PAPER F-7

USEFULL Exam techniques AND TIPS

Expect not to finish any question. When you run out of time for that
question, stop and move on to the next.
Not finishing a question is not something to feel bad about; its just part of
your technique for passing the exam. (YOUR FIRST OBJECTIVE 50%)
Be prepared that your statement of financial position or cash flow may not
balance.
o If it doesnt, leave it and get on with the rest of the paper
o Dont worry about it now. (If it does balance, well done!)
BELOW ARE SOME USEFULL TIPS FOR ATTEMPTING AN EXAM
Q1) Groups consolidation
You will benefit from having the proforma/standard workings (5 STD
WORKINGS) of your final answer set up first.
o For example if the question requires a consolidated SFP then drawing
up the SFP with open brackets
o Beside those numbers that do not need a standard working can get all
the easy adding across 100% of the Parent and subsidiary figures.
o The other headings can have the standard working number written
beside them instead.
o A couple of lines would need to be left for each section of the SFP in
case other things come up in the additional information.
In addition to this setting up the standard workings can also be done.
o The subsidiaries share capital figures and the yearend retained
earnings can be put into these without reading any of the additional
information.
o In addition to this the parents retained earnings figure can also be put
into W5 (Retained earnings) without reading any additional narrative.
With all of the proforma and standard workings set up, it means that you are
able to tackle the issues in the order that they are presented in the question.
o It also allows you to deal with both sides of any adjustments as
everywhere is set up to make the adjustments.
o It hopefully prevents non-balancing accounts and means that each
issue only has to be addressed once;
o Thus helping with time management. Also if you run out of time,
o You will get full credit for all that you have already done provided
everything is referenced through.
A similar process can be applied to the income statement equivalent of
setting up final answer and workings to help tackle the issues that come up.
Q2) Single company financial statements
As with the groups question, it may be possible to get the proforma of the
final answer set up,
o Particularly if the data in the question is set up with the draft financial
statements rather than the trial balance.
o If possible it then means that open brackets can be used and the draft
figures placed in them, ready for adjustments as they arise.
o Generally speaking there are often more adjustments required for cost
of sales figure in the income statement and the PPE figure in the SFP.
o As such I would suggest these are likely to need separate workings
rather than just a bracket beside the final answer.
If there is a topic/adjustment that you are unsure of, come back to it.
o You are better to get the adjustments that you are comfortable with
done first.
o It is easy to get bogged down and waste time on a difficult adjustment
at the expense of doing an easier one that appears later in the question.
Q3) Performance appraisal
With a performance appraisal question you may be asked to calculate ratios
or prepare a statement of cash flow or both.
o When calculating ratios, if you are unsure of a particular calculation
always have a go,
o As even if the calculation is incorrect you will be awarded merit for
your discussion of the incorrect number in the written section of the
question.
o It also really helps the marker if you note your formula down so that
your working is clearly identified.
When preparing a statement of cash flow set up you proforma immediately
and begin to get the easy marks in the cash flow
o such as finding the movement in the cash and cash equivalent balance,
and finding the movements on basic shares and loans.
o You will also find the operating activities section familiar and useful
for scoring marks.
o If there are any cash items that you are unfamiliar with come back to
these at the end after you have dealt with the items that you can do.
o Finally, when appraising the performance of a company ensure that
you always refer to the scenario provided to ensure maximum credit is
awarded.
FAQs
Q. What are the core areas I need to learn?
As this is a compulsory paper the entire syllabus is examinable.
However, you will always find common traits at Q1 Q3 in that you will be
required to prepare a consolidation, single entity financial statements and
some form of performance appraisal including the calculation of
ratios/statement of cash flow.
Q. How much work is necessary to pass this paper?
You will need to ensure that you have practiced enough questions to feel
comfortable with both the examiner style and the content of the questions.
There are always familiar elements to every question.

Q. How should I present my answers?
As neatly as possible! The examiner often complains of difficult to read or
illegible answers.
Make sure you answer each question on a separate page.
Always present your answer first and include all supportive workings behind
this (i.e. set up your proforma consolidation and include the 5 standard
workings behind).
Q. How do you treat PUP adjustments between a parent and subsidiary?
For transactions between a parent and subsidiary, you always reduce the
inventory on the SFP.
The opposite entry will be to reduce the selling company's reserves, so if the
selling company is the parent, reduce W5, for the subsidiary reduces W2
(SFP and post-acquisition column).
Q. How do you treat PUP adjustments between a parent and associate?
For transactions between a parent and associate, you always reduce the
group reserves on W5.
The opposite entry will depend on which company is holding the inventory.
If the parent is holding the inventory, and therefore the inventory is included
on the group SFP, the inventory on the SFP should be reduced.
If the associate is holding the inventory, you should reduce the investment in
associate W6.
Q. Sometimes my non-current asset revaluation doesnt agree to the answer.
How do you treat a revalued asset in the financial statements?
When revaluations are examined (normally at question 2) a common mistake
is made by candidates.
This mistake is in the incorrect identification of the date the revaluation took
place.
If the revaluation takes place at the start of the year you must revalue the
asset immediately and depreciate the revalued amount over the remaining
useful economic life.
If the revaluation takes place at the end of the year then full years
depreciation should be charged based on the assets depreciation policy and
then the revaluation should be performed at the year end.