Professionally qualified

accountants must be able

to do more than simply post
transactions correctly and
prepare accurate financial
statements intelligent
analysis and interpretation of
these, with a view to reaching,
presenting and explaining a valid
conclusion, is just as necessary.
Whether youre dealing
with company-wide financial
information or data and records
from specific divisions, sites or
accounting periods, its likely
that youll also be required to
identify and investigate unusual
or alarming indicators, make
deductions based on how
different aspects of financial
reports interrelate, and suggest
reasons for certain financial
results or trends reflected
in the figures. End users of
financial statements whether
internal or external need to be
confident they can make sound,
informed decisions based on
the information with which they
are presented.
To effectively demonstrate your
competency, you might:
Calculate and interpret ratios
for meaningful comparison
of year-on-year figures or
benchmarking against relevant
departments of industry
competitors for instance, to
evaluate profitability, efficiency
or investor yield
Analyse and draw conclusions
from inventory levels, revenue
figures and balance sheets
Identify trends and use your
knowledge of the business
and industry sector to raise
issues management may
want to address (eg common
features of under-performing
or significantly over-performing
profit centres)
Meet with external clients or
internal stakeholders to present
and discuss your findings.
The next step is to answer
the challenge questions for
this objective in the trainee
development matrix (TDM):
Outline your contribution
to interpreting financial
transactions or
financial statements:
State your individual
responsibility within the
context of the team or
overall process who uses
the information you prepare,
and for what purpose?
What were you asked to do
and how might you have
exceeded the demands made
on you in a positive way?
How has this interpretation
helped your department
or organisation?
Provide examples
of decisions or
recommendations that
have arisen from your
findings, made by you, your
colleagues or management
Consider the impact
of those decisions or
recommendations
such as saving costs,
improving cash flow,
generating extra revenue or
securing investment
What business decisions have
or could be made based on this
interpretation?
These could include new
capital purchases, piloting
new products or services,
opening new sites/branches
(or even closure of sites
or lines of business) or
calculation of commission
payments to sales and
business development staff
Also relevant would be
instructions to keep a
watching brief on specific
trends where you may have
identified potential threats or
opportunities but which need
observation over a longer
period before any decisions
might be taken.
Performance objective 11 is
linked to Paper F3, Financial
Accounting, Paper F7, Financial
Reporting, and Paper P2,
Corporate Reporting.
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PO 11: INTERPRET FINANCIAL TRANSACTIONS AND FINANCIAL STATEMENTS
For PER support and advice on answering challenge questions
www.accaglobal.com/students/acca/per/support
FOCUS ON PER
01
STUDENT ACCOUNTANT ISSUE 01/2010