CIMA Chartered Management Accounting Qualification 2010

Student Support Guide Paper F1 Financial Operations

Introduction

This guide outlines matters to be considered by those wishing to sit the examination for
Paper F1 Financial Operations of the CIMA 2010 qualification. The first part compares the
syllabus of Paper F1 to that of the equivalent Paper P7 in the 2005 qualification and looks at
issues relating to transition from the 2005 to the 2010 qualification.

It should be noted that in the new 2010 syllabus, learning outcomes are shown as
overarching lead outcomes, with several component outcomes resulting from that lead. The
syllabus comparison displays the learning outcomes from the previous syllabus with the
component learning outcomes from the new syllabus.

The remainder of the guide looks at issues that are likely to be relevant to all students
planning to sit this examination and ends with a series of ‘frequently asked questions’.

Syllabus changes overview

The new Paper F1 has undergone considerable change. Managing short term finance, which
had a 25% study weighting in the old Paper P7, has been moved to the new Paper P1. This
has created space within Paper F1 for the expansion of principles of business taxation from
20% to 25% and the preparation of typical tax calculations. The section on regulation now
includes an area on the principles of business ethics and ethical codes, with an overall
increase in weighting from 10% to 15%.

However, the biggest change has come about in the financial accounting and reporting
section, which now has a study weighting of 60%, up from 45% in the old Paper P7. It now
includes an introduction to group accounts which had previously been included in old Paper
P8 Financial Analysis. The skill level has also been raised for some of the learning
outcomes.

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 Syllabus comparison
Old syllabus Paper P7
P7 A - Principles of Business F1 – A. Principles of Business
Taxation - 20% Taxation - 25%
(i) identify the principal types
of taxation likely to be of
relevance to an incorporated
business in a particular
country, including direct tax
on the company’s trading
profits and capital gains,
indirect taxes collected by
the company, employee
taxation, withholding taxes on
international payments;
(ii) describe the features of
the principal types of taxation
likely to be of relevance to an
incorporated business in a
particular country (e.g. in
terms of who ultimately bears
the tax cost, withholding
responsibilities, principles of
calculating the tax base);
(iii) describe the likely record-
keeping, filing and tax
payment requirements
associated with the principal
types of taxation likely to be
of relevance to an
incorporated business in a
particular country;
(iv) describe the possible
enquiry and investigation
powers of taxing authorities;
(v) identify situations in which
foreign tax obligations
(reporting and liability) could
arise and methods for
relieving foreign tax;
(vi) explain the difference in
principle between tax
avoidance and tax evasion;
New syllabus Paper F1 Comments
• The study weighting has
increased by 5%.
1 (a) identify the principal • This section has under
types of taxation likely to be of gone some key changes.
relevance to an incorporated While the material is largely
business in a particular the same, computations are
country; now specifically
examinable:
1 (b) describe the features of 1 (e) requires students to
the principal types of taxation illustrate numerically the
likely to be of relevance to an principles of different types
incorporated business in a of tax.
particular country; 3 (a) asks for the
preparation of corporate tax
1 (c) explain key administrative calculations.
requirements and the possible
enquiry and investigation • Material related to record
powers of taxing authorities keeping, filing and tax
associated with the principal payment in (iii) have been
types of taxation likely to be of deleted, though 1 (c) still
relevance to an incorporated covers the key
business; administrative
requirements.
1 (d) explain the difference in
principle between tax
avoidance and tax evasion;
1 (e) illustrate numerically the
principles of different types of
tax based on provided
information.
2 (a) identify situations in
which foreign tax obligations
(reporting and liability) could
arise and methods for relieving
foreign tax;
2 (b) explain sources of tax
rules and the importance of
jurisdiction.
3 (a) prepare corporate income
tax calculations based on a
given simple set of rules.
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 Old syllabus Paper P7
(vii) describe sources of tax
rules and explain the
importance of jurisdiction;
(viii) explain and apply the
accounting rules contained in
IAS 12 for current and
deferred taxation.
P7 B - Principles of
Regulation of Financial
Reporting - 10%
(i) explain the need for
regulation of published
accounts and the concept
that regulatory regimes vary
from country to country;
(ii) explain potential elements
that might be expected in a
regulatory framework for
published accounts;
(iii) describe the role and
structure of the International
Accounting Standards Board
(IASB) and the International
Organisation of Securities
Commissions (IOSCO);
(iv) explain the IASB’s
Framework for the
Presentation and Preparation
of Financial Statements;
(v) describe the process
leading to the promulgation of
an international accounting
standard (IAS);
(vi) describe ways in which
IAS’s can interact with local
regulatory frameworks;
(vii) explain in general terms,
the role of the external
auditor, the elements of the
audit report and types of
qualification of that report.
New syllabus Paper F1 Comments
4 (a) apply the accounting
rules for current and deferred
taxation, including calculation
of deferred tax based on a
given set of rules.
F1 – B. Regulation and Ethics • The study weighting has
of Financial Reporting - 15% been increased by 5%
1 (a) explain the need for • All the previous learning
regulation of published outcomes are retained with
accounts and the concept that the same skill levels.
regulatory regimes vary from
country to country; • A new area on ethics has
been added with three
1 (b) explain potential elements learning outcomes. They
that might be expected in a deal with ethical principles
national regulatory framework in reporting, sources of
for published accounts; ethical codes and CIMA’s
code of ethics.
1 (c) describe the role and
structure of the International
Accounting Standards Board
(IASB) and the International
Organisation of Securities
Commissions (IOSCO);
1 (d) explain the meaning of
given features or parts of the
IASB’s Framework for the
Presentation and Preparation
of Financial Statements;
1 (e) describe the process
leading to the promulgation of
an IFRS;
1 (f) describe ways in which
IFRSs can interact with local
regulatory frameworks;
1 (g) explain in general terms,
the role of the external auditor,
the elements of the audit
report and types of
qualification of that report.
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 Old syllabus Paper P7 New syllabus Paper F1 Comments

2 (a) explain the importance of

the exercise of ethical
principles in reporting and
assessing information;

2 (b) describe the sources of

ethical codes for those
involved in the reporting or
taxation affairs of an
organisation, including the
external auditors;

2 (c) apply the provisions of

the CIMA Code of Ethics for
Professional Accountants of
particular relevance to the
information reporting,

P7 C - Single Company F1 – C. Financial Accounting • The study weighting has

Financial Accounts - 45% and Reporting - 60% been increased by 15%

(i) prepare financial
statements in a form suitable
for publication, with
appropriate notes;
(ii) prepare a cash flow
statement in a form suitable
for publication;
(iii) explain and apply the
accounting rules contained in
IAS’s dealing with reporting
performance, tangible fixed
assets and inventories;
(iv) explain the accounting
rules contained in IAS’s
governing share capital
transactions;
(v) explain the principles of
the accounting rules
contained in IAS’s dealing
with disclosure of related
parties to a business,
construction contracts (and
related financing costs),
research and development
1 (a) prepare a complete set of
financial statements, in a form
suitable for publication for a
single company;
1 (b) apply the conditions
required for an undertaking to
be a subsidiary or an associate
of another company;
1 (c) prepare the consolidated
statement of financial position
(balance sheet) and statement
of comprehensive income for a
group of companies in a form
suitable for publication for a
group of companies
comprising directly held
interests in one or more fully-
controlled subsidiaries and
associates (such interests
having been acquired at the
beginning of an accounting
period);
1 (d) apply the concepts of fair
value at the point of
acquisition, identifiability of
• This section has seen
considerable change.
• As well as being able to
produce single company
accounts suitable for
publication, group accounts
are now required. 1(b) and
1(c) deal with the
preparation of published
consolidated accounts to
include both fully controlled
subsidiaries and
associates. Such interests
will have been acquired at
the beginning of an
accounting period.
• 1(d) deals with fair value at
the point of acquisition and
the recognition of goodwill.
• The skill level has
increased from being able
to “explain” (level 2) the
principles and rules

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 Old syllabus Paper P7
expenditure, intangible fixed
assets (other than goodwill
on consolidation), impairment
of assets, post-balance sheet
events, contingencies, and
leases (lessee only).
New syllabus Paper F1 Comments
assets and liabilities, and contained in IAS’s dealing
recognition of goodwill. with a number of areas to
being able to “apply” (level
2 (a) apply the accounting 3) the rules (2a).
rules contained in IFRSs and
IASs dealing with reporting
performance, non-current
assets, including their
impairment, inventories,
disclosure of related parties to
a business, construction
contracts (and related
financing costs), post-balance
sheet events, provisions,
contingencies, and leases
(lessee only);

2 (b) explain the accounting

rules contained in IFRSs and
IASs governing share capital
transactions.

D - Managing Short Term • This whole section has

Finance - 25% been removed and now
appears in the new Paper
P1.
(i) calculate and interpret
working capital ratios for
business sectors;

(ii) prepare and analyse

cash-flow forecasts over a
twelve-month period;

(iii) identify measures to

improve a cash forecast
situation;

(iv) compare and contrast the

use and limitations of cash
management models and
identify when each model is
most appropriate;

(v) analyse trade debtor

information;

(vi) evaluate debtor and

creditor policies;

(vii) evaluate appropriate

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 Old syllabus Paper P7 New syllabus Paper F1 Comments
methods of stock
management;

(viii) identify alternatives for

investment of short-term cash
surpluses;

(ix) identify sources of short-

term funding;

(x) identify appropriate

methods of finance for
trading internationally.

Assessment methodology

There will be a written examination paper of three hours, plus 20 minutes of pre-examination
question paper reading time. The examination paper will have the following sections:

Section A – 20 marks
A variety of compulsory objective test questions, each worth between two and four
marks. Mini scenarios may be given, to which a group of questions relate.

Section B – 30 marks
Six compulsory short answer questions, each worth five marks. A short scenario may
be given, to which some or all questions relate.

Section C – 50 marks
One or two compulsory questions. Short scenarios may be given, to which questions
relate.

The Financial Operations examination will primarily test the skills of knowledge,
comprehension and application, using verbs from levels 1 - 3 of the CIMA verb hierarchy.
You will be expected to use all of your knowledge and skills, gained from your study of the
Financial Operations syllabus, to explain and apply the various concepts you have learned.
The scenarios used in this examination are based on real life, though much simplified, and
prepare you for the Management Level examinations.

Preparing for the exam

At the Operational Level, textbook learning is generally sufficient. However, in order to

develop the required skill of application, you need to use your knowledge to solve relatively
straightforward, structured problems. This can best be done by practising examination-
standard questions.

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FAQs

Question Answer

I have passed the CIMA Certificate No

examinations of the 2005 CIMA
syllabus, and this is my first attempt at
Paper F1. Have I missed anything
that I need to catch up on?

I have failed old Paper P7. Where In three areas:

should I concentrate my efforts before
1. You need to concentrate on the new learning
doing my resit?
outcomes relating to ethics, tax computations
and consolidated accounts. In particular, you
need to practise computational questions on the
latter two.
2. You need to look through the detail of the
syllabus content (see below) concentrating on
those topics which are new (such as ethics and
consolidations).
3. The assessment methodology for the
Operational level has changed. There are now
fewer objective test questions, and a greater
emphasis on application of your knowledge. You
should look at (and attempt) the specimen paper
for this examination (see below)

Where can I find the detailed syllabus On the CIMA website under ‘the 2010 syllabus’.
for this paper?

Will there be a specimen examination Yes – it will be available on the CIMA website at the
paper? end of October 2009.

What knowledge is assumed prior to It is assumed that you have passed (or been
studying this syllabus? exempted from) all of the Certificate level papers.

What will be the balance between You should look at the specimen examination paper
calculations and discussions on this for guidance (see above).
exam?

End
Ver1 Aug09