Examiners interview: F3 Financial Accounting

Interviewer:

Hello and welcome to the examiners interview for F3, Financial Accounting. The examiner, Nicola Ventress, has provided answers and her words are spoken by an actor.

In this interview the examiner will cover the following areas:

Firstly, she will give a review of the past exam performance of candidates over the last few exam sessions, summarising areas where candidates do well and areas which candidates seem to find difficult.

Secondly, the examiner will highlight those areas where candidates seem to have the most difficulties.

Finally, the examiner will review the changes to the paper in the near future.

Interviewer:

So how have candidates performed over the last few sittings?

Examiner:

Over the period since the F3 exam was introduced, the pass rates have shown an improving trend. Since December 2009, the published pass rates include a combined paper-based and computer-based exam pass rate. Looking at the last four exam sessions there has been an improving pass rate and then a slight dip in the December 2010 result.

Interviewer:

Are there any areas where candidates have performed particularly well?

Examiner:

Typically, candidates perform well in the following areas of the syllabus: recording double-entry bookkeeping transactions, such as completing a journal entry or recording a transaction for the first time documentation of accounting transactions such as identifying which document is to be used in a transaction preparation of payables and receivables control accounts - either correcting errors or calculating the balance on the account. basic non-current asset transactions such as recording depreciation or selecting depreciation methods use of accounting equation, either definition of accounting equation or calculating missing figures accounting concepts / qualitative characteristics

Many of these areas are core to the syllabus, especially recording transactions, control accounts and non-current assets. These syllabus areas were answered consistently well by all candidates.

Interviewer:

Are there any areas where candidates have not performed so well?

Examiner:

There are a number of syllabus areas that candidates seem to find difficult.

It seems to be the more complex areas of the syllabus that cause problems, for example candidates can deal with basic non-current asset transactions but always find revaluations difficult. Additionally, topics such as partnerships and statements of cash flows are key areas and the failure to score well in these questions suggests that the topics have not been studied thoroughly enough. In the June 2010 exam, of the five worst answered questions, two covered cash flows, two covered partnerships and the last was a revaluation of non-current assets.

The treatment of errors which includes the suspense account has always been a difficult area for students and this hasnt changed over recent sittings of the paper. The failure of students to score well on questions on provisions and intangible assets suggests that the area has not been studied to the level required.

Generally, candidates seem to find the application of topics difficult. For example, they can identify basic provisions but find it difficult when application of the knowledge to a scenario is required. Likewise, they can calculate a basic accrual or prepayment, but score badly in questions that require them to assess the impact of the adjustment on profit or net assets.

Interviewer:

So, what can we learn from everything you have just explained?

Examiner:

It seems to me that one of the reasons for exam failure is a candidates lack of coverage of the breadth of the syllabus and failure to prepare properly for certain aspects of the syllabus. For example, accounts preparation, partnerships and statements of cash flows will be examined by asking for an aspect of a financial statement such as the tax expense from the income statement, or an appropriation statement in partnership accounts, or the cash flow for a particular item. In order to prepare for this, it is beneficial for the students to prepare by learning how to attempt the financial

statements in full and then to revise multiple choice questions on these topics.

The other advantage to this approach is that this will lay the groundwork for their future studies in paper F7 Financial Reporting.

Interviewer:

So which study areas need to be improved?

Examiner:

The issues identified in the review of exam performance are those that need to be addressed in improving performance.

The key is to cover the breadth of the syllabus and pay attention to areas that students typically find difficult as highlighted earlier. Students who have missed out parts of the syllabus in their revision will miss out on the opportunity to gain marks on the questions set on those syllabus areas.

There are not many accounting standards in the syllabus but the areas that tend to be overlooked include changes in accounting policy, recognition and amortisation of intangible assets, revaluation of non-current assets and provisions.

It is important that candidates focus on exam practice, using a combination of full questions leading on to the exam style objective questions. This paper is possibly more challenging than candidates expect - just because it consists entirely of multiple choice questions doesnt necessarily make it easy.

Both tutors and students should review the examiners report after each exam session. This report discusses three of the questions from the latest exam and the questions chosen are the ones where performance was particularly poor. This should serve as a guide to students as to the style and standard of questions, and the potential pitfalls.

The following are typical of errors that students make in answering multiple choice questions. Students should ensure that they: Read the question carefully and do what the question asks for. Finish the question and be careful not to select the distracter that represents the penultimate stage of the calculation.

For example, a question may ask for the expense for irrecoverable debts in the period. This may be made up of the movement in the allowance and specific debts that have been written off. Students often only calculate the movement in the allowance and then choose that as their answer but have failed to complete the question.

Pay attention to the number of years and months in a question this is especially important in accruals, prepayments and depreciation calculations. As there are no method marks in a multiple choice question, this type of error will result in the question being answered incorrectly.

Candidates must check the dates in the question to ensure they have the correct accounting period, or if dealing with a revaluation, whether this occurs at the beginning, partway through or at the end of the year.

Interviewer:

How can tuition providers help to overcome these problems?

Examiner:

In taught courses, it is important to highlight to students that studying the breadth of the syllabus is important, as the structure of the exam enables the entire syllabus to be examined.

A focus on traditional preparation of financial statements questions should help students to improve their performance in accounts preparation, statements of cash flows and partnership questions.

Revision courses should focus on question practice, highlighting the potential pitfalls of multiple choice and computer based exam style questions.

Interviewer:

What might we expect in future exams? Is there anything new to the syllabus for the exam approach?

Examiner:

ACCAs Foundations in Accountancy qualification updates the current CAT Technician scheme from December 2011. The current ACCA F3 Financial paper will be known as FFA Financial Accounting and will replace the current CAT Paper T6 Financial Accounting.

FFA will be the final accounting paper in the Foundations in Accountancy scheme and will continue to be the first paper in the ACCA scheme. As before, students completing the CAT qualification will start their ACCA studies at Paper F4.

There will be a number of changes to the current F3 paper both in the syllabus and structure of the paper.

Interviewer:

Please could you explain what the detailed F3 changes are?

Examiner:

The key changes to the syllabus are effective from December 2011. These are: The complete removal of partnership accounting from the syllabus. More detail on regulatory requirements such as the responsibility of directors in preparing financial statements and governance in preparing financial statements. Group financial statements will be examined covering the basic consolidation of a parent and single subsidiary. This will include simple adjustments such as intercompany trading, unrealised profit, and fair value adjustments on acquisition. It will exclude more complicated adjustments such as impairment of goodwill, depreciation of fair value adjustments and intercompany transactions other than trading. Key definitions in group accounting such as parent, subsidiary, and control will also be examined. Additionally, associates will be examined, but only to the extent of defining an associate and discussing its accounting treatment, not the calculation of figures to be included in the financial statements for an associate.

Interpretation of financial statements is also added to the syllabus. This will require candidates to calculate ratios and understand their meaning, what the change in the ratio means and also the purpose of interpretation.

It is hoped that with the addition of simple groups and interpretation, this will give candidates the basic knowledge that can be built on at Paper F7 Financial Reporting, and will (hopefully) ease the transition between the two papers.

Finally, only the international paper will be offered from December 2011. At this level there are only very minor differences between UK GAAP and IFRS so this will have little impact on candidates.

The revised FFA syllabus will now consist of eight sections, the new sections being: G - Prepare simple consolidated financial statements and; H - Interpretation of financial statements

The new syllabus can be found in the student section of the ACCA website - in the Foundations in Accountancy section - and under F3 within the ACCA qualification section.

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Interviewer:

And what are the changes to exam structure?

Examiner:

At the moment, F3 consists of 40 two mark questions and 10 one mark questions, regardless of whether students sit the paper based or CBE exam.

FFA will no longer have any one mark questions. For the first exam sitting in December 2011, there will be 50 two mark questions to complete which will cover the whole syllabus as with F3. For future exam sittings the structure of the exam will change to be: thirty-five two mark multiple choice questions two 15 mark long questions

The 15 mark questions will cover group accounting and preparation of financial statements and may include some interpretation. There will be consistency between the CBE and paper-based exam in terms of the structure of the longer questions, as the paper-based exams will follow the CBE style of question. For example, a CBE question may pick out elements of financial statements preparation such as calculating specified balances from the statement of financial position and the paper-based question will follow this same format.

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The exams, both CBE and paper-based will be two hours long. Sample questions and a pilot paper will be available on the ACCA website.

Interviewer:

Thank you very much for all that useful information.

Examiner:

Thank you.

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