Study guide

EXAMINATION TECHNIQUES
Your general strategy
You should spend the first few minutes of the examination reading the paper. You must
divide the time you spend on questions in proportion to the marks on offer. In a 3 hour
examination there are 1.8 minutes available for each mark. Therefore, there is 36 minutes
available for each 20 mark question. This 36 minutes must be allocated to each part of the
question in accordance with its mark allocation.
Poor time management often leads to exam failure. Stick to the time allocations. When the
time is up move on to the next question
You may answer questions in any order you like.

TUTOR TIPS
The syllabus states that “All International Financial reporting Standards covered in 2.1
Financial Reporting are also applicable and examinable in 3.1”.
The difference between questions on standards examined at this level compared to the
previous paper is that you will be faced with more complex scenarios to which the standards
apply and be expected to show a deeper understanding of the rules contained in those
standards.
Chapter 1: Regulatory framework and ethics
The content of this chapter is unlikely to form the basis of any one single question, but may
well be referred to in a question.
Ethics is perhaps the most important area covered in the chapter. Learn the five fundamental
principles and also the various threats to compliance with these principles. You could be
expected to identify an ethical issue faced in the scenario and provide advice on how to
resolve it.
Chapter 2: Accounting and reporting concepts
Most of the content of this chapter will be familiar to you from your earlier studies. Remember
that conceptual framework does not provide rules but represents the foundation upon which
the rules are based.
Learn the two fundamental qualitative characteristics (relevance and faithful representation)
and the four enhancing qualitative characteristics (comparability, verifiability, timeliness and
understandability). Make sure that you can understand why they are so important – basically
if financial information does not have these characteristics the financial statements cannot
fulfil their objectives.
You may be expected to indicate how these are applied in a given accounting treatment. As
you study the standards, try to think of why a particular rule exists and why the information
that results from the rule would be useful.
Learn the five elements of financial statements. Note that assets and liabilities are defined in
terms of their underlying features and the other definitions are based on assets and liabilities.
Make sure that you understand the recognition criteria in the framework.
You may be expected to comment on how the definitions and recognition criteria are applied
in a given standard. Try to think about this when you study each standard. Many standards
give recognition guidance. Read this in the context of the guidance in the framework and see
how they link together.

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Chapter 3: Presentation of financial statements

(IAS 1, IAS 34, IFRS 8, IAS 24, IAS 10)
IAS 1 is deemed knowledge at this level. You will get little credit for being able to present the
main financial statements in a format that is consistent with the guidance in the standard. If
examined, the examiner will be more interested in other content in IAS 1.
Make sure that you know which gains and losses must be presented in the statement of
other comprehensive income and which of those can and cannot be reclassified to the
statement of profit or loss in the future.
Make sure that you understand the requirements about key measurement assumptions and
disclosure of accounting policies.
IAS 34 is unlikely to form the basis of a question in its own right but could easily be added on
as part of another question. Make sure that you understand its scope (which is unusual). The
standard is not compulsory in that a company that applies IFRS does not have to prepare
interim statements according to this standard unless required to do so by the national
regulator. The standard must only be followed if the national regulator requires it (as is the
case in Ghana).
IAS 34 specifies the content of an interim report and the periods that should be presented.
Learn these.
Also make sure that you know the IAS 34 recognition and measurement guidance and also
the guidance on the use of estimates.
IAS 24 is unlikely to form the basis of a question in its own right. However, it might well
feature as a significant part of another question. For example, a question may be largely
about group accounts but mention in passing that one of the members of the group has
dealings with another company owned by one of the group’s directors.
Learn the definition of related party and the necessary disclosures.
IFRS 8 is an important standard and new to this level. Key areas to learn are:
the scope of the standard;
the definition and how to identify operating segments (including the rules on
aggregation);
what must be disclosed.
You must also be able to explain why segment reporting is important in that it allows users to
better understand the financial performance and position of an entity by providing detail of
the make-up of key line items in the financial statements.
IAS 10 is unlikely to form the basis of a question in its own right. However, it might well
feature as a part of another question.
Learn the definitions for adjusting and non-adjusting events after the reporting period and the
list of examples of each.
Note in particular the rule on proposed dividends.
Learn the definition of the basic types of employee benefits.

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Chapter 4: IAS 8: Accounting policies, changes in accounting estimates and errors

The single most important distinction to make is whether a change in accounting
methodology by an entity represents a change of accounting policy, or a change in an
accounting estimate, or perhaps easier to identify, a correction of an error. The result of that
analysis will then inform the entity as to whether the bookkeeping involves an adjustment to
the opening position (a retrospective approach), or a change to the current and future
bookkeeping (a prospective approach).
The distinction between accounting policies and accounting estimates is not always obvious,
and you should be prepared to discuss these things, using a solid knowledge of the
requirements of IAS 8.
The definitions of terms in IAS 8 are important and should be learned. Note also the
importance of the concepts from the Conceptual Framework when selecting a suitable
accounting policy when the Standards seem to be silent.
Chapter 5: Impact of differences in accounting policies
You are expected to understand how different policies affect the picture given by financial
statements of a company’s financial position and performance. his chapter uses several
examples to illustrate this.
As you study individual standards note areas where one policy might be chosen over another
(which are quite rare) but, more importantly, note areas where judgement is required. Such
areas might lead to different accountants taking a different view.
This type of skill could easily be examined in the context of a finance director choosing
policies or arriving at judgements that give a flattering view of a company’s position and
performance. You would then be expected to explain why he (she) is wrong, what the correct
treatment should be and to correct the financial information provided.
Chapter 6: IFRS 15: Revenue from contracts with customers
Learn the five-step model, and be able to provide arguments to support a revenue
recognition principle for application in particular circumstances described in an exam
question. This involves in particular the detailed analysis and application to circumstances of
steps two and five.
Issues surrounding transaction price, and the application of the requirements of steps three
and four of the IFRS 15 model are very examinable.
The chapter includes numerous examples of the application of steps 2 through 5 of the
model, and you should not move on in your studies until an example has been carefully
studied, and the application of the Standard to that example has been understood.
It should be clear to you that alongside the recognition of revenue is the recognition of costs
of sale, and so IFRS 15 sets out requirements for cost accounting also.
Finally the chapter sets out the application of the Standard to various specific business
models. These specific circumstances could very well feature in a question so make sure
that you understand them.

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Chapter 7: Non-current assets: sundry standards (IAS 16, IAS 23, IAS 20 and IAS 40)
All of the standards covered in this chapter were examinable in the previous paper so the
content of this chapter should be familiar to you.
You are assumed to know the basic rules having advanced to this paper from the lower level.
More complicated areas that you might face include:
The distinction between property accounted for under IAS 16 (owner occupied or used)
and investment property (held for income and or capital appreciation).
The difference between the IAS 16 revaluation model (gains and losses recognised in
other comprehensive income) and the IAS 40 revaluation model (gains and losses
recognised in profit or loss).
The interaction between IASs 16, 23 and 37 when arriving at a cost of an asset on
initial recognition.
IAS 23 requires the capitalisation of interest on funds borrowed funds for the construction of
a qualifying asset as part of the cost of the item.
Learn the definition of a qualifying asset and be prepared to recognise circumstances
that involve a qualifying asset.
Learn how to measure the interest to be capitalised on specific borrowing (net of any
interest on temporary investment) and on general borrowing where you must calculate
a weighted average.
Make sure that you know the rules on commencement, suspension and cessation of
capitalisation of interest.
You must be able to account for government grants related to both income and assets. This
could feature as a complication in a preparation of financial statements.
This topic could be linked or used as a key element to a question on deferred taxation.
Chapter 8: IAS 38: Intangible assets
This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you.
Know the definition of an intangible asset.
Make sure that you know the five ways that an intangible asset might be acquired and in
particular make sure that you know the recognition guidance for intangible assets acquired
through internal generation and acquisition in a business combination
The acquisition of an intangible through a business combination is likely to be dealt with in
the context of a group accounts question, but you must be able to correctly identify and
account for all types of acquisition.
The guidance on accounting for intangible assets acquired in a business combination often
result in the recognition of intangible assets on consolidation that were not previously
recognised in the financial statements of the new subsidiary. Make sure to note and
understand the example on in process R&D given in the chapter.
It is especially important that you learn the distinction between research spending, and
development spending (“R&D”), and can correctly specify the resulting accounting treatment.

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Intangible assets are accounted for in a similar way to property, plant and equipment after
recognition. However, there are differences. For example:
Intangible assets might be revalued in theory but this is extremely rare in practice
because revaluation must be with reference to an active market and the definition of
such means that they almost never exist;
intangible assets might have an indefinite useful life.
This topic could be linked or used as a key element to a question on deferred taxation.
Chapter 9: IAS 36: Impairment of assets
This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you.
There are many definitions to be learned, and the methodologies for measuring recoverable
amount must be understood and be able to be applied correctly.
You should also understand how the basic methodologies are adapted to deal with
collections of assets – cash generating units CGU’s.
Watch out for indicators of possible impairment in the facts of a question. These should be
reasonably obvious – the examiner will not try to trick you.
Impairment testing is a key element on the rules of accounting for goodwill. This is covered in
chapter 20.
This topic could be linked or used as a key element to a question on deferred taxation.
Chapter 10: IFRS 5: Non-current assets held for sale and discontinued operations
This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you.
Learn the definitions and be able to specify the correct presentation and disclosure.
You must know the criteria that must be met before an asset (or disposal group) can be
classified as held-for-sale. The criteria are strict because the classification has a
measurement implication.
Once classified as held-for-sale an asset (or disposal group) is measured at the lower of its
carrying amount and the fair vale less costs to sell. Make sure that you can measure any
impairment loss and correctly account for it.
Learn how held-for-sale assets (and related liabilities, if any) should be presented on the face
of the statement of financial position.
Remember that assets classified as held-for-sale are no longer depreciated.
Make sure that you know the presentation and disclosure implications of identifying a
discontinued operation.
This standard could be examined in the context of a disposal or part disposal of an interest in
a subsidiary. Such a disposal may or may not fall to be treated as a discontinued operation
and this has an impact on the presentation of the disposal in the financial statements. This is
covered in chapter 24.

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Chapter 11: IFRS 16: Leases

This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you but sale and leaseback transactions are new to you.
Lessees
Learn the definitions (interest rate implicit in the lease, lease term, right-of-use asset, and
lease liability).
Make sure that you can measure the right-of-use asset and lease liability on initial
recognition. (This is often equal to the cash price of the asset in questions at this level).
Right-of-use assets are depreciated in the same way as any other. If an asset is leased
depreciation is over the shorter of the lease term and the useful life of the asset.
You must be able to measure the lease liability at reporting dates after initial recognition. A
key part of this is recognising the interest expense based on the changing liability. The
chapter contains several worked examples. Study them carefully.
The calculations can be quite involved, although you will usually not have to do the
discounted cash flow arithmetic.
There are a number of definitions to be learned, and as well as being able to describe the
accounting from the perspective of the financial statements effect, you may also need to be
able to describe the bookkeeping at the debit and credit (prepare journals) level. You should
also be capable of preparing the detailed disclosure notes.
Lessors
Learn the definitions for a finance lease and an operating lease.
A question may ask you to say if a lease is an operating lease or a finance lease. Learn the
indications that a lease is a finance lease.
Sale and leaseback transactions
This is new to this level. Study this carefully and make sure that you understand the
examples. It can look a little tricky at first but remember that you are just trying to complete a
journal and some of the numbers in that journal are very straightforward.
Chapter 12: IAS 37: Provisions, contingent liabilities and contingent assets
This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you.
Learn the definition of provision.
Learn when provisions should be recognised paying particular attention to the guidance on
reconstructions, onerous contracts and assets that are subject to periodic overhaul.
You must be able to measure provisions at initial recognition and at subsequent reporting
dates.
You should also be capable of preparing the detailed disclosure notes.
Learn the definitions for contingent liability and contingent asset. These are not recognised
but might need to be disclosed. Learn when this is the case.

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The last sentence requires qualification. It is true that contingent liabilities are not recognised.
However, if a company with a contingent liability is acquired as a new subsidiary, the
contingent liability is recognised for group accounting purposes. This is covered in more
detail in chapter 20.
Chapter 13: IAS 12: Income taxes
This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you but the deferred tax consequences of business combinations are
new to you.
Accounting for deferred tax tries to account for the differences between the tax rules and
those in IFRS. Such differences might result in a company recognising an asset in its
financial statements where the tax rules would suggest that there is no asset. This would
mean that there is a debit in the statement of financial position under IFRS but not under the
tax rules. This leads to the recognition of a deferred tax liability.
Learn the definition of temporary difference.
You must be able to measure the required deferred tax balance by applying the tax rate to
the temporary differences that exist at a reporting date.
The other side of the movement on the deferred tax balance is recognised in the same
location as the transaction which caused the movement. For example, the deferred tax
balance might change because the IFRS view of the change in non-current assets and the
tax authority’s view of the change in non-current assets are different. This could be due to
accounting depreciation differing from the tax allowable differentiation. Depreciation is
recognised in the statement of profit or loss therefore the deferred tax arising as a result of
this difference should also be recognised in the statement of profit or loss.
Chapter 14: IAS 19: Employee benefits
This standard was examinable (in part) in the previous paper. There is a significant element
of the standard which you have not seen before. This is accounting for post-retirement
benefits (pension costs) and, in particular, accounting for defined benefit schemes.
This is quite a complex area and could form the basis of a question in its own right or be
examined as an adjustment arising in a consolidation question.
The accounting treatment comes down to measuring a net liability (net asset) at the start and
end of the year and accounting for the difference. Work through the examples carefully.
Chapter 15: IFRS 2: Share based payments
This is a standard that is new to this level.
Key topics to understand include:
The three types of share-based payment scheme
How to account for equity-settled share-based payments (basically Dr PL /Cr equity)
How to account for cash-settled share-based payments (basically Dr PL/Cr liability)
The most important application of the standard is in the area of equity-settled share-based
payments. Study the examples carefully.
Make sure that you understand the impact of the different types of condition attached to
grants of equity instruments (market and non-market etc.)

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Chapter 16: IFRS 13 Fair value measurement

This standard was examinable in the previous paper so much of the content of this chapter
should be familiar to you.
IFRS 13 sets out the principles of fair value measurement, and there are many important
definitions to be learned. The implications of those definitions for the application of the
principles to particular circumstances must be understood, and so the chapter includes a
range of illustrative examples of the application of IFRS 13.
You should ensure that you are able to identify a principal market where one exists or the
most advantageous market otherwise. The correct inclusion or exclusion of transport costs
and transaction costs in these steps must be understood.
The identification of highest and best use for a non-financial asset is a challenge in practice,
and you should be prepared to identify this for a basic description of circumstances.
Make sure you can briefly describe the fair value hierarchy. This could feature in a question
involving disclosure in respect of financial instruments.
Chapter 17: Financial instruments: Recognition and measurement
This standard was examinable in the previous paper so some of the content of this chapter
should be familiar to you. However, hedge accounting is new.
Remember that this is a complex standard and questions at this level will expect more of
you.
Make sure that you know the definitions of financial instrument, financial asset, financial
liability, and equity.
Learn how to classify financial asserts into the different measurement classes based on their
contractual cash flows and the business model under which they are held. (Make sure that
you understand the elections/designations that are available in given circumstances). A
question might provide the characteristics of a financial asset and ask you to explain (with
justification) how it should be accounted for.
Make sure that you understand how to treat transaction costs when measuring financial
assets and financial liabilities.
Impairment is relevant for all debt type instruments, and you should be able to describe the
purpose and operation of the expected loss model.
The chapter introduces the impairment general model which is quite complex, as it is written
for the application of banks and financial institutions to their portfolios of loans and debt
securities. It is only after you have understood this, that the chapter explains the simplified
approach that may well be required, or available, for things like trade or landlord (lessor)
receivables.
Hedge accounting is new to this level. Learn the definitions of a fair value hedge and a cash
flow hedge. Study the examples of how to account for each.
Chapter 18: Financial instruments: Presentation and disclosure
The standards covered in this chapter were examinable in the previous paper so the content
of this chapter should be familiar to you.

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Instruments issued to raise cash (e.g. shares, preference shares, loan notes etc.) must be
classified as debt or equity based on their economic substance. Learn the definition of
financial liability and how to apply it to identify the substance of an instrument. A key tip is
that an instrument is a liability if there is a circumstance where a company can be forced to
make a payment in respect of it. For example, if a preference share is redeemable, the
company is going to pay cash for it. Therefore, it is a liability.
Payments made to investors are classified as dividends or interest according to the
underlying classification of the instrument.
To make life even more complex, some entities issue instruments that have both a debt and
an equity component. IAS 32 requires split accounting to identify the equity and liability
component. There is an example of how to do this in the chapter. Make sure that you can do
this.
The chapter includes a high-level review of the disclosures required by IFRS 7. You should
be able to describe these disclosure requirements to the level covered in this short section.
Chapter 19: Sundry standards and interpretations (IAS 26, IAS 41, IFRS 17, IFRS 6, IFRS
for SMEs, IAS 2, IAS 29)
You have seen some of these standards before but some are new to this level.
IAS 26, IAS 41, IFRS 17 and IFRS 6 are industry specific standards.
IAS 26 explains how to prepare the financial statements of a pension fund. You need to
understand this in overview.
IAS 41 is examinable at the lower level. In many economies, the agriculture sector
represents a substantial part of economic activity. IAS 41 could form the basis of a question
in its own right. Make sure that you know the definitions and the accounting approach
required for biological assets and agricultural produce.
IFRS 17 is about accounting for insurance contracts. This is a complex standard. You need
to understand this standard in overview.
You should be able to draw out the similarities between expenditure on exploration and
evaluation costs and the more normal “Capital expenditure” involving the purchase of
machinery and equipment. The IFRS 6 accounting solution follows the same approach as
described in IAS 16. You need to understand this standard in overview.
The IFRS for SMEs is an important standard and is based on full IFRS. Learn the differences
between the rules in this standard and those in full IFRS.
IAS 2 is assumed knowledge at this level.
IAS 29 is a standard that is rarely relevant in practice. It provides rules for the preparation of
financial statements in hyper-inflationary economies. You need to understand this standard
in overview.
Chapter 20: Business combinations and consolidation
This topic was examinable in the previous paper so the content of this chapter should be
familiar to you.
The chapter revises key elements of IFRS 10 and IFRS 3.
IFRS 10 is the chapter that (inter alia) defines subsidiaries and explains the concept of
control.

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IFRS 3 explains how a newly controlled entity should be accounted for on initial
recognition. The recognition and measurement of goodwill is a very important part of
this and many of the rules in the standard provide guidance on this.
You must learn these rules.
The chapter also revises the preparation of consolidated statements of financial position for
basic groups.
You are unlikely to face questions involving consolidation of basic groups but this topic is
very important as it forms a foundation to the more complex areas of group accounting that
are more likely to be examined at this level (changes in ownership, complex group structures
and foreign subsidiaries).
Chapter 21: Consolidated statements of profit or loss and other comprehensive income
The chapter revises the preparation of consolidated statements of financial performance for
basic groups. Again, you are unlikely to face questions involving consolidation of basic
groups but this topic is very important as it forms a foundation to the more complex areas of
group accounting that are more likely to be examined at this level (as explained above).
Chapter 22: Associates and joint ventures
This topic was examinable in the previous paper so the content of this chapter should be
familiar to you.
Learn the definition of joint arrangement and joint control. You must be able to identify
whether joint control exists from a given scenario.
Learn the definitions of the two different types of joint arrangement (joint operation).
Learn how to account for joint operations (IFRS 11).
Learn the definitions of associate and joint venture (which are accounted for in the same way
as each other, using equity accounting)
You must be able to use equity accounting. It is not a difficult technique but should be
learned thoroughly.
Chapter 23: Business combinations achieved in stages
Accounting for changes in ownership within a group is new to this level. This chapter
explains the correct accounting treatment for acquisitions achieved in stages.
Questions on business combinations achieved in stages normally involve the preparation of
the consolidated statement of financial position.
Remember that an investment in a subsidiary must be consolidated from the date of
acquisition. This is the date on which the parent gains control.
This means that goodwill is calculated only when there is a transaction that achieves control.
For example, if a company buys 15% and later 40% control would not be gained until the
second transaction. This is when goodwill is calculated.
Goodwill is not calculated for any transaction where control is not achieved. For example, if a
company buys 60% and later 10%, goodwill is calculated at the date of acquisition of the
60%. The later purchase of an additional 10% is a transaction between owners of the group
(being the shareholders of the parent and the non-controlling interest) and accounted for as
an equity adjustment.
Consolidation of a new subsidiary where control is achieved in stages is not that different to
consolidation of a new subsidiary where control is achieved in a single transaction. The key
difference is that the cost of the earlier purchases is fair valued before being added to the

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cost of the investment that results in control. This total figure is then used to calculate
goodwill and from this point the consolidation proceeds as before.
Chapter 24: Disposal of subsidiaries
Accounting for changes in ownership within a group is new to this level. This chapter
explains the correct accounting treatment for disposals and part disposals.
Questions on disposals normally involve the preparation of the consolidated statement of
financial performance.
Profit or loss on disposal is only calculated if a disposal results in a loss of control. Part
disposals that do not result in a loss of control are transactions between owners of the group
(being the shareholders of the parent and the non-controlling interest) and accounted for as
equity adjustments.
The most common sort of question will involve a disposal (part disposal) in which control is
lost. There are two key areas in answering such a question:
Calculating the profit or loss on disposal from the group viewpoint; and
Making sure that the statement of profit or loss reflects the pattern of ownership in the
period. For example, if there is a part disposal in which control is lost but significant
influence is retained, the investment must be consolidated up to the date of disposal
and equity accounted from that date.
Chapter 25: Complex groups
This topic is new to this level.
Control is assumed to exist when a parent owns directly, or indirectly through other
subsidiaries, more than half of the voting power of another company (known as a sub-
subsidiary).
The chapter explains the consolidation of sub-subsidiaries.
There are two possible approaches, the direct method and the indirect method. Of these, you
should use the direct method in the exam as it is quicker.
Study the examples carefully and make sure that you can identify control through indirect
ownership and calculate effective holdings.
Once the effective holdings are calculated the workings for the consolidation of the statement
of financial position proceed as normal with the exception of a single complication in the
calculation of non-controlling interest. (Concentrate on the similarities between this and the
consolidation of a simple group rather than the differences).
Chapter 26: Other groups standards (IAS 27 and IFRS 12)
The final chapter in respect of group accounting sets out the requirements of IAS 27 for the
investor in the separate (or “stand-alone”) financial statements, and the requirements of IFRS
12 for disclosures in respect of interests in other entities.
Disclosures cover both amounts involved, and risks arising from interests in other entities,
and in an important extension to the IAS 1 disclosures about judgements. For example, IFRS
Chapter 27: Foreign currency
This standard was examinable in the previous paper so some of the content of this chapter
should be familiar to you. However, accounting for subsidiaries (associates) whose financial
statements are denominated in a foreign currency is a significant new topic.
Learn the definition of functional currency and how to identify it.

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All foreign currency transactions are measured at the rate ruling at the date of the transaction
(spot rate).
Make sure that you know whether and how to translate balances that were initially in a
foreign currency at each subsequent reporting date and how to account for the exchange
differences (if any).
The consolidation of foreign subsidiaries looks complicated but proceeds as two stages:
Stage 1: Translate the foreign subsidiary’s financial statements in the reporting
currency (cedi). There is no short cut available here – you will need a working.
Stage 2: Consolidate the foreign subsidiary
Once the foreign subsidiary’s financial statements have been translated, consolidation of the
statement of financial position proceeds as normal with the exception of a single
complication. The complication is that goodwill must be retranslated to the closing rate at the
date of consolidation.
A question might ask you to calculate the exchange difference arising on the translation of a
subsidiary. This is not difficult of itself but it can be easy to get lost in the numbers. Study the
examples carefully and you will see that the questions can be broken into discrete sections
and this makes it easier to keep track.
Statement of financial position (translate/consolidate/retransalate goodwill)
Statement of profit or loss (translate/consolidate)
Exchange difference arising on the translation of a subsidiary
Subsidiary’s
figures in foreign Subsidiary’s
currency Rate figures in cedi
Step 1: Calculate opening net assets X X X
Step 2: Profit for the year (from
original translation working) X X X
Step 4: Exchange gain or loss
(balancing figure) X
Step 3: Closing net assets (from
original translation working) X X X

Chapter 28: IAS 7: Statements of cash flows

This topic was examinable in the previous paper so the content of this chapter should be
familiar to you.
Learn the format of a cash flow statement, and then learn the typical workings that will be
needed to generate the required numbers.
The technique, in many cases, involves the preparation of workings designed to find a
missing figure – for example, you may have information about property, plant and equipment
this year-end and last year-end, and elements included in the profit or loss, but you might be
looking for the cash proceeds from an asset disposal. Similarly, you might have information
about dividends payable at last year-end, and this year-end, and the entry made in a
statement of changes in equity, but you need to identify cash paid for a dividend. You should
ensure you have understood each illustration, and complete the practice questions, before
moving on.

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Perhaps your greatest challenge will be working out the impact of changes in working capital
– numbers are not the problem, but whether the resulting number is an inflow or an outflow is
not so easy. Care is needed, so again, work through the illustrations and practice questions
thoroughly.
The preparation of consolidated statements of cash flow is new to this level. These are
prepared from the consolidated statement of financial position and the consolidated
statement of financial performance (in the same way as a statement of cash flows for a
company). However, there are added complications and you must be able to deal with:
Dividends received from an associate (cash inflow)
Dividends paid to non-controlling interest (cash outflow)
Impact of balances of a newly acquired subsidiary in the period of acquisition
Impact of balances of a newly disposed of subsidiary in the period of disposal

Chapter 29: IAS 33: Earnings per share

EPS is basically the profit or loss attributable to ordinary equity holders (earnings) divided by
the weighted average number of shares in the period.
Basic EPS
Study the sections showing how to arrive at the profit or loss attributable to ordinary equity
holders.
Study the sections showing how to take account of changes in the number of shares during
the period. Make sure that you understand the calculations and can apply them as needed.
Diluted EPS
Entities may have in issue so-called potential ordinary shares which, if they become actual
issued shares, may dilute the EPS (the profit measure gets spread over more shares).
Diluted EPS is calculated by adjusting the profit figure and the number of shares figure used
in the basic EPS calculation and adjusting them as necessary to take account of the effects
of the dilution. Work carefully through the illustrations and complete the practice questions to
make sure that you can do this.
Chapter 30: IFRS 1: First time adoption of IFRS
IFRS 1 explains how a company should account for changes from its previous GAAP to IFRS
when it adopts IFRS for the first time.
Ghana adopted IFRS some time ago so you might find it difficult to imagine when this might
be relevant. However, if say a Ghanaian parent bought a foreign subsidiary that was not
applying IFRS, the parent’s accountants would have to advise on the switch over.
The basic approach required is full retrospective application with permitted exceptions and
mandatory exemptions. Learn these.
You should also learn the definitions and the presentation and disclosure rules.
Chapter 31: Analysis and interpretation of financial statements
The exam requirement is likely to be to prepare a report (or certain extracts of a report) about
the position and/or performance of an entity. Report writing skills aside, the heart of such a

© Emile Woolf International xxix The Institute of Chartered Accountants (Ghana)

Corporate reporting

report will involve the calculation, comparison (prior year or industry averages), and
interpretation of various performance metrics or position descriptors.
This chapter sets out the range of examinable ratios that could be asked for (explicitly, or
implicitly to achieve a decent report), and you should ensure that you can calculate each of
these.
However, any ratio analysis is only as good as the accounting data from which the ratios are
calculated, and you should ensure that you are competent to provide a critique, not only of
the entity’s performance as you have analysed it, but of the ratios and interpretations that
you have come up with.
Chapter 32: Other information in the annual report
This chapter explains other information that might be found in the annual report of a quoted
company.
You need to be able to explain each of these areas.
Chapter 33: Beyond financial reporting
There has been a growing view that whilst the financial information provided by the financial
statements is important to stakeholders they need more information about the company than
might be reasonably found in such statements.
There has been a growth in demand for companies to provide information about corporate
social responsibility and sustainability.
Furthermore, there has been a growth in demand for companies to provide context to the
numbers published in the financial statements and explain how they create value. This has
led to the development of integrated reporting.
These topics are explained in this chapter.
You need to be able to explain each of these areas.
Chapter 34: Corporate reconstruction and reorganisation
This topic is new to you.
The chapter covers a situation where a company needs to reconstruction its capital for some
reason, usually after they have been in financial difficulties.
This has been a popular exam topic over the years and could easily be the subject of a
complete question.
You may be given a scheme of reconstruction and asked to carry it out. This would involve
performing double entry and producing a statement of financial position after the scheme is
complete. The scheme might involve the setting up of a new company to which the assets
and trade of the business are transferred (an external reconstruction).
You may be asked to comment on the acceptability of the scheme. This is achieved by
comparing the position of each stakeholder without the scheme (in which case the company
is usually wound up) to their position if the scheme were to be a carried out.
The trickiest questions are those that ask you to design a scheme.
The chapter explains the process needed to answer each type of question. Work through the
examples carefully.

© Emile Woolf International xxx The Institute of Chartered Accountants (Ghana)

 Study guide

Chapter 35: Business valuation

Business valuation can be carried out by utilizing a variety of valuation models, some being
more appropriate than others in given circumstances. Learn the valuation approaches and
their suitability (or not) to particular circumstances.
You must be able to use the models to calculate a range of values as required.

© Emile Woolf International xxxi The Institute of Chartered Accountants (Ghana)