the main types of systems used in an organisation to provide information to users
1.6 Identify how financial accounting systems can assist in providing information to users

2. The regulatory framework
2.1 Define what is meant by the regulation of published financial statements
2.2 Identify the different sources of accounting regulation including company law, local GAAP and IFRS
2.3 Identify the advantages and disadvantages of regulating financial statements
2.4 identify why regulatory regimes may vary between different countries
2.5 Describe the role of the International Accounting Standards Board (IASB) in the regulation of financial statements
2.6 Identify the need for international financial reporting standards as a global means of regulating accounting
2.7 Describe the benefits of international accounting standards for national jurisdictions
2.8 Describe the process involved when the IASB introduces a new accounting standard

3. Conceptual framework of accounting
3.1 Define and explain the purpose of a conceptual framework of accounting
3.2 Explain whether conceptual frameworks are a necessary component of financial reporting
3.3 Explain the benefits of a conceptual framework in the development of financial reporting standards
3.4 Identify the advantages and disadvantages of conceptual frameworks
3.5 Consider whether a conceptual framework removes the need for accountants to make judgements in financial
reporting
3.6 Explain why a conceptual framework cannot consist only of financial reporting standards
3.7 Explain the role and purpose of the IASB Framework for the Preparation and Presentation of Financial
Statements
3.8 Explain the process of accounting in situations where accounting standards do not exist
3.9 Identify the benefits of a conceptual framework in situations where accounting standards do not exist

4. Accounting standards and concepts
4.1 Define the purpose of an accounting standard
4.2 Explain the reason that accounting standards are used to regulate financial reporting
4.3 Explain the advantages and disadvantages of accounting standards
4.4 Explain the need for financial statements to provide a fair presentation of the financial performance and financial
position of an entity
4.5 Define the principle of substance over form
4.6 Explain the importance of recording the economic substance of transactions rather than the legal form
4.7 Distinguish between a principles-based and rules-based system of accounting
4.8 Identify recent developments in the harmonisation of worldwide accounting standards
4.9 Identify the effect of harmonisation of accounting standards on companies
4.10 Identify the importance of International Financial Reporting Standards in the harmonisation process

5. Elements of financial statements and their recognition criteria
5.1 Define the elements of financial statements
5.2 Identify and define the following elements of financial statements
5.2.1 asset
5.2.2 liability

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5.2.3 equity
5.2.4 income
5.2 5 expense
5.3 Identify the financial statements where these elements are recognised
5.4 Define the recognition means for an element of the financial statements
5.5 Identify the criteria for recognition of the elements of the financial statements

6. Alternative methods of valuation
6.1 Identify the advantages and disadvantages of the historical cost system of accounting
6.2 Identify, explain and calculate amounts using the following measurement bases
6.2.1 historical cost
6.2.2 current cost
6.2.3 fair value
6.2.4 deprival value
6.2.5 replacement cost
6.2.6 net realisable value

7. Alternative theories of accounting
7.1 Define positive accounting theory
7.2 Define normative accounting theory
7.3 Identify financial capital maintenance and operating capital maintenance and how this can affect calculated profits
7.4 Describe operating and financial capital maintenance as alternatives to historical cost and identify the impact on
reported profits
7.5 Calculate profits or losses using the financial capital maintenance and operating capital maintenance models

8. Reporting and disclosure of performance
8.1 Explain agency theory in the context of company activity
8.2 Define the role and authority of the agent
8.3 Explain the separation of ownership and control in a large corporation
8.4 Define an agency cost
8.5 Identify the types of agency costs involved in monitoring the activities of the agent
8.6 Identify the components of a set of financial statements
8.7 Identify the difference between the mandatory and non-mandatory information that is produced in the annual
report
8.8 Identify the different types of financial and non-financial information produced in the annual report
8.9 Identify the possible advantages and disadvantages of providing financial and non-financial information in the
annual report

9. Efficiency in capital markets and company reporting
9.1 Distinguish between the following concepts of capital market efficiency
9.1.1 weak form efficiency
9.1.2 semi-strong form efficiency
9.1.3 strong form efficiency
9.2 Discuss the benefits of providing company information to shareholders
9.3 Discuss the content of the following company reports
9.3.1 annual financial report
9.3.2 chairmans statement
9.3.3 directors report
9.3.4 corporate governance statement
9.3.5 corporate social responsibility report
9.3.6 auditors report

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Topic exam weightings:

1. Introduction to accounting 5%
2. The regulatory framework 15%
3. Conceptual framework of accounting 20%
4. Accounting standards and concepts 15%
5. Elements of financial statements and their recognition criteria 10%
6. Alternative methods of valuation 5%
7. Alternatives theories of accounting 10%
8. Reporting and disclosure of performance 10%
9. Efficiency in capital markets and company reporting 10%

TOTAL 100%