PQ magazine, March 2022 by PQ magazine

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March 2022

LATEST ACCA EXAM TIPS INSIDE

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AAT transition rules are out!

It’s PQ Award Nomination Time Page 17

CREATING AN INCLUSIVE PROFESSION The accountancy profession is finally putting inclusivity at the top of the agenda. ICAEW has launched a ‘Welcome Inclusion’ campaign, to help provide members with the practical tools to drive inclusion across the profession. The move is long overdue. Remember, when it comes to practice just 4.5% of partners are from ethnic minority backgrounds. And the ICAEW also doesn’t seem to be able to attract as many women as the other accountancy bodies. The campaign will focus on three themes – belonging, allyship and fairness – and uses a variety of formats to give members tools and ideas to drive inclusion at their firms. ‘Welcome Inclusion’ launches with a short film featuring a diverse group of 30 ICAEW members and students who discuss their experiences, what inclusion means to them, and the role of unconscious behaviours in exclusion. In the video they participate in training on workplace encounters, and how these can be approached differently to ensure everyone is included. During the campaign, some resources will

be tailored to people at different career stages. The resources will give members tips on how to create a culture of inclusion, such as by implementing diversity and inclusion training, and videos will bring this to life. Michael Izza, ICAEW CEO, said: “ICAEW is committed to helping our members thrive in their professional development throughout their careers. “We are currently delivering industry

FRC IN ‘A PRETTY POOR STATE’ The governance situation at the FRC is in a pretty poor state, according to the chairmandesignate of the accounting watchdog. Jan du Plessis told the Parliamentary BEIS select committee at the pre-appointment hearing: “They haven’t had a permanent chair for goodness how long, they have three non-executive directors; it really is not the way to run the regulator that should

be setting the tone for the whole of British business.” He said it is not good enough, and if appointed one of the first things he will do is address the governance issues. Du Plessis felt it is important to establish the new body as soon as possible – the Audit, Reporting and Governance Authority (ARGA). “It’s important because it is time for

progression by increasing access to the profession and removing complex and sometimes invisible social barriers.” More resources will be released over the next few months and will be available to non-members as well as ICAEW Chartered Accountants. Visit ICAEW’s Diversity and Inclusion hub for more information. Continued on page 9

a new beginning,” he explained. That means demolishing the FRC and starting afresh. Du Plessis said if we want to be serious about avoiding the corporate failures of the past, then what is needed is new legislation that gives real statutory powers. “This can’t be just a rebrand,” he stressed. He also emphasised that the people at the top of the Big 4 have to be ready for change, and unless they play their part “the outcome could be much worse for them”.

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March 2022

IN THIS ISSUE A note from the Editor

17 PQ awards 2022 We’ve extended the deadline – but we want your nominations now!

Welcome to the March issue! First up, can I encourage you all to enter the PQ magazine awards? The new deadline for nominations is Friday 18 March. If this is something you have never done, then maybe it’s time for a positive change. All we need is a few wise words and you could be our guest at the 2022 awards in April! Check out page 17 for all the details. We want our awards to be as inclusive as possible. In truth they have been better than others, but we could all do better. Inclusivity is what we lead on this month. The professional bodies are rightly taking charge of this issue. They are now providing employers with the tools to ensure accountancy becomes more inclusive. As a recent ACCA report reminds us, we must treat people as they wish to be treated rather than how we would wish to be treated. It sounds like a small thing, but it isn’t. We have all the usual bases covered in this issue – exams results from ACCA, CIMA and the ICAEW, exam tips for the March ACCA sitting and a look at how the transitional rules will work for AAT’s Q2022 qualification. As we always say, there lots more too! So, keep reading and keep safe. Graham Hambly, Editor and Publisher, PQ magazine

18 Reaching net zero Change needs to happen faster to achieve green goals, says PwC

News 04 AAT’s Scotland move Association makes moves to level up north of the border 05 EY initiative Big 4 firm opens new centre of excellence in Manchester 06 ICAEW pass rates All the Professional pass rates from the December exams 08 Corporate culture The UK’s boardrooms are failing when it comes to gender diversity 09 CIMA results Sitters cope well

with the case study exams this time around 10 ACCA pass rates Where did students do well in December, and where did they struggle? We reveal all! 12 Tech news Climate tech funding soars in 2021 Features, etc 14 Have your say Too many accountancy bodies spoil the broth; and why the figures around qualification times are shocking. Plus our social media round-up

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19 Study advice Top time management tips from Mindful Education 20 AAT qualification changes We explain the best way to make the transition to the new syllabus 22 ACCA spotlight Why the journey back to economic growth will be a slow one 23 A question for Tom Tom Clendon explains current accounting treatment of goodwill 24 AAT spotlight How the AAT qualification can transform your career 25 Financial statements We explain the misrepresentation of financial statements through the overstatement of costs 26 CIPFA spotlight Apprentice training is a central component of the CIPFA offering 27 ACCA exam tips Five pages of great tips for the March exams 32 Keep it Simple Neil Da Costa tackles an inheritance tax topic that regularly crops up in the exams

p22 37 AAT exams #2 Test your knowledge by tackling our question on accounting for inventory 38 Test bank How much do you know about consolidated financial statements? 41 Careers CFOs are targeting growth in 2022; some more career advice from Hays’ Karen Young; and our book review 42 Fun The lighter side of life; and more great PQ giveaways The columnists Lisa Nelson The surprising truth about learning by video 4 Robert Bruce Why working from home is far from straightforward 6 Prem Sikka How the government made Covid support fraud easy 8

35 CIMA spotlight Manage exam stress by planning for the future

Anna Kate Phelan Make the most of digital learning opportunities 10

36 AAT exams #1 Mark up and margins explained

Vikki Bean Accountants can help their clients go green 12

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To subscribe go to www.pqmagazine.com

PQ Magazine March 2022

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LISA NELSON Surprising truths about watching video x2 One of the great things about learning is being surprised by research that challenges your thinking. This is exactly what happened when I came across a study undertaken by the University of California. Dillon Murphy et al concluded that students can save time and learn more efficiently by watching pre-recorded lectures at twice the speed. Yes, you read that correctly – twice the speed. In this experiment learners were tested immediately after and one week after watching videos at either 1x, 1.5x, 2x, or 2.5x normal speed. The results showed that video speed had little effect on both immediate or delayed comprehension up to twice the speed. After that learning suffered which is perhaps as might be expected. However, that’s not the end of the story; it’s what you do with the time saved. The researchers went one stage further and tested whether using the saved time to watch the video again at twice the speed was better than watching at normal speed, but only once. The conclusion was, learners’ performance improved if they watched the video twice, at twice the speed, as long as it was just before the exam. Now be careful! Watching video is relatively passive and is not as effective as working examples or answering questions. But if you are watching video, speeding it up does no harm and if you use that time wisely, it’s beneficial. Lisa Nelson is Director of Learning at Kaplan

AAT levels up qualification in Scotland AAT has said that its qualifications will be releveled in Scotland later this year, to match the HNC and HND qualification pathways and to help create new opportunities for students, colleges and training providers. The releveling of the qualifications means from 1 September 2022, AAT Level 2 Foundation Certificate in Accounting will be a SCQF Level 6 in Scotland (Highers equivalent) and AAT Level 3 Advanced Diploma in Accounting will be a

SCQF Level 7 in Scotland (HNC equivalent). This brings them into alignment with AAT’s academic position in England and places

Changes to ACCA Option exams To help ACCA students prepare for their role of finance professionals of tomorrow, all the Options exams will have 20 marks awarded for professional skills (which are demonstrated throughout the exam). These changes will be incorporated from September 2022 in the following exams: • Advanced Audit and Assurance (AAA).

• Advanced Financial Management (AFM). • Advanced Performance Management (APM). And from June 2023, in the Advanced Taxation (ATX) exam (note – changes to ATX-MYS variant will come into effect from the December 2023 exam session). The exam duration will remain the same, which ACCA believes will allow students to more

them on the same level as Scottish qualifications (SQA). The AAT Level 4 Professional Diploma in Accounting remains a SCQF Level 8 (HND equivalent). The new AAT pathway is designed to dovetail with school and pre-university qualifications, making it easier for students to gain a qualification. It also provides a fast-track opportunity to become a chartered accountant or entry to university for students who complete AAT Level 4 Professional Diploma in Accounting (SCQF L8). effectively manage their time to answer the 80 marks allocated for showing mastery of their technical specialism. The professional marks will be the same as those currently assessed in Strategic Business Leader (SBL), but tailored to reflect the specialist content being assessed in each Option exam: • Communication. • Commercial acumen. • Analysis and evaluation. • Scepticism (and judgement).

Coventry University and CIMA join forces A new collaboration between Coventry University and CIMA is offering members a fast track to a master’s qualification. The link-up means CIMA members will start their MBA studies with 120 credits, and will be able to gain the full 180 credits for their qualification in as little as two semesters. Not only this, but the first 100 CIMA members to sign up for an MBA will get a £1,000 discount on their tuition fees. The course offering advance entry is fully online and available to CIMA members anywhere in the world.

Kai Peters, Pro-Vice-Chancellor of the Faculty of Business and Law at Coventry University, said: “This new collaboration offers students a more accessible, flexible approach to gaining life-changing qualifications with Coventry University. “It recognises the skills CIMA candidates have obtained during

their learning, giving them credit for the hard work they have already put in. The discount we are offering on tuition fees is an added help to students, increasing opportunities for more learners to gain a prestigious Master of Business Administration with us.” To find out more visit https:// tinyurl.com/mrxtsaw3

In brief Pap We have ACCA exams tips for the March sitting The ACCA exam sittings seem to come around faster every time. We are now heading into the March sitting and PQ magazine has five pages of advice and tips in this issue. APM has the dubious distinction of consistently having the worst pass rates – it’s been 32%, 30% and 32% for the last three sittings. That means twothirds of sitters are failing this one every time. You need to read what our experts say about this exam, 4

as there is still time to hone your revision and be one of the 30%! Our March tips cover PM, TX, FR, AA, FM, SBR, SBL, APM, ATX, AAA and AFM, and you can find them on pages 27 to 31. Pap Get yourself a CIMA mentor CIMA has now launched its mentoring scheme for members across the UK. Regional Vice President, UK and Ireland, Paul Turner, said: “The scheme will be a fantastic opportunity to bring members together and support

one another in their careers.” Sanju De Alwis agreed: “I am currently a mentor with #CIMA and must say it is a great way to give back.” Pap Spell it right on the CV Almost two in three job application CVs contain at least one spelling mistake, according to new research. A study by Adzuna, a job search website, of 150,000 CVs found one in three contained five or more errors. And a staggering 5,000 CVs had

20 or more spelling mistakes. The three most commonly misspelt words are ‘modelling’, ‘behaviour’ and ‘organisation’. Lots of American spellings were also evident, such as ‘analyze’. Other mistakes included leaving gaps in employment history, invalid email addresses, and CVs which were either too short or too long. Adzuna’s Andrew Hunter said: “Documents with spelling errors or missing information often led to the jobseeker falling at the first hurdle.” PQ Magazine March 2022

news the PQ

EY to open new Neuro-Diverse Centre We need your EY is set to open its first NeuroDiverse Centre of Excellence (NCoE) in the UK in Manchester. The NCoE is designed to create a supportive working environment for individuals with cognitive differences – such as autism, dyslexia and ADHD – that will help them to apply their strengths and meet clients’ business needs in emerging technologies such as artificial intelligence, data analytics, automation, blockchain and cyber. EY admits it is continuing to learn from the contributions of its current neurodivergent employees,

but believes the new centre will fuel innovation in technology, bring a new dimension of creativity, and drive greater diversity and inclusion in the UK workplace. EY already has six NCoEs in the US, three in Canada, one in India, one in Poland and one in Spain, with further expansion plans into Europe, South America and AsiaPacific. Alison Kay, EY’s Managing Partner for Client Service in the UK

& Ireland, said: “Just 22% of autistic adults are in any kind of employment in the UK, according to the Office for National Statistics (ONS). Yet, neurodivergent individuals are typically highly proficient in some of the ‘in-demand’ skills of right now, and in the future. EY’s UK Neuro-Diverse Centre of Excellence will help harness some of these skills, boosting innovation for our clients and our own business.”

Are you being paid enough?

finance professionals at every level to share the details of their working lives. By doing so, it can then build a clear picture of the state of the industry. This survey will give you a unique opportunity to benchmark your salary too, allowing you to see if your compensation is in line with colleagues and the wider industry average. To contribute to the 2022 GAAPweb Audience Insight Report click here.

GAAPweb want to learn more about the accountancy profession and the impact that the challenges and uncertainty of the pandemic has had on salaries and working lives throughout 2021. Has the pandemic and associated candidate shortages

driven up salaries and bonuses for finance professionals? What other changes have taken place for those working in accountancy? To answer these questions – and many more – it needs your assistance. GAAPweb is asking accountants, finance managers, CFOs, and other

nominations

The window for entries to the PQ magazine 2022 awards has been widened, just a little – you now have until 18 March to get your entries to us! The venue has been booked and the trophies have been ordered, so now it really is time to get nominating. There are 20 categories up for grabs, so lots of chances of winning a coveted PQ trophy. Now is not the time to hide your achievements under a bushel, so why not nominate your team mates and you for Accountancy Team of the Year? If there is someone who has made a really difference in your professional life then you can put them forward for Training Manager/Mentor of the Year. Check out all the details on page 17, or simply download the nomination form at https://tinyurl. com/bdeb688e. You have until Friday 18 March

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ROBERT BRUCE Why working from home is getting complicated

ICAEW Professional Level December exam results are in the pass rate was 70.7%, that means nearly a third came away with nothing (29.3% or 818 sitters). In all, some 6,745 sitters sat the

December test, with 11,598 exam attempts in total. Of these 4,806 passed all the exams they took, but some 1,234 sitters came away with nothing. A total of 1,504 students passed the Professional Level at the session, with 795 of these not failing any exams.

ICAEW PROFESSIONAL PASS RATES F0R 2021 No one ever said that working through the chaos created by the virus would be easy. Before the virus it was complicated. The working from home was fine. Projects could be run with relative ease and tranquillity. People could escape and produce useful work. The difficult bit was when people needed to be in the office. The balance of desks, communication points and people turning up to use them was almost impossible to achieve. Swapping working from home with working on the office floor was hopeless. But talking with people face-toface made people happier. Little of that, even though the number of people back in offices has grown, has come back. There is a poignancy in the air. Later in the Spring there is, it is hoped, to be a large conference gathering in London called The Watercooler. That says it all. Meanwhile the downsides of working from home are still being worked through. Consultancy Independent Audit recently unveiled its latest advice. Pointing out that the Financial Conduct Authority has the power to visit ‘any location where work is performed… including residential addresses’, it illustrates this with a cartoon of a half-dressed chap, a draft prospectus by his side and overlooked by a cat on the bookshelves, being interrupted by his wife. ‘Darling, there is a lady at the door’, she is saying. ‘She says she is from the regulator’. Robert Bruce is an award-winning writer on accountancy for The Times

Just two PQs decided to sit four ICAEW Professional papers in December, and their story is a familiar one – they failed all four! It was better for those who attempted three papers. Some 70.8% passed all three and 14.3% passed two. Just 6.6%, or 60 PQs, failed all three. For those sitting just one paper

Audit & Assurance Business Planning: Banking Business Planning: Insurance Business Planning: Taxation Business Strategy & Technology FAR: IFRS FAR UK GAAP Financial Management Tax Compliance *Just seven PQs took this exam

Dec 79.8% 68.5% 77: 8% 79.4% 87.6% 72.3% 78.4% 78.3% 77.2%

Sept 74.2% 66.0% 79.2% 73.2% 86.4% 80.9% 57.1% 77.9% 88.4%

June 73.0% 64.6% 70.9% 81.1% 92.5% 75.3% 71.4% 81.6% 80.4%

March 87.7% 88.0% 93.2% 82.3% 14.3%* 85.1% 81.9%

ACCA statement on ‘affiliate’ message A system error led to confusion for some waiting for their December exam results. Certain PQs received a ‘congratulations you are an affiliate’ email message before they had officially received their results. In a statement (which we asked the ACCA to provide) it said: “ACCA apologises to students for a system error that’s led to confusion about their December exam results. “On Thursday (13 January) a small number of students resident

in Ireland received an email issued earlier than scheduled that invites them to apply for ACCA membership, ahead of them getting their exam results from the December sitting which will be published on Monday. “For those who’ve received this email, we can confirm it is genuine and accurate. They’ll duly receive

KPMG unveils robust FY21 results KPMG UK latest annual results saw the firm post growth of 10%, with revenue rising from £2.14bn to £2.35bn, and profit before tax increasing from £288m to £436m. While audit revenues grew by a

steady 5%, the deal advisory part of the firm saw a 31% jump in revenue. However, the big news is that the consulting business (£646m), which saw revenue grow by 13% yearon-year, is now bigger than audit

confirmation of their results and the marks they achieved on Monday. “We also apologise to students who may be concerned because they have not received this same correspondence – this doesn’t necessarily mean they’ve failed their final exams, and they will also find out their result(s) on Monday, as scheduled.” (£634m). During the year KPMG completed the £300m sale of its restructuring business and unveiled an ambitious transformation programme to invest in the firm. It all meant that the average partner pay jumped from £572,000 to £688,000 (the biggest pay day since 2014). CEO Jon Holt was paid £1.7 million and chair Bina Mehta received £879,000.

In brief Pap ICAS launches ethics buddy service ICAS is introducing an ethics buddy service, where a CA can have confidential and informal discussions with an experienced member to see how they would deal with a problem. Ann Buttery, head of ethics at the institute, said: “Often people caught in a dilemma struggle to see the wood for the trees. If a CA has an issue which is troubling them, the ethics buddy service will give them access to constructive input early in the 6

process to help delineate the issues and prevent matters from escalating.” Pap New MOU for ACCA ACCA and the International Baccalaureate Organisation (IBO) have signed a Memorandum of Understanding (MOU), creating an integrated pathway programme for IBO students looking for a career in accountancy. The agreement will see the creation of an International Baccalaureate Career-Related Programme (IBCP)

with ACCA. Those choosing to kick-start their journey with ACCA through the IBCP will receive exemption from ACCA’s Applied Knowledge papers three modules – Business & Technology, Financial Accounting and Management Accounting – together with ACCA’s Foundations in Professionalism (FiP) module, leaving 10 papers to complete in the ACCA Qualification. Pap Corporate tax first for UEA The United Arab Emirates is

planning to charge corporation tax for the first time from 2023. The Gulf state plans to start small – the initial charge on profits will be 9%. Last October the UAE joined 135 other countries in the OECD deal that would mean a 15% minimum corporation tax rate will be charged. The OECD believes that these new international standards will help tax transparency and help prevent under-cutting. • See page 8’s Taxwatch for more on the minimum worldwide CT rate. PQ Magazine March 2022

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UK boardrooms struggle to keep up

PREM SIKKA Covid fraud: what’s in a name? The government is thought to have written-off £4.3bn of fraudulent financial support provided to firms at the height of the pandemic. Billions of pounds have been handed out without basic fraud prevention checks which would have taken a few seconds. For example, no one in the UK can open an ISA without providing their NI number. This deters fraudsters from stashing money in tax-free accounts. The check is automated and takes just seconds. Yet companies applying for furlough support were not asked to provide NI numbers for their staff. Inevitably, support has been claimed for phantom staff. Applicants for Covid-19 loans were not asked to provide their tax reference number. Their names were not checked against any police crime register. Now the government is chasing miscreants. The difficulty is that Companies House does not authenticate names and addresses of directors, many of whom are abroad. They may have provided false details. I have drawn the government’s attention to some interesting names of UK company directors. These include Mr Adolf Tooth Fairy Hitler, Lord Truman Hell Christ, Judas Superadio Iskariot, Victor Les-Appy Hugo and a Joseph Smith Jr, who listed his occupation as ‘Prophet and Ringwatcher’ and ‘Guardian Angel of the Ring of Mormon’. Are they authentic? The write-offs will increase and people will pay the price of government failures. Prem Sikka is Emeritus Professor of Accounting at the University of Essex

Gender diversity in UK boardrooms is lagging behind their European counterparts, with only 30.1% of company seats held by women in the UK. According to a new global report by Deloitte, ‘Women in the boardroom: A global perspective’, women leaders on the continent boast the largest share of global boardroom seats, led by France (43.2%), followed by Norway (42.4%) and Italy (36.6%). On a positive note, the UK has now entered the top 10 global ranking, moving from 13th to ninth place, since the report was

Time to Rise GCSE-aged pupils at some of the most deprived schools in the UK will learn work and life-related skills in bespoke sessions designed to drive social mobility, in an initiative launched by chartered accountancy body ICAEW and five of the larger accountancy firms. The programme, called Rise, will teach communication, problemsolving and teamwork skills to pupils in workshops at schools

last published in 2019. However, despite the 7.4% increase of women holding UK board seats, the UK’s boardroom diversity lags behind six European countries as well as New Zealand and South Africa. Jackie Henry, managing partner

people and purpose, Deloitte UK, said: “Board diversity is a demonstration of an organisation’s commitment to inclusion. Whilst the number of board seats held by those identifying as women in the UK is moving in the right direction, we’re still a long way behind our European neighbours with leaders France only 6.8% short of gender parity. UK businesses need to be even more proactive in taking diversity targets seriously, improving disclosure and providing more transparent reporting.”

across the country. The scheme was founded by ICAEW, EY, KPMG, PwC, BDO and Grant Thornton. Deloitte and Mazars have also signed up to support Rise. Rise was set up to raise the aspirations of young people from low socio-economic backgrounds by ensuring they have the skills required to succeed in life and work, irrespective of their background and future career choices. Rather than simply encouraging young people to become

accountants, Rise will focus on building a talented workforce for the future economy, and will be rolled out following a successful pilot scheme over the last year.

Junior employee makes his case

A former junior employee of KPMG, who is accused of pasting additional text into documents to mislead inspectors looking at the firm’s Carillion work, told a tribunal

as an unqualified accountant of minority ethnicity it was hard for him to challenge instructions from more senior colleagues. He cited “the trust he placed in his seniors,

which is an essential part of his training in the hierarchy”. Pratik Paw is one of six former KPMG employees accused by the FRC of conspiring to create false documents. Judgement in this case is due very soon. PwC’s CEO Jon Holt said: “I very much regret that individuals involved in this case failed to act properly or to call out the inappropriate behaviour of others, and I am saddened that some relatively junior former members of staff are facing very serious regulatory sanctions at an early point in their careers.” Go to www.pqmagazine.com for all your news as it happens.

Taxwatch Pap Millionaires call to ‘tax us now’ A group of 100 wealthy people have said taxing them would help tackle the gulf between rich and poor. They revealed that the tax system is rigged in their favour (we think we knew that) and needs a complete rewrite, to restore trust in governments and create a fairer system for hard-working people. In an open letter they said: “As millionaires, we know 8

that the current tax system is not fair. Most of us can say that, while the world has gone through an immense amount of suffering in the last two years, we have actually seen our wealth rise during the pandemic – yet few if any of us can honestly say that we pay our fair share in taxes.” The signatories want to see the introduction of permanent wealth taxes on the richest to help reduce extreme inequality and raise revenue for sustained

long-term increases in public services, like healthcare. Pap How will global minimum tax for large multinationals work? The UK government has published a consultation seeking views for how a worldwide 15% minimum corporation tax should be domestically implemented. Agreed by over 130 countries in October 2021, the landmark reform comes as part of a two-

pillar package first agreed in principle by the G7 last June during talks chaired by the Chancellor in London. With changes aimed to come into effect from 2023, the consultation will run for 12 weeks and seeks views on the application of the global minimum corporation tax in the UK, as well as a series of wider implementation matters – including who the rules apply to, transition rules and how firms within scope should report and pay. PQ Magazine March 2022

news PQ

The billion- CIMA November 2021 case study results pound claim KPMG is being sued a whopping £1.1 billion by the liquidators of Carillion, the official receiver. The High Court claim says the Big 4 firm’s audits missed “multiple red flags”, in the lead up to the collapse of the construction and facilities management giant. The official receiver, acting on behalf of Carillion’s creditors, is also alleging Carillion’s profits were heavily overstated when it was in fact “balance sheet insolvent”. The claim goes on to say that a “reasonably competent auditor” would have picked up on the manipulation by two directors at Carillion. In its defence KPMG has said that the “claim is without merit”, and it will robustly defend the case. It went on to say that the responsibility for the collapse of the company lies solely at the feet of the company’s board and management.

CIMA has released the November case study pass rates, and they show sitters coped well with what the examiner threw at them. Those sitting the Management case achieved the highest pass rate, at 73%. That’s the best pass rate for this level for the whole of 2021. Some 67% of Strategic sitters passed the final case this time around, which is slightly down on the August rate of 69%.

Continued from page 1 Recent research from ACCA found that 73% of respondents globally thought the profession was inclusive. However, just 63% of respondents in the UK felt they were part of an inclusive profession, compared with 76% in Ireland and 86% in Nigeria. The ACCA Inclusion Report stresses: “While we might believe that we represent a profession that is open to all, that belief may

The Operational pass rate seems stuck, with just over half of sitters passing this time around – 52% Stephen Flatman, Vice President, Examinations – Management Accounting, told PQ magazine: “I’m very happy to see that our students’ performance in case study exams remains strong. The efforts they are putting into their CIMA studies are clearly paying off.”

CIMA CASE STUDY 2021 PASS RATES Nov

Aug

May

Feb

Operational

52%

53%

46%

60%

Management

73%

68%

69%

71%

Strategic

67%

69%

68%

67%

itself come from a perspective of privilege.” It went on: “The profession cannot afford to be complacent: rather, it must continue to focus on the issue, to ensure that we continue to reach out to all communities, to represent social justice and equity through our values and ethics. We need to encourage people of all backgrounds and characteristics to join the diverse profession and to continue to educate ourselves

as well as educating and supporting others.” Inclusion, along with integrity and innovation is one of ACCA’s three core values. The report reminds us that we must treat people as they wish to be treated rather than how you would wish to be treated. We also have to welcome ideas that are different from your own, and you must be prepared to speak up. You can read the report at https://tinyurl.com/2p97s6bp

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PQ Magazine March 2022

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ANNA KATE PHELAN Making the most of digital

As we look toward the year ahead, it’s a great opportunity to look at the digital trends that may impact your life as students going forward. The Covid-19 pandemic has catalysed the digitisation of education to such an extent that technologies such as augmented reality (AR) and virtual reality (VR), which would have seemed like a pipe dream for real-world application just five years ago, are now more likely than ever to become a part of our classroom or study experience. VR provides an immersive learning experience that allows you to make decisions from a personal perspective, further solidifying your learning. Imagine putting on a virtual reality headset and being transported to an interview with a Big 4 firm. You can take the interview as many times as you would like, and each time your answers get sharper and more detailed. Education is set to be the fourth biggest sector for VR investments by 2025; with 97% of students wishing to take a course via VR and 70% of teachers wishing to utilise VR for learning. The value of AR in the education sector is predicted to be around $700 million by 2025. Additionally, augmented reality (AR) involves overlaying visual, auditory, or other sensory information onto the environment surrounding you. You may soon find yourself in a classroom scenario where you are analysing data using 3D simulations. AR in education is set to have a value of approximately $5.3 billion by 2023. Anna Kate Phelan is Senior Product Manager at Eintech

APM December ACCA pass rates remain low ACCA December 2021 pass rates have been announced. APM is the paper with the lowest pass rate among the Options – just 32% – and AFM has the highest pass rate at 41%. The two Essential paper pass rates are holding ‘nice and steady’ at 51% for SBL and 48% for SBR. For Applied Knowledge, AA has the lowest pass rate at 38%, and next comes PM at 43%. That 38% for AA is the lowest pass rate for that exam since March 2020. The same is true of PM. Commenting on the results,

ACCA PASS RATES FOR 2021 TX FR PM FM AA SBL SBR AAA AFM APM ATX

DEC 49% 50% 43% 50% 38% 51% 48% 34% 41% 32% 37%

SEPT 52% 48% 37% 52% 39% 51% 48% 34% 38% 30% 36%

JUN 50% 51% 41% 53% 39% 46% 44% 32% 39% 32% 41%

MAR 46% 47% 44% 46% 43% 50% 52% 32% 39% 36% 44%

New scholarship programme from AIA AIA has launched two new scholarship programmes to support students with strong career aspirations in accountancy or audit to obtain the AIA professional qualification with full financial assistance. Five awards are to be made available through the AIA

Accountancy Scholarship UK, two of which are given with priority to applicants from lower socio-economic backgrounds to support the AIA’s commitment to Access Accountancy. This award covers all course fees via AIA Achieve Academy, exemption

Carbon budget first for Suffolk Suffolk County Council has published proposals for its first-ever full carbon budget, as it strives to be a Net Zero organisation by 2030. The inaugural carbon budget will be presented alongside the financial budget, and the aim is to enhance biodiversity across 30% of the council’s estate.

KPMG misled FRC over Carillion audit, says CEO KPMG has admitted at a tribunal hearing that it misled regulators over the audit of collapsed outsource firm Carillion, as it became apparent that its accountants had forged documents. CEO Jon Holt apologised on the firm’s behalf, saying: “It is clear to me that misconduct has occurred and that our regulator was misled.” He went on: “This misconduct is a violation of our processes and clearly against our values. It is unacceptable, we do not tolerate or condone it in any way, and I am very sorry that it occurred in our firm.” 10

Alan Hatfield, executive director – content, quality and innovation said: “These are a solid set of results to round off the 2021 exam sessions. Last year, and as the pandemic continued, we issued over 476,600 results in total. And over this time, our students have shown immense resilience and determination to continue with their journey to become ACCA members.” He reminded students that pass rates were 20% better for students who use the ACCA exam Practice Platform. So that’s a no brainer!

Suffolk hopes the Net Zero carbon budget will also allow it to measure its carbon emissions, and monitor and evaluate the impact of decisions it makes. This will mean it can report each year on its progress, tracking its ambitions towards Net Zero. The council recently announced a £12.8 million investment to

His admission followed FRC accusations that the auditors at KPMG created ‘forged’ and ‘fabricated’ documents in a ruse to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis (another outsourcer). Deloitte opts for flexible public holidays Deloitte has introduced ‘flexible public holidays’, so its workers can choose when to take their public holidays. Staff will also start to see some UK offices transformed with more collaboration spaces and the latest audio and video technology to better enable hybrid meetings. In addition, all new and recent joiners will benefit from a £500 budget, which was provided to Deloitte’s UK people at the start of

fees and exam fees for the AIA professional qualification on either the accountancy or audit route. The AIA Commonwealth Scholarship offers a further five awards and is open to applicants from all Commonwealth countries, excluding the UK. The scholarship is part of the AIA’s aims as a Commonwealth Accredited Organisation to support education and the economy through financial education and professional skills. begin decarbonising the buildings that it owns, reducing emissions and making them cheaper to run. Deputy leader Richard Rout said: “This is an historic budget – the first full budget of its kind that the council has ever produced. Becoming a Net Zero organisation by 2030 is incredibly ambitious, but I’m committed to doing everything we can to realise that vision.”

the pandemic, to ensure they have a full range of equipment to properly support them whilst working from home. EY Reading relocates to allow hybrid working EY Reading is relocating into offices designed to support the firm’s new hybrid working model, with enhanced focus on collaboration space and tech enabled meeting rooms. The office space has been designed with health and wellbeing in mind, with a dedicated multi-faith room, as well as social spaces, including larger communal eating areas. These enhancements aim to encourage individuals to take regular breaks away from their desks and provide areas to meet with team members. PQ Magazine March 2022

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PQ tech the news

The state of climate tech

VIKKI BEAN Helping small firms to go green

Sustainability and creating more environmentally friendly practices is something every business is grappling with. We’ll see more small businesses leaning on their accountants for help in this area. We spoke with two Xero partners – Scott Johnson of Kung Fu Accounting and Ian Jarvis of Vertis Accounting – for some practical tips on helping clients to be more sustainable. • It’s vital for advisors to introduce clients to changes and initiatives that are appropriate for their scale and size. Forcing them to adopt a full-blown ‘eco-warrior’ mindset will likely discourage engagement. Ian remarked that changes can often be beneficial to the bottom line, as well as the environment. “We believe it’s the right thing to do from an efficiency perspective and there is technology to enable it, too. We’re teaching our clients that for the same reasons. The environmental benefits are just the cherry on top.” • Gone are the days of accountants surrounded by sky-high piles of paper. Tech is more accessible than ever, opening up small businesses to more digital tools. Scott says that his entire accounting firm is paperless (aside from recycled toilet roll!), has second-hand furniture and uses 100% renewable energy. Ian explained that at Vertis, they use as little paper as possible. We have some great resources and tips to support you and your clients. Visit https://www.xero.com/ uk/sustainable-small-business/ Vikki Bean is Director of Global Education and Delivery at Xero

The average climate tech deal nearly quadrupled in size last year, when compared with the previous year (2020), according to PwC’s State of Climate Tech 2021. The worry is, however, is the investment is missing in areas that can make the biggest impact on emissions. The good news is more investors from the wider investment community are now coming forward as they become familiar with the opportunities in climate tech as an asset class. Mobility and Transport continues to receive the lion’s share of climate tech funding as electric vehicles (EVs), micro-mobility and other innovative transit models attract investor attention. This area represented two-thirds of total

climate tech funding raised in the period. Emma Cox, Global Climate Leader, PwC UK, said: “The world has 10 years to halve global greenhouse emissions if we are to have hope of achieving net zero by 2050. Innovation is critical to meeting the challenge and the good news is that climate tech investment is up significantly across the board.

“However, our research has found there is potential to better channel and incentivise investment in technology areas that have the greatest future emissions reduction potential. This raises the question of why these sectors are missing out – are investors missing a value opportunity or is there an incentive problem that needs the attention of policy makers?”

Crypto crooks steal $14 billion Cryptocurrency-based crime hit a new all-time high in 2021, with illicit addresses receiving $14 billion over the course of the year, according to research by Chainalysis. The data group revealed that this is almost double the amount of crime recorded in 2020 ($7.8 billion). The Crypto Crime Report stressed that just 0.62% of 2021

cryptocurrency transaction volume was associated with illicit activity. It emphasised that law enforcement’s ability to combat cryptocurrencybased crime is also evolving. The sheer size of the crime, however, represents a ‘significant problem’, said the report. It said: “Criminal abuse of cryptocurrency creates huge impediments for continued adoption, heightens the likelihood of restrictions being

Mobile is the GOAT The big screen is slowly dying as mobile continues to break records in virtually every category – time spent, downloads and revenue, according to App Annie’s State of Mobile 2022 report.

Consumers continued to embrace a mobile lifestyle, and in the top 10 mobile markets a staggering 4.8 hours a day was spent on mobiles. Consumers spent $170 billion on apps, which is up 19% from last year. Downloads

imposed by governments, and worst of all victimises innocent people around the world.” continue to growing at 5% year on year, reaching 230 billion. The report reveals that, worldwide, consumer spend on dating apps surged past $4.2 billion (a 55% increase from 2019). Food and drinks apps also hit a new milestone at 194 billion sessions in 2021 (up 50% year on year). App Annie’s CEO Theodore Krantz (pictured left) said: “Mobile is the Greatest of All Time and the go-to device of the future.”

Tech briefs Pap Google bitten by cookies Google has been fined €150 million by the French data privacy watchdog CNIL for making it too difficult to refuse its cookies. Meta Platforms (Facebook) was fined €60 million for the same reason. The two tech giants now have three months to comply with the orders or face an extra penalty of €100,000 per day of delay. The CNIL stressed that rejecting cookies should be as easy as accepting them, and is concerned that when someone accepts 12

cookies it’s done in just one click. Pap Prepaid card market cartel fined £33m The UK’s Payment Systems Regulator (PSR) has imposed fines against Mastercard, allpay, Advanced Payment Solutions (APS), Prepaid Financial Services (PFS) and Sulion, after concluding that the five parties infringed competition law by agreeing not to compete or poach each other’s customers in the prepaid cards market

in Great Britain. The pre-paid cards in question were used by local authorities to distribute welfare payments to vulnerable members of society, such as homeless people, victims of domestic violence and asylum seekers. This decision concludes the PSR’s investigation that was opened in October 2017 following a complaint made by allpay about one of the infringements. In February 2018, the PSR carried out unannounced searches at the premises of some of the parties.

Pap Snack attack KP Snacks recently warned customers that there may be shortages of some of its popular crisps and nuts following a ransomware attack. The Hayesbased company owns leading brands such as Hula Hoops, KP Nuts and Skips, and it said the disruption to supplies could last until the end of March. The cyber-attack was discovered on 28 January and KP Snacks has brought in a leading forensic IT firm and legal counsel to help in its investigation. PQ Magazine March 2022

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One profession I read with interest the latest moves by CIPFA and ICAEW to ‘work closer’. Surely, we all have to admit that there are too many accountancy bodies in the UK. I was shocked when I started training to discover all the different options. It seems to me the accountancy profession has just been allowed to do what it liked, totally unregulated. We have ACCA, CIMA, CIPFA, ICAEW, ICAS and ICAI. Then there’s the AAT, CIOT, ATT, AIA, ICB, and IAB. But we don’t seem have lots of different bodies for lawyers, so how has this all been allowed to happen? The accountant in me

just thinks about all the duplicated costs being wasted. If we all did the same basic training then there could be one body to rule us all. That would

give us a bigger, more coherent voice too, which has to be better. Currently, there doesn’t appear to be anyone pushing what we do and the benefits accountants bring to UK plc. The problem is the people running the bodies don’t always seem to truly have their members interests at heart. CIPFA and ICAEW have risen above self-interest and put the profession first, and my hat goes off to them. I now hope that those stuffy ICAEW members don’t stop this positive move in its tracks. Like they have done the last two times the profession has tried to put its house in order. Name and email address supplied

Our star letter writer wins a fantastic ‘I love PQ’ mug! Five years’ time I was shocked to read how many students (175,000) are still studying towards their professional qualifications after five years (PQ magazine, February, page 6). This information should be on every professional body’s website for those at the start of their study journey. But I can totally understand why they wouldn’t! It doesn’t make perfect reading. I think it is time for the FRC, who put this all together, to get the bodies to go beyond five years too! How many of those 130,000 ACCA five-years-plus PQs are still studying after six, seven even 10 years? Or maybe all that might be too frightening! Name and address supplied

DIY tuition With so much learning material being produced by the professional bodies now, isn’t it time they just take the plunge and provide the whole ‘learning experience’ for their PQs? CIPFA does it and I am sure ICAS does it too (sorry, not totally sure about that). The standard of lecturers and learning material is so inconsistent that it would give all us students the same chance

of passing – and be so much more ‘inclusive’. Currently, you have students working for big companies going to approved training providers who are top-notch. Then there are the self-studiers like myself who try to get as much as they can for

free. That’s not to say what the likes of Open Tuition provide isn’t great – I have used them with a lot of success, but that’s surely not fair! In the end you do get what you pay for. Name supplied via Facebook

What advice would you give someone starting out on their ACCA journey? On Facebook recently a PQ wondered what other fellow students did to ensure a 50% pass mark in the exam. The big answer coming back was question practice. Pierre said you also have to “put the time and effort in outside of any course, and once the learning is done then its question practice. And make sure you do it under exam conditions and to timer.” Adele agreed: “Definitely practise questions. Try a timed mock too as it helps you get used to the time pressure.” Stuart suggested blasting through the text books quickly so you can get lots and lots of exam practice in. Students said you should search online for free practice questions, and maybe do more than one! There was also lots of chatter about AAT’s announcement of transitional rules for students who want to switch from AQ2016 to Q2022. It was suggested that AAT has “gone out of their way to make it easy.” FI’s Gareth John (pictured) explained AAT have now said that they will honour the grades that transitioning students

achieved in most AQ2016 assessments they have already passed. He explained: “Merits will stay as merits, distinctions will stay as distinctions.” It all means that there is really is no benefit to students waiting until September when the new Q2022 syllabus is introduced. John stressed: “Crack on now with your level and pass some of the easier AQ2016 assessments.” You will qualify sooner!

PQ Magazine PO Box 75983, London E11 9GS | Phone: 07765 386489 | Email: graham@pqmagazine.com Website: www.pqmagazine.com | Editor/publisher: Graham Hambly graham@pqmagazine.com | Associate editor: Adam Riches | Art editor: Tim Parker Contributors: Robert Bruce, Prem Sikka, Lisa Nelson, Anna Kate Phelan, Tony Kelly, Phil Gammon, Edward Netherton | Subscriptions: subscriptions@pqmagazine.com | Origination services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email admin@pqmagazine.com

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PQ awards 2022 PQ

NOMINATENOW! We need your nominations for the PQ magazine awards 2022 – the new deadline for entries is Friday 18 March

he venue is booked, the trophies have been ordered, and we have given you more time to get your entries to us – yes, it’s time to get nominating for the PQ magazine awards 2022! You now have until Friday 18 March to get your entries to us, but please note that there’s no extension after this date, as our independent judges need to get started! A new venue has also been found to host the awards, which we will unveil in next month’s issue. We promise to keep our awards unique – there really is nothing stuffy and boring at the PQ award’s night. Ask anyone who has been to one! And, after hosting last year’s event behind closed doors, we can’t wait to see old and new friends alike once more for real. What we can reveal is the awards will take place somewhere in London town on Monday 25 April. But we are jumping the gun. We need your nominations first. To start you need to download the

THE AWARD CATEGORIES

PQ OF THE YEAR  NQ OF THE YEAR  DISTANCE LEARNING  STUDENT OF THE YEAR ACCOUNTANCY  GRADUATE OF THE YEAR APPRENTICE OF THE  YEAR STUDENT BODY OF THE  YEAR ACCOUNTANCY BODY  ACCOUNTANCY COLLEGE  – PUBLIC SECTOR ACCOUNTANCY COLLEGE  – PRIVATE SECTOR ONLINE COLLEGE OF  THE YEAR LECTURER – PUBLIC  nomination form from the website at https://tinyurl.com/ bdeb688e. You then have 250/350 words to make your case. If you don’t feel that is enough just provide your supporting material separately, and we will make sure the independent judges see everything you send us. There are lots of shiny PQ awards up for grabs – we have a record number of sponsors and awards this year. Don’t forget our Accountancy Team of the Year and Training Manager/Mentor categories. The past two years have been tough on everyone, but maybe you worked for someone who rose to the challenge and needs recognition – well, we can do that! Now’s not the time to hide your light under a bushel. We positively encourage you to enter yourself – sometimes there’s no one else that will. Once you have written your submissions all you need to do is send them to awards@pqmagazine.com, or post to: The Editor, PQ magazine, PO Box 75983, London E11 9GS. Then you are in the hat, and who knows what will happen; maybe you will get a shortlisting – all those who are get shortlisted will receive an invite to the awards night free of charge. Remember, the new deadline for entries is Friday 18 March 2022. So, as we say in the headline, get nominating now!

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PQ Magazine March 2022

PQ net zero

Time to act is now We need to accelerate the progress on decarbonising the economy to hit our bold targets, says PwC wC’s latest Net Zero Economy Index found that a decarbonisation rate of 12.9% (up from 11.7% last year) is now required to achieve the 1.5ºC climate goal – more than five times greater than what was achieved over the last year (2.5%) and eight times faster than the global average over the course of the 21st century. Tracking a complete year of energy and economic data from 2020, PwC’s Net Zero Index shows that, in 2020, due to the impact of Covid, energy demand fell by 4.3%, leading to a reduction in energy related emissions of 5.6% (from 2019 levels) and a fall in total global emissions. There was a notable 4.6% reduction in coal consumption and 9.3% reduction in oil consumption. However, as economic activity rebounds worldwide, so do emissions, driven by an increase in demand for coal in electricity generation in particular. The UK achieved a 6.5% rate of decarbonisation in 2020. This was linked to a significant reduction of 15.7% in energy related emissions as a result of the pandemic. For the UK to deliver on its climate

commitments and align with the 1.5°C Paris goal it will need to significantly accelerate progress on decarbonising the economy. Mexico and Indonesia recorded the highest

rates of emission reductions relative to their economic growth at 12.4% and 10.6% respectively. These results are expected to be an isolated occurrence rather than evidence of a longer-term trend as economic activity resumes and both countries have announced plans to invest in fossil fuel production in 2021. No country in the G20 was able to achieve the 12.9% rate of decarbonisation required to limit warming to 1.5°C. Kiran Sura, Assistant Director in the Sustainability & Climate Change at PwC UK, said: “World leaders need to heed what the climate science is telling us – we need higher ambition and an acceleration of action to keep 1.5°C in striking distance. The window of opportunity is narrow so it’s imperative we see more decisive action from world leaders. “We also need to ramp up efforts to enhance adaptation and build resilience globally to manage the impacts of climate we have already locked in, especially for those countries on the frontlines of climate change who are least able to adapt.”

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PQ Magazine March 2022

study advice PQ can concentrate on one area of the curriculum at once. However, if all your lesson materials are readily available at once, don’t feel pressure to study all the lessons as soon as possible, as this could actually prove counter-productive. Breaking the lessons up into chunks means that you will be able to concentrate and practice each topic more thoroughly. Break your learning into small chunks Studying in shorter, more frequent sessions can often be more effective than longer study sessions. A good blended learning course will enable you to access your Virtual Learning Environment (VLE) when you are on the move. If you have a long work commute on the train or bus, utilise that time to log in and watch some tutorials, or have a go at some practice questions. You are in charge of your own schedule, which means you have the option to study when, where and how you want.

Beat the clock Mindful Education has some top time management tips for blended learning students

f you are new to blended learning you may be wondering how best to plan your at-home study time. Blended learning requires you to set some time aside during your week in which you can study online, which is great in terms of flexibility but also requires a real understanding of how to use your time wisely throughout the day. We have put together some top tips for how best to manage your time during your blended learning studies.

Create a schedule Working towards your in-person class gives you an excellent starting point for creating a study schedule. Sit down on a weekly basis to plan out your work so that deadlines do not overwhelm you. Make sure that you can incorporate your studies into your daily routine, and remember to review your schedule frequently to ensure that it keeps working for

PQ Magazine March 2022

you. With blended learning, at-home lessons will often be released in intervals, which means you

Seek support from your tutor and peers If you are still struggling with time management, do not be afraid to ask for help. Your tutor will be on hand to offer their guidance and support with your course and the workload that comes with it. Fellow students are also a fantastic source of study tips and ideas for how to achieve that elusive work-life-study balance, so make the most of your opportunity for group work during your in-class sessions. Make sure you take time to relax Lastly, while you might have worked out how to maximise your time to include periods of study, you must not forget to make time to relax and enjoy some downtime. You want to avoid the risk of burnout. Remember exercise and getting enough sleep is essential in keeping you energetic and motivated in your studies and day-to-day life. Rather than just opening YouTube or checking social media, use your breaks to get away from your desk. Go for a walk outside or spend time with others who might also be in the house. If you are interested in studying an AAT qualification using our Online and On Campus blended learning approach then please visit the Mindful Education website to find your nearest provider.

PQ AAT qualification 22

THE YEAR AHEAD Nick Craggs looks at the best way to transition to the new AAT qualification – research is vital!

s I am sure every AAT student is aware, AAT are bringing in a new qualification, Qualification 22, in September. The other thing that students are aware of is that on Qualification 22 level 3 and level 4 no longer have synoptic exams. The feedback that I have had is that students REALLY want to avoid the synoptic exams. However, whilst on Qualification 22 you would avoid the synoptic exams, there are other considerations to consider before deciding to move over onto the new qualification. AAT are moving away from an annual subscription model to a one-off registration fee per level. So rather than pay £101 per year, someone starting level 3 on Qualification 22 for example will have to pay £225 to register. The accountants among you will no doubt spot that if a student were only to take one year on level 3 it would be cheaper on the old annual membership model. Also, it was that if you moved over mid-level, any exam passes you have would carry over at 70%, irrespective of what the actual percentage you achieved. Some units don’t carry over, so you need to be careful about losing passes you have previously obtained.

New announcement However, AAT have made a couple of announcements which make it much more appealing to move over mid-level recently. Firstly, if a student has sat one assessment on that level on the full AQ2016 accounting qualification, they can transfer onto the new qualification at a reduced cost of £50, £75 and £100 for level 2, 3 and 4 respectively, up to 23 September. Secondly, if you have passed exams on AQ2016 some of them will carry the percentage that you achieved in the exam over. However, not all do, and then it gets more complicated for certain units where they are combined on Qualification 22. Level 2 is the most straightforward in terms of transitional arrangements. Bookkeeping Transactions, Bookkeeping Controls and Elements of Costing carry their percentage over to their equivalent units on Qualification 22. Foundation Synoptic and Using Accounting software do not, as there is no equivalent unit for them on the new standards. Level 3 is where is starts to get a bit more complicated. Indirect Tax carries directly over onto the new standards and the percentage will carry over. As we knew previously, to get the exemption from the Qualification 22 Financial Accounting: Preparing Financial Statements you had to pass BOTH Advanced Bookkeeping and the Final Accounts Preparation unit. Only having passed one will mean you don’t get the exemption, and you have to sit the new 20

unit which will test you on the knowledge from both Advanced Bookkeeping and Final Accounts preparation. However, the change now is that you can carry across a percentage, but it is only your percentage in Advanced Bookkeeping. You do still have to pass Final Accounts Preparation, but the percentage will have no bearing on the percentage carried over. The new Management Accounting Techniques unit is similar in that you must have passed Management Accounting Costing as well as either the old Advanced Synoptic or the new Spreadsheets unit to get the exemption. However, the percentage you carry over will only be the percentage you gained on Management Accounting Costing. There is no equivalent unit on AQ2016 for the new Business Awareness paper, so everyone will have to sit this exam if they move over part way through level 3. Finally, we have level 4 which is a bit more straight forward than level 3. All the optional units, Financial Statements Unit and the Professional synoptic unit carry directly over onto Qualification 22 and carry over their percentage. The only complication relates to Budgeting and Decision and Control. On Qualification 22 these are being amalgamated into the new, large, Applied Management Accounting unit. To get the exemption from this unit you need to have passed both Budgeting and Decision and Control units. Only passing one will mean you won’t get the exemption. However, due to the extra knowledge being assessed in the Applied Management Accounting unit, if you get the exemption, you will only get an exemption at 70% irrespective

of what you achieved in Budgeting or Decision and Control. What does it all mean? So, what does this mean for AAT students? For level 2 not a great deal, as there is a synoptic on both AQ2016 and Qualification 22. However, for the later levels if you are careful, you can get the best of both worlds! You can make a ‘hybrid’ of the best bits of both qualifications. At level 3 you could start level 3 now and take the Advanced Bookkeeping unit and Final Accounts unit, and avoid the large combined Final Accounts: Preparing Financial Statements units. You could sit the Indirect Tax as that carries over directly. This will keep you busy for a number of months, and then when Qualification 2022 launches in September 22, pay the reduced £75 fee to transfer over, and sit the Management Accounting Techniques paper and finish off with the new Business Awareness paper. This would mean you avoid the synoptic exam that students don’t like. Likewise at level 4, you could avoid the large, combined Management Accounting unit by sitting Budgeting and Decision and Control on AQ2016. You could then transfer over to Qualification 22. You would only get a 70% for the exemption, when you transferred over but you would then avoid the tricky Professional Synoptic unit later on. However, before you decide to do anything, I would advise you to do your research, or speak to your tutor, if possible, as you may need to get extra material, and remember you can’t register on Qualification 22 until September 22. • Nick Craggs, AAT distance learning director, First Intuition PQ Magazine March 2022

Tom Clendon takes you through Double Entry Bookkeeping You should be able to master the rules of double entry bookkeeping in just eightand-a-half minutes. So do you know your credits and debits? You can find Tom’s feature explaining all on page 22 of the July issue.

MICHELE BAKER – THE TRIAL BALANCE Accountancy can be simple if you know the basics! PQ magazine has gathered together the top tutors in the world to help us help you. Our back to basics video series will guide you through some of the fundamental topics of accountancy. Some of the videos even come with an accompanying article! In just six short minutes Michele Baker will explain how to create the trial balance and why you are doing it. Michele will let you know whether a balance is a credit or debit, and help you get to grips with ‘DEAD CLIC’. She’s had over 300 views already! Check out her video at: https://vimeo.com/500074449.

Sean Purcell looks at the Strategic Planning Process Sean looks at the three steps you need to understand the strategic planning process – analysis, strategic choice and strategic implementation. See pages 24-25 in the August issue for the accompanying feature. Sunil Bhandari delves into financial maths This presentation is slanted to ACCA FM and AFM students sitting the CBE exams, but will be useful for any PQs wanting to understand financial maths that bit better. See pages 20-21 of the September issue for the accompanying article. Check out these short videos at www.pqmagazine. com. Either click on the video bar at the top of the home page or scroll down to the video section

PQ ACCA spotlight

A slow journey back to global economic growth ACCA’s chief economist Michael Taylor gives PQ readers an insight into the latest view of the global economy from the perspective of accountants s a profession, accountants hold pivotal roles in the management and direction of every type of organisation – from global corporations through to governments and small businesses. And it’s because of this that our members can detect the first signs of economic change. With members covering 178 countries and regions, they’re in a unique position to take a temperature-check of economic activity on a global scale. This is what we do each quarter, joining forces with IMA to ask our members questions about their economic confidence and fears. These are then published in our Global Economic Conditions Survey* (GECS). Omicron has clearly caused chaos in many regions with our latest survey for Q4 2021 finding that global confidence dropped by 12 points at the end of 2021. Western Europe, the region which experienced the fastest spread of the outbreak, reported the biggest drop of 28 points. Only North America and Asia-Pacific recorded improved confidence and this increase was modest in both regions. Confidence also fell in South Asia and Africa, highlighting the ongoing challenges faced by emerging markets.

Impact of Covid-19 and inflationary pressure Our analysis shows that Omicron’s impact on the road to economic recovery may be something of a bump in the road, with its impact likely to be modest and short lived. Global orders were 22

relatively unchanged in the last quarter of 2021 and there was little movement in the ‘fear indices’ which measure concerns of suppliers and customers going out of business. However, cost increases and supply shortages are more troubling, with inflationary pressures being experienced in many markets globally. Concerns over costs doubled over the course of the last year and inflation is likely to be the biggest economic risk in 2022. This could potentially lead to a greater degree of monetary tightening than anticipated, which would in turn slow growth and prevent a return to the prepandemic trends. Looking at all the indicators, there is optimism about progress towards a more normal economic environment, and that we should see global GDP growth of around 4% in 2022. Emerging market opportunities A special focus in the latest issue of our GECS is about the potential for growth in emerging markets, for advancing digital technology and the growing demand for clean energy. Adoption of digital technology can drive down costs, increase productivity and stimulate demand. The advantage emerging markets have is their ability to bypass the ‘bricks and mortar’ stage of business development, instead beginning with digital, much as we’ve seen in the banking and financial services sector. Since 2017, digital revenue has been growing in emerging countries at an average annual pace of 26 per cent,

compared with 11 per cent in the developed ones. Climate change While climate change poses obvious risks, there are also opportunities ahead. Energy consumption is expected to rise three times faster in emerging markets and significant investment will be needed to both deliver this generation demand while also meeting the net zero target by 2050. Much of the investment needed is likely to come from private international sources with a major focus on investing in renewables. While wind and solar power have low electricity supply costs once established, they require large upfront capital cost. This increase and transition in energy generation also has the potential to create new jobs, as the appropriate domestic infrastructure and regulatory environment is developed. Looking ahead We began GECS in 2009, when there was immense turbulence following the global financial crisis. We knew then that while there was no shortage of views on the outlook for recovery, there were few concrete indicators to turn to – and no indications about what accountants thought about the economic picture. Over a decade later, and during turmoil caused by the pandemic, the experience, insights and knowledge of our and IMA’s global members are as valuable as ever, and especially so as we look ahead to a post-pandemic future. Their views help us to monitor volatility and provide a clear picture of current issues and challenges. And we can also ensure the right responses can be made, whether that’s through informing business strategy or influencing public policy. Together, ACCA and IMA members provide a sound bellwether for the future economic climate because they are at the forefront of economic activity. And the insights for GECS Q4 2021 show that despite the recent storms, there’s cautious optimism for 2022 as we look forward to continued global economic growth, albeit at a modest pace. • Michael Taylor is the chief economist at ACCA * The survey of 2,471 members of the ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) was conducted during late November and early December 2021. PQ Magazine March 2022

PQ goodwill PQ

A question for Tom This month top tutor Tom Clendon explains current accounting treatment for goodwill 2. Less relevant information for the user A characteristic of useful information is that it should be relevant. In turn that means it has a predictive value. With the current system of annual impairment reviews, it is harder for users to predict future profits as in many years there will be no impairment loss charged for goodwill – but in years when there is the impairment loss and it is large, profits will fall off a cliff! If goodwill were systematically amortised, then reported group profits would be smoother and thus easier to predict. Investors don’t like surprises.

Question Can you explain why some are against the current accounting treatment for goodwill? Tom’s answer Good question. I like questions that have that phrase ‘explain why’ and seek to challenge orthodox thinking. Before we challenge the current regulation, let us first remind ourselves of the accounting treatment of goodwill. How to account for goodwill Where a group acquires a subsidiary, and the aggregate of the purchase consideration for the controlling interest and the amount attributed to the non-controlling interest exceeds the fair value of the net assets acquired, then the difference that arises represents a premium paid and is called goodwill. In other words, purchased goodwill arises when you buy a business, and you pay more for the business than the assets you are getting. This is not because you are being “ripped off” rather it reflects the value put on the goodwill of the business because it has a certain reputation, staff are already employed, systems are in place, and there are existing customers! Such goodwill is recognised as an intangible asset in the group accounts because there is a transaction that

underpins it. The inherent goodwill, the self-generated goodwill, that every business has, however, cannot be recognised as an asset. This is because it has not been bought and thus cannot be reliably measured. All of the above is uncontroversial. Annual impairment review The controversy regarding IFRS 3 Business Combinations is that it subsequently requires purchased goodwill to be subject to an annual impairment review. This treatment has its critics when compared to an alternative treatment of systematically writing off such goodwill over its useful life (which is after all the default treatment for other intangible assets). The arguments against the annual impairment review of goodwill are as follows: 1. Costs to the preparer The process of conducting an annual impairment review is not without cost. Every year the group will have to ascertain the recoverable amount of the cash generating unit where the goodwill is allocated. If goodwill were systematically amortised, then these costs would be avoided.

3. Overstatement of the purchased goodwill In reality the purchased goodwill at the date of acquisition does have a limited useful life. Where year after year the purchased goodwill is impairment-tested and not found to have suffered a loss then what is really happening is that the original goodwill (reputation, staff and customer loyalty) is actually being dissipated and is really being gradually replaced by newly created (inherent) goodwill. After all, if you measure the amount of water in a pond every year you could conclude that the water level never falls but surely after 10 years the original water there has evaporated and been replaced by new different water! The original water in the pond is like the original goodwill at acquisition, it does dissipate over time as staff leave or as new customers are attracted. If goodwill were systematically amortised, then the overstatement of purchased goodwill by allowing inherent goodwill to be recognised as an asset through the back door, would be prevented. The challenge Of course, if IFRS 3 Business Combinations were to be revised to require the amortisation of purchased goodwill then companies would have to determine the useful economic life of goodwill. This would be very subjective. UK GAAP, in the form of FRS 102, takes the pragmatic view by setting a maximum of 10 years. • Tom Clendon is an ACCA SBR online lecturer and podcaster. See www.tomclendon.co.uk

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PQ AAT the spotlight

AAT and the paths to success Distance learning provider Premier Training caught up with some of its former students to see how their AAT qualification has helped them forge the ideal career AT qualifications create a pathway into a range of accountancy and finance positions for thousands of students every year. Many use their AAT qualification to progress in existing roles, apply for new opportunities, or as a stepping stone to gain additional qualifications from other professional bodies. Finance Manager: Wren completed the AAT Level 3 and 4 Accounting qualifications and is today a Finance Manager. “AAT qualifications enabled me to obtain a position as Finance Assistant and promotion to Finance Manager, and also start my own small business,” he said. Wren, who describes his Premier Training experience as “excellent” is next aiming to consolidate and refresh his knowledge and ultimately grow his own business. Finance Assistant: Dina has used her AAT Level 3 and 4 Accounting qualifications – and additional ATT (Association of Taxation Technicians) studies – to become a Finance Assistant. Describing her AAT journey with Premier Training, she said: “It was wonderful. I am pleased they put up with me and all my questions. Thank you!”

Accountant: Following completion of the AAT Level 4 Professional Diploma in Accounting, Kelly has progressed to become an accountant. She enjoyed being able to work and study at her own pace, and is considering ATT (Association of Taxation Technicians) and CIPP (Chartered Institute of Payroll Professionals) qualifications next as her progression continues.

Accounts Assistant: AAT qualifications have helped Anita take on more responsibility in her role as an Accounts Assistant. She explains: “I have progressed to preparing management accounts as part of my role. Also, now I have started to study CIMA I feel that AAT has given me an excellent grounding, including exemptions from the certificate level.” Being able to fit her Level 3 and 4 Accounting courses with Premier Training around her work and family commitments was a huge plus for Anita. Accounts for own business: Dance teacher Hayley found AAT distance learning to be the ideal fit for her in every respect. “Due to health conditions and other time pressures, going to a college would not have been suitable for me,” she explained. “Distance learning allowed me to study when I was able to.” Today, she is able to complete the accounts for her own business – an entity she established using the knowledge and confidence from her AAT studies. • Are you targeting a career in finance or looking to progress? Find out more about AAT distance learning qualifications at www. premiertraining.co.uk

Leading Inclusion The latest professional insights report from ACCA, Leading Inclusion, discusses the important subjects of diversity, inclusion and equity. Ensuring that accountancy is a profession that is open to everyone.

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PQ Magazine March 2022

PQ financial statements PQ

What’s the cost? Raihan Safa probes the practice of the misrepresentation of financial statements through overstatement of cost

e hear in the news how some companies try to misrepresent their financial statements with higher profits by understating cost or by overstating revenues, and this is often done to impress the investors. However, have you ever heard of cases where companies are intentionally misrepresenting their financial statements by lowering their profits through overstatement of costs? Yes, that’s right, this practice is also surprisingly prevalent across the corporate world. The companies try to predict their future financial performances through forecasting, and if the management anticipates poor performance in the future they try to take advantage of the good year when they are earning high profits by artificially inflating the costs and redistributing the understated earnings in the bad year when their financial performances are likely to worsen.

Why is it done? You might wonder, why would any company deliberately misrepresent its financial statements by increasing cost, understating its net earnings and redistributing them in the future? Well, there could be two common reasons, which are: 1. Management performance: as you know, the financial performance of a company is also a reflection of the performance of the top officials such as the CEO and CFO. Therefore, a major decline in financial performance in any particular year or for a number of years could risk their jobs or bonuses. As a result, through the redistribution of the unreported earnings, they would be able to manipulate the financial performance as favourable PQ Magazine March 2022

even though in reality the company’s profit is diminishing. 2. Consistency: most investors would like to invest in companies that are steady and predictable. Investors would lose confidence if the performance of the company is volatile. Therefore, the management tries to maintain consistent performance throughout the years instead of presenting a fluctuating performance. Imagine, if in one year the company has a growth percentage of 7% and in the next year it has a growth percentage of 2%? This is likely to deter the investor from buying shares as they would perceive it as a high financial risk and this will eventually impact the share price. How is it done? There are many ways in which a company can manipulate their cost. However, I have tried to highlight a few common areas that can be examined and reviewed to ensure no manipulation has taken place. Provisions – Companies can make large provisions against operating expenses and this is often done by booking highly estimated provision figures than the actual probable liability which is likely to incur. Later in the desired year, they are reversed and thus the differences between the higher and actual amount contribute to increased profit. Depreciation – Some companies can also use unrealistically high depreciation rates for their assets so that the asset life is quickly depreciated within a few years. After some years when the asset life is over, the total depreciation

cost will reduce drastically and this will result in increased future profits. Booking CAPEX as operating expenditure – Some expenses which can be conceptually qualified as CAPEX are treated as Revenue expenses, this enables the company to avoid future depreciation costs. Some of these common types of expenses are Machine Overhauling costs, License, and Server installations. Recognising supplies as non-stock items – The modern ERP systems usually allow us to recognise any supplies either as inventory or non-stock items. When supplies are recognised as inventory it is recorded in the balance sheet as current assets and expensed gradually based on the consumption of the supplies. However, in a good year where the profit is expected to be very high, the management may order supplies in bulk quantities and record them as Non-stock items in the ERP system. In this way, the entire supplies cost is being booked directly as an expense into the Profit and Loss account although it was not used. As a result, in the future years, these supplies can be consumed as per the operational needs but without any cost impact in the Profit and Loss account. Conclusion As professional accountants it is our ethical responsibility and professional duty to try our best in preventing the misrepresentation of the financial reports. This can only be done with in-depth knowledge and awareness of the risk areas which are prone to manipulation. • Raihan Safa is an ACCA member, financial consultant and senior finance manager working for an international research institute 25

PQ CIPFA spotlight

From strength to strength Apprentices will always be central to CIPFA’s training services, writes Sarah Shreeves ust before we finished work for 2021, we received official confirmation of some extremely welcome news. Following a rigorous four-day inspection by Ofsted in November, CIPFA’s apprenticeship provision was graded as ‘Good’. This is a fantastic achievement, particularly as it was our first full inspection. The report highlighted many of CIPFA’s strengths including its “very strong commitment to responsible stewardship of public money” and on the strong relationships that we build with students and their employers. Inspectors commented: “Work-based learning coaches provide good support to apprentices to help them pace their studies. Coaches liaise effectively with employers to make sure that over the course of the programme, apprentices gain broad knowledge and relevant experience, linked to what they learn.” Ofsted’s validation of the strength of our current apprenticeship provision is certainly a cause for celebration, but we are by no means resting on any laurels. We are committed to an ongoing programme of educational development which includes the launch of

a refreshed syllabus for our Professional Accountancy Qualification. The new syllabus has an updated curriculum to include content on new technology, green and sustainable finance and the important role of ethics in public sector financial management. National Apprenticeship Week National Apprenticeship Week (NAW), which falls between 7-13 February, was a great opportunity to promote and celebrate CIPFA apprenticeships, and of course, all the apprenticeships being delivered across the country by different organisations in different sectors. This year’s NAW theme is ‘build the future’, reflecting how apprenticeships are a brilliant way for people

to gain the skills and knowledge they will need for a successful career in their chosen field. For younger people, they also offer the chance to gain their first experience in the world of work. As we do every year, we will be featuring a selection of our apprentices, along with their employers, on our website over the course of the week, highlighting the work they do and their experience of learning at CIPFA. To mark the success of our counter fraud apprenticeships and our ‘Good’ Ofsted grading, we will be attending the Counter Fraud Conference and awards ceremony at the QE11 in London on 23 February. To show our apprentices how much we value their hard work, and to say thank you for choosing CIPFA, we will be taking a few of them with us. This year is already shaping up to be another busy but exciting year for CIPFA and our apprentices. Education and training will always be the cornerstone of our purpose, and we are looking forward to another year of quality outcomes and positive results for our current and prospective students. • Sarah Shreeves, Head of Training Services at CIPFA

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PQ Magazine March 2022

ACCA March exam tips PQ

YOUR MARCH EXAM TIPS How ready are you for the March sitting? Can you tick off all these subjects on the exam tip list from our friends at BPP? Performance Management PM As any syllabus area can be tested in sections A&B the best advice is to study all areas of the syllabus. But you knew that already! In section C expected to be tested on: budgetary systems, planning and operational variances, mix and yield variances, and evaluation of the company performance (either as a whole, or on a divisional basis). This is a performance management paper, so you are advised to be prepared to evaluate some performance. General advice: Plan your answers to section C questions before starting to type and make sure you make reference to the scenario in your answer. The examining team have said that they expect students to study broadly for all of the syllabus areas, meaning that question spotting is not a good idea – instead you are told to expect the unexpected. The exam will be approximately 40% calculation and 60% discussion, meaning that it is not sufficient to be able to perform all of the calculations to pass. Interpretation and application are crucial, especially in section C. Taxation TX (UK) In section A there will be a wide range of topics tested as there are 15 OTQs. Tutors expect at least a couple of these to be devoted to the administration of income tax and corporation tax. So, candidates should ensure they are comfortable with the following: • Due dates for the payment of income tax (including payments on account). • Due dates for the payment of corporation tax (including instalments for large companies). • Filing dates for the income tax and corporation tax returns. • Penalties and interest for late payments and returns. Other topic areas likely to be tested in section A of the exam are: • VAT rules on registration, impairment loss (bad debt) relief, and the SME schemes relating to cash accounting, annual accounting and flat‐ rate schemes. • Inheritance tax due on lifetime transfers both in the donor’s life and on death. • Statutory residence tests for individuals. • Identification of groups of companies for corporation tax loss reliefs and gains. • Trading loss reliefs for both companies and sole traders. In section B the questions will be similar to those of section A, but there will be a longer scenario to deal with. This means a slightly different exam skill is necessary as you have more information to work through and each OTQ will require you to find the relevant information or data in that scenario. It is not a difficult skill, but you have to practise an extensive range of section B questions from the practice and revision kit PQ Magazine March 2022

before attempting the real exam. In section C you will face the longer, constructive response questions with scenarios and much more open requirements. Your answers will need to show not just sound technical knowledge, but also the application of that knowledge to the question you have been asked. At least 50% of your revision time should be spent answering the section C questions in the practice and revision kit to build confidence and speed in a way that will also maximise marks. 1. Remember to learn your income tax and corporation tax pro formas. 2. Calculations which require no more than two or three entries into your calculator can be included on the face of your pro formas (e.g. time apportioning a salary). Calculations which are more complex (e.g. company car benefits) need separate workings which are properly referenced (W1, W2 etc) and have a heading. Use the cell formulae to link the workings answer into your pro forma – then if you change the working the main body will be automatically update. 3. Actually attempt the narrative parts of the requirement – aim for as many sentences as there are marks with each sentence containing something technical. Keep your paragraphs to no more than three sentences long. 4. Your exam will be in the CBE software and the spreadsheets have some differences to the software you may be accustomed to so it is crucial you practice using the CBE software, especially for section C type questions. 5. Remember you cannot insert rows into the CBE spreadsheets. So, leave plenty of space on the page (especially when setting up pro-

formas). You may need to add something in and you can always go back and move workings up the page. Show workings down the page, rather than across the page as it makes them easier to mark. Well‐spaced answers are also easier to mark – and you always want to keep the marker happy. We know that the two longest questions will focus on income tax and corporation tax. These are likely to include the following: • Employment benefits. • Property income. • Relief for pension contributions. • Adjustments to profit to arrive at trading income for both companies and sole traders – in past sittings we have seen a number of questions whereby you have to correct errors in computations included in the scenario. • Capital allowance computations. Finally, remember the pass mark is 50% so you don’t need to be perfect. If you don’t know something have a guess and move on. Sometimes you have to do that in order to get follow through marks in section C questions. If you make a mistake, but then use that incorrect figure later in a subsequent calculation, then that’s fine – you can only lose the mark once. In sections A and B never leave an OTQ unanswered – have a guess if you don’t know the answer. It might be right! Financial Reporting FR Section A: • Fifteen two-mark OTQs on a wide range of topics including several on consolidation and interpretation of financial statements. • Expect a few questions on non-core areas (e.g. inflation, specialised entities). Continued on page 28

PQ ACCA March exam tips Continued from page 27 Section B (Case questions): • Three separate scenarios with five OTQs on each scenario; each question is worth two marks. • Each scenario could be a mix of topic areas or focused on one topic and will usually consist of two/three calculations and two/three narratives. • Questions are not dependant on each other and can be answered in any order. Section C (Constructed response questions): • Two 20-mark questions, one covering interpretations and the other preparation of financial statements. • One question is likely to be in the context of a single company and one in the context of a group, so you could have a single company interpretation and a groups preparation or vice versa. • Accounts preparation questions may include extracts or standalone calculations or full statements of profit or loss and other comprehensive income and/or statement of financial position. • Both questions will cover the accounting for items from other areas of the syllabus. • May include a short separate part, e.g. with a statement of changes in equity, statement of cash flows extract, earnings per share calculation or linked written topic. • A consolidation question would include

one subsidiary and often an associate, with adjustments, e.g. fair values, deferred/ contingent consideration, PUP on inventories/ PPE, intragroup trading and balances, goods/ cash in transit. • A single entity question could be preparation from a trial balance or restatement of given financial statements with the usual adjustments for depreciation, revaluation and current/deferred tax (including deferred tax on revaluations) plus a mixture of adjustments on other syllabus areas, e.g. leases, substance over form issues, financial instruments (change in fair value or amortised cost), share issues, government grants, inventory valuation, revenue recognition or construction contracts. Audit & Assurance AA In section A there will be three mini-case style scenarios, each with five 2-mark questions based on the scenario (30 in total). Each mini-case question will test single topic areas of the syllabus and so will test syllabus areas A, B, C, D or E. Expect questions in section A to focus on areas A and E. All three questions in section B will be broken down into sub requirements and be scenario based. The majority of marks in each question will test syllabus areas B, C and/or D. Areas expected to be tested in questions 16 to 18 include: • Audit planning. • Audit risk (identification and explanation of

audit risks from a scenario and explanation of the auditor’s response to each risk). • Internal audit. • Internal controls (identification and explanation of deficiencies in internal control and the recommendation of suitable internal controls or description of tests of controls). • Audit procedures (both substantive procedures and tests of controls). General advice: Where questions are based on a scenario it is essential that you use the information in the scenario to score the identification marks and then develop this to score the explanation marks. The exam often provides a table for you to complete your answer. For example, audit risk questions will have a table with two columns, one for ‘audit risk’ and one for ‘auditor’s response’ with each properly explained point being worth one mark. Using this tabular approach encourages you to answer both parts of the question, therefore maximising your marks. Pay attention to the verbs used in question requirements as these indicate the number of marks available. For example, the verb “explain” requires a sentence and will score one mark if properly explained whereas the verb “list” simply requires you to list out information with no further explanation and this will score 0.5 mark per point. Finally, it is essential you read the Examiner’s Reports which are issued twice a year after the June and December exam sittings. These are an invaluable source of advice and provide a sample

PQ Magazine March 2022

ACCA March exam tips PQ section A OTQ case style question as well as three constructed response questions from the March/June and September/December sittings. Not only do they provide the example questions but these are accompanied by a commentary from the examining team which gives guidance on interpreting the question requirements and common mistakes/areas of weakness noted during the marking process. These reports can be found on the ACCA website – go to https://tinyurl. com/2p8w44a7 Financial Management FM Questions in section A will often be knowledge based (testing your knowledge of key technical terms), and will balance out the questions in section B and C of the exam to make sure that all aspects of the syllabus are examined. It is therefore likely that a good number of these questions will test your understanding of financial management and objectives (ratio analysis, the concept of shareholder wealth) as well as the economic environment and financial institutions topics (financial intermediation, fiscal and monetary policies). Each section B case-study will be broken down into five separate two-mark MCQs (so 15 questions in total). Areas expected to be commonly tested in this section are working capital management (e.g. the operating cycle, the impact of a change in credit period or accepting a factor’s offer), business or security valuations (e.g. methods of valuation), and financial risk management (currency risk and interest rate risk). Section C’s two 20-mark questions will be broken down into sub requirements and be scenario based. These two questions will focus mainly on syllabus sections C, D and E. Section C is working capital management, section D is investment appraisal and section E is business finance. Whichever of these three topics does not feature in section C is likely to appear in section B of the exam. Questions from syllabus section C (working capital management) are likely to be broad ranging so a good broad knowledge of this syllabus section is important. Candidates are sometimes exposed by a weak understanding of working capital finance. Questions from section D (investment appraisal) are likely to feature NPV with inflation and tax; however, it is important to also be able to answer questions that include risk, leasing, asset replacement and capital rationing. Section E (business finance) questions often either feature an evaluation of financing options (interest coverage and gearing ratios are likely to be important here) or calculation and analysis of a company’s cost of capital. Strategic Business Reporting SBR It is vital that you read the examiner’s approach article on the ACCA website. ACCA has also published several exam technique and technical articles that you should read as part of your exam preparation. These are available in the exam technique section of the SBR exam support resources section of the ACCA website at www. accaglobal.com. The exam section A will be two questions, worth 50 marks in total.

PQ Magazine March 2022

Question 1 – 30 marks: • Q1 will be based on group accounting. Be aware that this question may test any aspect of group accounting, including consolidated statements of cash flows, overseas subsidiaries and associates and JVs. • Make sure you provide calculations if these are asked for. A recent examiner's report stated that some candidates are not attempting the required calculations and therefore struggling to gain a pass mark on this question. • To score well, you need to do the calculations and, where asked explain the principles underlying the calculations you have performed. If a question simply asks for a calculation, you do not need to provide an explanation, unless this is specifically indicated in the requirement. • Time-keeping is key to passing this question. A recent examiner report identified that students were spending too long writing detailed answers to the first parts of question 1 and then not attempting the later parts. The marker cannot award more than the allocated number of marks for each part of the question, so to maximise your marks, you must make sure you attempt each part of the question. Make sure you work out the time you have available for each question, and for each part of the question and then stick to it. Question 2 – 20 marks, including two professional marks for application of ethical principles: • Q2 will cover the reporting and ethical implications in a given scenario. Make sure you consider any threats to the fundamental principles of ACCA's Code of Ethics and Conduct in your answer. • Two professional marks are available in this question and going forward the examiner has stated that the question will make it clear what these marks will be awarded for. Section B will be two questions, worth 25 marks each: • Section B can deal with any area of the syllabus and may be based on a short scenario, a case study with several parts, or

an essay. • Section B will always include a question or part-question involving the analysis or appraisal of information from the perspective of a stakeholder. Make sure you have a go at answering this question. There is no ‘right’ answer at this level – marks will be awarded for sensible points that have been applied to the scenario. • There are two professional marks available for the question that covers the stakeholder's perspective. To gain these marks, you must discuss the issue from the perspective of the stakeholder – e.g. if asked for the investor’s perspective, you must answer from the investor's perspective. • Current issues are usually examined in section B as a part of a question (not a full question). However, current issues could be examined in either section A or section B of the exam. A question on current issues may require the application of existing accounting standards to a current accounting issue – for example, Continued on page 20 accounting for cryptocurrency, accounting for the effects of a natural disaster. General advice: Make sure you plan your time at the beginning of the exam (and stick to it) to ensure you don't over-run on a particular question – it is 1.95 minutes per mark (or 1.8 minutes per mark if you allocate 15 minutes to reading the paper). Strategic Business Leader SBL As with all other ACCA exams SBL is examined as a closed book examination. Unlike the other Strategic Professional level exams which are three hours and 15 minutes in duration, the SBL exam ‘lasts’ four hours. The exam builds upon the knowledge that you gained at the ‘Applied Knowledge’ and ‘Applied Skills’ levels. However, it does also have its own distinct syllabus content. You will not be issued with any pre-seen information in advance of sitting your exam as everything you will require will be made available to you within the examination itself. The SBL exam will focus on one main organisation, and all of the question requirements will relate to this organisation. You may have to take on a variety Continued on page 30 29

PQ ACCA March exam tips Continued from page 29 of roles which may require you to adopt an internal or external perspective when answering questions. You will also be required to respond to a variety of people within the organisation. All of the questions in the exam are compulsory. Every SBL exam will consist of 80 technical marks and 20 Professional Skills marks. Question requirements in the exam will assess and link several subject areas from across the syllabus, and these will test your ability to construct appropriate responses and to carry out numerical analysis. General advice: While four hours (240 minutes) can sound like a lot of time in which to attempt the exam, it is crucial not to become complacent in how you use this time. ACCA recommend spending around 40 minutes reading, planning and interpreting the requirements and the information/exhibits provided. Based on this estimation when planning the amount of time you will spend on each requirement you should look to allocate 2.5 minutes per mark on offer. This time allocation is based on the fact that the exam is 240 minutes in duration, once the 40 minutes reading time is deducted this gives 200 minutes to write up your answer in order to earn the 100 marks on offer. You can earn the 20 Professional Skills marks by virtue of attempting the 80 technical marks on offer, so we can divide the 200 minutes remaining over the 80 technical marks to give 2.5 minutes per mark. It is important to note that you can spend longer than the recommended 40 minutes reading and planning your answer. If you do choose to spend longer on this task then you will need to bear this in mind when you come to writing your answers. Alternatively, you may prefer to work on the basis of two minutes per mark (being 200 minutes divided by 100 marks). Reading question requirements: The SBL exam will contain all of the information that you will require to answer the question requirements set. This information will be presented in a series of exhibits. To help you locate the exhibits most relevant to answering a specific question it is therefore important that you take the time to read the question requirements set carefully as this should help to direct you. Furthermore, reading the question requirements carefully is important as this will indicate the role and the perspective from which you are expected to answer the question. Identifying this early on is important as it will drive how you construct your answer. Planning your answer: Clearly, if you have gone to the trouble of preparing an answer plan it is important that you use it when writing up your answer. To get the most from your answer plan it

is therefore important that you include as much detail as you think will be helpful when the time comes to write up your answer. When planning your work it is important to bear in mind the ACCA’s guide of using 40 minutes for reading and planning. As mentioned earlier you need to remember that some question requirements may require you to conduct some numerical analysis. For example, you may be asked to analyse the performance of the organisation featured in the exam. It is important that you plan the numerical analysis that you intend to perform to ensure that you only focus on performing those calculations that are going to support your answer and provide you with something to talk about. Producing lots and lots of unnecessary calculations for the sake of it will only serve to waste your time in the exam. Using computer software: Ensure you practise timed exam questions using the ACCA CBE software. You need to be comfortable reading and highlighting the exhibits on the screen as well as taking notes in the scratch pad. It will be easier if you plan your ideas and set up your answer structure in the software, in the form of headings. The exam software comprises a word processor, a spreadsheet and some presentation software. The word processor will be used for answering the majority of the tasks. Any calculations you perform should be in an appendix in the spreadsheet software. Tasks requesting slides should be completed in the presentation software. Understanding the syllabus and the appropriate use of theoretical models in the exam: To stand the best chance of passing the SBL exam, you will need to have a good understanding of the entire syllabus. However, it is important to remember that unlike other exams that you may have sat in the past, questions in the SBL exam will not ask you to simply regurgitate your knowledge of a particular topic or theoretical model. Requirements will test your ability to apply your understanding of the subjects covered in

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the SBL syllabus in the context of the question scenario. Furthermore, requirements will not specifically ask you to use a particular model in answering the question. Whether to use a theoretical model when constructing your answer will be a matter of judgement that you will need to weigh up in light of the information presented to you in the exam. Attempting plenty of questions in the lead up to your exam is the most effective way of developing your judgement in this area. Understanding the difference between technical marks and Professional Skill marks: Technical marks relate to the knowledge (which we discussed in the previous section), there are 80 technical marks on offer in the exam. By contrast the 20 Professional Skills marks are awarded for displaying the following skills and behaviours: • Communication. • Commercial acumen. • Analysis. • Scepticism. • Evaluation. Every Professional Skill will be tested in every SBL exam sitting. The Professional Skill being tested will be specified under each question requirement. As you prepare to attempt the exam it is crucial that you take the time to attempt as many practice questions as you can. To increase your chances of exam success you need to ensure that you take sufficient time to develop your understanding of the Professional Skills. Advanced Performance Management APM Q1 section A: Q1 of the APM exam will focus on a range of issues from syllabus section A (strategic planning and control), section C (performance measurement systems and design) and section D (strategic performance measurement). Section A (50 marks) contains one compulsory question. In recent exams Q1 has often required linking a business’s mission to its performance objectives using the concept of CSFs and KPIs. You may well also have to critique and recommend improvements to performance reports and the balanced scorecard and/or information systems could well be tested in this context. The assessment of performance is also likely to be tested and this could easily include benchmarking as a theme. Financial performance measures (ROCE/ RI/EVA, etc) are also likely to be commonly examined in Q1 but don't neglect non-financial issues from syllabus section D such as quality management and reward systems. Q2-3 section B: ACCA have said that one of the section B

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ACCA March exam tips PQ questions will come from syllabus section E (performance evaluation and corporate failure). In section B, commonly tested areas include quality management, information reporting (e.g. big data, lean information), HR frameworks (e.g. reward & appraisal systems), risk management and environmental management accounting. Advanced Taxation ATX (UK) The exam will comprise of two compulsory questions within section A which will both be of a case study style. The first question will be 35-marks in length and the second will be for 25-marks. One of these questions will focus on personal tax issues and the other will focus on corporate tax issues. In Q1 there will be four professional skills marks, and in section A there will be five marks on ethics. Section B will comprise of two compulsory 20-mark questions. These will be in a more succinct, note form style. The exam will examine candidates’ ability to analyse and evaluate the tax implications of various situations, numerical calculations will only be required to assist in producing an answer and no purely numerical questions will be set. Remember any tax breaks available due to Covid 19 are not examinable. Topics/scenarios we would expect to see are: • Personal income tax scenarios which could involve: investing in a pension; investing in EIS, SEIS or VCTs, share schemes; employment income possibly with termination payments; a personal service company; property income or a takeover. • Unincorporated business – particularly including loss reliefs, partnerships or basis period rules. • A question focussing on overseas issues – this could be income tax, capital gains tax, inheritance tax or a corporate scenario. • Capital gains tax versus inheritance tax including availability of reliefs. • Corporate scenarios – likely to focus in more depth on intangibles; research and development; losses; corporate groups or consortia. • Special corporate scenarios such as liquidation; purchase of own shares; close or investment companies. • A business transformation scenario question such as selling a sole trade business, incorporation, or, in a corporate context, the sale of shares versus the sale of trade and assets. • Other common types of question/calculation to expect are: • Reviewing a pre-prepared computation to spot, explain and correct errors. • Calculations such as “tax saved through an action”, “after-tax proceeds”, “the value of a post-tax inheritance”, “net spendable income” or the “net of tax cost of something”. Don’t forget that across the scenarios you can expect to see VAT marks available. Partial exemption, land & buildings, transfer of going concern, capital goods scheme, overseas VAT and registration/group registration tend to be frequently examined. There will also likely be a couple of marks for stamp duty points if you remember to think about PQ Magazine March 2022

be prepared to answer a question relating to completion, review and reporting. There are a number of formats this question could adopt, including, but not limited to, matters to be considered and evidence expected to be on file, a going concern assessment, the impact of subsequent events, evaluating identified misstatements and any corresponding effects on the auditor’s report. Candidates may also be asked to critique an auditor’s report or a report which is to be provided to management or those charged with governance. The second section B question can be drawn from any other part of the syllabus, including sections A, B, C, D and F. Syllabus section G on current issues is unlikely to form the basis of a question on its own, but instead will be incorporated into the Case Study or either of the section B questions depending on question content and the topical issues affecting the profession at the time of sitting the exam (for topical issues, see technical articles below). General advice: This subject often tests topical issues which have been covered by the examining team’s technical articles (for example, the impact of data analytics in September/December 2020). There are also five exam technique articles that you must read covering ethics, risk, accounting issues, audit procedures and reporting.

it in your planning! Finally, don’t forget your basic administration points are also likely to be examined – when do we need to pay tax, when do we file a return and what if either of those are late? Advanced Audit & Assurance AAA The most recent AAA exams have contained no real surprises, although you should be prepared for the look and feel of the embedded email and supporting exhibits. Section A will comprise a case study, worth 50 marks, set at the planning stage of the audit, for a single company, a group of companies or potentially several audit clients. Candidates will be provided with detailed information, which will vary between examinations, but is likely to include extracts of financial information, strategic, operational and other relevant information for a client, as well as extracts from audit working papers, which could include the results of analytical procedures. The date will be set as 1 July 20X5. Candidates will be required to address a range of requirements, from syllabus sections A, B, C and D thereby tackling a real-world situation where candidates may have to address a range of issues simultaneously in relation to planning, risk assessment, evidence gathering and ethical and professional considerations. Four professional marks will be available in section A and will be awarded based on the level of professionalism with which a candidate’s answer is presented, including the structure, layout and clarity of the answer provided. Section B will contain two compulsory 25 mark questions, with each being predominately based around a short scenario. There are no optional questions in AAA. One question will always test syllabus section E, and candidates should therefore always

Advanced Financial Management AFM All AFM exams will have questions which have a focus on section B of the syllabus (advanced investment appraisal) and section E (treasury and advanced risk management techniques). These syllabus areas are therefore high priority areas for your revision. Q1 section A: You can expect section A questions to cover at least two different syllabus areas. This emphasises the importance of having a good broad knowledge of the syllabus (so you are strongly advised NOT to target your revision on a small number of syllabus areas). Section A questions are often based on core syllabus areas such as: project appraisal (domestic or overseas), business valuations and business/financial reorganisations; these areas often include cost of capital calculations. Risk management may also feature in a number of different ways e.g. value at risk, real options, interest rate or current hedging, and risk management (e.g. mapping). Q2-3 section B: • Risk management (currency or interest rate). • Dividend policy and general financing issues. • Real options. • Business reorganisation. General advice: The examining team have stressed that exams are designed to make question spotting extremely difficult for this paper, so it is important to have a broad understanding of the key aspects of each syllabus area. Don't over-emphasise numerical analysis in your final revision – remember that this paper is not a maths exam and, in all exam questions the examiner is interested in your ability to communicate well and to give good management advice that relates to the scenario in the question. 31

PQ agricultural property relief

Death and taxes… In this month’s article in our ‘Keep It Simple’ series Neil Da Costa tackles a popular inheritance tax (IHT) topic that features regularly in tax exams: agricultural property relief. years, so the gift is eligible for 100% APR on the agricultural value of £1m. This was a tenanted farm, so no BPR was available. If Chloe still owns the farm at the date of Natasha’s death, the PET of £1.5m is eligible for £1m APR. The inheritance tax payable by Chloe will be £1,500,000 - £1,000,000 APR = £500,000 x 40% = £200,000. As the PET took place three-four years before death, the tax is reduced by 20% taper relief. Chloe would have to pay £200,000 x 80% = £160,000 IHT. Unfortunately, if Chloe sells the farm before Natasha’s death, the APR is withdrawn and the full £1,500,000 is taxable. The inheritance tax payable by Chloe will be £1,500,000 x 40% = £600,000. As the PET took place three-four years before death, the tax is reduced by 20% taper relief. Chloe would have to pay £600,000 x 80% = £480,000 IHT. By Chloe retaining the farm until Natasha dies, the tax liability reduces from £480,000 to just £160,000 and she will save tax of £320,000. We would recommend selling the farm after Natasha’s death.

Underlying Concept Agricultural Property Relief (APR) is the most important IHT relief for farmland. APR makes farmland and farm buildings tax free for IHT during the lifetime and on death. It is available on both UK and EEA farms that are owner occupied for at least two years. With regard to tenanted farms, the farm must be owned for seven years to get the APR. APR is generally available at 100% but it is only given on the agricultural value of the farm. With regard to owner occupied farms, the remaining value of the farm could be covered by business property relief (BPR) as the farm is also a business. Simple Example: Farmer Giles (owner-occupied farm) Farmer Giles has owned and farmed his UK farm for the last 10 years. He has obtained planning permission carry out commercial development on his farm. The agricultural value of the farm is £1m and the full market value is £1.5m. Farmer Giles decides to retire and give his farm to his son, Steve. Solution to Farmer Giles The gift to Steve is a potentially exempt transfer (PET) valued at £1.5m and will be tax free if Farmer Giles survives for the next seven years. As Farmer Giles has owned the farm for at 32

least two years, 100% APR is available on the agricultural value of £1m. The farm is also a business that has been owned for two years so the balance of £500K will be covered by 100% BPR. In order to claim the APR and the BPR, Steve must still own the farm at the date of Farmer Giles’ death. The value of the PET would be £1.5m - £1m APR - £500k BPR = 0 Simple Example: Natasha (tenanted farm) Natasha has owned a UK farm for the past 10 years. She has obtained planning permission to carry out commercial development on the farm. The farm has been let out to tenanted farmers for the last 10 years. The agricultural value of the farm is £1m and the full market value is £1.5m. Natasha decides to give her farm to her daughter, Chloe. Natasha has already used up her nil rate band and annual exemptions. Natasha is unwell and expected to die three or four years after the gift. What would happen if Chloe still owned the farm when Natasha dies? Compute the tax if Chloe sells the farm before Natasha dies and offer planning advice to Chloe. Solution to Natasha Natasha has owned the farm for at least seven

APR on death estate APR is also available on the death estate which allows farms to be passed on to the next generation without any tax liability. Simple Example: Liu (owner-occupied farm in death estate) Liu owns a chicken farm in the UK which he has owned for more than two years and is valued at £2,000,000. In addition, Liu has other wealth of £2,000,000. Liu is single and, on his death, left £4 million including the farm to his two children, Ming and Lee. How much IHT is payable on the death estate? Solution to Liu Yong Liu’s death estate is eligible for 100% APR on the farm valued at £2m. Liu’s death estate is worth more than £2.35m so no residence NRB of £175,000 can be claimed. The relevant estate for the test is before APR. The taxable death estate is £4m - £2m APR £325K NRB = £1,675K IHT payable on the death estate will be £1,675 x 40% = £670K. • Neil Da Costa is a Senior Tax Lecturer with Kaplan in London. He is the author of Tax Condensed and Advanced Tax Condensed, which summarises the entire syllabus using memory joggers PQ Magazine March 2022

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Managing exam stress Mark Foley explains why it is so important that you plan for success o you have words of affirmations on your ceiling that are the first thing you see when you wake up? “You’re amazing, you’re going to ace this exam!” Maybe you have a stress-relieving app that brings you peace when you need it. As you prepare for your CIMA exams, we encourage you to plan your strategies and tap into all positive coping techniques.

It’s all possible with a plan Understand the format of your exam — Objective Test and Case Study exams. Familiarise yourself with the exams. Once you have booked your exam, take a look at our free exam and question tutorials. These resources will help you to understand the exam software and the types of questions included in both the Objective Test and Case Study Exams. Plan your study strategy. Do you study better with other people around you studying, or do you need to be alone in a room with no distractions? Maybe a little bit of both is the secret to your study success. Determine your study style and then plan your strategy. Block out dedicated study time. Use your Google, iCal, Outlook, Android calendar on your tablet, phone, smartwatch, or computer to plan your study time! Whether it’s 30 minutes on your lunch break, that hour after you put your child to bed or every Saturday at noon, let whatever works for you work for you. Put enough consistency in your schedule that you study for a certain amount of time each week. Study by level, not by subject. The CIMA exam is taken at three levels — strategic, management and operational, with three subject areas for each level. Although the subject areas align with three pillars across the levels, plan your studies by level. Exam blueprints are available online for each level. You can study one subject at a time or all three, whatever works for you. You can also take the exams in any order; however, we recommend following the E, P, F in order per each level as outlined below. Study across the levels Enterprise Pillar

Performance Pillar

Financial Pillar

Operational Level

E1 — Managing Finance in a Digital World

P1 — Management Accounting

F1 — Financial Reporting & Taxation

Management Level

E2 — Managing Performance

P2 — Advanced Management Accounting

F2 — Advanced Financial Reporting

Strategic Level

E3 — Strategic Management

P3 — Risk Management

F3 — Financial Strategy

Prepare with study resources and practice tests. There are a variety of tools to help you achieve success. CIMA Planner lets you set a personalised study plan and track your progress as you go. CIMA Study is an online learning resource the CIMA faculty reviewed, approved and delivered in partnership with Kaplan. CIMA Aptitude offers mock exams in practice mode or with timed assessment. For each of the three Case Study exams, there is a Walkthrough Answer guide, which compares a passing exam

answer with an unsuccessful one and is annotated with examiner feedback — it’s a must-read before sitting your Case Study exams. Take a look at the one for the Operational Case Study to get an idea of what the guides look like. Prioritise positive coping techniques as a life skill Did you know there are proven health benefits to hugs and that they are great stress-relievers? Well, now you do. Positive coping techniques help mitigate life-stressors and are beneficial for helping exam nerves. After you have planned your study strategy, here are some stress-relievers to consider: Plan time for rest and relaxation. Maybe a massage, a trip to a scenic area that brings you peace, or some time away from a crowded home environment is what you need. Maybe it’s five minutes a day meditating or sitting in silence to calm your mind. Find your relaxation sweet spot and plan that time the way you plan your study strategy. Talk to a trusted friend, colleague or your manager. Resist any urges to keep your feelings bottled up or to deal with your stress in isolation. Seeking support to help navigate fears and anxiety is often invaluable. Tap into your network of supportive friends who provide a non-judgmental listening ear. You can also consider professional counselling to help you develop better ways of coping with stress and anxiety. Find a physical stress-reliever. Physical activity releases endorphins that relieve pain and create a general feeling of well-being. It doesn’t matter what you choose to do — dance, kickbox or running — getting into something physical is good for your body and has a calming effect on the mind. Pour positivity into yourself. You’ve got this. You are a smart person that is well-equipped to pass your CIMA exams. Whether you have visual words of affirmation or you speak them to yourself, believing you can do this is a step in the right direction. • Mark Foley, Director of Relationship Programmes – Management Accounting at the Association of International Certified Professional Accountants, representing AICPA and CIMA

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Mark-up and margin calculations explained Our AAT guru Teresa Clarke explains all you need to know about mark-up and margin ark-up and margin calculations are essential for your studies for AAT Level 3 Final Accounts Preparation. Mark-up is on cost and takes the cost figure of 100% and marks UP. Margin is on sales and take the sales figure of 100% and the margin is withIN this. So, mark-up goes up from 100% and margin is within 100%. The best way to look at this is in a table, and you can use this for an exam question, too. Jas buys units for £250 each and uses mark-up at 25% to set his sales price. Put this into the table first and then calculate the missing figures.

Mark-up Cost Mark-up Sales price

100%

£250.00

25%

£62.50

125%

£312.50

the table to find the cost of the item. Firstly, we draw up the table for the mark-up at 40%. Cost is 100% and we put in our markup of 40% and then the sales price is 140%.

Margin at 18% Mark-up at 40% Cost

Workings: £250 cost = 100% £250 x 25% mark-up = £62.50 Add the mark-up to the cost to find the sales price = £312.50 Janis buys units for £140 each and uses margin at 30% to work out her sales price. Put this into the table first and then calculate the missing figures.

100%

Mark-up

40%

Sales price

140%

70%

£140.00

30%

£60.00

100%

£200.00

Sales price

Margin

18%

Sales price

100%

Mark-up at 40%

Margin at 18%

Cost

100%

Mark-up

40% 140%

£700

In order to find the missing numbers now we take the £700 and divide it by its associated percentage of 140 to find 1%. 700 / 140 = £5 £5 = 1% Mark-up is 40% so we multiply £5 by 40 to find this figure. £5 x 40 = £200 The cost is 100% so we multiply £5 by 100 to find this figure. £5 x 100 = £500 When we put these in the table, we can check the figures:

Workings: The sales price represents the 100% but we were given the cost of £140. £140 divided by 70 = 1%. 1% = £2 Then multiply this up by 30 for the margin = £60. Add these two together to arrive at the sales price. Remember: The key to answering this question is the table. If you use the table to answer a question, it will make it much clearer. Whatever number you are given in the question you can calculate the others by finding 1% and then multiplying up. Let’s look at the maths again in another couple of examples.

Cost plus mark-up = sales price £500 + £200 = £700

Example 1 We are given the mark-up percentage of 40% and told that the sales price is £700. We can use

Example 2 We are given the sales price of £90 and told that the margin is 18%.

82%

Then we can add the figure we know into the table.

Margin

Cost

Then we can add in the figure that we know.

Sales price Cost

We can put these into a table. Sales price is 100% and remember that margin is all within 100%, so margin is 18% and cost is 82%.

Mark-up at 40% Cost

100%

£500

Mark-up

40%

£200

Sales price

140%

£700

Cost

82%

Margin

18%

Sales price

100%

£90

We know that the sales price of £90 represents 100%, so we can divide £90 by 100 to find 1%. £90 / 100 = 0.90 or 90p We see that the margin is 18%. £0.90 x 18 = £16.20 Cost is 82% £0.90 x 82 = £73.80 Now we can put those into the table to check the figures. Margin at 18% Cost

82%

£73.80

Margin

18%

£16.20

100%

£90

Sales price

To check the figures: Cost plus margin equals sales price. £73.82 + £16.20 = £90 For more help with mark-up and margin, take a look at my workbook, Incomplete Records, available on Amazon in both paperback and as an eBook – see https://www.amazon.co.uk/dp/ B08Y49HFPD • Teresa Clarke FMAAT PQ Magazine March 2022

PQ AAT exams PQ

Accounting for inventory Karen Groves explains this important concept and tests your knowledge with a question about it s part of your AAT studies, you will need an understanding regarding how to account for inventory, which can include both raw materials and goods that are held for resale. Inventory is a current asset and must be included in the financial statements to reflect this. IAS 2 Inventory states that we should recognise inventory at ‘the lower of cost and net realisable value’. The cost includes the purchase cost, costs to bring the inventory to its present location and any conversion costs. The net realisable value (NRV) is the estimated or actual selling price minus any costs to sell, for example selling and distributing. At the end of an accounting period, the inventory is counted and valued. Inventory is shown in both the Statement of Profit or Loss (SPL) and Statement of Financial Position (SFP). Let’s look at the Statement of Profit or Loss:

£ Revenue Less:

than cost. If inventory was valued at the NRV, this would include a profit element which is not allowed under IAS2. Occasionally, a loss could occur if the NRV was lower than the cost and, in this situation, the NRV amount would be used as the inventory valuation. IAS2 also states that each inventory line should be valued separately, and not merged. Example There are two lines of inventory for company A. The details of the cost and NRV are as follows: Cost NRV £ £ Product E

250

325

Product C

120 370

110 435

Cost £

NRV £

Inventory Valuation £

X Cost of sales Opening inventory

Purchases

Less Closing inventory

(X)

Gross profit

Solution

(X)

Product E

250

325

250

Product C

120 370

110 435

110 360

The cost of sales includes the opening inventory (this would be the previous year’s closing inventory), plus purchases, minus closing inventory. The closing inventory is deducted as this inventory will be carried forwards into the next accounting period. The closing inventory will also be entered in the Statement of Financial Position, as a current asset. The double-entry to account for the closing inventory would be: Debit – Closing Inventory (SFP) Credit – Closing Inventory (SPL) Example EC manufacture shirts. The following information has been provided: Cost per shirt £8 Selling price per shirt £2 Selling price £15

Product C has a lower NRV than cost, so this must be used for the valuation. Question There are three lines of inventory for company B. The details of the cost and NRV are as follows:

Product E Product C Product K

£ 8 13

Each shirt in inventory would therefore be valued at £8, being the lower of cost and NRV. Usually, the inventory will sell for a profit, so the NRV will be higher PQ Magazine March 2022

NRV £ 140 160 390 690

Cost £ 150 105 350 605

NRV £ 140 160 390 690

Solution

The value for each shirt in inventory would be as follows: Cost Net realisable value (£15 - £2)

Cost £ 150 105 350 605

Product E Product C Product K

Inventory Valuation £ 140 105 350 595

• Karen Groves is an AAT tutor and AAT Course Director at e-Careers 37

PQ test bank

So what do you know? Professor Philip E Dunn tests your knowledge of Consolidated Financial Statements Q1. Which International Financial Reporting Standard deals with a Business Combination? Q2. Which International Financial Reporting Standard deals with Consolidated Financial Statements? Q3. Positive Goodwill is capitalised but is then subject to what on an annual basis? Mini case study Dunn Ltd acquired 7.5m shares in Davenport Ltd at a cost of £30m on 1 January 2020 and the summary Statements of Financial Position of the companies immediately after the acquisition were: Dunn Ltd Non-Current Assets Investment in Davenport Current Assets Total Assets

£m 60.00 30.00 20.00 ------£110.00

Equity Share Capital Retained Earnings Total Equity Current Liabilities Total Equity and Liabilities Davenport Ltd Non Current Assets Current Assets Total Assets Equity Share Capital 10m Ordinary Shares £1.00 each Retained Earnings Total Equity Current Liabilities Total Equity and Liabilities

30.00 70.00 100.00 10.00 ------£110.00 ------£m 25.00 15.00 ------£40.00

10.00 23.00 33.00 7.00 ------£40.00

Q4. Calculate the amount of Goodwill arising on the acquisition. Q5. Calculate the Non-Controlling Interest. When drafting the Consolidated Statement of Financial Position immediately after the acquisition what would be the values for the following? Q6. Non-Current Assets. Q7. Goodwill. Q8. Current assets. Q9. Total assets. Q10. Share capital. Q11. Retained earnings. Q12. Non-Controlling Interest. Q13. Total equity. Q14. Current liabilities. Q15. Total equity and liabilities. Q16. In future years the Goodwill will be subject to Impairment under which International Financial Reporting Standard?

Answers Q1. IFRS 3 Business Combinations, Q2. IFRS 10 Consolidated Financial Statements, Q3. Impairment, Q4. £5.25m, Q5. £8.25m, Q6. £85m, Q7. £5.25m, Q8. £35m, Q9. £125.25m, Q10. £30m, Q11. £70m, Q12. £8.25m, Q13. £108.25m, Q14. £17m, Q15. £125.25, Q16. IAS 36 Impairment of Assets. 38

PQ Magazine March 2022

careers PQ

Dear Karen Ask PQ’s agony aunt Karen Young when you need expert advice. Email your dilemma to graham@pqmagazine.com, and he will pass on the best ones to Karen THE QUESTION The Christmas break led me to realise that I want to invest more into my professional development. Do you have any suggestions for how I can progress my career outside of my day job?

CFOs going for growth CFOs seem to be looking past Omicron and plan to focus their businesses on growth in 2022 CFOs rate persistent labour shortages, the pandemic, climate change and higher inflation respectively as the top risks facing their firms, according to Deloitte’s UK CFO Survey Q4 2021. Compared with this time last year, CFOs have reduced their risk rating for Covid-19. In contrast, labour and supply shortages have emerged as significant short-term risks over the past year, resulting in a higher risk rating for inflation.

Almost half of the CFOs surveyed (46%) reported that their businesses have faced significant or severe recruitment difficulties over the past three months. Things are expected to improve in 2022, with 24% of CFOs expecting significant or severe recruitment difficulties in a year’s time.

The survey found that finance leaders are focused on growth, with a record 37% rating an increase in capital investment as a strong priority in the next 12 months. Expansionary strategies, including introducing new products and services, expanding into new markets and raising investment are a greater focus now than at any time since the question was first asked in 2009. When it comes to investment an overwhelming majority of CFOs expect to invest more in digital technology (94%) and workforce skills (77%) over the next three years. Most CFOs (84%) expect productivity to grow faster, too.

In brief

KAREN’S RESPONSE Online learning of every description is exploding right now, and as a result there is no excuse for you not to continue to learn, grow and hone your skills to help you prepare for your next job or promotion. That said, you should not ignore the immense benefits that both old-school organic networking and online networking can have on your career. Have a look at some professional finance organisations or groups that you can join. You can then stay up-to-date with the conversations that the members are having and what journals are being published. Joining LinkedIn groups can also allow you to join in with these conversations, giving you the ability to message members directly and remotely. You may take this networking one step forward and look to take on a leadership role on a committee or for a local organisation, to showcase the skills you use both inside and outside of your day job. You could also use this role as a tool to target your professional association to raise your visibility among those you are in contact with on LinkedIn – network whenever you have the opportunity. • Karen Young is a director at Hays. She is passionate about helping people to find the right job, and companies to find the right person PQ Magazine March 2022

Pap Fancy a four-day week? Some 30 UK companies have joined a six-month pilot offering employees a four-day working week. The trial, which starts in June, is being run on the 100:80:100 model – 100% of the pay for 80% of the time, in exchange for a commitment for 100% productivity. Staff will be expected to work between 32 to 35 hours a week. The pilot programme will be run in conjunction with academics, the UK 4 Day Week Campaign and the think tank Autonomy. Pap Boosting diversity UK companies must step up their efforts to appoint more directors from ethnic minorities, says the Institute of Directors. It

said that many companies have failed to meet government targets, and they were accused of being ‘too slow’ to increase ethnic minority representation. While recruitment of more diverse directors has accelerated, some 20% of FTSE 100 companies still lack any board members. Under the Parker review, FTSE 100 companies were told to have at least one director of colour on the board by the start of 2022. The review also recommended that FTSE 250 companies should meet the target by 2024. Pap London top for finance London leads the global financial and professional services rankings for the second

year running, according to new figures published by the City of London Corporation. London received an overall competitiveness score of 61, followed by New York (58) and Singapore (53). The rankings were rounded out with Frankfurt (45), Hong Kong (39) and Tokyo (36). For the first time, the research includes Paris as a second European comparator centre, with a competitiveness score of 41. The study said that the UK’s international financial reach continues to be unmatched. Against the backdrop of a challenging year, UK financial services exports increased and the UK’s trade surplus remains higher than in all other global financial centres.

The PQ Book Club: books you should read Sort Your Brain Out: Boost your performance, manage stress and achieve more, by Dr Jack Lewis and Adrian Webster (Capstone, £10.99) How is your brain feeling at the moment? Do you need to unlock its hidden potential? Well, this is where the authors come in. They start off with a nice picture of your ‘amazing brain’ – that wrinkled pink lump of pulsating wetware! It may be 89% water and 11% fat, but Lewis and Webster remind us it is the ultimate supercomputer, and currently light years ahead of anything that humans have so far managed to create. It is

also working relentlessly, just for you. They stress there are a few things you can do to ensure you improve your brain’s performance. The first is water! You must hydrate your brain every day – remember it’s 80% water. Every time you breathe you lose water in the form of water vapour so start every day with a big glass of water. Next up is exercise. We are talking 20-30 minutes of moderate exercise every day (or 40-60 minutes every other day). This is particularly important in the revision phase. How you deal with stress is

also important. The authors think it has a bad reputation – cortisol, the primary stress hormone, is actually vital for helping us get things done. The key point here is that a little bit of stress is the short-term is a good thing. Chronic stress, however, is most definitely bad. PQ rating: 5/5 There are lots of books out there helping you ‘sort your brain out’, but this one is really nicely put together – like a healthy brain! 39

PQ got the a story, funny or serious, you want to share? Email graham@pqmagazine.com

Time to get Wordle?

The last chairman of the FRC Once appointed, Jan du Plessis will be the last chairman of the FRC and the first of the ARGA. But who is Jan? Well, he started his working life as an articled clerk (trainee) at Greenwood Ironside, a small accountancy firm in South Africa, and still has a beach cottage there. As FRC chairman he will earn £125,000, The ex-chair of BT liked to get up at 5.30am – so staff may need to get into work a little earlier if they want to beat the boss in! He drives a 15-year-old silver Mercedes estate and at his Buckinghamshire home he has alpacas, chickens, guinea fowl, pigs and sheep.

Have you signed up to the Wordle craze yet? It has taken social media by storm and even PQ magazine has got hooked. Wordle is a simple puzzle game which gives you six chances to guess a five-letter word. If the letter goes green you have the right letter in the right place, yellow means you have found the letter but it’s in the wrong position. The game was created by a software engineer Josh Wardle in New York for his partner. He has now sold it for a seven figure sum! We don’t want to spoil it for you, but computer scientists and linguists have been trying to discover the ultimate five-letter word start. ‘IRATE’ is a popular suggestion, as is ‘LATER’. PQ magazine always starts with ‘TRAIN’, but we thought it should really be ‘DEBIT’!

Know your symbols?

HMRC fraud squad brings in £1billion

Hidden Assets If you are running out of things to watch on the goggle box then PQ magazine has a recommendation for you – Hidden Assets (BBC 4). Set in Ireland and Belgium the story involves diamonds, a terrorist bombing campaign, and a dead body (more than one, actually). It’s up to Emer Berry and her Criminal Assets Team to make sense of it all… and in truth it makes so much more sense than the last two series of Line of Duty! Think Scandi Noir here, but what we really liked is the fact that it didn’t spoonfeed the audience despite the complex plot.

’ WEV E

HMRC’s Fraud Squad is now five years old and since its creation it has recovered more than £1 billion. Since 2016, more than 1,200 seizures of cash and assets have been made, including gold bars worth £750,000 from a passenger at Manchester Airport and £48,000 found in a freezer drawer, hidden among chicken nuggets at a house in Blackpool! The gold bars were auctioned off with the proceeds going back into the public purse, the cash was part of a £16 million tobacco fraud. Simon York, Director, Fraud Investigation Service, said: “Whether it’s cash seizures, confiscation orders or account freezing orders, recovering these assets stops criminals bankrolling their lavish lifestyles and funding further crimes that harm our communities, such as drugs, guns and human trafficking.”

New research by AAT has found that millions of Brits can’t identify basic GCSE level maths symbols, with only 2% of the 2,000 adults surveyed able to identify all 10 of the GCSE level symbols! Just 41% of those surveyed could identify the infinity symbol and 34% cannot name the less than sign. Perhaps more worryingly more than a quarter of teachers couldn’t identify the square root symbol. The idea behind the AAT research is to highlight how most adults haven’t used these symbols since they left school, and maths knowledge is not indicative of success when it comes to a career in accounting or finance – there is a much broader skillset involved. Rachel Staples, Head of Qualifications and Product Development at AAT, said: “Maths can be a polarising topic with many people believing they aren’t good at it. However, that shouldn’t be the case. While we’ve looked into the knowledge of the nation in regards to common GCSE mathematical symbols, the truth is they aren’t used as frequently in later life or indicative of overall professional success.”

GOT THE L OT

Book of numbers The i Book of Number Puzzles has brand new content throughout, with a collection of over 100 mixed puzzles that have been specially selected by the creators of the i puzzle page. This fantastic range of number puzzles will engage even the most avid solver. Instructions are featured alongside every puzzle and solutions are included at the back of the book. The book contains a large range of puzzle types familiar from the daily puzzle pages in the i, together with a selection of other puzzle types, including ‘calcudoku’, mental maths and maths puzzles. To be in with a chance of winning one of three number puzzle books this month simply email your name and address to giveways@ pqmagazine.com. Head up your email ‘Numbers’.

Mindfulness counts We are giving away the fourth in a series of four books by bestselling author Gareth Moore, which currently includes The Mindfulness Puzzle Book, The Mindfulness Puzzle Book 2 and The Mindfulness Puzzle Book 3. There is also an ebook, Mindfulness Puzzles for Your Kindle, comprising content from books 2 and 3. Puzzle-solving is a favourite relaxation technique for many, and this book features a wide range of specially selected games to provide the perfect level of challenge and reward for your brain. Feel the tension release as you focus on each achievable and fun task, and experience the endorphin-reward buzz as you successfully complete each puzzle. We have three books to give away. To be entered into the free draw simply send you name and address to giveways@pqmagazine.com and we will do the rest. Head up your email ‘Refresh’.

Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 11 March 2022. The main draw will take place on Monday 14 March 2022.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 40

PQ Magazine March 2022

PQ magazine, March 2022

Articles inside

ACCA exam tips Five pages of

CIMA spotlight Manage exam

Test bank How much do you know about consolidated financial statements?

Keep it Simple Neil Da Costa

CIPFA spotlight Apprentice

Financial statements We

Reaching net zero Change

EY initiative Big 4 firm opens new centre of excellence in Manchester

AAT qualification changes

Study advice Top time

CIMA results Sitters cope well

A question for Tom Tom

ACCA spotlight Why the

AAT spotlight How the AAT