6a. Financial Accounting - UK Accounting Standards (IFNA)  

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 the 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.

Aims

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.

Assessment

There will be a written paper of three hours. There will be three sections: section A will be compulsory as 10 multiple choice questions for 20% of the marks; section B will be compulsory question for 30% of the marks; and section C will offer a choice of  two from four questions for 50% of the marks.

Learning outcomes and syllabus content

6a(i) Regulation - 10%

Learning outcomes

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), ASB, Urgent Issues Task Force (UITF) and Financial Reporting Review Panel (FRRP) and their relationship to the International Accounting Standards Board (IASB) 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.

Syllabus content

  • 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, IASB 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.

6a(ii) Accounting statements - 40%

Learning outcomes

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.

Syllabus content

  • The ASB Statement of Principles.

  • Preparation of the accounts of non group limited companies; the regulatory requirements for published accounts (Companies Act 1985 + FRS 18).

  • 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 (SSAP25).

  • 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 including definitions and treatment of share issue and redemption costs (FRS 4), the share premium account, the capital redemption reserve and the purchase by a company of its own shares.

6a(iii) Accounting treatment of significant transactions - 30%

Learning outcomes  

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.

Syllabus content

  • Tangible Fixed Assets (FRS15 +FRS11) – 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).  

  • Goodwill (excluding Goodwill arising on consolidation) and Intangible Fixed Assets (FRS10 and FRS11) – recognition, valuation, amortisation and impairment. (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 tax (FRS19).  

  • Post balance sheet events (SSAP17), Provisions, contingent liabilities and contingent assets (FRS 12).  

  • The principle of substance over form (FRS 5) and its application to transactions for sale and repurchase agreements and consignment stock.  

  • Leases and hire purchase contracts (SSAP 21) – Operating leases and finance leases in the books of the lessor and lessee.  

  • Earnings per share (FRS14 + FRS 3) to include the effect of bonus issues, rights issues and convertible stock.

6a(iv) Interpretation - 20%

Learning outcomes

On completion of their studies students should be able to:

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

Syllabus content

  • 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.

6b. Financial Accounting - International Accounting Standards (IFAI)

Syllabus overview

This syllabus deals with the financial statements of a non-group enterprise and aims to build upon Financial Accounting Fundamentals and Business Law at the 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 International Accounting Board’s (IASB) Framework for the Preparation and Presentation of Financial Statements (the Framework). Students will be required to elect to answer in terms of International Accounting Standards (IASs) 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 IASs.

Where financial statements are required in a form for publication it is expected that the layout and presentation will follow that seen in the relevant IAS, for example IAS 1 for an income statement and a balance sheet and IAS 7 for cash flow statements. In some cases IASs permit two accounting treatments for like transactions and events. In this paper it is expected that answers will be produced using the benchmark treatment and only knowledge of an alternative treatment is required. With regard to external audit the reference point will be International Standard on Auditing (ISA) 700, The Auditors Report on Financial Statements.

Aims

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 enterprises;

  • identify and apply the correct treatment for transactions in accordance with International Accounting Standards (IASs);

  • analyse the position and performance disclosed by the financial statements of a non-group enterprise.

Assessment

There will be a written paper of three hours. There will be three sections: section A will be compulsory as 10 multiple choice questions for 20% of the marks; section B will be a compulsory question for 30% of the marks; and section C will offer a choice of two from four questions for 50% of the marks.

Learning outcomes and syllabus content

6b(i) Regulation - 10%

Learning outcomes

On completion of their studies students should be able to:  

  • explain the elements of the regulatory framework within which published financial statements are produced;

  • explain the role and structure of the IASB and its relationship to the International Organisation of Securities Commissions (IOSCO) and local regulatory bodies;

  • explain the process leading to the promulgation of a standard practice;

  • evaluate the relationship of the Framework for the Preparation and Presentation of Financial Statements 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.

Syllabus content

  • The Regulatory Framework within which published financial statements are produced.

  • The role and structure of the IASB, it’s committees including the Standing Interpretations Committee (SIC) and the relationship to IOSCO and to local regulatory authorities.

  • 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.

6b(ii) Accounting Statements - 40%

Learning outcomes

  • On completion of their studies students should be able to:
  • explain the relevant 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 relevant 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.

Syllabus content

  • The IASB’s Framework for the Preparation and Presentation of Financial Statements.
  • Preparation of the financial statements of non-group enterprises; the regulatory requirements for published financial statements (IAS 1).
  • The preparation of cash flow statements (IAS 7).
  • Reporting Performance; the measurement of income, extraordinary items, prior period items, Statement of changes in equity (IAS 1+ 8+35). Segment reporting (IAS 14).
  • The treatment in an enterprise’s financial statements of shares, debentures, dividends and interest; the recognition of revenue (IAS 18), the distribution of profit and the maintenance of capital.
  • The disclosure of related parties to a business (IAS 24).
  • The issue and redemption of shares including definitions and treatment of share issue and redemption costs (IAS 32 and IAS 39), the share premium account, the accounting for maintenance of capital arising from the purchase by a company of its own shares.

6b(iii) Accounting treatment of significant transactions - 30%

Learning outcomes

On completion of their studies students should be able to:

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

Syllabus content

  • Property, Plant and Equipment (IAS 4+16+36) – the calculation of depreciation and the effect of revaluations, changes to economic useful life, impairment in value, repairs, improvements and disposals. (Note for IAS 36 no ‘value in use’ calculations are required, only a knowledge of basic principles).
  • Goodwill (excluding Goodwill arising on consolidation) and Intangible Fixed Assets (IAS 38 and IAS 36) – recognition, valuation, amortisation and impairment. (Note: for IAS 36 no ‘value in use’ calculations are required, only a knowledge of basic principles).
  • Investment Properties (IAS 40).
  • Research and development costs (IAS 38) – arguments for and against capitalisation and the criteria to be met before development expenditure should be capitalised.
  • Inventories and construction contracts (IAS 2+11) to cover determination of cost, net realisable value (NRV), the inclusion of overheads and the measurement of profit on uncompleted contracts.
  • Tax in financial accounts and government grants (IAS 12+20), and deferred tax (IAS 12).
  • Contingencies and events occurring after the balance sheet date (IAS 10), Provisions, contingent liabilities and contingent assets (IAS 37).
  • The principle of substance over form (IAS 1) and its influence in dealing with transactions for sale and repurchase agreements and consignment stock.
  • Leases (IAS 17) – Operating leases and finance leases in the books of the lessor and lessee.
  • Earnings per Share (IAS 33) to include the effect of bonus issues, rights issues and convertible stock.

6b(iv) Interpretation - 20%

Learning outcomes

On completion of their studies students should be able to:

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

Syllabus content

  • 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.