Paper P2 Corporate Reporting (International and United Kingdom) This ACCA Study Text for Paper P2 Corporate Reporting (International and United Kingdom) has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage In addition to ACCA examining team reviewed material you get: • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book Corporate Reporting (International and United Kingdom) BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA P2 ACCA approved content provider Study Text BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia For exams up to June 2015 Contact us ACCA APPROVED CONTENT PROVIDER ACCA Approved Study Text Paper P2 Corporate Reporting (International and United Kingdom) Study Text for exams up to June 2015 Free access to our Exam Success site Look inside June 2014 £32.00 ACP2ST14 (HO).indd 1-3 27/05/2014 18:14 S T U D Y PAPER P2 CORPORATE REPORTING (INTERNATIONAL AND UNITED KINGDOM) BPP Learning Media is an ACCA Approved Learning Partner – content This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam  Highlight the most important elements in the syllabus and the key skills you need  Signpost how each chapter links to the syllabus and the study guide  Provide lots of exam focus points demonstrating what is expected of you in the exam  Emphasise key points in regular fast forward summaries  Test your knowledge in quick quizzes  Examine your understanding in our practice question bank  Reference all the important topics in our full index BPP's Practice & Revision Kit and i-Pass products also support this paper FOR EXAMS IN DECEMBER 2014 AND JUNE 2015 T E X T First edition 2007 Seventh edition June 2014 ISBN 9781 4727 1086 (Previous ISBN 9781 4453 9654 5) e-ISBN 9781 4453 6741 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the exam answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated Published by BPP Learning Media Ltd BPP House, Aldine Place 142-144 Uxbridge Road London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom by Polestar Wheatons Hennock Road Marsh Barton Exeter EX2 8RP Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from traceable, sustainable sources ii © BPP Learning Media Ltd 2014 Contents Page Introduction Helping you to pass – the ONLY P2 Study Text reviewed by the examiner! Studying P2 Important note for UK students The exam paper v vii vii xxxiii Part A Regulatory and ethical framework Financial reporting framework Professional and ethical duty of the accountant Environmental and social reporting 27 57 Part B Accounting standards 10 11 Non-current assets Employee benefits Income taxes Financial instruments Share-based payment Provisions, contingencies and events after the reporting period Related parties Leases 87 133 155 181 231 245 261 269 Part C Group financial statements 12 13 14 15 16 17 Revision of basic groups Complex groups and joint arrangements Changes in group structures Continuing and discontinued interests Foreign currency transactions and entities Group statements of cash flows 291 337 363 393 401 423 Part D Performance reporting 18 19 20 21 Performance reporting Current developments Reporting for specialised entities Reporting for small and medium-sized entities Practice question and answer bank Mathematical tables Index Review form 449 507 523 549 561 647 651 Contents iii A note about copyright Dear Customer What does the little © mean and why does it matter? 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BPP Learning Media – ACCA Approved Learning Partner - content As ACCA’s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team’s comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your on-line My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success Developing exam awareness Our Texts are completely focused on helping you pass your exam Our advice on Studying P2 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future Using the Syllabus and Study Guide You can find the syllabus and Study Guide on pages ix – xxxii of this Study Text Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions – lots of them – both within chapters and in the Exam Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points When and how specific topics were examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) vi Introduction Question Gives you essential practice of techniques covered in the chapter Case Study Real world examples of theories and techniques Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Exam Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Studying P2 Paper P2 Corporate Reporting is a tough paper, reflecting the demands that will be made upon the professional accountant in his or her working life At the Fundamentals level, you will have studied the essentials of financial statement preparation and analysis, including those of group accounts At the Professional level, these essentials will be assumed knowledge You will be required to apply them, assuming the role of a professional adviser and analyst to the management as well as the shareholders and other stakeholders What P2 is about The P2 syllabus comprises eight main areas: A B C D E F G H The professional and ethical duty of the accountant The financial reporting framework Reporting the financial performance of entities Financial statements of groups of entities Specialised entities Implications of changes in accounting regulation on financial reporting The appraisal of financial performance and position of entities Current developments There is, of course, some overlap between these areas For example, if you are discussing current developments (H), you might be talking about the proposed changes to accounting for business combinations (D) and considering the implications of changes in accounting regulation (F) and perhaps even the ethical duty of the accountant to report those changes fairly and accurately (A) Skills you have to demonstrate At the Fundamentals level, the questions would be more easily categorised into syllabus areas However, at this level you may need to demonstrate knowledge, skills and thinking from outside the syllabus area that the question seems to be about on the surface The examiner has stated: Students should be capable of relating professional issues to relevant concepts and practical situations The evaluation of alternative accounting practices and the identification and prioritisation of issues will be a key element of the paper Professional and ethical judgement will need to be exercised, together with the integration of technical knowledge when addressing corporate reporting issues in a business context So the paper is not predictable That said, clear guidance has been given The compulsory Section A question, worth 50 marks, will always be on group accounts It will also deal with issues in financial reporting and will be case study based In Section B, questions could be on any area of the syllabus, but we have been told that two questions will be scenario based and one question will be an essay You have a choice of two from three Increasingly, questions are discursive rather than numerical, so it is vital that you get practice at answering this type of question Important note for UK students If you are sitting the UK P2 paper you will be studying under International standards and up to 20 marks will be for comparisons between International and UK GAAP The ACCA UK Syllabus and Study Guide gives the following advice: International Financial Reporting Standards (IFRS) are the main accounting standards examined in the preparation of financial information The key differences between UK GAAP and International Financial Reporting Standards are looked at on a subject by subject basis The comparison between IFRS and UK GAAP will be based on the new UK GAAP as set out in FRSs 100-102, so the standard by standard Introduction vii comparisons that appeared in previous editions of this study guide are now combined in outcome C11 (d): Discuss the key differences between the IFRS for SMEs and UK GAAP This Study Text covers all the topics you need to know under International Financial Reporting Standards An online supplement will be available at www.bpp.com/learning-media, covering the additional UK issues Exam technique for P2 Do not be needlessly intimidated There is no shortcut to passing this exam It looks very difficult indeed, and many students wonder if they will ever pass But many How they this? Easy marks All the questions are demanding, but there are many easy marks to be gained Suppose, for example, you had a consolidated statement of cash flows with a disposal, some foreign exchange complications and an impairment calculation There will be easy marks available simply for the basic cash flow aspects, setting out the proforma, setting up your workings, presenting your work neatly If you recognise, as you should, that the disposal needs to be taken into account, of course you will get marks for that, even if you make a mistake in the arithmetic If you get the foreign exchange right, so much the better, but you could pass the question comfortably omitting this altogether If you’re short of time, this is what you should Be ruthless in ignoring the complications Look at the question Within reason, if there are complications – often only worth a few marks – that you know you will not have time or knowledge to do, cross them out It will make you feel better Than tackle the bits you can This is how people pass a seemingly impossible paper Answer all questions and all parts of questions The examiner frequently comments that students don't this, so they miss easy opportunities to gain marks Be ruthless in allocating your time At BPP, we have seen how very intelligent students one almost perfect question, one averagely good and one sketchy For a fifty mark question, the first twenty marks are the easiest to get Then you have to push it up to what you think is thirty to get yourself a clear pass For a twenty-five mark question, the first eight to ten marks are the easiest to get, and then you must try to push it up to fifteen Do your best question either first or second, and the compulsory question either first or second The compulsory question, being on groups, will always have some easy marks available for consolidation techniques viii Introduction Syllabus and Study Guide The P2 syllabus and study guide can be found below International Introduction ix Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Review Form – Paper P2 Corporate Reporting (International and UK) (6/14) Please help us to ensure that the ACCA learning materials we produce remain as accurate and user-friendly as possible We cannot promise to answer every submission we receive, but we promise that it will be read and taken into account when we update this Study Text Name: Address: During the past six months you recall seeing/receiving any of the following? 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On the reverse of this page is space for you to write your comments about our Study Text We welcome your feedback The BPP Learning Media ACCA Range Manager of this edition can be e-mailed at: pippariley@bpp.com Please return this form to: Pippa Riley, ACCA Range Manager, BPP Learning Media Ltd, FREEPOST, London, W12 8AA TELL US WHAT YOU THINK Please note any further comments and suggestions/errors below For example, was the text accurate, readable, concise, user-friendly and comprehensive? [...]... covering a particular accounting treatment and ethical and social issues in financial reporting Section B will normally include:  Two scenario or case study- based questions (covering a range of standards and syllabus topics, one usually in the context of a particular industry)  A essay-style discussion question, often encompassing current developments in corporate reporting, which may also include... Introduction xxvii xxviii Introduction Introduction xxix xxx Introduction Introduction xxxi xxxii Introduction The exam paper The paper will comprise two sections Section A: Section B: 1 compulsory case study Choice of 2 from 3 questions (25 marks each) Number of marks 50 50 100 Section A will be a scenario-based question which will include:  The preparation of consolidated financial statements (including... stages and joint operation; de-recognition of financial asset; ethics Section B 2 3 4 Sale and leaseback, defined benefit pension plan, cash-settled share-based payment and contingent liability in the context of a business combination Measuring fair value, impairment of goodwill, deferred tax liabilities and the fair value option for an accounting mismatch; shares as financial liability or equity Changing ... pass – the BPP Learning Media Study Text reviewed by the ACCA examining-team! BPP Learning Media – ACCA Approved Learning Partner - content As ACCA s Approved Learning Partner – content, BPP Learning... PAPER P2 CORPORATE REPORTING (INTERNATIONAL AND UNITED KINGDOM) BPP Learning Media is an ACCA Approved Learning Partner – content This means we work closely with ACCA to ensure this Study Text. .. June 2015 This Study Text is for exams in December 2014 and June 2015 The study guide offers more detail guidance on the depth and level at which the examinable documents will be examined The study