F2 Last Chance Preparation

As dusk approaches and the last day of (Bohra) Eid-ul-adha disappears into the sunset, I am finally getting set to begin my final preparation for P2 and E2 after almost a four-day stretch of preparing for my weakest paper (F2).

Having taken a look over the May 2010 paper (another touch-and-go proposition), there is not much change in the existing strategy, though the pressing need for additional preparation continues to haunt me.

The final preparation list is as follows, which will probably take place once I have given in the P2 paper on the final eve and day-time hours before the paper, hopefully armed with the revision kit and some clarified concepts:

For the main bulk of the paper:

1. Understand clearly the requirements for subsidiaries, associates and joint ventures: when to consolidate fully/ partially and use equity accounting for consolidation of financial statements including SOCI, CSCIE, CSOFP and CCFS with crystal clear concepts relating to extent of ownership based on ownership of equity and entitled share of income between parent and NCI, as well as Comprehensive Income

2. Be particularly comfortable with goodwill calculation, fair value adjustments, intra-group trading and unrealized profit adjustments, sale of asset with corresponding effect on income statement, assets/ liabilities, Retained Earnings and NCI, and elimination of internal dividends and other transactions. The examiner's guide to passing F2 mentions 'the big three - goodwill, non-controlling interest and group retained earnings'.

3. Expect correction of entries relating to acquisition and disposal of investments such as disposal of subsidiary and accounting for retained investment as associate (e.g. May 2010 Part B Q6). Understand also the terms AFS, HFT and their implications on the SOFP

4. Be clear on how to use accounting ratios to critically evaluate business performance in terms of profitability (margins, their relations with each other and interpretation in context of horizontal/vertical comparisons), working capital management (turnover, changes over time), leverage (debt to equity ratios, interest cover).

Ascertain fundamentals of the business such as cash position, effective interest rates of financing and extent of using debt to equity, asset values etc. and make adjustments in the figures used for ratio analyses to capture the reality of the business. Reporting style using appropriate narrative and mentioning further opportunities for investigation should flow nicely. The examiner's guide mentions a key 'skill being tested is your ability to identify the big issues and select the ratios relevant to those issues' and always remember to use the word 'because':

"If your sentences include the word ‘because’, it means you must be identifying the issue or the solution and explaining why it is an issue or solution. That is what’s going to earn you marks."

Also, for potential lifesaving:

1. Understand how sub-subsidiaries are accounted for and piecemeal acquisitions (understanding the basic concept may be pivotal to a not-so-difficult 10 mark question or even a long answer question)

2. Understand the limitation of analysis of financial statements, defects in conventional accounting, especially with rising price levels, international differences and across markets, using different accounting policies etc.

3. Expect a question relating to foreign subsidiaries and the application of exchange rates (given that the specimen paper and May 2010 seem to 'forget' this part of the syllabus, so do anticipate the bombshell)

2. Be confident in EPS calculations including comparative, effect of dilution and their effect on investor confidence

4. Pay close attention to the 10% part of the syllabus for easy scoring theoretical questions: substance over form with examples, latest developments regarding IFRS convergence with US GAAP (mentioning shift of approach, Norwalk agreement, Roadmap, short and long term projects, dropping of recon and the most recent developments such as completion of first phase of conceptual framework and examples of technical areas where convergence was acheived), environmental and social reporting, voluntary disclosures and managerial reviews, and importantly, capital maintenance concepts

5. Form a basic understanding of share based payments and pension plans

6. While I have decidedly ignored the Financial Instruments part of the syllabus, basic knowledge of accounting entries with a feel for the substance over form should help

So that's a lot of work cut out for the 20 hours or so between exams (minus, say, two hours for commuting and five to six hours for resting and answering urgent calls from nature, leaving me with two or three 3-hour sessions or one or two long 4-hour sessions at best) in my last chance at preparing to clear the F2.

Please keep in mind that anyone who wants to get a high score on F2 should NOT use this advice. ALL the coverage mentioned above can help me scrape through to inch a mark or two past the 50 per cent mark.

There's also an online FOC session for F2 preparation intimated by email this Sunday 5:30 to 7 pm. I missed the email two days ago which required a response by the next day, so I'm a day late in responding. But with the media chosen as internet and preparation for the other exams starting so late, it may or may not be feasible anyway. In case it is, I don't want to miss it.