F3 Financial Accounting 1
Hello, I am Nicola Ventress the Examiner for paper F3 Financial Accounting. 2
F3 Financial Accounting This presentation aims to cover: a review of past exam performance areas where students do well areas that students find difficult areas to focus on in the future 3
REVIEW OF PAST EXAMS First of all, I d like to look at exam performance over the past 3 examination sittings, looking at pass rates and particular areas that need improvement. 4
Pass rates 100 90 80 70 67 60 50 40 30 20 10 48 50 0 Dec-07 Jun-08 Dec-08 Pass rates for December 2007 overall were good at 67%. However, there was a dramatic fall in June 2008 down to 48%. This has picked up a little in December 2008 with an overall pass rate of 50%. The June and December 2008 results were disappointing and highlight that the preparation and technique for sitting the exam is a key factor. We will look at this later. 80% of candidates sit the International paper so this tends to drive the pass rate. The remaining 20% of candidates sit the UK paper and other variants. 5
WHAT WAS DONE WELL? This section of the presentation looks at the syllabus areas where students performed well. 6
WHAT WAS DONE WELL? Areas of the syllabus were answered well such as: double entry bookkeeping documentation of accounting transactions preparation of control accounts non-current asset transactions recording and valuation of inventory accounting concepts / qualitative characteristics events after reporting date and basic provisions From reviewing the three exams that have been set so far, there has been an obvious trend in the syllabus areas where students have performed well. Typically, these tended to be in the basic areas of the syllabus such as: double entry bookkeeping documentation of accounting transactions preparation of control accounts non-current asset transactions recording and valuation of inventory accounting concepts / qualitative characteristics events after reporting date and basic provisions Many of these areas are core to the syllabus, especially recording transactions, control accounts and non-current assets. These syllabus areas were consistently answered well by all candidates. 7
WHAT WASN T DONE WELL? Here we will look at areas of the syllabus that were not answered well. 8
WHAT WASN T DONE WELL? Areas that were consistently answered badly included: Suspense accounts and errors Partnership accounts Statements of cash flows Intangible assets Provisions There were a number of syllabus areas that weren t answered well and this seemed consistent across all three sittings of the paper so far. It seems to be the more complex areas of the syllabus that causes problems, for example, suspense accounts and errors are always difficult for students to understand. However, topics such as partnerships and statements of cash flows are key areas and the failure to score well in these questions suggest that the topics have not been studied thoroughly enough. Syllabus areas such as intangible assets and provisions can be difficult and the failure of students to score well in this areas suggests that the area has not been studied to the level required. Students were able to identify basic provisions but found it difficult when application of the knowledge to a scenario was required. Students seem to find application of topics difficult. For example, they are able to 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. 9
LESSONS LEARNED This section will consider ways to improve performance in the F3 exam. 10
LESSONS LEARNED Students must study the breadth of the syllabus Practice questions Attempt full questions in the following areas: accounts preparation partnerships statements of cash flows Don t forget theoretical aspects of syllabus e.g. Framework One of the reasons students fail the paper is their lack of coverage of the breadth of the syllabus. Certain syllabus areas such as accounts preparation, partnerships and statements of cash flows can be difficult for students to prepare for in a MCQ exam as they are not going to be examined as a full question. However, they lend themselves well to MCQs as a particular aspect can be pulled out and examined, such as accruals / prepayments or appropriations of profit. For this reason, it is advisable that students practice full questions on these topics so that they can deal with the subject in its entirety. This will also be advantageous as they move up to paper F7 Financial Reporting. F3 underpins a great deal of the work in F7 and certainly, if double entry bookkeeping and the preparation of financial statements including statements of cash flows is not studied in sufficient detail in F3, it will make F7 a more challenging paper than it already is! 11
WHAT TO FOCUS ON? This section looks at specific areas for students to focus on. 12
WHAT TO FOCUS ON? All areas of syllabus! Questions practice Review of Examiner s reports A MCQ / CBE exam by nature can cover all aspects of the syllabus and this is how the exam is set. 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 is no substitute for practising MCQ questions and there are various sources available. Additionally, the Examiner s report for each exam sitting publishes and discusses 3 of the questions from the latest exam. The questions chosen are the ones where performance was particularly poor and should serve as a guide to students as to the style and standard of question and the potential pitfalls within the questions. 13
HOW TO IMPROVE? This section looks at specific recommendations for students to improve their performance. 14
HOW TO IMPROVE? Focused question practice - combination of MCQ and full questions Ensure accounting standards in syllabus are reviewed - especially changes in accounting policy, intangible assets, non-current assets and provisions. Pay attention to trickier areas - errors, suspense accounts, discounts, partnerships and cash flow. More question practice! 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. 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 noncurrent assets and provisions. There is a possibility that students think this paper is going to be very easy as it consists entirely of MCQs. However, as a professional exam paper, it should be challenging even though it is set at the first stage. 15
TYPICAL ERRORS 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 Pay attention to the number of years or months in a calculation Do not always assume the financial year end is December, the question will always state the year end very clearly Check dates of revaluations to assess whether the asset needs to be depreciated first or not The following are typical of errors that students make in answering MCQ 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. There are no method marks in a MCQ question so this can result in the question being answered incorrectly Do not always assume the financial year end is December, the question will always state the year end very clearly Check the dates of revaluations to assess whether the asset needs to be depreciated first or not. 16
FOCUS ON FUTURE EXAMS This section looks at future F3 papers 17
WHAT S NEW? 18
WHAT S NEW? Currently, no new standards to be examined Recent changes have included IAS 1 and terminology changes in INT paper Students must know the treatment of revaluation gains in the: Statement of comprehensive income (INT) Statement of total recognised gains and losses (UK) At present, there are no new standards that have been issued that will affect the F3 paper. IAS 1 has had an impact on the INT paper and students should already be aware of the terminology changes that have taken place. One further point is that students are expected to deal with the statement of comprehensive income, albeit in a very simple format. The only area of the syllabus that is affected is the treatment of revaluation gains on the revaluation of a non-current asset. The tax effect is outside of the syllabus. In the UK paper, this means that the Statement of Total Recognised Gains and Losses may be examined in an equivalent question so students must understand the content of this statement. 19
WILL THINGS CHANGE? 20
WILL THINGS CHANGE Changes in accounting standards have a minor effect on this paper Exam format of 40 2-mark questions and 10 1-mark questions will continue Exam paper will continue to examine entire syllabus There are no changes foreseen to the paper as it stands. Both the paper based and CBE exam will continue to examine the breadth of the syllabus and students must be prepared for this. 21
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