Lead up to DFS December 2009

Steve Collings presents a series of revision tips for students studying for the AAT DFS paper in December 2009.

• Ensure you have a copy of the Unit 11 Guidance Notes from the AAT website. If you go to the Homepage and type ‘Unit 11 DFS Guidance’ you will be able to download the Guidance Notes.
• You know you are going to get asked to do the following:
• Adjustments to a trial balance using journal entries.
• Preparation of single entity financial statements.
• Preparation of a consolidated primary statement (usually the consolidated statement of financial position but the consolidated statement of comprehensive income could also be asked).
• Preparation of all (or part) of the statement of cash flows.
• Write about accounting standards.
• Financial statement interpretation using ratio analysis.
• Make sure you have covered all the above using a mix of exam standard questions PLUS working all past papers on the AAT website which examine IFRS. It is widely known that practising exam standard questions greatly improves the likelihood of success in the exam.
• Do not get bogged down in accounting standards study – as long as you have a basic and broad (B&B) knowledge of the examinable standards, that will suffice.
• Section 1 will comprise 70% of the exam with section 2 being the remaining 30%. Students often fall down in section 2 because they have not devoted sufficient time in section 1 – make sure you cover ALL aspects of the syllabus sufficiently enough.
• IAS 1 (revised) will apply to DFS from the December 2009 sitting. Remember therefore that:
• Balance sheet = statement of financial position
• Income statement = statement of comprehensive income
• Minority interests = non controlling interests
• Cash flow statement = statement of cash flows
• Always stick to your time allocation. If you run out of time – move on. By not moving on you risk losing marks on other aspects of the paper.
• If you are asked to do adjustments that increase or reduce profit before taxation DO NOT start adjusting any corporation tax liability – simply use the tax liability given to you in the question. This is a financial reporting exam, not a tax exam. Such adjustments are tested in BTC.
• Remember in the consolidation you only ever consolidate where ‘control’ exists. Control exists when the parent holds more than 50% of the shares. ‘Control’ can also be obtained where the parent holds 50% or less but is able to direct the subs operating and financial policies. For the purposes of DFS work out the shareholding (number of shares acquired ÷ subs issued share capital) to ascertain the percentage.
• In December 2008 the consolidation question resulted in the parent owning 66.667% of the sub. Where this happens change it to a fraction so that parent owns 2/3 with the non controlling interests owning the remaining 1/3. Using a % would allow your statement of financial position to balance, but the numbers would be slightly different.
• The examiner can ask candidates to prepare a statement of cash flows in full, in part or comment on a statement of cash flows. Be prepared to be able to do all of these in full and as a combination.
• The examiner has said that students often fail DFS because they cannot deal properly with the discursive element to the paper. Remember that the paper will consist of preparing financial statements (section 1) and discussing financial statements (section 2) so you must be able to write about various issues.
• Do not think that just because a topic has been tested in recent sitting that it will not come up in December 09. This is called ‘question spotting’ and is reckless!
• Ensure you have a good study timetable and keep to it! Take account of other exams you may have and other commitments.
• Try to do lots of short study periods rather than long drawn out study sessions.
• Ask as many questions as you feel necessary either via your tutor or through the forums.
• Try to attend a revision course and use these courses to ‘iron out weaknesses’ and address issues you have. I am running revision courses for the December 2009 sitting on 7 November 2009 in Manchester and 21 November 2009 in London. Drop me a line at .(JavaScript must be enabled to view this email address) if you are interested in attending.
• Focus on your weaker areas rather than areas you are good at. For example if you like doing the statement of cash flows but hate consolidations, then you need to focus more on consolidations.
• If you suffer from bad handwriting, try slowing down the speed at which you write.
• Get into the habit of always showing your workings. In a computational paper such as DFS it is vital that a marker can see your method of arriving at an answer. You can get credit for an incorrect answer if the marker can see your methods. A marker cannot give you credit for a wrong answer if they cannot see how you have arrived at it. No working is a waste of time!

Steve Collings FMAAT ACCA DipIFRS is a partner in AccountancyStudents.co.uk.