How to pass Financial Reporting

The Financial Reporting exam is 60% OTQs (objective test questions) and 40% written (constructed response) questions.  This format allows the examiners to test a wide area of the syllabus, and this is what they will do.  So do not make the mistake of thinking you can get through this exam by just learning a few key topics.

So what are the basics that you must have down cold? You must have a good understanding of the Conceptual Framework, including the most recent amendments.  You must know the formats for single entity and group financial statements and be able to get them down quickly.  You must be able to tackle an interpretation question.  You must be able to prepare a consolidation.

Then there are the accounting standards.  Pay particular attention to the more recent ones – such as IFRSs 13, 15 and 16.  Some of the earlier standards, such as IAS 2 and IAS 16, you will have encountered in lower level papers.  At FR you can expect to meet the more challenging aspects of these standards – such as the treatment of decommissioning costs and annual maintenance checks under IAS 16.

Market Analysis

However many times you read through the material, you will probably never feel that you know enough, so your revision must be based on question practice.  Work through the ACCA specimen paper and the past papers on the ACCA website.  For each OTQ that you get wrong (or where you know that you just guessed the answer) look at the correct answer and make sure you understand it.  Then note that topic down as one to revise.


ACCA only releases a limited number of Section A and B questions but it does publish some constructed response questions from each sitting.  Do not just read through these and then read the answers.  That will teach you nothing.  Make yourself set out your financial statement format and answer the question as well as you can.  You may do better than you think, but expect to get lots of things wrong.  This is good.  It’s the things you get wrong that you can learn from. 

Whether you pass this paper depends almost entirely on the work you do before the exam.  All you can do in the exam is demonstrate how much, or how little, work you have done.  So it is important that you also work on exam technique before the exam, because that is an important part of passing.  One of the things students are always told is to read the question carefully, and this is particularly relevant to accounting exams.  Even with an OTQ, don’t just click on an answer and move on without making sure you have read the question properly.  OTQs are formulated so that the incorrect answers are credible.  Some of them would arise from a mistake in the calculation, some of them would arise from not reading the question properly. So don’t be that person who gets caught out.  Every 2 marks counts, take your time and think about it.

When it comes to the constructed response questions, you are confronted with what looks like a mass of data, and the immediate response can be to panic and try to launch into it as fast as possible.  Don’t do that.  Read it through once, as fast as you like.  Then look carefully at the requirements – make sure you know exactly what you are expected to produce.  Then make yourself read the question again, slowly and carefully.  You will start to see which pieces of information relate to which requirements.  Highlight important points that you might otherwise forget.  If you are preparing a financial statement, particularly a consolidated financial statement, look carefully at all the dates.  Was the subsidiary acquired mid-year?  For how many years has the asset been owned?  For how many months has the loan been outstanding?  Did this event take place before or after the year end?  Then get down your proformas and start by filling in the easy numbers.  Practise doing the proformas and workings on a spreadsheet.  You can no longer just scribble down a T-account, you have to do it as a table, so get good at doing it.  And if you have to correct your working, it’s easier to do that on a spreadsheet, making it easier for the marker to read – and to give you marks.

If you have to do an interpretation question in Part C – which you probably will – the same points apply.  Do not rush in with loads of ratios.  The examiners will often tell you which ratios to calculate, because they do not want to see a bunch of irrelevant ratios.  Just decide which ones are relevant, calculate them, and say something intelligent about them – the last bit being the most important.  You will get good at this by practising lots of exam standard questions.

So decide that you are going to pass this exam before you even go into it.  Work through any available past papers, do as many mock exams as you can and what you do in the exam room will be just confirming what you know.