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DETAILED SYLLABUS
A Specialist cost and management accounting
techniques
1. Activity-based costing
2. Target costing
3. Life-cycle costing
4. Throughput accounting
5. Environmental accounting
B Decision-making techniques
1. Relevant cost analysis
2. Cost volume analysis
3. Limiting factors
4. Pricing decisions
5. Make-or-buy and other short-term decisions
6. Dealing with risk and uncertainty in decision-making
C Budgeting and control
1. Budgetary systems and types of budget
2. Quantitative analysis in budgeting
3. Standard costing
4. Material mix and yield variances
5. Sales mix and quantity variances
6. Planning and operational variances
7. Performance analysis
D Performance measurement and control
1. Performance management information
systems
2. Sources of management information
3. Management reports
4. Performance analysis in private sector
organisations
5. Divisional performance and transfer pricing
6. Performance analysis in not-for-profit
organisations and the public sector
7. External considerations and behavioural
aspects
APPROACH TO EXAMINING THE SYLLABUS
The syllabus is assessed by a three-hour 15 minutes
paper-based examination.
All questions are compulsory. It will contain both
computational and discursive elements.
Some questions will adopt a scenario/case study
approach.
Section A of the exam comprises 15 multiple choice
questions of 2 marks each.
Section B of the exam comprises three questions
comprised of 5 multiple choice questions.
Section C of the exam comprises two 20 mark
questions.
The two 20 mark questions will come from decision
making techniques, budgeting and control and/or
performance measurement and control areas of the
syllabus. The section A questions and the questions
in section B can cover any areas of the syllabus.
Candidates are provided with a formulae sheet.
© ACCA 2016-2017 All rights reserved.
7
Study Guide
A SPECIALIST COST AND MANAGEMENT
ACCOUNTING TECHNIQUES
1. Activity based costing
a) Identify appropriate cost drivers under ABC.
[1]
b) Calculate costs per driver and per unit using
ABC.
[2]
c) Compare ABC and traditional methods of
overhead absorption based on production
units, labour hours or machine hours.
[2]
2. Target costing
a) Derive a target cost in manufacturing and
service industries.
[2]
b) Explain the difficulties of using target costing in
service industries.
[2]
c) Suggest how a target cost gap might be
closed.
[2]
3. Life-cycle costing
a) Identify the costs involved at different stages of
the life-cycle.
[2]
b) Derive a life cycle cost in manufacturing and
service industries.
[2]
c) Identify the benefits of life cycle costing.
[2]
4. Throughput accounting
a) Discuss and apply the theory of constraints.
[2]
b) Calculate and interpret a throughput
accounting ratio (TPAR).
[2]
c) Suggest how a TPAR could be improved.
[2]
d) Apply throughput accounting to a multi-product
decision-making problem.
[2]
5. Environmental accounting
a) Discuss the issues business face in the
management of environmental costs.[1]
b) Describe the different methods a business may
use to account for its environmental costs.
[1]
B DECISION-MAKING TECHNIQUES
1 Relevant cost analysis
a) Explain the concept of relevant costing.
[2]
.
b) Identify and calculate relevant costs for a
specific decision situations from given data.
[2]
c) Explain and apply the concept of opportunity
costs.
[2]
2. Cost volume profit analysis
a) Explain the nature of CVP analysis.
[2]
b) Calculate and interpret the break-even point
and margin of safety.
[2]
c) Calculate the contribution to sales ratio, in
single and multi-product situations, and
demonstrate an understanding of its use.
[2]
.
d) Calculate target profit or revenue in single and
multi-product situations, and demonstrate an
understanding of its use.
[2]
e) Prepare break even charts and profit volume
charts and interpret the information contained
within each, including multi-product
situations.
[2]
f) Discuss the limitations of CVP analysis for
planning and decision making.
[2]
3. Limiting factors
a) Identify limiting factors in a scarce resource
situation and select an appropriate technique.
[2]
b) Determine the optimal production plan where
an organisation is restricted by a single limiting
factor, including within the context of “make”
or “buy” decisions.
[2]
.
c) Formulate and solve multiple scarce resource
problem both graphically and using
simultaneous equations as appropriate.
[2]
© ACCA 2016-2017 All rights reserved.
8
d) Explain and calculate shadow prices (dual
prices) and discuss their implications on
decision-making and performance
management.[2]
e) Calculate slack and explain the implications of
the existence of slack for decision-making and
performance management.
[2]
(Excluding simplex and sensitivity to changes
in objective functions)
4. Pricing decisions
a) Explain the factors that influence the pricing of
a product or service.
[2]
b) Explain the price elasticity of demand.
[1]
c) Derive and manipulate a straight line demand
equation. Derive an equation for the total cost
function(including volume-based discounts).
[2]
d) Calculate the optimum selling price and
quantity for an organisation, equating marginal
cost and marginal revenue
[2]
e) Evaluate a decision toincrease production and
sales levels, considering incremental costs,
incremental revenues and other factors.
[2]
f) Determine prices and output levels for profit
maximisation using the demand based
approach to pricing (both tabular and algebraic
methods) .[1]
g) Explain different price strategies, including:
[2]
i) All forms of cost-plus
ii) Skimming
iii) Penetration
iv) Complementary product
v) Product-line
vi) Volume discounting
vii) Discrimination
viii) Relevant cost
h) Calculate a price from a given strategy using
cost-plus and relevant cost.
[2]
5. Make-or-buy and other short-term decisions
a) Explain the issues surrounding make vs. buy
and outsourcing decisions.
[2]
b) Calculate and compare “make” costs with
“buy-in” costs.
[2]
c) Compare in-house costs and outsource costs of
completing tasks and consider other issues
surrounding this decision.
[2]
d) Apply relevant costing principles in situations
involving shut down, one-off contracts and the
further processing of joint products.
[2]
6. Dealing with risk and uncertainty in decision-
making
a) Suggest research techniques to reduce
uncertainty e.g. Focus groups, market
research.
[2]
b) Explain the use of simulation, expected values
and sensitivity.
[1]
c) Apply expected values and sensitivity to
decision-making problems.
[2]
d) Apply the techniques of maximax, maximin,
and minimax regret to decision-making
problems including the production of profit
tables.
[2]
e) Draw a decision tree and use it to solve a
multi-stage decision problem
f) Calculate the value of perfect and imperfect
information.
C BUDGETING AND CONTROL
1. Budgetary systems and types of budget
a) Explain how budgetary systems fit within the
performance hierarchy.
[2]
b) Select and explain appropriate budgetary
systems for an organisation, including top-down, bottom-up, rolling, zero-base, activity-
base, incremental and feed-forward control.
[2]
c) Describe the information used in budget
systems and the sources of the information
needed.
[2]
d) Indicate the usefulness and problems with
different budget types (including fixed, flexible,
© ACCA 2016-2017 All rights reserved.
9
zero-based, activity- based, incremental,
rolling, top-down, bottom up, master,
functional).
[2]
e) Prepare rolling budgets and activity
based budgets.
[2]
f) Explain the beyondbudgeting model, including
the benefits and problems that may be faced if
it is adopted in an organisation.
[2]
g) Discuss the issuessurrounding setting the
difficulty level for a budget.
[2]
h) Explain the benefits and difficulties of the
participation of employees in the negotiation of
targets.
[2]
i) Explain the difficulties of changing a budgetary
system or type of budget used.
[2]
j) Explain how budget systems can deal with
uncertainty in the environment.
[2]
2. Quantitative analysis in budgeting
a) Analyse fixed and variable cost elements from
total cost data using high/low method.
b) Estimate the learning rate and learning effect
[2]
c) Apply the learning curve to a budgetary
problem, including calculations on steady
states
[2]
d) Discuss the reservations with the learning
curve.
[2]
e) Apply expected values and explain the
problems and benefits.
[2]
f) Explain the benefits and dangers inherent in
using spreadsheets in budgeting.
[2]
3. Standard costing
a) Explain the use of standard costs.
[2]
b) Outline the methods used to derive standard
costs and discuss the different types of cost
possible.
[2]
c) Explain and illustrate the importance of flexing
budgets in performance management.
[2]
d) Explain and apply the principle of
controllability in the performance management
system.
[2]
4. Material mix and yield variances
a) Calculate, identify the cause of, and explain
material mix and yield variances.[2]
b) Explain the wider issuesinvolved in changing
material mix e.g. cost, quality and performance
measurement issues.[2]
c) Identify and explain the relationship of the
material usage variance with the material mix
and yield variances.
[2]
d) Suggest and justify alternative methods of
controlling production processes.
[2]
5. Sales mix and quantity variances
a) Calculate, identify the cause of, and explain
sales mix and quantity variances.
[2]
b) Identify and explain the relationship of the
sales volume variances with the sales mix and
quantity variances.
[2]
6. Planning and operational variances
a) Calculate a revised budget.
[2]
b) Identify and explain those factors that could
and could not be allowed to revise an original
budget.
[2]
c) Calculate, identify the cause of and explain
planning and operational variances for:
i) sales, including market size and market
share;
ii) materials;
iii) labour, including the effect of the learning
curve.
[2]
d) Explain and discuss the manipulation issues
involved in revising budgets.
[2]
7. Performance analysis
a) Analyse and evaluate past performance using
the results of variance analysis.
[2]
© ACCA 2016-2017 All rights reserved.
10
b) Use variance analysisto assess how future
performance of an organisation or business can
be improved.
[2]
c) Identify the factors which influence
behaviour.
[2]
d) Discuss the effect that variances have on staff
motivation and action.[2]
e) Describe the dysfunctional nature of some
variances in the modern environment of JIT
and TQM.
[2]
f) Discuss the behavioural problems resulting
from using standard costs in rapidly changing
environments.
[2]
D PERFORMANCE MEASUREMENT AND
CONTROL
1. Performance management information systems
a) Identify the accounting information
requirements and describe the different types
of information systems used for strategic
planning, management control and operational
control and decision-making.
[2]
b) Define and identify the main characteristics of
transaction processing systems; management
information systems; executive information
systems; and enterpriseresource planning
systems.
[2]
c) Define and discuss the merits of, and potential
problems with, open and closed systems with
regard to the needs of performance
management.[2]
2. Sources of management information
a) Identify the principal internal and external
sources of management accounting
information.
[2]
b) Demonstrate how these principal sources of
management information might be used for
control purposes.
[2]
c) Identify and discuss the direct data capture
and process costs of management accounting
information.
[2]
d) Identify and discuss the indirect costs of
producing information.
[2]
e) Discuss the limitations of using externally
generated information.
[2]
3. Management reports
a) Discuss the principal controls required in
generating and distributing internal
information.
[2]
b) Discuss the procedures that may be necessary
to ensure security of highly confidential
information that is not for external
consumption.
[2]
4. Performance analysis in private sector
organisations
a) Describe, calculate and interpret financial
performance indicators (FPIs) for profitability,
liquidity and risk in both manufacturing and
service businesses. Suggest methods to
improve these measures.
[2]
b) Describe, calculate and interpret non-financial
performance indicators (NFPIs) and suggest
method to improve the performance
indicated.
[2]
c) Analyse past performance and suggest ways for
improving financial and non-financial
performance.
[2]
d) Explain the causes and problems created by
short-termism and financial manipulation of
results and suggest methods to
encourage a long term view.
[2]
e) Explain and interpret the Balanced
Scorecard, and the Building Block model
proposed by Fitzgerald and Moon.
[2]
f) Discuss the difficulties of target setting in
qualitative areas.
[2]
5. Divisional performance and transfer pricing
a) Explain and illustrate the basis for setting a
transfer price using variable cost, full cost and
the principles behind allowing for intermediate
markets.[2]
© ACCA 2016-2017 All rights reserved.
11
b) Explain how transfer prices can distort the
performance assessment of divisions and
decisions made.
[2]
c) Explain the meaning of, and calculate, Return
on Investment (ROI) and Residual Income (RI),
and discuss their shortcomings.
[2]
d) Compare divisional performance and recognise
the problems of doing so.
[2]
6. Performance analysis in not for profit
organisations and the public sector
a) Comment on the problems of having non-quantifiable objectives in performance
management.[2]
b) Explain how performance could be measured
in this sector.
[2]
c) Comment on the problems of having multiple
objectives in this sector.
[2]
d) Outline Value for Money (VFM) as a public
sector objective.
[1]
7. External considerations and behavioural
aspects
a) Explain the need to allow for external
considerations in performance management,
including stakeholders, market conditions and
allowance for competitors.
[2]
b) Suggest ways in which external considerations
could be allowed for in performance
management.[2]
c) Interpret performance in the light of external
considerations.
[2]
d) Identify and explain the behaviour aspects of
performance management
[2
Study Guide
A THE UK TAX SYSTEM AND ITS
ADMINISTRATION
1. The overall function and purpose of taxation
in a modern economy
a) Describe the purpose (economic, social etc) of
taxation in a modern economy.
[1]
b) Explain the difference between direct and
indirect taxation.
[2]
c) Identify the different types of capital and
revenue tax.
[1]
2. Principal sources of revenue law and practice
a) Describe the overall structure of the UK tax
system.
[1]
b) State the different sources of revenue law.
[1]
c) Describe the organisation HM Revenue &
Customs (HMRC) and its terms of reference.
[1]
d) Explain the difference between tax avoidance
and tax evasion, and the purposes of the
General Anti-Abuse Rule (GAAR).
[1]
e) Appreciate the interaction of the UK tax system
with that of other tax jurisdictions.
[2]
f) Appreciate the need for double taxation
agreements.
[2]
g) Explain the need for an ethical and professional
approach.
[2]
Excluded topics
Specific anti-avoidance legislation.
3. The systems for self-assessment and the
making of returns
a) Explain and apply the features of the self-assessment system as it applies to
individuals.
[2]
b) Explain and apply the features of the self-assessment system as it applies to
companies, including the use of iXBRL.
[2]
4. The time limits for the submission of
information, claims and payment of tax,
including payments on account
a) Recognise the time limits that apply to the
filing of returns and the making of claims.
[2]
b) Recognise the due dates for the payment of tax
under the self-assessment system, and
compute payments on account and balancing
payments/repayments for individuals.
[2]
c) Explain how large companies are required to
account for corporation tax on a quarterly
basis and compute the quarterly instalment
payments.
[2]
d) List the information and records that taxpayers
need to retain for tax purposes.
[1]
Excluded topics
The payment of CGT by annual instalments.
Tax deducted at source from savings
income or dividend income when
calculating payments on account based on
the tax year 2015-16.
Simple assessments
5. The procedures relating to compliance checks,
appeals and disputes
a) Explain the circumstances in which HM
Revenue & Customs can make a compliance
check into a self-assessment tax return.
[2]
b) Explain the procedures for dealing with appeals
and First and Upper Tier Tribunals.
[2]
Excluded topics
Information powers.
Pre-return compliance checks.
© ACCA 2017-18 All rights reserved.
9
Detailed procedures on the carrying out and
completion of a compliance check.
6. Penalties for non-compliance
a) Calculate late payment interest and state the
penalties that can be charged.
[2]
B INCOME TAX AND NIC LIABILITIES
1. The scope of income tax
a) Explain how the residence of an individual is
determined.
[1]
Excluded topics
The split year treatment where a person
comes to the UK or leaves the UK.
Foreign income, non-residents and double
taxation relief.
Income from trusts and settlements.
2. Income from employment
a) Recognise the factors that determine whether
an engagement is treated as employment or
self-employment.
[2]
b) Recognise the basis of assessment for
employment income.
[2]
c) Recognise the income assessable.
[2]
d) Recognise the allowable deductions, including
travelling expenses.
[2]
e) Discuss the use of the statutory approved
mileage allowances.
[2]
f) Explain the PAYE system, how benefits can be
payrolled, and the purpose of form P11D.
[1]
g) Explain and compute the amount of benefits
assessable.
[2]
h) Recognise the circumstances in which real
time reporting late filing penalties will be
imposed on an employer and the amount of
penalty which is charged.
[2]
Excluded topics
The calculation of a car benefit where
emission figures are not available.
The exemption for zero emission company
motor cars.
The reduced charge applicable to zero
emission company vans.
Tax free childcare scheme.
Share and share option incentive schemes
for employees.
Payments on the termination of
employment, and other lump sums received
by employees.
3. Income from self-employment
a) Recognise the basis of assessment for self-employment income.
[2]
b) Describe and apply the badges of trade.
[2]
c) Recognise the expenditure that is allowable in
calculating the tax-adjusted trading profit.
[2]
d) Explain and compute the assessable profits
using the cash basis for small businesses.
[2]
e) Recognise the relief which can be obtained for
pre-trading expenditure.
[2]
f) Compute the assessable profits on
commencement and on cessation.
[2]
g) Recognise the factors that will influence the
choice of accounting date.
[2]
h) Capital allowances
i) Define plant and machinery for capital
allowances purposes.
[1]
ii) Compute writing down allowances, first-year allowances and the annual investment
allowance.
[2]
iii) Compute capital allowances for motor
cars.
[2]
iv) Compute balancing allowances and
balancing charges.
[2]
© ACCA 2017-18 All rights reserved.
10
v) Recognise the treatment of short life
assets.
[2]
vi) Recognise the treatment of assets included
in the special rate pool.
[2]
i) Relief for trading losses
i) Understand how trading losses can be
carried forward.
[2]
ii) Understand how trading losses can be
claimed against total income and
chargeable gains, and the restriction that
can apply.
[2]
iii) Explain and compute the relief for trading
losses in the early years of a trade.
[1]
iv) Explain and compute terminal loss relief.
[1]
v) Recognise the factors that will influence the
choice of loss relief claim.
[2]
j) Partnerships and limited liability partnerships
i) Explain and compute how a partnership is
assessed to tax.
[2]
ii) Explain and compute the assessable profits
for each partner following a change in the
profit sharing ratio.
[2]
iii) Explain and compute the assessable profits
for each partner following a change in the
membership of the partnership.
[2]
iv) Describe the alternative loss relief claims
that are available to partners.
[1]
Excluded topics
Change of accounting date.
The 100% allowance for expenditure on
renovating business premises in
disadvantaged areas, flats above shops and
water technologies.
Capital allowances for agricultural
buildings, patents, scientific research and
know how.
Knowledge of the annual investment
allowance limit of £500,000 applicable
prior to 1 January 2016.
Enterprise zones.
Investment income of a partnership.
The allocation of notional profits and losses
for a partnership.
Farmers averaging of profits.
The averaging of profits for authors and
creative artists.
Loss relief following the incorporation of a
business.
Loss relief for shares in unquoted trading
companies.
The loss relief restriction that applies to the
partners of a limited liability partnership.
4. Property and investment income
a) Compute property business profits.
[2]
b) Explain the treatment of furnished holiday
lettings.
[1]
c) Understand rent-a-room relief.
[1]
d) Compute the amount assessable when a
premium is received for the grant of a short
lease.
[2]
e) Understand how relief for a property business
loss is given.
[2]
f) Compute the tax payable on savings and
dividends income.
[2]
g) Recognise the treatment of individual savings
accounts (ISAs) and other tax exempt
investments.
[1]
h) Understand how the accrued income scheme
applies to UK Government securities (gilts).
[1]
Excluded topics
The deduction for expenditure by landlords
on energy-saving items.
Premiums for granting subleases.
Junior ISAs.
The additional ISA allowance for a surviving
spouse or registered civil partner
© ACCA 2017-18 All rights reserved.
11
Help-to-buy and innovative finance ISAs.
Savings income paid net of tax.
The detailed rules for establishing whether
higher or additional rate tax is applicable
for the purposes of the savings income nil
rate band
5. The comprehensive computation of taxable
income and income tax liability
a) Prepare a basic income tax computation
involving different types of income.
[2]
b) Calculate the amount of personal allowance
available.
[2]
c) Understand the impact of the transferable
amount of personal allowance for spouses and
civil partners.
[2]
d) Compute the amount of income tax payable.
[2]
e) Understand the treatment of interest paid for a
qualifying purpose.
[2]
f) Understand the treatment of gift aid donations
and charitable giving.
[1]
g) Explain and compute the child benefit tax
charge.
[1]
h) Understand the treatment of property owned
jointly by a married couple, or by a couple in a
civil partnership.
[1]
Excluded topics
Consideration of the most beneficial
allocation of the personal allowance to
different categories of income.
The blind person’s allowance and the
married couple’s allowance.
Tax credits.
Maintenance payments.
The income of minor children.
6. National insurance contributions for employed
and self-employed persons
a) Explain and compute national insurance
contributions payable:
i) Class 1 and 1A NIC.
[2]
ii) Class 2 and 4 NIC.
[2]
b) Understand the annual employment
allowance.
[2]
Excluded topics
The calculation of directors’ national
insurance on a month by month basis.
The offset of trading losses against non-trading income.
The exemption from employer’s class 1 NIC
in respect of employees aged under 21 and
apprentices aged under 25.
7. The use of exemptions and reliefs in deferring
and minimising income tax liabilities
a) Explain and compute the relief given for
contributions to personal pension schemes,
and to occupational pension schemes.
[2]
b) Understand how a married couple or a couple
in a civil partnership can minimise their tax
liabilities.
[2]
c) Basic income tax planning.
[2]
Excluded topics
The conditions that must be met in order
for a pension scheme to obtain approval
from HM Revenue & Customs.
The anti-avoidance annual allowance limit
of £10,000 for pension contributions (the
tapering of the annual allowance down to a
minimum of £10,000 is examinable).
The threshold level of income below which
tapering of the annual allowance does not
apply.
© ACCA 2017-18 All rights reserved.
12
The transitional rules affecting the annual
allowance for pension contributions for the
tax year 2015-16.
The enterprise investment scheme and the
seed enterprise investment scheme.
Venture capital trusts.
Tax reduction scheme for gifts of pre-eminent objects.
C CHARGEABLE GAINS FOR INDIVIDUALS
1. The scope of the taxation of capital gains
a) Describe the scope of capital gains tax.
[2]
b) Recognise those assets which are exempt.
[1]
Excluded topics
Assets situated overseas and double
taxation relief.
Partnership capital gains.
2. The basic principles of computing gains and
losses
a) Compute and explain the treatment of capital
gains.
[2]
b) Compute and explain the treatment of capital
losses
[2]
c) Understand the treatment of transfers between
a husband and wife or between a couple in a
civil partnership.
[2]
d) Understand the amount of allowable
expenditure for a part disposal.
[2]
e) Recognise the treatment where an asset is
damaged, lost or destroyed, and the
implications of receiving insurance proceeds
and reinvesting such proceeds.
[2]
Excluded topics
Small part disposals of land, and small
capital sums received where an asset is
damaged.
Losses in the year of death.
Relief for losses incurred on loans made to
traders.
Negligible value claims.
3. Gains and losses on the disposal of movable
and immovable property
a) Identify when chattels and wasting assets are
exempt.
[1]
b) Compute the chargeable gain when a chattel or
a wasting asset is disposed of.
[2]
c) Calculate the chargeable gain when a principal
private residence is disposed of.
[2]
Excluded topics
The disposal of leases and the creation of
sub-leases.
4. Gains and losses on the disposal of shares and
securities
a) Recognise the value of quoted shares where
they are disposed of by way of a gift.
[2]
b) Explain and apply the identification rules as
they apply to individuals including the same
day and 30 day matching rules.
[2]
c) Explain and apply the pooling provisions.
[2]
d) Explain and apply the treatment of bonus
issues, rights issues, takeovers and
reorganisations.
[2]
e) Identify the exemption available for gilt-edged
securities and qualifying corporate bonds.
[1]
Excluded topics
The exemption for employee shareholders.
The small part disposal rules applicable to
rights issues, takeovers and reorganisations.
© ACCA 2017-18 All rights reserved.
13
Gilt-edged securities and qualifying
corporate bonds other than the fact that
they are exempt.
5. The computation of capital gains tax
a) Compute the amount of capital gains tax
payable.
[2]
b) Explain and apply entrepreneurs’ relief.
[2]
Excluded topics
Entrepreneurs’ relief for associated
disposals.
Mixed use property
6. The use of exemptions and reliefs in deferring
and minimising tax liabilities arising on the
disposal of capital assets
a) Explain and apply capital gains tax reliefs:
(i) rollover relief.
[2]
(ii) holdover relief for the gift of business
assets.
[2]
b) Basic capital gains tax planning .
[2]
Excluded topics
Incorporation relief.
Reinvestment relief.
D INHERITANCE TAX
1. The basic principles of computing transfers of
value
a) Identify the persons chargeable.
[2]
b) Understand and apply the meaning of transfer
of value, chargeable transfer and potentially
exempt transfer.
[2]
c) Demonstrate the diminution in value
principle.
[2]
d) Demonstrate the seven year accumulation
principle taking into account changes in the
level of the nil rate band.
[2]
Excluded topics
Pre 18 March 1986 lifetime transfers.
Transfers of value by close companies.
Domicile, deemed domicile, and non-UK
domiciled individuals.
Trusts.
Excluded property.
Related property.
The tax implications of the location of
assets.
Gifts with reservation of benefit.
Associated operations.
2. The liabilities arising on chargeable lifetime
transfers and on the death of an individual
a) Understand the tax implications of lifetime
transfers and compute the relevant liabilities.
[2]
b) Understand and compute the tax liability on a
death estate.
[2]
c) Understand and apply the transfer of any
unused nil rate band between spouses.
[2]
Excluded topics
Specific rules for the valuation of assets
(values will be provided).
Business property relief.
Agricultural relief.
Relief for the fall in value of lifetime gifts.
Quick succession relief.
Double tax relief.
Variation of wills and disclaimers of
legacies.
Grossing up on death.
© ACCA 2017-18 All rights reserved.
14
Post mortem reliefs.
Double charges legislation.
The reduced rate of inheritance tax payable
on death when a proportion of a person’s
estate is bequeathed to charity.
The additional nil rate band available from
6 April 2017 when a residential property is
inherited by direct descendants.
3. The use of exemptions in deferring and
minimising inheritance tax liabilities
a) Understand and apply the following
exemptions:
i) small gifts exemption
[2]
ii) annual exemption
[2]
iii) normal expenditure out of income
[2]
iv) gifts in consideration of marriage
[2]
v) gifts between spouses.
[2]
b) Basic inheritance tax planning
[2]
Excluded topics
Gifts to charities.
Gifts to political parties.
Gifts for national purposes.
4. Payment of inheritance tax
a) Identify who is responsible for the payment of
inheritance tax and the due date for payment
of inheritance tax.
[2]
Excluded topics
Administration of inheritance tax other than
listed above.
The instalment option for the payment of
tax.
Interest and penalties.
E CORPORATION TAX LIABILITIES
1. The scope of corporation tax
a) Define the terms ‘period of account’,
‘accounting period’, and ‘financial year’.
[1]
b) Recognise when an accounting period starts
and when an accounting period finishes.
[1]
c) Explain how the residence of a company is
determined.
[2]
Excluded topics
Investment companies.
Close companies.
Companies in receivership or liquidation.
Reorganisations.
The purchase by a company of its own
shares.
Personal service companies.
2. Taxable total profits
a) Recognise the expenditure that is allowable in
calculating the tax-adjusted trading profit.
[2]
b) Recognise the relief which can be obtained for
pre-trading expenditure.
[1]
c) Compute capital allowances (as for income
tax).
[2]
d) Compute property business profits and
understand how relief for a property business
loss is given.
[2]
e) Understand how trading losses can be carried
forward.
[2]
f) Understand how trading losses can be claimed
against income of the current or previous
accounting periods.
[2]
g) Recognise the factors that will influence the
choice of loss relief claim.
[2]
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15
h) Recognise and apply the treatment of interest
paid and received under the loan relationship
rules.
[1]
i) Recognise and apply the treatment of
qualifying charitable donations.
[2]
j) Compute taxable total profits.
[2]
Excluded topics
Research and development expenditure.
Non-trading deficits on loan relationships.
Relief for intangible assets.
Patent box.
3 Chargeable gains for companies
a) Compute and explain the treatment of
chargeable gains.
[2]
b) Explain and compute the indexation allowance
available.
[2]
c) Explain and compute the treatment of capital
losses.
[1]
d) Understand the treatment of disposals of
shares by companies and apply the
identification rules including the same day and
nine day matching rules.
[2]
e) Explain and apply the pooling provisions.
[2]
f) Explain and apply the treatment of bonus
issues, rights issues, takeovers and
reorganisations.
[2]
g) Explain and apply rollover relief.
[2]
Excluded topics
A detailed question on the pooling
provisions as they apply to limited
companies.
Substantial shareholdings.
4. The comprehensive computation of
corporation tax liability
a) Compute the corporation tax liability.
[2]
Excluded topics
The tax rates applicable to periods prior to
financial year 2015
Marginal relief
Franked investment income
5. The effect of a group corporate structure for
corporation tax purposes
a) Define a 75% group, and recognise the reliefs
that are available to members of such a
group.
[2]
b) Define a 75% chargeable gains group, and
recognise the reliefs that are available to
members of such a group.
[2]
Excluded topics
Relief for trading losses incurred by an
overseas subsidiary.
Consortia.
Pre-entry gains and losses.
The anti-avoidance provisions where
arrangements exist for a company to leave
a group.
The tax charge that applies where a
company leaves a group within six years of
receiving an asset by way of a no gain/no
loss transfer.
Overseas aspects of corporation tax.
Transfer pricing
© ACCA 2017-18 All rights reserved.
16
6. The use of exemptions and reliefs in deferring
and minimising corporation tax liabilities:
The use of such exemptions and reliefs is
implicit within all of the above sections 1 to 5
of part E of the syllabus, concerning
corporation tax.
F VALUE ADDED TAX
1. The VAT registration requirements
a) Recognise the circumstances in which a person
must register or deregister for VAT
(compulsory) and when a person may register
or deregister for VAT (voluntary).
[2]
b) Recognise the circumstances in which pre-registration input VAT can be recovered.
[2]
c) Explain the conditions that must be met for
two or more companies to be treated as a
group for VAT purposes, and the consequences
of being so treated.
[1]
2. The computation of VAT liabilities
a) Calculate the amount of VAT
payable/recoverable.
[2]
b) Understand how VAT is accounted for and
administered.
[2]
c) Recognise the tax point when goods or services
are supplied.
[2]
d) List the information that must be given on a
VAT invoice.
[1]
e) Explain and apply the principles regarding the
valuation of supplies.
[2]
f) Recognise the principal zero rated and exempt
supplies
[1]
g) Recognise the circumstances in which input
VAT is non-deductible.
[2]
h) Recognise the relief that is available for
impairment losses on trade debts.
[2]
i) Understand when the default
surcharge, a penalty for an incorrect VAT
return, and default interest will be applied.
[1]
j) Understand the treatment of imports, exports
and trade within the European Union.
[2]
Excluded topics
VAT periods where there is a change of VAT
rate.
Partial exemption.
In respect of property and land: leases, do-it-yourself builders, and a landlord's option
to tax.
Penalties apart from those listed in the
study guide.
© ACCA 2017-18 All rights reserved.
17
3. The effect of special schemes
a) Understand the operation of, and when it will
be advantageous to use, the VAT special
schemes:
i) cash accounting scheme.
[2]
ii) annual accounting scheme.
[2]
iii) flat rate scheme.
[2
Study Guide
A THE CONCEPTUAL AND REGULATORY
FRAMEWORK FOR FINANCIAL REPORTING
1. The need for a conceptual framework and the
characteristics of useful information
a) Describe what is meant by a conceptual
framework for financial reporting.
[2]
b) Discuss whether a conceptual framework is
necessary and what an alternative system
might be.
[2]
c) Discuss what is meant by relevance and
faithful representation and describe the
qualities that enhance these characteristics.
[2]
d) Discuss whether faithful representation
constitutes more than compliance with
accounting standards.
[1]
e) Discuss what is meant by understandability
and verifiability in relation to the provision of
financial information.
[2]
f) Discuss the importance of comparability and
timeliness to users of financial statements.
[2]
g) Discuss the principle of comparability in
accounting for changes in accounting
policies.
[2]
2. Recognition and measurement
a) Define what is meant by ‘recognition’ in
financial statements and discuss the
recognition criteria.
[2]
b) Apply the recognition criteria to:
[2]
i) assets and liabilities.
ii) income and expenses.
c) Explain and compute amounts using the
following measures :
[2]
i) historical cost
ii) current cost
iii) net realisable value
iv) present value of future cash flows
v) fair value
d) Discuss the advantages and disadvantages of
historical cost accounting.
e) Discuss whether the use of current value
accounting overcomes the problems of
historical cost accounting.
[2]
f) Describe the concept of financial and physical
capital maintenance and how this affects the
determination of profits.
[1]
3. Regulatory framework
a) Explain why a regulatory framework is needed
including the advantages and disadvantages of
IFRS over a national regulatory framework.
[2]
b) Explain why accounting standards on their own
are not a complete regulatory framework.
[2]
c) Distinguish between a principles based and a
rules based framework and discuss whether
they can be complementary.
[1]
d) Describe the IASB’s Standard setting process
including revisions to and interpretations of
Standards.
[2]
e) Explain the relationship of national standard
setters to the IASB in respect of the standard
setting process.
[2]
4. The concepts and principles of groups and
consolidated financial statements
a) Describe the concept of a group as a single
economic unit.
[2]
b) Explain and apply the definition of a subsidiary
within relevant accounting standards.
[2]
c) Using accounting standards and other
regulation, identify and outline the
circumstances in which a group is required to
prepare consolidated financial statements.
[2]
d) Describe the circumstances when a group may
claim exemption from the preparation of
consolidated financial statements.
[2]
e) Explain why directors may not wish to
consolidate a subsidiary and when this is
permitted by accounting standards and other
applicable regulation.
[2]
© ACCA 2017-2018 All rights reserved.
f) Explain the need for using coterminous year
ends and uniform accounting polices when
preparing consolidated financial statements.
[2]
g) Explain why it is necessary to eliminate intra
group transactions.
[2]
h) Explain the objective of consolidated financial
statements.
[2]
i) Explain why it is necessary to use fair values
for the consideration for an investment in a
subsidiary together with the fair values of a
subsidiary’s identifiable assets and liabilities
when preparing consolidated financial
statements.
[2]
j) Define an associate and explain the principles
and reasoning for the use of equity accounting.
[2]
B ACCOUNTING FOR TRANSACTIONS IN
FINANCIAL STATEMENTS
1. Tangible non-current assets
a) Define and compute the initial measurement of
a non-current asset (including borrowing costs
and an asset that has been self-constructed ).
[2]
b) Identify subsequent expenditure that may be
capitalised, distinguishing between capital and
revenue items.
[2]
c) Discuss the requirements of relevant
accounting standards in relation to the
revaluation of non-current assets.
[2]
d) Account for revaluation and disposal gains and
losses for non-current assets.
[2]
e) Compute depreciation based on the cost and
revaluation models and on assets that have
two or more significant parts (complex
assets).
[2]
f) Discuss why the treatment of investment
properties should differ from other properties.
[2]
g) Apply the requirements of relevant accounting
standards to an investment property.
[2]
2. Intangible non-current assets
a) Discuss the nature and accounting treatment of
internally generated and purchased
intangibles.
[2]
b) Distinguish between goodwill and other
intangible assets.
[2]
c) Describe the criteria for the initial recognition
and measurement of intangible assets.
[2]
d) Describe the subsequent accounting treatment,
including the principle of impairment tests in
relation to goodwill.
[2]
e) Indicate why the value of purchase
consideration for an investment may be less
than the value of the acquired identifiable net
assets and how the difference should be
accounted for.
[2]
f) Describe and apply the requirements of
relevant accounting standards to research and
development expenditure.
[2]
3. Impairment of assets
a) Define, calculate and account for an
impairment loss.
[2]
b) account for the reversal of an impairment loss
on an individual asset
c) Identify the circumstances that may indicate
impairments to assets.
[2]
d) Describe what is meant by a cash generating
unit.
[2]
e) State the basis on which impairment losses
should be allocated, and allocate an
impairment loss to the assets of a cash
generating unit.
[2]
4. Inventory and biological assets
a) Describe and apply the principles of inventory
valuation.
[2]
b) Apply the requirements of relevant accounting
standards for biological assets.
[2]
© ACCA 2017-2018 All rights reserved.
5 Financial instruments
a) Explain the need for an accounting standard on
financial instruments.
[1]
b) Define financial instruments in terms of
financial assets and financial liabilities.
[1]
c) Explain and account for the factoring of
receivables.
d) Indicate for the following categories of financial
instruments how they should be measured and
how any gains and losses from subsequent
measurement should be treated in the
financial statements:
[1]
i) amortised cost
ii) fair value through other comprehensive
income ( including where an irrevocable
election has been made for equity
instruments that are not held for trading)
iii) fair value through profit or loss
[2]
e) Distinguish between debt and equity capital.
[2]
f) Apply the requirements of relevant accounting
standards to the issue and finance costs of:
[2]
i) equity
ii) redeemable preference shares and debt
instruments with no conversion rights
(principle of amortised cost)
iii) convertible debt
6. Leasing
a) Account for right of use assets and lease
liabilities in the records of the lessee.
[2]
b) Explain the exemption from the recognition
criteria for leases in the records of the lessee.
[2]
c) Account for sale and leaseback agreements.
[2]
7. Provisions and events after the reporting period
a) Explain why an accounting standard on
provisions is necessary.
[2]
b) Distinguish between legal and constructive
obligations.
[2]
c) State when provisions may and may not be
made and demonstrate how they should be
accounted for.
[2]
d) Explain how provisions should be measured.
[1]
e) Define contingent assets and liabilities and
describe their accounting treatment and
required disclosures
[2]
f) Identify and account for:
[2]
i) warranties/guarantees
ii) onerous contracts
iii) environmental and similar provisions
iv) provisions for future repairs or
refurbishments.
g) Events after the reporting period
i) distinguish between and account for
adjusting and non-adjusting events after the
reporting period
[2]
ii) Identify items requiring separate disclosure,
including their accounting treatment and
required disclosures
[2]
8. Taxation
a) Account for current taxation in accordance with
relevant accounting standards.
[2]
b) Explain the effect of taxable temporary
differences on accounting and taxable profits.
[2]
c) Compute and record deferred tax amounts in
the financial statements.
[2]
9. Reporting financial performance
a) Discuss the importance of identifying and
reporting the results of discontinued
operations.
[2]
b) Define and account for non-current assets held
for sale and discontinued operations.
[2]
c) Indicate the circumstances where separate
disclosure of material items of income and
expense is required.
[2]
d) Account for changes in accounting estimates,
changes in accounting policy and correction of
prior period errors
© ACCA 2017-2018 All rights reserved.
e) Earnings per share (eps)
i) calculate the eps in accordance with
relevant accounting standards (dealing with
bonus issues, full market value issues and
rights issues)
[2]
ii) explain the relevance of the diluted eps and
calculate the diluted eps involving
convertible debt and share options
(warrants)
[2]
10. Revenue
a) Explain and apply the principles of recognition
of revenue:
(i) Identification of contracts
(ii) Identification of performance obligations
(iii) Determination of transaction price
(iv) Allocation of the price to performance
obligations
(v) Recognition of revenue when/as
performance obligations are satisfied.
b) Explain and apply the criteria for recognising
revenue generated from contracts where
performance obligations are satisfied over time
or at a point in time.
[2]
c) Describe the acceptable methods for measuring
progress towards complete satisfaction of a
performance obligation.
[2]
d) Explain and apply the criteria for the recognition
of contract costs.
[2]
e) Apply the principles of recognition of revenue,
and specifically account for the following types
of transaction:
[2]
i) principal versus agent
ii) repurchase agreements
iii) bill and hold arrangements
iv) consignments
f) Prepare financial statement extracts for
contracts where performance obligations are
satisfied over time.
[2]
11. Government grants
a) Apply the provisions of relevant accounting
standards in relation to accounting for
government grants.
[2]
12. Foreign currency transactions
a) Explain the difference between functional and
presentation currency and explain why
adjustments for foreign currency transactions
are necessary.
b) Account for the translation of foreign currency
transactions and monetary/non-monetary
foreign currency items at the reporting date.
C ANALYSING AND INTERPRETING THE
FINANCIAL STATEMENTS OF SINGLE
ENTITIES AND GROUPS
1. Limitations of financial statements
a) Indicate the problems of using historic
information to predict future performance and
trends.
[2]
b) Discuss how financial statements may be
manipulated to produce a desired effect
(creative accounting, window dressing).
[2]
c) Explain why figures in a statement of financial
position may not be representative of average
values throughout the period for example, due
to:
[2]
i) seasonal trading
ii) major asset acquisitions near the end of the
accounting period.
d) Explain how the use of consolidated financial
statements might limit interpretation techniques
2 Calculation and interpretation of accounting
ratios and trends to address users’ and
stakeholders’ needs
a) Define and compute relevant financial
ratios
[2]
b) Explain what aspects of performance specific
ratios are intended to assess.
[2]
c) Analyse and interpret ratios to give an
assessment of an entity’s/group’s performance
and financial position in comparison with:
[2]
i) previous period’s financial statements
ii) another similar entity/group for the same
reporting period
iii) industry average ratios.
© ACCA 2017-2018 All rights reserved.
d) Interpret financial statements to give advice
from the perspectives of different
stakeholders.
[2]
e) Discuss how the interpretation of current value
based financial statements would differ from
those using historical cost based accounts.
[1]
3. Limitations of interpretation techniques
a) Discuss the limitations in the use of ratio
analysis for assessing corporate performance.
[2]
b) Discuss the effect that changes in accounting
policies or the use of different accounting
polices between entities can have on the ability
to interpret performance.
[2]
c) Indicate other information, including non-financial information, that may be of relevance
to the assessment of an entity’s performance.
[1]
d) Compare the usefulness of cash flow
information with that of a statement of profit or
loss or a statement of profit or loss and other
comprehensive income.
[2]
e) Interpret a statement of cash flows (together
with other financial information) to assess
the performance and financial position of an
entity.
[2]
f) i) explain why the trend of eps may be a
more accurate indicator of
performance than a company’s profit
trend and the importance of eps as a
stock market indicator
[2]
ii) discuss the limitations of using eps as a
performance measure.
[3]
4. Specialised, not-for-profit and public sector
entities
a) Explain how the interpretation of the financial
statement of a specialised, not-for-profit or
public sector organisations might differ from
that of a profit making entity by reference to
the different aims, objectives and reporting
requirements.
[1]
D PREPARATION OF FINANCIAL STATEMENTS
1. Preparation of single entity financial statements
a) Prepare an entity’s statement of financial
position and statement of profit or loss and
other comprehensive income in accordance
with the structure and content prescribed
within IFRS and with accounting treatments as
identified within syllabus areas A, B and C.
[2]
b) Prepare and explain the contents and purpose
of the statement of changes in equity.
[2]
c) Prepare a statement of cash flows for a single
entity (not a group) in accordance with relevant
accounting standards using the direct and the
indirect method .
[2]
2. Preparation of consolidated financial
statements including an associate
a) Prepare a consolidated statement of financial
position for a simple group (parent and one
subsidiary and associate) dealing with pre and
post acquisition profits, non-controlling
interests and consolidated goodwill.
[2]
b) Prepare a consolidated statement of profit or
loss and consolidated statement of profit or
loss and other comprehensive income for a
simple group dealing with an acquisition in the
period and non-controlling interest.
[2]
c) Explain and account for other reserves (e.g.
share premium and revaluation surplus).
[1]
d) Account for the effects in the financial
statements of intra-group trading.
[2]
e) Account for the effects of fair value
adjustments (including their effect on
consolidated goodwill) to:
[2]
i) depreciating and non-depreciating non-current assets
ii) inventory
iii) monetary liabilities
iv) assets and liabilities not included in the
subsidiary’s own statement of financial
position, including contingent assets and
liabilities
© ACCA 2017-2018 All rights reserved.
f) Account for goodwill impairment.
[2]
g) Describe and apply the required accounting
treatment of consolidated goodwill.
[2]
h) Explain and illustrate the effect of the disposal
of a parent’s investment in a subsidiary in the
parent’s individual financial statements and/or
those of the group (restricted to disposals of
the parent’s entire investment in the
subsidiary).
© ACCA 2017-2018 All rights reserved.
SUMMARY OF CHANGES TO F7
RATIONALE FOR CHANGES
ACCA periodically reviews its qualification syllabuses so that they fully meet the needs of stakeholders such as
employers, students, regulatory and advisory bodies and learning providers.
Note of significant changes to study guide Paper F7
The main areas to be added or deleted from the syllabus from that date are shown in Table 1 and 2 below:
Table 1 – Additions to F7
B3 (b) Account for the reversal of an impairment loss on an individual
asset
This learning outcome has been
introduced to clarify that the
reversal of an impairment loss is
examinable.
B6(a) Account for right of use assets and lease liabilities in the
records of the lessee
This learning outcome has been
amended to reflect the issue of
IFRS 16 Leases B6 (b) Explain the exemption from the recognition criteria for leases
in the records of the lessee
Table 2 – Deletions to F7
B6(a) Explain why recording the legal form of a finance lease can be
misleading to users (referring to the commercial substance of
such leases)
This learning outcome has been
amended to reflect the issue of
IFRS 16 Leases
B6(b) Describe and apply the method of determining a lease type
(i.e. an operating or finance lease).
B6(c) Discuss the effect on the financial statements of a finance
lease being incorrectly treated as an operating lease
B6(d) Account for assets financed by finance leases in the records of
the lessee
B6(e) Account for operating leases in the records of the lessee
Additionally the exam format will change in September 2016. Please refer to “Approach to examining the
syllabus” in this docum
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