ACCA Revision: Conquering Financial Reporting

Francis Braganza asks why some students find F7 Financial Reporting so easy to pass whilst many others struggle.

As I formulate this article I’m sitting in my dentist’s waiting room wondering whether my meticulous regime will pass muster.  I cannot help but think of an analogy, admittedly a much more serious matter.  Why do some students find F7 Financial Reporting so easy to pass and many others struggle?

Problem Areas

Many students get caught out by the more obscure areas being examined.  While F7 has, in my opinion, based on the evidence of many superb questions, a quite brilliant examiner, it is not only the basics that get examined.  In recent years we have seen obscure topics like Capitalisation of Borrowing Costs and (in June 2013) Investment Properties given almost full-question status, catching out thousands of students.  These topics are not difficult in themselves, but the under-prepared student would, I suspect, have glossed over them.  So make time to study the whole syllabus.

My impression at times is that we live in a ‘lottery-generation’.  Many students, aware of the 25+  Accounting Standards in the vast Syllabus come up to me to ask ‘which one should I study?’  Reading between the lines, they are saying to me ’What are the lucky numbers to win’.  It is worth bearing in mind that the examiner and his hand-picked team of markers are more interested in the depth of your roots than the height of your branches, in other words, are you displaying a thorough understanding of the subject, or are you merely chancing your arm?

It is worth quoting the legendary golfer Gary Player who on being asked if his recent win was because of luck, is reputed to have said ‘yes, the more I practise, the luckier I get’.  When you see Wimbledon champion Andy Murray’s vastly-improved backhand, he is not trying it out on the day for the first time, but has honed that skill by hitting perhaps 150,000 backhands in practice.

The F7 exam is more than a quarter written; actually all of it is!  Students choosing to study Accountancy tend to favour the numerical parts, often ignoring the written bits.  Some even refer to it as ‘theory’, which immediately puts it out of reach mentally.  The F7 examiner ensures that these parts of the paper are examined in an imaginative and practical way, ie examining your ability to apply the principles to a realistic scenario.

Some students struggle because of poor choices they have made, for example attempting to study F7 and the more-advanced P2 at the same time.  The examiner was almost apoplectic and shot down the idea in the most emphatic terms when it was mentioned at Conference earlier this year.  You must clear F7 before you even think about P2, or you will get so confused that you’ll probably fail both if you attempted them at the same sitting.  The issues they examine are different.

Learn it in layers

An advanced topic to grasp in F7 is Consolidations.  My teaching method is to first show students the basic method, then add Adjustments such as Fair Value, Provision for unrealised profit and Inter-company cancellations, etc and finally expose students to unusual exam points such as handling Accounting Standards points in a consolidation question and coping with how the question is worded, ie exam-complexities.   It is crucial that you study the more technical ACCA subjects in layers.  I whole-heartedly agree with PQ’s correspondent who makes this point so clearly.

Another problem for students is being granted exemptions from earlier stages.  It is ideal, if you have the time, to actually attend the exempted paper’s lecture-based course anyway, or at the very least, to speak to the lecturer in charge either through e-mail or in person to find out what the gaps in your knowledge might be.  ACCA are rigorous in scrutinising claimed syllabus coverage before they grant exemptions, but students have often forgotten crucial points from earlier knowledge gleaned several years previously.

So get started now and remember that you only need 50% to pass – but imagine yourself pursuing a career in practice and attempt to cover as much of the Syllabus as you possibly can, and be meticulous.

Oh by the way, I did get a clean bill of health.

Francis Braganza is a Senior ACCA Lecturer at LSBF

A version of this article has been published by the PQ Magazine.