Business Reporting Revision Session 1.pptx

Important to point out that the reasonable adjustments application process for exams is much more formal – students will all need to apply for adjustments, clearly stating what adjustments they need and providing evidence to substantiate the request. As an example, if they are requesting extra time because of dyslexia, they will have to provide evidence of a formal diagnosis. For a condition or impairment that doesn’t change over time, they may be given approval for adjustments for all exams. For conditions that may change or improve, then they may be asked to apply for each exam sitting. Would recommend to students that they review the Policy and Guidance document on the website.

LINK to the website page for exams special considerations (to be put in chat): www.cipfa.org/qualifications/student-policies-procedures-and-forms

For CETC support, there is no formal process and we don’t necessarily require any evidence. We simply want students to let us know how we can best support them – and we will do whatever we can to make adjustments to enable the best learning outcomes for that student. But they do need to let us know – each term. They must not assume that if they inform us as Training Provider that we will inform the Exams team.

1. Welcome to Business Reporting Revision Session 1 1 We will start in a few minutes

2. Important information Safeguarding If you have a safeguarding or Prevent (counter-extremism/ radicalisation) concern about yourself or a classmate, please contact a Designated Safeguarding Officer (details in your student handbook) or, if urgent, speak to your tutor Welfare & wellbeing Find wellbeing resources through www.CIPFAwellbeing.com and webinars in your CIPFA Learning account. If you are having a mental health emergency, email [email protected] to contact a trained Mental Health First Aider British values Please remember to treat each other with respect and adhere to our British Values (details in your student handbook) Democracy Respect & tolerance The rule of law Individual liberty Career Hub Please visit our new Career Hub available via: www.cipfa.org/members/membership-benefits CV building Interview skills E-learning Jobs board Video in CIPFA Learning Free e-learning Please subscribe to the free weekly CPD Bites service via: www.cipfa.org/ members/membership-benefits Please also complete the Ethics e-learning you will find in CIPFA Learning Key contacts for queries about: course administration and general queries: [email protected] apprenticeships: [email protected] exams: [email protected]

3. Support from CIPFA Support from CETC as your Training Provider We recognise that different students will have different needs and that these may change. We will do all that we can to provide reasonable adjustments in our teaching and support. We need you to let us know what you need and how we can help. Recognising that needs may change over time, please tell your tutor for each module how they/we can help you at the start of each term . Your needs may relate to (as examples, but not limited to): Cognition and learning needs – e.g. Dyslexia, Dyscalculia Communication and interaction needs – e.g. Autism Spectrum Disorder, or Speech, Language and Communication Needs Sensory and physical needs – e.g. Hearing or Visual Impairment, Physical Disability Social, mental and emotional needs – e.g. Attention Deficit Disorder, Anxiety or Depression Faith-related needs Please let me know by email Support from CIPFA Exams team If you require adjustments to the way you take your exam or the time you have available to you, you can apply for ‘Reasonable Adjustments’. Examples of adjustments include (but are not limited to): Extra time allowed – up to 100% extra Reading aloud, or an exam reader pen A scribe Supervised rest breaks – or breaks for food or medication Coloured overlays Use of assistive software/technologies YOU need to apply – and you may need to apply for each exam sitting, depending on the nature of the reason you are asking for adjustments. Evidence is required. The Policies and Application Form are on the CIPFA website in the Qualifications tab (then Student Policies, Procedures and Forms) - www.cipfa.org/qualifications/student-policies-procedures-and-forms Exams Tuition

4. A bit about me… … and a bit about logistics Insert image of trainer here 4 How can we talk? Chat panel

5. Exam rubric 180 minutes (3 hours) Maximum 100 marks 35 marks - 7 x 5 mark objective questions 65 marks - preparation of single and consolidated FS Pass mark: 50%

6. Course weighting (%) Workbook A IFRS Regulatory framework 15 1 B Single-entity financial statements 30 2-7 C Consolidated financial statements 35 8 D Analysis of financial statements 20 9

7. Revision Plan Session 1 LO 1 IFRS Regulatory Framework (15 marks) LO 4 Analysis and Interpretation of Financial Statements (20 marks) Session 2 LO 2 Single Entity Financial Statements (30 marks) Session 3 LO 3 Consolidated Financial Statements (35 marks) Session 4 LO 3 Consolidated Financial Statements (35 marks) LO 2 Single Entity Financial Statements (30 marks) 7

8. LO 1 Regulatory Framework the role of the International Accounting Standards Board (IASB) the standard-setting process the status of IFRSs the benefits of global harmonisation IASB Conceptual Framework Integrated Reporting 8

9. Bruno is aware that the formal objectives of the International Accounting Standards Board (IASB) includes to promote and facilitate the adoption of International Financial Reporting Standards (IFRS). However, Bruno is unsure of how the IASB is structured and what the roles of each body are. Requirement   Briefly explain the structure of the IASB with reference to the following:   IFRS Foundation IFRS Foundation Trustees International Accounting Standards Board IFRS Advisory Council / IFRS Interpretations Committee International Accounting Standards Committee (IASC) (5 marks) 9

10. Revision Mock 1 Q1 - The main objective of IASB is to develop a single set of high quality financial reporting standards. Briefly explain the process for developing an individual standard Revision Mock 1 Q2 - The IASB’s purpose is to try to achieve harmonisation of accounting standards across the world. Explain advantages of the global harmonization of the accounting standards. Revision Mock 2 Q1 - Explain the objectives of IASB 10

11. Conceptual Framework 11 The key aim of the Conceptual Framework To provide a set of accepted accounting principles that can be used by standard setters when developing new accounting standards The Status of the Conceptual Framework Not an accounting standard Does not overrule any individual IFRS or IAS. In the (rare) cases of conflict between an IFRS and the Framework, the IFRS will prevail

12. Revision Mock 1 Q3 - Explain the benefit of conceptual framework and the status of the conceptual framework Revision Mock 2 Q3 – Use the definition of assets in the conceptual framework to explain why inventory should be classified as assets 12

13. Qualitative characteristics 13

14. Revision Mock 2 Q2 – Explain fundamental and enhancing characteristics of financial information 14

15. Key Definitions 15 Controlled by an entity as a result of past event and from which future economic benefits expected Assets Obligation arising from past events, e xpected to result in an outflow Liabilities The residual interest in the assets of the entity after deducting all its liabilities Equity

16. A company spends £3m on staff training. Requirement For this transaction consider whether the expenditure should be capitalized or written off by reference to the Conceptual Framework. (5 marks) 16

17. The Conceptual Framework gives two fundamental qualities of financial information being relevance and faithful representation. There are also enhancing characteristics that the financial statements should show. Requirement State the enhancing characteristics and give a brief explanation to each (5 marks) 17

18. Integrated reporting Integrated reporting is a concise communication about how an organisation's , strategy , governance , performance and prospects , in the context of its external environment, lead to the creation of value over the short, medium and long term 18

19. Revision question List and briefly explain the 8 content elements of an integrated report 19

20. LO 1 Nature and benefits of the global harmonisation of financial reporting standards • National and international financial reporting • Development of common conceptual frameworks • Advantages and disadvantages of convergence of national and international standards 20

21. The International Accounting Standards Board’s purpose is to try and achieve harmonisation of accounting standards across the world. There are many advantages of harmonisation but also potential difficulties in applying these standards in individual countries. Requirement Identify FIVE potential difficulties when trying to achieve the harmonisation of accounting standards across the world. (Total 5 marks) 21

22. LO 4 Interpret Company Financial Statements Scope and limitations of published financial information in meeting the needs of a variety of users Calculation and application of ratios to address the needs of relevant users of financial statements Financial statements and other information, and prepare relevant analysis for specified users 22

23. Interpretation of financial statements Ratios enable us to Compare performance with that of previous accounting periods Make comparisons with similar businesses/industry averages Interpret performance of a business 23

24. Categories of ratios 24

25. Profitability   25

26. Company A operates in a highly competitive industry with many competitors. They sell several different products and are operating at full capacity. Which of the following is NOT feasible as a means to increase profitability?   Increasing sales prices Increasing unit sales of their higher margin products Increasing control of cost of sales Increasing control over administrative expenses 26

27. The following balances are taken form the financial statements of Company A:   Profit from operations £135 000 Profit for the year £104 000 Shareholders’ funds £800 000 Long term debenture loans £50 000 Total shareholders’ funds and liabilities £1 350 000   What is the ROCE based on the above information? 27

28. Efficiency   28

29. The following balances are extracted from the financial statements of Company A: Revenue £1 500 000 Costs of sales £675 000 Trade Receivables £250 000 Inventory £65 000 The inventory days for this company are? 29

30. A business achieved a 30% gross profit margin on revenue of £4m for the year ended 31 December 20X4. At the year-end they had inventory of £0.5 m. What is the inventory days for the year ended 31 December 20X4?   A 46 days B 65 days C 70 days D 76 days 30

31. Liquidity/Solvency   31

32. Which one of the following ratios is used to as a way of understanding the short term liquidity of a business?     Gearing ROCE Quick ratio Interest Cover 32

33. Capital Structure   33

34. At 30 June 20X4 Company A had equity of £12m, loan notes of £4m and finance lease liabilities of £2m.   During the year to 30 June 20X5 equity increased by £6m, loan notes of £2m were repaid and finance lease obligations increased by £2m.   What was gearing (debt/debt +equity) at 30 June 20X5? 34

35. Gearing Which one of the following would result in a reduction in gearing? A A new loan taken out to repay an old loan. The new loan has lower interest rates B Acquiring an asset under a lease C Repaying a long term loan shortly before the year end D Repurchase of equity shares using funds raised from new share issue 35

36. Which of the following would cause a company’s gearing ratio to rise?   Non- current assets are sold for cash Profits are higher than last year Leases are entered into 36

37. Shareholder investment   37

38. Price earnings ratio Which of the following is correct with regards to the price earnings ratio? A Indicates market expectations on the liquidity of the business B A high price earnings ratio indicates market confidence C Is used to compare businesses in different industries D A low price earnings ratio indicates market confidence 38

39. ROCE   39

40. Profitability ratios 40

41. Improving profitability 41

42. Improving efficiency 42

43. Limitations of ratio analysis 43 Based on past performance Comparison is sometimes difficult Use of different accounting policies One off items Definition of ratios Judgements Economic and seasonal variations Ratios do not offer solutions

44. When reviewing financial statements comparisons to previous periods or other companies are often made. Which of the following would impact the usefulness of any comparison?     Use of different accounting policies One off items included Use of different accounting estimates High inflation 44

45. KPIs and benchmarking Key performance indicators (KPIs) are used to measure performance Benchmarking is the process of systematic comparison of a service, practice or process against one or more similar activities. 45

46. Company W would like to invest in a private company and they have identified two potential investment opportunities. Both companies operate in the same industry which is highly competitive. The following ratios have been calculated for the same 12 month period: Requirement   Comment on the ratios of the two companies and suggest reasons for the differences. Give recommendation on which investment Company W should make. (5 marks) 46   Company A Company B Gross Profit Margin 37% 34% Operating Profit Margin 22% 16% Gearing 45% 20%

47. Revision mock 2 Q4, Q5, Q7 Revision mock 1 Q5 47

48. Via the class forum 48 Contact me

49. Any questions? What can I help you with? What topics did you find most challenging today? What would you like to go over in a tutorial?