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Revision: AC3091 Financial Reporting

Singapore Institute of Management 2015
Danny Chow (Durham University)
Jim Haslam (Newcastle University)

Overview

Introduction

GoingthroughtheMockExamination

StudyandExaminationGuidance

Somecoverageofparticulartopics

Introduction: Timetable

Day 1

Day 2

Introduction

Session 5: Fully Stabilised Accounts Q4

Session 1: Consolidation Q1

Session 6: Essays Q6 & supplement Q

Session 2: Hicks Q2

Long break

Session 3: Mix Questions Q4

Session 4: Essays Q5

Regulation

Deprival Value

Goodwill

Investment Property

Research & Development

Long break

Session 7: Forex translation

Calculations (Supplementary Q)

Discussion (Essay from Mock paper)

Session 8: Practical advice

Session expectations

Main focus is to discuss your mock exam performance

Evaluate strengths & limitations

Focus on particular topics or discussions to develop our perceptions of

weak areas

Feedback on mock exam 2015

Lack of preparation for calculation

Struggle with discursive questions

Value added

Ideas on how to link numerical components with discursive topics

Essay and long discussions

Over-arching themes for discussion

Financial Reporting for stewardship purposes versus

Financial Accounting for decision making

Introduction: Session expectations

Set expectations for:

Standards of answers expected & workings (calculation)

Exemplars for essays (structure, argumentation, content, reference)

Not our purpose or intention to:

Provide hints what is coming out (or not) for actual exam

Work through other past year (or other) questions with you

Cover entire syllabus (your local lecturer will help you here)

We are not miracle workers!

You need to put in the hard graft

Day 1 (4 sessions)

Session 1: Consolidation Q1

Discussion of performance in mock exam

Consolidation concepts

Different methods (IAS)

Full consolidation Subsidiaries

Equity Associate and Joint Ventures

Worked solution to Q1 mock exam

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Short Break

Session 2: Hicks (Economic

perspectives on income)

Worked solutions

Discussions

Decision focus (relevance) rather than stewardship oriented

(reliability)

Comparisons with Hicks

Comparisons with Historical cost

Objective of financial reporting?

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Long Break

Session 3: Mix questions Q4

Discussionson(deferred)taxation

Fullprovisionmethodisthecurrentstandard

Longtermcontracts

Conservatismversusfuturerevenuerecognition

Artificialityofreportingtimeframes(annual)comparedwithlongerterm
revenuerealisationandrecognition

Rethinkingtherelevanceversusreliabilitydebate

Session 3: Mix questions Q4

Longtermcontracts

Conservatismversusfuturerevenuerecognition

Artificialityofreportingtimeframes(annual)comparedwithlongerterm
revenuerealisationandrecognition

Rethinkingtherelevanceversusreliabilitydebate

Treatmentofcontingentliabilities

Probabilitiesofoccurrence

Recognise

Disclose(butnotrecognise)

Donotdisclose

Calculationofexpectedoutcomes

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Short break

Session 4: Essay Q5

GUIDEFORESSAYQUESTIONS(someofthisrelevanttoany
writtenparttoaquestion)

Whereyouareunclearastothemeaningofthequestion,clarify
yourinterpretationupfront

Thinkcarefullyaboutstructure;perhapswriteoutastructureon
aseparatepage,orderingthekeypointsyouwanttomake
(referringbacktothiscouldkeeptheanswerfocused)

Session 4: Essay Q5

Gobeyondalisttoproduceatextthatlogicallyflows;check
consistencyandcoherenceofthearguments,supportedas
appropriatebyreference,reasoningandevidence.

Howtoreviseforessays?Remember,youmustansweratleast
one.

Session 4: Essay: Regulation

Critically appraise both the traditional and economic arguments

for and against accounting regulation

Session 4: Essay: Deprival

Define deprival value and discuss the strengths and limitations of

deprival value as the basis of asset valuation in corporate
financial reports

Day 2 (4 sessions)

Session 4: Q3: Fully stabilised

current value accounts

Workthroughsolutionsanddiscussions

Concept:

CPPdealsonlywithgeneralpricechanges
CVAdealsonlywithspecificpricechanges

Notedifferences

CVA(replacementcost)physicalversus
P&L:excludesallholdinggainsandlosses
B/S:includecapitalmaintenancereserve
CVAfinancialcapitalmaintenance
P&L:includesunrealisedandrealisedholdinggains
B/S:nocapitalmaintenancereserve

Session 4: Q3: Fully stabilised

current value accounts

Use the correct indexation method

CVA or Replacement Cost

Date of consumption or replacement / Date of transaction

Current Purchasing Power

Date of stabilization / Date of transaction

1.

Work out CVA financial

2.

Then add in general price changes (CPP)

Session 4: Q3: Fully stabilised

current value accounts

Inventory: real realised holding gain

Inventory: real unrealised holding gain

Closing inventory (CPP) less

Closing inventory (FSCVA)

Non-current assets: real realised holding gain

Cost of sales (CPP) less

Cost of sales (CVA then CPP, to FSCVA)

Depreciation (CPP) less

Depreciation (FSCVA)

Non-current assets: real unrealised holding gain

Net Book Value (FSCVA) less

Net Book Value (CPP)

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Short break

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Session 6: Essay: Goodwill

Session 6: Class exercise

Question: Investment Property

A non-current asset (building) has been acquired by Maison

and it wishes to account for this as an investment property. The
non-current asset cost 400,000 on 1 January 2012, its market
value on 31 December 2012 is 500,000 and Maisons
depreciation policy for similar non current assets is the
reducing balance method using a rate of 10%.

What are investment properties and how are they accounted

for? Show how the non-current asset would be accounted for in
the income statement for the year ended 31 December 2012
and in the balance sheet as at 31 December 2012 for Maison if
it could be classed as an investment property using both the
fair value model and the cost model.

Research & Development: R&D

Define research and development and discuss the accounting

concepts used to determine the accounting treatment of
research and development.

Compare and contrast SSAP 13 on research and development

with IAS 38 on intangibles as it relates to research and
development and critically assess these standards.

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Long Break

Session 7: Class exercise: Forex

Please attempt the supplementary foreign currency numerical

question in advance (i.e., before the start of the revision
sessions)

Forex discussions / essay

Compare and contrast the different methods for translating the

financial statements of foreign subsidiaries.

Discuss how the foreign exchange reserves arise under each

method, how they should be accounted for and the situations in
which each of the methods should be used.

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Short break

Session 8: Practical advice

Learningfromthemockexamination

Needatleastone essayquestion

Usetechnicalknowledgeaspartofthecontenttoessays

e.g.,toillustratecontradictionsinaccountingprinciples

Practicaladviceforthemainexamination

TimeManagement

Attemptingallpartsofquestions

Needforasoundbasis

Practice

Zone B: 2009 Exam

Topics
Q1

Calculate: Consolidated Income Statement and Balance Sheet

Q2

Discuss: Current value financial statements - advantages and limitations

Calculate: Current value physical capital maintenance

Q3

Calculate: Deprival values

Q4

Q6

Calculate: Foreign currency exchange

Discuss: Concept of realisation
Mixed:
a) financial analysis
b) events after the balance sheet date
c) financial instruments
d) investment property
e) economic income concepts
Discuss: goodwill or different models of consolidation

Q7

Discuss: conceptual framework or accounting for leases

Q5

Zone B: 2010 Exam

Topics
Q1
Q2

Calculate: Consolidated Balance Sheet

Discuss: Subsidiary and Associates
Discuss: Operating capital maintenance
Calculate: Current value accounting (replacement cost)

Q6

Discuss: Economic income concepts

Calculate: Economic income concepts
Discuss: Research and Development
Calculate: Research and Development
Mixed:
a) contingent liability
b) operating lease
c) foreign currency exchange
d) consolidation using merger accounting
e) international differences in accounting systems
Discuss: goodwill or different methods of foreign currency translation

Q7

Discuss: conceptual frameworks or regulation

Q3
Q4
Q5

Zone B: 2011 Exam

Topics
Q1
Q2
Q3

Calculate: Consolidated Income Statement

Discuss: Subsidiary, minority interest, goodwill
Discuss: Deprival value
Calculate: Deprival value

Q5

Discuss: Fully stabilised current value accounts

Calculate: Replacement cost; Fully stabilised current value accounts
Discuss: Leases
Calculate: Leases
Mixed:
a) Share premium
b) Capital funding and Taxation
c) Merger accounting
d) Research and development

Q6

Discuss: Non-current assets or standard setting (regulation)

Q7

Discuss: Economic income concepts or foreign currency translation

Q4

Zone B: 2012 Exam

Topics
Q1
Q2
Q3

Calculate: Consolidated Income Statement & Statement of Fin. Position

Discuss: None
Calculate: Foreign currency exchange
Discuss: Foreign currency exchange

Q6

Discuss: Deferred taxation

Calculate: Deferred taxation
Discuss: CPP
Calculate: CPP
Mixed:
a) Internal v externally generated intangibles
b) Non-current assets & revaluation
c) Foreign currency exchange
d) Inventories
e) True & fair
Discuss: Regulation or conceptual framework

Q7

Discuss: R&D & Intangibles or Substance over form / leases

Q4
Q5

Zone B: 2013 Exam

Topics
Q1

Q5

Calculate: Consolidated Income Statement

Discuss: Define subsidiaries and associates
Calculate: Hicks
Discuss: Hicks
Discuss: Current Purchasing Power & gain/loss on net monetary assets
Calculate: Current Purchasing Power
Mixed:
a) Interpretation / Ratio analysis
b) Consolidation: Merger v Acquisition accounting
c) Liabilities: Debentures
d) Post-balance sheet events
e) Investment properties
Discuss: conceptual framework and standard-setting

Q6

Discuss: foreign currency translation and goodwill

Q2
Q3
Q4

Zone B: 2014 Exam

Topics
Q1

Q5

Calculate: Consolidated Income Statement

Discuss: Define subsidiaries and associates
Calculate: Hicks
Discuss: Hicks
Discuss: Current Purchasing Power & gain/loss on net monetary assets
Calculate: Current Purchasing Power
Mixed:
a) Interpretation / Ratio analysis
b) Consolidation: Merger v Acquisition accounting
c) Liabilities: Debentures
d) Post-balance sheet events
e) Investment properties
Discuss: conceptual framework and standard-setting

Q6

Discuss: foreign currency translation and goodwill

Q2
Q3
Q4

Zone B: 2015 Exam

Topics
Q1
Q2
Q3
Q4

Q5
Q6

Calculate: Consolidated Balance Sheet

Discuss: Define Non-Controlling Interest
Calculate: Forex translation of subsidiary & consolidation with parent
Discuss: Temporal vs. closing rate
Discuss: Off-balance sheet & substance over form
Calculate: Leases finance & operating
Mixed:
a) Provision v contingent liability
b) Goodwill recognition criteria
c) Ratios
d) Taxation
Discuss: Historic Cost versus CVA/CPP/FSCVA and Hicks
Discuss: Investment properties & construction contracts; and
Intangibles

Analysis of exam topics

Categorise past year papers (ZA & ZB together)

Topics for calculation

Topics for discussion

Coverage

Understand broader themes in discussion

Relevance v reliability debate

Historical cost versus alternative methods of accounting

Conceptual framework and objectives of financial reporting

Implications of alternative choices of accounting policies

Accounting for goodwill (capitalize; amortize; impair)

Acquisition v mergers