Yes a tee aS Le i Hee U1] inate Ht tia ey BLL \\\ \i\ \ XY ZA \ \ \ \ \ \\ \ . \) \) ‘\ \ \ \ \ yx ‘ «\ ‘i Wy \ yr \N \ i i \ a \\ Approved Workbook Strategic Business Reporting — International & UK (SBR — INT & UK) For exams in September 2019, December 2019, March 2020 and June 2020 Free access to eBook & additional digital content Valid for both paper- and computer-based examsHow do | access my free eBook? To access your eBook digital version of the BPP Workbook, follow the instructions on the Exam Success Site below. Once you've logged on the first time, you can read the eBook on your computer, and then use the BPP eBooks app on your smartphone or tablet. BPP eBooks offer an intuitive interface, enabling you to highlight and comment on the content. You can download and read your eBook offline and sync it across your devices. The eBook digital version of the BPP Workbook for Strategic Business Reporting contains the following additional content: + Essential reading + Further question practice and solutions + Glossary of key terms To access your free eBook, please go to: Sette + Register (first time only) and reply to the confirmation email. + Log in using your rei + Click on the ACTIVATE A PRODUCT button. Select Exam Success Site, then select the title you wish to access. istered username and password. + Enter the code below when prompted. You will only have to do this once for each exam you are studying. How do | access the additional digital content? ‘To maximise your chances of succeeding in your exams, we've put together a suite of exclusive ACCA resources. Our Exam Success Site provides you with an exam debrief, past exam, examining team commentary as well as extra resources designed to focus your efforts on exams and study methods. To access the Exam Success Site, please follow the instructions above. What if I’m taking the SBR UK variant? SBR UK variant students can access the UK Supplement to this Workbook via the Exam Success Site link above. ACCA Approved Content Provider {As the first accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for producing exceptional study materials for students and tutors alike. This Workbook has been reviewed by the ACCA examining team and has been written by our in-house authors with industry and teaching experience who understand what is required for exam success.ee ACCA Strategic Business Reporting Workbook For exams in September 2019, December 2019, March 2020 and June 2020Second edition 2019 ISBN: 9781 5097 2345 4 Provious ISBN 9781 5097 1648 7 elSBN 9781 5097 2349 2 British Library Cataloguing-in-Publication Data ‘A catalogue record for this book Is avaliable from the Betsh Library Published by BPP Learning Media Ud BPP House, Aldine Place 142-144 Uxbridge Road london W12 BAA ‘wun bpp.com/leorningmedian Printed in Chino [vor ang mia pid ig de | vow Son pope ale tor ocebl sustainable sources, | All igh ceserved. 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Contac he ERS Feundoon for fithr datos The IFRS Foundation logo, the IASB logo, the IFRS for ‘SMEs logo, the "Hexagon Device", “IFRS Foundation”, JFRS", "AS, "TASB", “IFRS for SMES", “ASS, “IERS*, FRSs", “Intemationcl Accounting Standards ond “Intrrational Financial Reporing Standards", “IFRIC™ SIC" ond “IFRS Taxonomy" are Trade Marks ofthe |FRS Foundation, Further detail of he Teade Mocks including details of countries where the Teade Marks ore registered or applied for are availabe from the Licensor on requeet @ESIFRSContents Helping you to pass Introduction to the Essential Reading Introduction to Strategic Business Reporting (SBR) Essential skills areas 1 The financial reporting framework Professional and ethical duty of the accountant Revenue Non-current assets Anon Employee benefits SKILLS CHECKPOINT 1: Approaching ethical issues 6 Provisions, contingencies and events after the reporting period 7 Income taxes 8 Financial instruments 9 Leases 10 Share-based payment SKILLS CHECKPOINT 2: 11 Basic groups 12 Changes in group structures: step acquisitions 13 Changes in group structures: disposals and group reorganisations 14 Non-current assets held for sale and discontinued operations jesolving financial reporting issues 15 Joint arrangements and group disclosures 16 Foreign transactions and entities 17 Group statements of cash flows SKILLS CHECKPOINT 3: Applying good consolidation techniques 18 Interpreting financial statements for different stakeholders SKILLS CHECKPOINT 4: Interpreting financial statements 19 Reporting requirements of small and medium-sized entities 20 The impact of changes and potential changes in accounting regulation SKILLS CHECKPOINT 5: Creating effective discussion Appendix 1 - Activity answers ‘Appendix 2 - Essential reading* Further question practice* Further question practice solutions* Glossary* Bibliography Mathematical tables Index Contents iv vi viii 21 43 59 87 107 123 137 161 195 215 241 259 287 307 333 349 361 383 409 427 467 ‘487 501 517 535 “Note. Sections marked with an asterisk are available in the digital eBook version of the Workbook, accessed via the Exam Success Site (see inside cover for details) some BDHelping you to pass BPP Learning Media - ACCA Approved Content Provider ‘As an ACCA Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examining team. By incorporating the examining team's comments cand suggestions regarding the depth and breadth of syllabus coverage, the BPP learning Media Workbook provides excellent, ACCA-approved support for your studies. These materials are reviewed by the ACCA examining team. The objective of the review is to ensure thot the material properly covers the syllabus and study guide outcomes, used by the examining team in setting the exams, in the appropriate breadth and depth. The review does not ensure that every eventuality, combination or application of examinable topics is addressed by the ACCA Approved Content. Nor does the review comprise o detailed technical check of the content as the Approved Content Provider has its own quality assurance processes in place in this respect. The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil «a three-year practical experience requirement (PER). To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the 'PER alert’ feature {see the section below). You will find this feature throughout the Workbook to remind you that what you are learning to pass your ACCA exams is equally useful fo the fulfilment of the PER requirement. Your achievement of the PER should be recorded in your online My Experience record. Chapter features Studying can be a daunting prospect, particularly when you have lots of other commitments. This Workbook is full of useful features, explained in the key below, designed to help you to get the most out of your studies and maximise your chances of exam success. Key to icons & Key term Central concepts are highlighted ond clearly defined in the Key terms feature. Lh Key terms are also listed in bold in the Index, for quick and easy reference. a PER alert This feature identifies when something you are reading will also be useful for your PER requirement (see ‘The PER alert’ section above for more details) Stakeholder perspective selzrae In the SBR exam, you may be asked to tackle an issue from the perspective of penpecve stakeholder, such os an investor, preparer or lender. This feature highlights «reas in each chapter which may be of particular interest to stakeholders. PER alan Link to the Conceptual Framework g I Venere _ SBR requires an indepth knowledge of the IASB's Conceptual Framework as it Cencopne] sels out the concepls on which IFRSs are based. This feature identifies links fromewerk between areas of specific Standards and the Conceptual Framework cme 2D%} Ieroducon Illustration Illustrations walk through how fo apply key knowledge and techniques step by step. Activity Activities give you essential practice of techniques covered in the chapter. Exer Exercises suggest tasks which can be done to further your understanding. Essential reading Links to the Essential reading are given throughout the chapter. The Essential reading is included in the free eBook, accessed via the Exam Success Site {s08 inside cover for details on how to access this) Knowledge diagnostic Summary of the key learning points from the chapter. At the end of each chapler you will find a Further study guidance section. This contains suggestions for ways in which you can continue your learning and enhance your understanding. This can include: recommendations for question practice from the Further question practice and solutions, to test your understanding of the topics in the chapter; suggestions for further reading which can be done, such as technical articles, ond ideas for your own researchIntroduction to the Essential reading The digital eBook version of the Workbook conisins additional content, selected to enhance your studies. Consisting of revision materials, activities (including practice questions and solutions) and background reading, itis designed to aid your understanding of key topics which are covered in the main printed chapters of the Workbook. The Essential reading section of the eBook also includes further illustrations of complex areas. To access the digital eBook version of the BPP Workbook, follow the instructions which can be found on the inside cover; you'll be able to access your eBook, plus download the BPP eBook mobile app con multiple devices, including smartphones and tablets, ‘A summary of the content of the Essential reading is given below, eer ens 1 The financial * Revision of the important principles in IAS 1 Presentation of Financial | reporting Statements | framework | Influences on ethics Social responsibility ond businesses Managing ethics within organisations 2 Professional and ethical duty of the accountant 4 Noncurrent assets Further reading regarding componentisation and overhauls of assets under IAS 16 Property, Plant and Equipment + Further reading regarding acceptable methods of amortisation under IAS 38 Intangible Assets Concepts and principles of employee benefits costs 5 Employee benefits ‘+ Explanation and comparison of defined benefit, defined contribution | | | cand multiemployer benefits plons | + Illustration of how to apply the asset ceiling test | + llustration of contributions and benefits paid other than at the end of the reporting period 6 Provisions, '* Provisions recognition and measurement revision and activities conlingencies and | ¢ IAS 10 Events Affer the Reporting Period examples evenis fier the | ¢ — Examstandard activity reporting period 7 Income taxes * Current tax — revision of material covered in Financial Reporting © Deferred tax — revision of material covered in Financial Reporting 8 Financial © Further detail on: instruments = Definitions | | ~ Derecognition 19 Leases ‘+ Revision of lessee accounting, including lease identification examples, separating lease components, remeasurement and sale | and leasebackSeen een Inwoducfon 10 Share-based payment 11 Basic groups 12 Changes in group structures: step acquisitions 13 Changes in group | structures: disposals and group reorganisations | | 14 Non-current assets | held for sale and discontinued operations 15. Joint | arrangements and | | group disclosures 1 | 16 Foreign transactions and entities 17 Group statements of cash flows 18 Interpreting financial statements for different stakeholders 19 Reporting requirements of small and mediumsized entities 20 The impact of changes and potential changes in accounting regulation BPP Background to IFRS 2 Share-based Payment Further detail on share-based payments amongst group eniilies Activities on vesting conditions for further practice "Further detail on non-controlling interests Further detail on investment to associate step acquisitions | Further de = Group profit or loss on disposal - Deemed disposals = Group reorganisations Discontinued operations comprehensive aclivity Joint arrangements ~ further detail on determining the existence of a contractual arrangement for joint control Discussion of changes in functional currency Revision of single company statement of cash flows Revision of ratio analysis Revision of basic and diluted earnings per share, presentation and significance Further detail on preparing group statement of cash flows Further detail on the Global Reporting Initiative guidelines, environmental and social reporting, management commentary and segment reporting Further detail on the background to and consequences ofthe IFRS for ‘SMEs Practical issues when managing the transition to IFRS — |Introduction to Strategic Business Reporting (SBR) Overall aim of the syllabus This exam requires students to discuss, apply and evaluate the concepis, principles and practices that underpin the preparation and interpretation of corporate reporis in various contexts, including the ethical assessment of managements’ stewardship and the information needs of a diverse group of stakeholders SBR UK Supplement This Workbook is based on International Financial Reporting Standards {IFRS} only. Students siting the UK GAAP variant of the SBR exam can access an additional free online UK supplement which covers UK accounting standards, providing relevant illustrations and examples, and should be used in conjunction with the IFRS Workbook, The Supplement can be found on the Exam Success Site; for details of how to access this, see the inside cover of the Workbook. Brought forward knowledge The Strategic Business Reporting syllabus assumes knowledge acquired in earlier ACCA papers: Financiol Accounting (FA) and Financial Reporting (FR). This knowledge is developed and applied in Strategic Business Reporting and is therefore vitally important. IFit has been some time since you studied FR or if you were exempted from the FR exam as a result of having o relevant degree, they we recommend that you revise the following topics before you begin your SBR studies: Tangible non-current assets Intangible assets Impairment of assets Leasing Statements of cash flows Financial statement formats Noncurrent assets held for sale and discontinued operations ‘Accounting policies and prior period adjustments Provisions, contingent liabilities and contingent assets Income taxes Financial instruments The consolidated statement of financial position The consolidated statement of profit or loss and other comprehensive income The syllabus The broad syllabus headings are: Fundamental ethical and professional principles The financial reporting framework Reporting the financial performance of a range of entities Financial statements of groups of entities Interpreting financial statements for different stakeholders The impact of changes and potential changes in accounting regulation 7™moOo> BPPMain capabilities On successful completion of this exam, you should be able to: A Apply fundamental ethical and professional principles to ethical dilemmas and discuss the consequences of unethical behaviour B Evaluate the appropriateness of the financial reporting framework and critically discuss changes in accounting regulation © Apply professional judgement in the reporting of the fina performance of a range of entities Note. The learning outcomes in Section C of the syllabus can apply to single eniiies, groups, public sector entiies and noHfor-profitentiies (where appropriate) D Prepare the financial stalements of groups of entities Interpret financial statements for different stakeholders: Communicate the impact of changes and potential changes in accounting regulation on financial reporting Links with other exams Strategic Business > need Audit Reporting (SBR) ‘and Assurance . (AAA) incial Reporting (FR) Financial ‘Accounting (FA) The diagram shows where direct (solid line arrows) and indirect (dashed line arrows} links exist between this exam and other exams preceding oF Following it The SBR syllabus assumes knowledge acquired in Financial Accounting and Financial Reporting and develops and applies this further and in greater depth Achieving ACCA's Study Guide Learning Outcomes This BPP Workbook covers all the SBR syllabus learning outcomes. The tables below show in which chapter(s} each area of the syllabus is covered a Fundamental ethical and professional principles A1 Professional behaviour and compliance with accounting standards | Chapter 2 A2__ Ethical requirements of corporate reporting and the consequences of | Chapter 2 unethical behaviour B The financial reporting framework B1 The applications, strengths and weaknesses of an accounting framework | Chapter 1 oon PED :a Reporting the financial performance of a range of entities C1 Revenue Chapter 3 2 Noncurrent assets | Chapter 4 3 Financial instruments | Chapter 8 CA leases OO | Chapter : - €5 Employee benefits Chapter 5 6 Incometes Chapter 7 7 Provisions, contingencies and events after the reporting period Chapter 6 8 Sharebased payment Chapter 10 [9 Fair value measurement Chapters 4, 8 | C10. Reporting requirements of small and medium-sized entities (SMEs) Chapter | | C11 Other reporting issues Chapters 4, 9, jo | Financial statements of groups of entities p2 D3 D4 [El reoreting finan E1 Analysis ond interpretation of financial information and measurement | Chapter 18 | Group accounting including statements of cash flows Associates and joint arrangements Changes in group structures Foreign transactions and entities statements for different stakeholders of performance 18 | Chapters 11, (14-17 | Chapters 11, 15 | Chapters 12, 13 Chapter 16 Ed the impact of changes and potential changes in accounting regulation || Chapter 20 Discussion of solutions fo current issues in financial reporting ‘| The complete syllabus and study guide can be found by visiting the exam resource finder on the ACCA website: www.accaglobal.com BPPIreducon The Exam Computer-based exams With effect from the March 2020 sitfing, ACCA have commenced the launch of computer-based exams (CBEs) for this exam with the aim of rolling out into all markels internationally over a short period. Paperbased examinations (PBE) will be run in parallel while the CBEs are phased in. BPP materials have been designed to support you, whichever exam option you choose, For more information on these changes and when they will be implemented, please visit the ACCA website. Approach to examining the syllabus The Strategic Business Reporting syllabus is assessed by a 3 hour 15 minute paper-based exam. The pass mark is 50%, All questions in the exam are compulsory, It examines professional competences within the business reporting environment, You will be examined on concepts, theories and principles, and on your ability to question and comment on proposed accounting treatments. You should be capable of relating professional issues to relevant concepts and practical situations, The evaluation of alternative accounting practices and the identification and prioritisation of issves will be a key element of the exam. You will need to exercise professional and ethical judgement, and integrate technical knowledge when addressing business reporting issves in a business coniext You will be required to adopt either a stakeholder or an external focus in answering questions and to demonstrate personal skills such as problem solving, dealing with information and decision making. You will also have to demonstrate communication skills ‘appropriate to the scenario. The paper also deals with specific professional knowledge appropriate to the preparation and Presentation of consolidated and other financial statements from accounting dato, to conform with accounting standards. The ACCA website contains a useful explanation of the verbs used in exam questions. See: 'What is the examiner asking?" available at www.accaglobal.com/uk/en/student/sa/study- skills/questions.himleae cy ig Section Two compulsory scenariobased questions, totolling 50 marks 50 A Question 1: (incl. wo | ‘© Based on the financial statements of group entities, or exiracts professional | | thereof (syllabus area D) marks) | | «Also likely to require consideration of some financial reporting | issves (syllabus area C) | Numerical specs of group accountng will be @ maximum of 25 marks | © Discussion and explanation of numerical aspects will be | | required | | Question 2: | | © Consideration of the reporting implications and the ethical | implications of specific events in a given scenario | | Two professional marks will be awarded tothe ethical issues question. jon Two compulsory 25-mark questions 50 Questions: | fined 2 | * May be scenario, case-study, or essay based | ee | + Will contain both discursive and computational elements oe * Could deal with any aspect of the syllabus | © Will always include either a full or part question that requires | | the appraisal of financial and/or nonfinancial information | {rom either the preparer’s or another stakeholder’s perspective | Two professional marks will be awarded to the question that requires | 100 Current issues The current issues element of the syllabus (Syllabus area F] may be examined in Section A or B but ill not be a full question. It is more likely to form part of another question. BPP LeARWNG MEDIAAnalysis of past exams The table below shows when each element of the syllabus has been examined and the section in which the element was examined for the specimen and September and December 2018 exams. Cen) perros eee ee ed Cos cc ed meh Fundamental ethical and professional pri 2 Professional behaviour and compliance A A AL A ‘with accounting standards 2 Ethical requirements of corporate reporting A A AA ‘and the consequences of unethical behaviour The financial reporting framework ‘The applications, strengths and weaknesses. AB. A 8 | AB of an accounting framework Reporting the financial performance of a range of entities Revenue 8 8 Aa Non-current assets | AB AB AB Financial instruments A A Leases B Employee benefits =A Income toxes A 8 Provisions, contingencies ond events after A 8 the reporting period Share-based payment Fair value measurement 8 119 [Reporting requirements ofsmalland = | medium-sized entities (SMEs) 4,9, 18 Other reporting issues iL / 8 Financial statements of groups of _ entities 11, 14-17 |Group accounting including statements of cash flows 12,13 |Changes in group structures | 11,15 Associates and joint arrangements | J oa A | | 16 Foreign transactions and entities LEARN MEDIACe ed Cred exam] exam2 2018 2018 (18 |Analysis and interpretation of financial |information and measurement of | performance |The impact of changes and potential |changes in accounting regulation | | 120 Discussion of solutions to current issues in. AB 8 | AB | AB | financial reporting | | IMPORTANT! The table above gives a broad idea of how frequently major topics in the syllabus are examined. it should not be used to question spot and predict, for example, that Topic X will not be examined because it came up two sittings ago. The examining team's reports indicate that they are well aware that some students try to question spot. They avoid predictable patterns and may, for example, examine the same topic two sitiings in a row, particularly if there has been a recent change in legislation.Ineducion Essential skills areas to be successful in Strategic Business Reporting We think there are three areas you should develop in order to achieve exam success in Strategic Business Reporting: These are shown in the diagram (2) Specific Strategic Business Reporting skills below. (1) Knowledge application } (3) Exam success skills @ eer secs sis @ sercscsonsis Specific SBR skills These are the skills specific to SBR that we think you need fo develop in order fo pass the exam. In this Workbook, there are five Skills Checkpoints which define each skill and show how it is applied in answering a question. A brief summary of each skill is given below. Skill 1: Approaching ethical issues Question 2 in Section A of the exam will require you to consider the reperting implications and the ethical implications of specific events in a given scenario. The two Section B questions could deal with any aspect ofthe syllabus. Therefore, ethics could feature in this part of the exam too. Given that ethics will feature in every exam, it is essential that you master the appropriate technique for approaching ethical issues in order to maximise your mark. BPP recommends @ step-by-step technique for approaching questions on ethical issues: STEP! Work out how many minutes you have to answer the question. STEP! Read the requirement and analyse it. STEP! Read the scenario, identify which IAS or IFRS may be relevant, whether the proposed accounting treatment complies with that IAS or IFRS, and any threats to the fundamental ethical principles. STEP Prepare an answer plan using key words from the requirements as headings. STEP! Write up your answer using key words from the requirements as headings. 88 886 Skills Checkpoint 1 covers this techni in detail through application to an exam-standard question.Skill 2: Resolving financial reporting issues Financial reporting issues are highly likely to be tested in both sections of your SBR exam, so it is essential that you master the skill for resolving financial reporting issues in order to maximise your chance of passing the exam. The basic approach BPP recommends for resolving financial reporting issues is very similar to the one for ethical issues. This consistency is important because in Guestion 2 of the exam, both will be tested together. [STEP( 1 )) Work out how many minutes you have to answer the question. [STEP( 2) Read the requirement and analyse it, identifying sub-requirements [STEP( 3) Read the scenario, identifying relevant IFRSs and how they should be applied to the scenario. [STeP( 4 )) Prepare on answer plan ensuring that you cover each ofthe issues raised inthe scenario. (SteP( 5 )) Write up your answer using separate headings for each item inthe scenario, Skills Checkpoint 2 covers this technique in detail through application to an examstandard question Skill 3: Applying good consolidation techniques Question 1 of Section A of the exam will be based on the financial statements of group entities, or extracts thereof. Section B of the exam could deal with any aspect of the syllabus so it is also possible that groups feature in Question 3 or 4. Good consolidation technique is therefore essential when answering both writen and numerical aspects of group questions. Skills Checkpoint 3 focuses on the more challenging technique for correcting errors in group financial statements that have already been prepared. A step-by-step technique for applying good consolidation techniques is oulined below. STEP! Work out how many minutes you have to answer the question. STEP Read the requirement for each part of the question and analyse it, identifying sub-requirements, STEP Read the scenario, identify exactly what information has been provided and what you need to do with this information. Identify which consolidation workings/adjustments may be required STEP! Draw up a group structure. Make notes in the margins of the question as to which consolidation working, adjustment or correction to error is required. Do not perform any detailed calculations at this stage. 8 88E Write up your answer using key words from the requirements os headings (if preparing narrative). Perform calculations first, then explain, Remember that marks will be available for a discussion of the principles underpinning any calculations, [3 3 mi 3 Skills Checkpoint 3 covers this technique in detail through application to an exam-standard question. " net Qlnoduetion Skill 4: Interpreting financial statements Section B of the SBR exam will contain two questions, which moy be scenario or case-study or essoy based and will contain both discursive and computational elements. Section B could deal with any aspect ofthe syllabus but will always include either o full question, or part of « question that requires appraisal of financial or nonfinancial information from either the preparer’s and/or another stokeholder's perspective. Two professional marks will be awarded to the question in Section B that requires analysis. Given that appraisal of financial and nonfinancial information will feature in Section B of every exam, itis essential that you have mastered the appropriate technique in order to maximise your chance of passing the SBR exam. A step-by-step technique for performing financial analysis is outlined below. STEP’ Work out how many minules you have to answer the question STEP’ Read and analyse the requirement STEP Read and analyse the scenario. [STEP| Prepare an answer plan STEP Write up your answer. E8500 Skills Checkpoint 4 covers this technique in detail through application fo an examstandard question. Skill 5: Creating effective discussion More marks in your SBR exam will relate to writen answers than numerical answers. It is very fempting to only practise numerical questions, as they are easy to mark because the answer is right ‘or wrong, whereas writien questions are more subjective and a range of different answers will be given credit. Even when aitempting written questions, it is tempting to write a brief answer plan and then look at the answer rather than writing © full answer to plan. Unless you practise writen questions in full to time, you will never acquire the necessary skills to tackle discussion questions. The basic five steps adopted in Skills Checkpoint 4 should olso be used in discussion questions. Steps 2 and 4 are particularly important for discussion questions. You will definitely need to spend a third of your time reading and planning. Generating ideas ot the planning stage to create o comprehensive answer plan will be the key to success in this style of question, Skills Checkpoint 5 covers this technique in detail through application to an examstandard question. Exam success skills Passing the SBR exam requires more than applying syllabus knowledge and demonstrating the specific SBR skills; it also requires the development of excellent exam technique through question practice, We consider the following six skills to be vital for exam success. The Skills Checkpoints show how each of these skills can be applied in the exam. BPP eiExam success skill Managing information Questions in the exam will present you with a lot of information. The skill is how you handle this information to make the best use of your time. The key is determining how you will approach the ‘exam and then actively reading the questions Advice on developing Managing information Approach The exam is 3 hours 15 minutes long. There is no designated ‘reading! time at the start of the exam, however, one approach that can work well isto start the exam by spending 10-15 minutes carefully reading through all of the questions to familiarise yourself with the exam paper Once you feel familiar with the exam paper consider the order in which you will attempt the questions; always attempt them in your order of preference. For example, you may want to leave to last the question you consider fo be the most difficult IF you do take this approach, remember to adjust the time available for each question appropriately ~ see Exam success skill 6: Good time management IF you find that this approach doesn’t work for you, don't worry ~ you can develop your own technique, Active reading You must take an active approach to reading each question. Focus on the requirement first, underlining key verbs such as ‘prepare’, ‘comment’, ‘explain’, ‘discuss', 1o ensure you answer the question properly. Then read the rest of the question, underlining and annotating important and relevant information, and making notes of any relevant technical information you think you will need. Exam success skill 2 Correct interpretation of the requirements The active verb used offen dictates the approach that written answers should take (eg ‘explain’, ‘discuss’, ‘evaluate'). It is important you identify and use the verb to define your approach. The correct interpretation of the requirements skill means correctly producing only what is being asked for by a requirement. Anything not required will not earn marks. Advice on developing correct interpretation of the requirements This skill can be developed by analysing question requirements and applying this process: Step 1 Read the requirement Firstly, read the requirement a couple of times slowly and carefully and highlight the active verbs. Use the active verbs to define what you plan to do. Make sure you identity any subvequirements Step 2 Read the rest of the question By reading the requirement first, you will have an idea of what you are looking out for as you read through the case overview and exhibits. This is a great lime saver ‘and means you don't end up having fo read the whole question in ful You should do this in an active way ~ see Exam success skill 1: Managing Information, i BPPStep 3 Read the requirement again Read the requirement again to remind yourself of the exact wording before starting your written answer. This will capture any misinierpretation of the requirements or any missed requirements entirely. This should become a habit in your approach and, with repeated practice, you will find the focus, relevance and depth of your answer plan will improve. Exam success skill 3 ‘Answer plant structure and logic This skill requires the planning of the key ospecls of an answer which accurately and completely responds to the requirement. Advice on developing Answer planning: Priorities, structure and logic Everyone will have a preferred style for an answer plan. For example, it may be a mind map, bullet pointed lisls or simply annotating the question paper. Choose the approach that you feel most comfortable with, or, if you are not sure, try out different approaches for different questions until you have found your preferred style. For a discussion question, annotating the question paper is likely to be insufficient. It would be betier Jo draw up a separate answer plan in the format of your choosing (eg a mind map or bulletpointed lists). For a groups question, you will typically spend less time planning than for a discussion question. You should aim to draw up the group structure. Then, rather than drawing up a formal plan, the best use of your time is to annotate the question paper margins noting which group working, adjustment or correction of error will be required Exam success skill 4 Efficient numerical analysis This skill ims to maximise the marks awarded by making clear fo the marker the process of arriving att your answer. This is achieved by laying out an answer such that, even if you make a few errors, you can sill score subsequent marks for follow-on calculations. It is vital that you do not lose marks purely because the marker cannot follow what you have done Advice on developing Efficient numerical analysis This skill can be developed by applying the following process: Step 1 Use a standard proforma working where relevant If answers can be laid out in a standard proforma then always plan to do so. This will help the marker to understand your working and allocate the marks easily. It wil ‘also help you to work through the figures in a methodical and time-efficient way. Step 2 Show your workings Keep your workings as clear and simple as possible and ensure they are cross: referenced to the main part of your answer, Where it helps, provide brief narrative ‘explanations to help the marker understand the steps in the calculation, This means that if a mistake is made you do not lose any subsequent marks for follow-on calculations. Step 3 Keep moving! It is important fo remember that, in an exam sitvation, it is difficult to get every number 100% correct. The key is therefore ensuring you do not spend too long on any single calculation. If you are struggling with a solution then mcke a sensible assumption, stote it and move on. BPP =xam success skill § Effective writing and presentation Written answers should be presented so that the marker can clearly see the points you are making, presented in the format specified in the question. The skill is to provide efficient written answers with sufficient breadth of points that answer the question, inthe right depth, in the fime available. Advice on developing Effective writing and presentation Step 1 Use headings Using the headings ond sub-headings from your answer plan will give your answer structure, order and logic. This will ensure your answer links back to the requirement and is clearly signposted, making it easier for the marker to understand the different points you are making. Underlining your headings will also help the marker Step 2 Write your answer in short, but full, sentences Use short, punchy sentences with the aim that every sentence should say something different and generate marks. Write in full sentences, ensuring your style is professional. Step 3 Do your calculations first and explanation second Questions offen ask for an explanation with suitable calculations. The best approach is to prepare the calculation first but present it on the bottom half of the page of your answer, or on the next page. Then add the explanotion before the colculation. Performing the calculation first should enable you to explain what you have done. Good time management This skill means planning your time across all the requirements so that all tasks have been attempted at the end of the 3 hours 15 minutes available and actively checking on time during your exam. This is $0 that you can flex your approach and prioritise requirements which, in your judgement, will generate the maximum marks in the available time remaining, Advice on developing Good time management The exam is 3 hours 15 minutes long, which translates to 1.95 minutes per mark. Therefore a 10-mark requirement should be allocated a maximum of 20 minutes to complete your answer before you move on fo the next task. At the beginning of a question, work out the amount of ime you should be spending on each requirement and write the finishing fime next to each requirement on your ‘exam paper. If you take the approach of spending 10-15 minutes reading and planning at the start of the exam, adjust the fime allocated to each question accordingly; eg if you allocate 15 minutes to reading, then you will have 3 hours remaining, which is 1.8 minutes per mark Keep an eye on the clock ‘Aim to ottempt all requirements, but be ready to be ruthless and move on if your answer is not going cs planned. The challenge for many is sticking to planned timings. Be aware this is difficult to achieve in the early stages of your studies and be ready to let this skill develop over time If you find yourself running short on time and know that a full answer is not possible in the time you have, consider recreating your plan in overview form and then add key terms and details as time allows. Remember, some marks may be ovailable, for example, simply stating a conclusion which you don't have time to justify in full Ps . oo POtrodtion Question practice is @ core part of learning new topic areas. When you praclice questions, you should focus on improving the Exam success skills ~ personal to your needs - by obtaining feedback or through a process of selkassessment BPP LEARNING MEDIAThe financial reporting framework Learning objectives (On completion of his chapter, you should be able to: syllabus reference no. | | | i | | Discuss the importance of the Conceptual Framework for Financial Reporting in Bio) | underpinning the production of accounting standards. | Discuss the objectives of financial reporting, including disclosure of information, Bib) | that can be used fo help assess management's stewardship of the entity's | resources and the limitations of financial reporting. | I | | Discuss the nature of the qualitative characteristics of useful financial information. BI). Explain the roles of prudence and substance over form in financial reporting. Bi(d) | Discuss the high level of measurement uncertainty that can make financial Bile} information less relevant. | Evaluate the decisions made by management on recognition, derecognition ond. Bit) ‘measurement. | Critically discuss and apply the definitions of the elements of financial statements Big) | and the reporting of items in the statement of proft or loss and other comprehensive income. | Discuss the impact of current issues in corporate reporting including. The | following examples are relevant to the current syllabus: | 1. The revised Conceptual Framework for Financial Reporting Exam context File) The 1ASB's Conceptual Framework for Financial Reporting underpins International Financial Reporting Standards and is fundamental to the SBR exam. You are expected to be able to apply the principles in the Conceptual Framework to accounting issues, such as an accounting issue where no IFRS currently exists.Chapter overview Dee ir) eee 1. Fair presentation 2.The and compliance Framework for with IFRS Financial Reporting 2 BPP LEARNING MEDIA1: The Bnancilveporing hemewerk 1 Fair presentation and compliance with IFRSs ‘Fair presentation’ is the term used in |AS 1 Presentation of Financial Statements equivalent to the concept of rue and fair view! Essential reading Chapter | of the Essential Reading {available in Appendix 2 of the digital edition of the Workbook} contains revision of the important principles in IAS 1 Presentation of Financial Statements, including further discussion on the requirements in IAS 1 relating to other comprehensive income In order to achieve fair presentation, on entity must comply with (IAS 1: para. 15): * Inlernational Financial Reporting Standards (IFRSs, IASs and IFRIC Interpretations) ©The Conceptual Framework for Financial Reporting. 2 The Conceptual Framework for Finan 2.1 Introduction | Reporting A conceptual framework is a statement of generally accepled theorelical principles which form the frame of reference for financial reporting. These theoretical principles provide the basis for the IASB's development of new accounting standards and the evaluation of those already in existence. The financial reporting process is concerned with providing information that is useful in the business and economic decisionmaking process. Therefore a conceptual framework will form the theoretical basis for determining which events should be accounted for, how they should be measured and how they should be communicated to the user. Although it is theoretical in nature, a conceptual framework for financial reporting has highly practical inal aims. 2.2 Revised Conceptual Framework The Conceptual Framework for Financial Reporting (referred to throughout this Workbook «5 the ‘Conceptual Framework! or the ‘revised Conceptual Framework’) was revised and [porgraphrfrence reissued in 2018. The revision follows criticism that the previous Conceptual Framework _|houghow is ‘econ fro the was incomplete, and out of date and unclear in some areas. eveed Concepnal The revised Conceptual Framework now includes: feeder New definitions of elements in the financial statements (flonan ony You Guidance on derecognition el Considerable guidance on measurement + High-level concepts for presentation and disclosure You are net expected to know the requirements of the 2010 Conceptual Framework for the SBR exam. 2.3 Purpose The purpose of the Conceptual Framework is to (para. SP1.1) + Assist the IASB to develop IFRSs that are based on consistent concepts; She ws expec his | «Assist preparers of accounts to develop accounting policies in cases where there is no” |sivaton lobo | IFRS applicable to @ particular transaction, or where a choice of accounting policy re 7 exists; and ‘© Assist all parties to understand and interpret IFRS. BPP 3The instances in which a preparer will use the Conceplual Framework to develop an accounting policy are expected fo be rare, Therefore the Conceptual Framework will primarily be used by the IASB to develop IFRSs. 2.4 Content ‘The Conceptual Framework is divided into chapters: [Gispien Lend 2) |ctcssinfrmation Chapter 1 The objective of general purpose financial reporting ] pride! general Toc Choplee 2 Gualiative characteristics of useful financial information | enhanced if hese characteristics «Tima . Understandability are maximised BPP 5 EARNING MEDIA@) Key term Key ten Understandability Enhancing qualitative characteristics cannot make information usetul ifthe information is irrelevant or if tis not a faithful representation Comparabi Comparability: Comparability is the qualitative characteristic that enables users to identify ond understand similarities in, and differences among, items (para. 2.25) The disclosure of accounting policies is particularly important here. Users must be able to distinguish between different accounting policies in order to be able to make a valid comparison of similar items in the accounts of diferent entities. When an enlity changes an accounting policy, the change is applied retrospectively so that the results from one period fo the next can still be usefully compared. Comparabiliy is not the same as uniformity. Accounting policies should be changed if the change vill result in information that is celiable and more relevant, of where the change is required by an IFRS. Verifiability: Verifiability helps assure users that information faithfully represents the economic phenomena it purports lo represent. Verifiability means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a parlicular depiction is a faithful representation (para. 2.30). Information can be verified to a model or formula or by direct observation, such as undertaking an inventory count. Independent verification, such as a valuation by a specialist, is also useful. Timeliness Timeliness: Timeliness means having information available to decision-makers in time to be capable of influencing their decisions. Generally, the older information is the less useful (para. 2.33) ible information. There is a balance between timeliness and the provision of |F information is reported on a timely basis when not all aspects of the transaction are known, it may not be complete or free from error. Conversely, if every detail of a transaction is known, it may be too late to publish the information because it has become irrelevant. The overriding consideration is how best to satisfy the economic decisionmaking needs of the users. Understandability: Classifying, characterising and presenting information clearly and concisely makes it understandable (para. 2.34) Financial reports are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyse the information diligently (para, 2.36) 2.6.4 Cost constraint (paras. 2.39-2.43) The benefits of reporting information should justify the costs incurred in reporting it.1: The nancial repering framework 2.7 Chapter 3: Financial statements and the reporting entity 2.7.1 Financial statements To provide financial information about the reporting entity's assets, ese liabilities, equity, income and expenses that is useful lo users of financial fines statements in assessing the prospects for future net cash inflows to Pee the reporting entity and in assessing management's stewardship of the entity's economic resources (para. 3.2]. Useful financial information is presented in (para. 3.3): {0} The statement of financial position (SOFP] by recognising assets, liabilities and equity {b] The statement of profit or loss and other comprehensive income (SPLOCI) by recognising income and expenses {ec} Other statements and notes by presenting and disclosing information about: The nature of recognised items and associated risks The nature of unrecognised assets and liabilities and associated risks Cash flows Transactions with equity holders ‘Methods, assumptions and judgements used to estimate omounts presented or disclosed Financial statements are: Prepared for: Presented from: Normally prepared on the ‘A period of time +The perspective of the assumption that an enfity is 0 With comparative reporting entity os.a whole || going concern and will information + Not from the perspective of |} continue in operation for the Include information about a particular group of users || foreseeable fuure transactions ater the reporting date if necessary (paras. 3.4-3.7) 2.7.2 The reporting entity (paras. 3.10-3.14) & Reporting entity: A reporting entity is an entity thot is required, or chooses, to prepare financial satements. A reporting entily can be a single entity or a portion of an entity or can comprise more thon one entity. A reporting entity is not necessarily a legal entity (para. 3.10}. Key erm nscale! Parent and its subsidiories mm | Consolidated financial statements Parent (as a single entity) — Unconsoldsted fnoncol stotem Two or more entities not all Combined financial statements linked by parentsubsidiary (these are rare and will not be relationship examined in SBR} BPP > LeARWING MEDIAKey tem & Where a reporting entity is not a legal entity or a group linked by parentsubsidiary relationships, then the boundary of a reporting entity is driven by the information needs of the users of the reporting entity's financial statements. 2.8 Chapter 4: The elements of financial statements CICo CC o v v ea vy Asset Liability Equity A present economic A present obligation _The residual resource controlled by the of the entity to interest in the entily as a result of past transfer an economic assets of the enfily events. resource as a result of after deducting all its past events. liabilities ‘An economic resource is o {ie claims that do not right thot has the meet the definition of potential to produce « liability) economic benefits (para. 4.2) Economic benefits include (para. 4.16) + Cash flows, such as returns on investment sources + Exchange of goods, such as by trading, selling goods, provision of services + Reduction or avoidance of liabilities, such as paying loans ‘An essential characteristic of « liability is that the entity has an obligation. Obligation: A duty or responsibility that the entity has ne practical ability to avoid (para. 4.29). ‘A present obligation exists as ai result of past events if the entity hos already obtained economic benefits or laken an action, and as a consequence, the entily will or may have to transfer «an economic resource that i! would not otherwise have had to Iransfer (para. 4.43). Mlustration 2 IFRS 16 Leases requires a lessee to recognise a rightotuse asset for each lease they enter into (with limited exceptions). A rightofuse asset is consistent with the definition of an asset in the Conceptual Framework: as a result of entering into the lease agreement (past event), the lessee can direct the use of the leased asset (control) in the course of business in order to direclly or indirectly generate ‘economic benefits. IFRS 16 also requires the recognition of a lease liability, equivalent to the present value of future lease payments. The lease liability meets the Conceptual Framework definition of « liability: the lessee has a responsibility (present obligation) os a result of entering into the lease agreement (past event) to pay the lease rentals (transfer of economic benefits) as they become due. ; anne ee1: The Fnncil reporting komewerk Pence cs Pee atte Pore Income Expenses Increases in assets, of Decreases in assels, or decreases in liabiliies, that increases in liabilities, that resul in increases in resul in decreases in equity, other than those ‘equity, other than those relating to contributions from relating to distributions to holders of equity claims holders of equity claims (pora. 4.2) Different transactions generate income and expenses with different characteristics. Showing information about income and expenses with different characteristics separately can help users to understand the entity's financial performance. Contributions from owners are not income and distributions to owners are not expenses. 2.9 Chapter 5: Recognition and derecognition 2.9.1 Recognition process [BB | Recognition: Recognition is he process of captring for inclusion in the statement of nancial position or the statement(s) of financial performance an item that meets the definition of one of the Kev’ | elements of financial statements—an asset, a liability, equity, income or expenses (para. 5.1). The elements and the SOFP and SPLOC! are linked by recognition, os follows: Assels minus liabilities equal equity Income minus expenses | Changes in equity Contributions from holders of equity claims minus istributions to holders of equity claims SOFP ot end of reporting period Assets minus liabilities equal equity (para. 5.4) BPI °The statements are linked because of the use of double entry bookkeeping: recognising one item requires the recognition or derecognition of one or more other items. Eg Recognise atthe same tine (I o, eS eee ee ees Debit expenses Credit asset or 2.9.2 Recognising an element (paras. 5.6-5.8) ‘An item is recognised in the financial statements if (o} The item meets the definition of an element (asset, lability, income, expense or equity); and (b) Recognition of that element provides users of the financial statements with information that is useful, ie with * Relevant information about the element + A faithful representation of the element Recognition is subject to cost constraints: the benefits of the information pro «an element should justify the costs of recognising that element. Mlustration 3 The previous Concepival Framework required an element to be recognised if (bo) The item could be measured with reliobiliy. However, these criteria were not applied consistently within IFRSs. For example, different standards use different levels of probability in determining when elements should be recognised, Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, one of the criteria for recognising a provision is that outflows should be probable. However, contingent consideration (in respect of a business combination under IFRS 3 Business Combinations) is recognised whether or not itis probable. Instead the level of uncertainty is taken into account in the measure of fair value. IAS 37 also requires a provision to be reliably measurable before it can be recognised. Some parts of IAS 19 Employee Benefits also include the reliable measurement criterion. However, other IFRSs do not include this criterion The revised Conceptual Framework recognition criteria removes the probability and reliability criteria and replaces it with recognition of an element if that recognition provides users with relevant | information that is a faithful representation of that element. While this will not remove the | inconsistencies in recognition criteria that currently exis! across IFRSs, it does provide a basis for both | | the 1ASB to consider when developing new standards and revising existing standards and for | preparers to consider when developing accounting policies for which no accounting standard exists, (a) The inflow or outflow of future economic benefits was probable; and 2.9.3 Derecog! ion — Derecognition normally occurs (para. 5.26) [eae ie oes 1 + Foran asset - when control is lost + Fora liability - when there is no longer a present obligation The requirements for derecognition aim to faithfully represent both (para. 5.27): (o) Any assels and liabilities retained after derecognition; ond (b) The change in the enfily’s assels and liabilities as a result of derecognition. To give a faithful representation, it may also be necessary to provide explanatory information and/or to present separately related income/expenses and retained components in the financial statements 10 BPP