Financial Accounting - UK Accounting Standards (IFNA) - (Pre-requisite FAFN)

Syllabus overview

This syllabus deals with the financial statements of a non-group organisation and aims to build upon Financial Accounting Fundamentals and Business Law at Foundation level. Although the emphasis in this syllabus is on accounting techniques, students will be expected to understand the basic principles of accounting theory, including the Accounting Standards Board's (ASB) Statement of Principles. Students will be required to answer in terms of Financial Reporting Standards (FRSs) and Statements of Standard Accounting Practice (SSAPs) in so far as they affect topics in the syllabus. It should also be noted that certain concepts draw upon terms seen in the wider accounting literature and not just those found in FRSs and SSAPs.

This syllabus aims to test the student's ability to:

• explain and evaluate the regulatory framework governing the preparation of financial statements and corporate reports;
• prepare financial statements for non-group organisations;
• identify and apply the correct treatment for transactions in accordance with UK Generally Accepted Accounting Practice (GAAP);
• analyse the position and performance disclosed by the financial statements of a non-group organisation.

There will be a written paper of three hours. There will be two sections: Section A will be compulsory for 60% of the marks, and Section B will offer a choice of two from four questions for 40% of the marks.

On completion of their studies students should be able to:

• explain the elements of the regulatory framework within which published accounts are produced;
• explain the role and structure of the Financial Reporting Council (FRC), Accounting Standards Board (ASB), Urgent Issues Task Force (UITF) and Financial Reporting Review Panel (FRRP) and their relationship to the International Accounting Standards Committee (IASC) and the International Organisation of Securities Commissions (IOSCO) and to company law;
• explain the process leading to the promulgation of a standard practice;
• evaluate the relationship of the Statement of Principles to the standard-setting process;
• explain the role of the external auditor;
• explain the elements of the audit report and the ‘qualifications’ of that report.

• The regulatory framework within which published accounts are produced.
• The role and structure of the FRC, ASB, UITF, FRRP and their relationship to company law, IASC and IOSCO.
• The process leading to the promulgation of a standard practice.
• The powers and duties of the external auditors; the audit report and its qualification for accounting statements not in accordance with best practice.

On completion of their studies students should be able to:

• explain the regulatory requirements;
• prepare financial statements in a form suitable for publication, with appropriate notes;
• prepare a cash-flow statement in a form suitable for publication;
• explain and apply the rules for reporting performance;
• explain and apply the rules for the disclosure of related parties to a business;
• explain and apply the rules governing share capital transactions.

• The ASB Statement of Principles.
• Preparation of the accounts of non-group limited companies; the regulatory requirements for published accounts (Companies Act 1985 + SSAP 2).
• The preparation of cash-flow statements (FRS 1 ).
• Reporting Performance (FRS 3); the measurement of income, the ‘layered effect’, exceptional and extraordinary items, prior-year adjustments and the Statement of Total Recognised Gains and Losses (STGL), and the Reconciliation of Movements in Shareholders’ Funds. Segmental reporting (SSAP 25).
• The treatment in company accounts of shares, debentures, dividends and interest; the recognition of revenue, the distribution of profit and the maintenance of capital.
• The disclosure of related parties to a business (FRS 8).
• The issue and redemption of shares, the share premium account, the capital redemption reserve and the purchase by a company of its own shares.

On completion of their studies students should be able to:

• explain the accounting rules contained in Financial Reporting Standards which provide guidance as to the appropriate treatment of certain transactions;
• identify, apply and evaluate the accounting treatment of significant transactions.

• Tangible Fixed Assets (FRS 15 + FRS 11) – the calculation of depreciation and the effect of revaluations, changes to economic useful life, impairment in value, repairs, improvements and disposals (note: for FRS 11, no value-in-use calculations are required, only a knowledge of basic principles).
• Investment properties (SSAP 19).
• Research and development (SSAP 13) – arguments for and against capitalisation and the criteria to be met before development expenditure should be capitalised.
• Stocks and long-term contracts (SSAP 9), to cover methods of determining cost, NRV, the inclusion of overheads, and the measurement of profit on uncompleted contracts.
• Tax in financial accounts and government grants (SSAP 4 + FRS16), and deferred taxation (SSAP 15).
• Pensions (SSAP 24) – defined benefit schemes and defined contribution schemes, actuarial deficits and surpluses.
• Post balance sheet events (SSAP 17), provisions, contingent liabilities and contingent assets (FRS 12).
• Leases and hire purchase contracts (SSAP 21) – operating leases and finance leases in the books of the lessor and lessee.
• Earnings per share (FRS 14 + FRS 3), to include the effect of bonus issues, rights issues and convertible stock.

On completion of their studies students should be able to:

• calculate a full range of accounting ratios;
• analyse financial statements to comment on performance and position;
• explain the limitations of accounting ratio analysis.

• The analysis of financial statements to interpret the position and performance of a business.

• The application of ratio analysis to financial statements and its limitations.