Paper 2.5(Int): June 2006 Exam Tips (BPP)

ACCA Paper 2.5 (Global)
Part 2 – Financial Reporting
June 2006 Exam Tips

For each area described, please note the reference to useful questions from BPP’s Practice and Revision kit (P&R kit) (2006 edition) for the International Stream or UK Variant. We recommend you practise them all to get broad syllabus coverage.

Section A

Question 1

Section A will comprise one compulsory question that will examine group accounting. Group accounting is a core area and this question could ask you to produce a consolidated balance sheet and/or income statement (profit & loss account) with one subsidiary and possibly an associate or joint venture.

It usually includes adjustments for items such as: fair values, unrealised profit on inventories (stock) or tangible assets, cancellation of intragroup trading, goods/cash in transit, pre-acquisition dividends.

Part (b) of the question usually includes a related discussion element.

2006 P&R Kit Questions: Q52 Hanford (B/S), Q46 Hydrate (I/S and B/S), Q50 Holdrite (I/S with associate), Q55 Hapsburg (B/S with associate), Q51 Augment (joint venture).

Section B

Section B will comprise four questions out of which candidates should select three questions. The examiner, Steve Scott has stated that the style of the paper will remain fairly static:

Question 2

Question 2 will be preparation/restatement of an income statement (profit & loss account) and/or balance sheet. This question normally requires adjustments for current tax, depreciation, interest and dividends. Other adjustments may relate to debt factoring or other substance over form issues, leases, financial/capital instruments, revaluations, share issues, inventory (stock) valuation, government grants or deferred tax. There may be further disclosure requirements re discontinued operations, movement in reserves or an earnings per share calculation.

2006 P&R Kit Questions: Q8 Chamberlain, Q28 Telenorth, Q35 Deltoid (also includes convertible debt), Q54 Bloomsbury.

Question 3

Question 3 will be a written question examining theoretical/conceptual areas or accounting standards. This could be on construction contracts, leases, provisions, inflation, intangible assets, accounting policies or substance over form issues with reference to the Framework for the Preparation and Presentation of Financial Statements (Statement of Principles).

2006 P&R Kit Questions: Q13 Dexterity (intangibles), Q26 Bodyline (provisions), Q31 Atkins (substance), Q57 Update (inflation). For other topics, see Question 5.

Question 4

Question 4 is likely to examine interpretation and/or cash flow statements. There could also be a discursive part on why, for example, segment or discontinued operations disclosures are useful.

2006 P&R Kit Questions: Q39 Planter (CFS), Q40 Bigwood (CFS and interps), Q63 Comparator (interps).

Question 5

Question 5 has no specified format or content and will cover other areas of the syllabus. The examiner frequently includes a ‘mixed bag’ question, which examines three or four different accounting standards.

Possibilities this sitting include: deferred tax, construction contracts, segment reporting, events after the balance sheet date, governments grants, financial/capital instruments, discontinued operations or substance over form issues.

2006 P&R Kit Questions: Q3 Derringdo (revenue and grants), Q7 Tintagel (accounts preparation & financial instruments), Q17 Linnet (construction contracts, segment reporting) (Q16 in UK kit), Q21 Bowtock (deferred tax, leases, events after the balance sheet date), Q27 IFRS 5 (INT kit only).
Relevant Articles (www.accaglobal.com/students)

How to approach performance appraisal questions
Steve Scott (Examiner), 28 April 2004

First time adoption of International Financial Reporting Standards
Steve Scott (Examiner), 4 January 2005

Dealing with debtors
Graham Holt, 14 October 2005

Health Warning! The examiners deliberately try to avoid question spotting. Just because a question featured last time, doesn’t mean it won’t feature this time. Use the tips as areas to have a good look at, but remember that no one knows what is in the exam, apart from the examiner. Your safest bet is to achieve good syllabus coverage in your revision, as the examiner aims to do in the exam.

Author’s Note: The tips are taken directly from BPP Learn Online.