study professional stage

The restyle

Accounting
for change

The Financial Management (FM)

examining team set out whats new
from the September 2013 sitting

Valuation of companies will now

include the Shareholder Value Analysis
approach introduced as part of
investment appraisal. You will be
required to calculate the value of a
business using the seven value drivers
and discuss the results.
The section on the Efficient Market
Hypothesis has been extended to include
modern behavioural theories of investor
behaviour. You should be able to discuss

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whether these behavioural theories mean

markets are no longer (at least semistrong form) efficient.
The section on CAPM has been
extended to incorporate other models
for adjusting for risk, which recognises
the weaknesses of the CAPM model. You
will be expected to be able to discuss the
weaknesses of the CAPM and how these
alternative models attempt to overcome
the weaknesses.
The corporation tax rate used will be
21% pa, with writing down allowances
at 18% pa.
The calculation of the contract size for
stock index futures and options has been
amended to bring it into line with the
treatment used for foreign exchange
futures and options. The futures or
exercise price, as appropriate, will be
used to determine the contract size, not
the current spot rate.
The calculation of the cost of
redeemable debt has been altered to
reflect the fact that premiums/discounts
on redemption have a tax effect as well as
the interest paid. The calculation will now
be done as a gross redemption yield (ie,
the cost of debt ignoring any tax relief ),
adjusted for the tax relief as the final
stage of the calculation.
R
 emoval of all OT questions from
the exam.

eptember 2013 will be your first

opportunity to sit the new
Professional Level exams
including the new FAR module, which
will ultimately replace the current
Professional Stage Financial Accounting
and Financial Reporting exams after the
last sitting of these modules in June 2014.
If youve previously sat the Financial
Accounting (FA) exam, you might notice
some differences between current FA
and new FAR.
One of the most noticeable changes is
the length of time youll get to complete
the exam. FAR is a three-hour exam; the
only paper of this length at Professional
Level. You will need to remember to
allocate your time on a different basis
than you may have done for other
Professional Level modules. In a threehour exam, one mark equates to 1.8
minutes rather than the 1.5 minutes for a
two and a half hour exam.
As a result of the different time
allocations between FA and FAR, marks
may be allocated in different ways. All six
Professional Level exams are marked out
of 100. However, both FA and FAR have
a question on the preparation of
consolidated financial statements;
during the parallel running period this
question could be common across the
two papers.
Use the mark allocation to guide
your time: a 20-mark question in the
FA paper would indicate that you
should spend 30 minutes on this
question. The same question
would be set at 17 marks in the FAR
exam, to ensure that you still have
30 minutes to spend on the
question. So if you are comparing the
exam papers after they are published you

These changes are all examinable from

September 2013. Therefore it is important
that you ensure you are studying from the
correct learning materials for the exam
sitting. If you are at all unsure, check with
your tutors or contact the student
support team.

ikon

he format of the FM exam from

September will be significantly
different to the Professional
Stage Financial Management module that
it replaces; there will no longer be any
objective test (OT) questions. Instead, you
will need to answer three or four written
test questions (WTQs). The sample paper
contains three WTQs and the maximum
mark for any one question will be 40. The
level of difficulty will remain at the
standard set by the Financial
Management exams pre-September 2013.
The marks attached to the WTQs will
broadly follow the syllabus weightings:
there will be a risk question worth
approximately 30 marks, with the two
other questions covering the financing
and investment sections of the syllabus
worth approximately 35 marks each.
Financing and investment may form the
basis of two separate questions, or
could be combined together within a
single question.
The syllabus is largely unchanged
except for the addition of ethics, which is
examinable from the March 2014 sitting.
However, there are some changes to the
coverage of certain learning outcomes in
the learning materials to better aid
progression to the new Advanced Level
Strategic Business Management exam.
The major changes, together with other
key updates, are as follows:

The Financial Accounting and Reporting

(FAR) examiners explain some of the
changes to the assessment of financial
accounting from September 2013

july 2013 vital

vital july 2013

will need to remember that the marks are

allocated on a different basis for this
reason. Of course, this difference will
only occur during parallel running,
when the same topics may be tested in
different modules.
The FAR paper consists of four or five
written test questions; the number of
questions will vary from sitting to sitting.
To ensure a smooth transition between
Accounting at the Certificate Level and
Corporate Reporting at the Advanced
Level, the FAR paper covers accounting
standards in both breadth and depth,
with flexibility built into the paper to
allow this. There are broadly five different
question types which may feature in the
FAR module:
p
 reparation/completion of single
entity financial statements from a trial
balance or draft financial statements;
p
 reparation/completion of consolidated
financial statements from individual
financial statements or consolidated
financial statements;
w
 ritten questions explaining the
application of IFRS to specific scenarios;
m
 ixed or single topic questions
requiring extracts and/or calculations
with possibly an explanation of the
accounting treatment element;
s tatement of cash flows single
company (completion of a draft
statement or the requirement to prepare
extracts) or a consolidated statement.
Within any one or more questions,
accounting concepts, ethics and UK GAAP
differences will also be tested. There will
also be more emphasis on showing the
double entries for transactions.
Visit icaew.com/studentresources to access
syllabus, sample papers and other resources
for all of the new Professional Level modules
being introduced from September 2013

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