Could someone please explain to me, in laymans terms if poss, the addback parts of the cashflow. I have read the Kaplan text and memorised the wording, can produce the cashflow statement but it doesn't mean anything to me as yet. The level 3 Kaplan books overdid the workings, there was enough info in them to make an easy exam module seem complicated, but level 4 seems to have left gaps in the explanations. Maybe they are written for people already working in an accounts environment or have experience of such but for the like of me.................hope my question makes sense.

 

Taverymucho

Neil.

So seeing as though your now into level 4, I have a question.

People keep telling me that really you should be working in an accounting role to do level 4, would you agree Neil?

I can't personally see why you would, as I do something similar to Shaun in that I sit down and do everything I llearn with live data, so surely this should be no different?

How did the interview go?

Ok, your not online so I'll assume IFRS and the indirect method

start with the basics.

The financial statements will start you off with three very important peices of information.

The Profit Before Tax which will be your starting point

Cash Brought Forwards and Cash Carried forwards.

You know that the your calculated change in cash in the period must equal the difference between the brought forwards and carried forwards figures so straight away you know your starting point (profit before tax) and the figure that your cashflow calculations must equal (difference between cash b/fwd and c/fwd).

there are three segments to the cashflow statement. Operating Activities, Investing Activities and Financing activities.

Some elements may be put in different segments dependant upon the preparers viewpoint with Interest being the most quoted element in issue there as it can be perceieved as relating to operating, financing and investing activities.

The key is that however interest is applied it must be applied consistently in the same manner.

A key here is not to give the moderator any easy way of failing you so DON'T TOTAL THE INDIVIDUAL SEGMENTS!!!!! Markers will look for specific figures such as the total of Operating activities but by putting interest in a different segment to the stock answer your toal would not be the same as there's but your final answer should be the same.

Now lets take a look at what your attempting to achieve.

... Actually, no, stop. Lets have an expert lecturer show you... Watch this series of video lectures

http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-part-1/
http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-part-2-examples-1-and-2/
http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-example-3/
http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-example-4/

You can watch without being a member of openutition but if you want the accompanying notes you need to sign up... Then again, it's free so no worries.

Try not to laugh too much at the advanced level ACCA students who are all from one of the big four.... Just makes me keep saying to myself "Why have I still not passed this if they can!!!".

Right, once you've done those you will understand Cashflow statements far better and your questions will be less open ended.

Cashflows used to be my real nemesis (which has now moved on to financial instruments) and these lectures put me on the straight and narrow after many days of beating my head repeatedly against my Kaplan study text.... Ooh, just had a brilliant idea, maybe if I had read it rather than just beating my head against it!!!

Happy Saturday Neil,

Shaun.

Shamus wrote:

---

Ok, your not online so I'll assume IFRS and the indirect method

start with the basics.

The financial statements will start you off with three very important peices of information.

The Profit Before Tax which will be your starting point

Cash Brought Forwards and Cash Carried forwards.

You know that the your calculated change in cash in the period must equal the difference between the brought forwards and carried forwards figures so straight away you know your starting point (profit before tax) and the figure that your cashflow calculations must equal (difference between cash b/fwd and c/fwd).

there are three segments to the cashflow statement. Operating Activities, Investing Activities and Financing activities.

Some elements may be put in different segments dependant upon the preparers viewpoint with Interest being the most quoted element in issue there as it can be perceieved as relating to operating, financing and investing activities.

The key is that however interest is applied it must be applied consistently in the same manner.

A key here is not to give the moderator any easy way of failing you so DON'T TOTAL THE INDIVIDUAL SEGMENTS!!!!! Markers will look for specific figures such as the total of Operating activities but by putting interest in a different segment to the stock answer your toal would not be the same as there's but your final answer should be the same.

Now lets take a look at what your attempting to achieve.

... Actually, no, stop. Lets have an expert lecturer show you... Watch this series of video lectures

http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-part-1/
http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-part-2-examples-1-and-2/
http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-example-3/
http://opentuition.com/acca/p2/p2-chapter-13-ias-7-cash-flow-example-4/

You can watch without being a member of openutition but if you want the accompanying notes you need to sign up... Then again, it's free so no worries.

Try not to laugh too much at the advanced level ACCA students who are all from one of the big four.... Just makes me keep saying to myself "Why have I still not passed this if they can!!!".

Right, once you've done those you will understand Cashflow statements far better and your questions will be less open ended.

Cashflows used to be my real nemesis (which has now moved on to financial instruments) and these lectures put me on the straight and narrow after many days of beating my head repeatedly against my Kaplan study text.... Ooh, just had a brilliant idea, maybe if I had read it rather than just beating my head against it!!!

Happy Saturday Neil,

Shaun.

---

 Shaun

How the hell have you not managed to pass yet?  You're like a fountain of knowledge.

Ahh, took me too long to write and your back on line. I guessed right though about IFRS.

On this one though the subject matter is quite complex and can take a bit of getting your head around so no worries.

The sub headings don't have to be in any specific order provided that they are consistently included under the correct headings (interest is the real nightmare with strongly held opinions justifying why it should be under any of the three headings. I use the Kaplan approach as it makes sense to me but would not pick someone up on using an alternative approach).

Sounds as though you main issue is with the three working capital elements of Operating activities.

Just think of them logically.

Inventory, payables and receivables all went into adjusting the profit figure but they do not represent a change in cash. only changes in Stock, money owed to the company and money the company owes to others

If there has been an increase in inventory then more money is tied up in stock. This is not readily convertible to cash so needs to be deducted from the profit before tax figure.

Conversely a reduction in stock means that less cash is tied up in stock which is deemed a cash inflow for the period and needs to be added to the profit before tax figure.

Payables and receivables follow the same thinking.

Try to remember this working capital matrix :

(increase)/decrease in Inventory
(increase)/decrease in receiveables
increase/(decrease) in payables

If it's in brackets you deduct and if it's not in brackets you add back,

HTH,

Shaun.

"adjusting the profit figure "

Ahh this is where i'm falling down, i understand the inventories/payables/receivables, got that down pat but depreciation and loss/gain on sale of non-current asset is throwing me. Same as i understand that gain on disposal is a deduction and loss is an add back, just not comfortable with them as yet. It'll click later.

I used inventories as my main example to come back to as this is easy to explain, increase in inventories is a deduction as this means more cash going out, increase in receivables is treated the same as this means less cash collected, increase in payables means less cash spent so is an addback. Damn this is a tongue twister.

Off home to watch vids, i'll check in later.

TTFN

Neil

You've got to love Eureka moments, I've had plenty with the AAT and I'm only part way through level3.

Shaun you could try writing "I am a fish" 400 times then passing out, it didn't work for Rimmer but it might work for you.

Shamus wrote:

---

Of course, my issue would be that I would also need to tell the reader the type, colour, gendre and size of the fish combined with it's migration habits. interaction with other fish and a complete history of the fish up to that stage using both UK and international terminology!

---

 Bugger, that scuppers that plan then.

 

Shamus wrote:

---

Wonder if stapling a used £20 note to each page of the exam script might help me at all???... Actually, no as it's all now electronic so all that the marker would get would be a photocopy of a £20 note on each page covering up my actual answers... So much for plan B!

---

 Your credit card details, take what you need sort of thing, surely you could trust an ACCA examiner to not max the card out.

Shamus wrote:

---

Good one...

actually, maybe we could start a business doing examiner gift certificates bit like the HMV and Boots ones that you get at Christmas from unimaginative relatives (how many times have I got to tell them that all I want in my Christmas stocking is Scarlett Johansson!!!).

Anyway, one attaches a number that can be redeemed at... Oh no, that doesn't work as everyone who looks at your exam script (and everyone that they know) would be able to redeem the same card before the intended recipient gets hold of it.

Mmmm.... Thinking here that I might not do too well in an ethics exam!

---

 

 

Or you could just try writing faster and summarising what you are trying to say.

Ahhhhhh, I love glancing through the window now and then whilst studying, to see my two boys playing nicely on the lawn.


What a difference an English speaking tutor makes (i don't mean English as in not foreign, i mean English as in good old plain English)

What country is he teaching in?

Anyway i found another film as well about single entity SCFs and although this guy sounded like he was wearing a snorkel, his workings were very easy to understand.

I think theres a lot going on at this level Shaun that should have been intoduced at level 3, the changes of certain names for instance, non-current assets, and the switch from using T-accounts to using the (often quicker and smarter way) of just adding and subtracting the correct figures to get your balancing/missing figure. That is easier than T-accounts and with practise you find yourself just knowing how a transaction works. I know this is only basic stuff but it's more hassle when dumped on you in a time pressured module than if introduced earlier at a more basic level.

Anyway watched the films, had a coffee then completed 2 exam style SCF without peeking, just consolidated accounts to go over today, got most of it, just the inter company transactions to read, but i take it thats an addback and deduct jobby as well. Then onto memorising the formula for ROCE and other stuff so's to be able to interpret and write a report. The rest of the need to know stuff for the exam is memorising so i think i've nearly got this one covered. Them IFRSs are sticking in my head, a lot easier to remember when you are actually applying the standard.

Anyway Sunday mornin' coffee time

Peace out,

Neil

After this weekend i am having serious doubts as to whether AAT was the right choice for me. I'm just wondering if starting out with ACCA would have been better. I've made my bed now. Anyway, soaked up loads of info from watching "Telly" for hours lol, going to have some late nights this week putting it all into practice. The AAT mock makes sense and seems reasonably do-able at this point, so i have hope that within the next fortnight i should be ready to take the FNST exam by the end of March. I am rather hoping that i can nail the budgeting exam within the walls of 8 weeks and cut me some time to spend on the others, the tax exams are pressuring me as i have already bought the texts and need to knock them out before March of next year.

Learning has become fun once again and i'm getting quite quick with my workings.

Didn't get too far into group accounts although they seem quite basic at this level.

If you have time to layman out the PUPs and Inter Co. transactions Shaun, i would be most grateful. They are only basic as i said, sold some stock, only received half, money sent, not yet received etc.

Thanks ever so much,

Knackered Neil.

Hi Neil,

well, considering you just dipped your toe in the water at P2 level I'm guessing that I already know where you're going after AAT!

The issues with PURP come down to :

• Was it the parent to the subsidiary or the subsidiary to the parent?
• Was it a pre acquisition or post acquisition inter company trade?

• Does the question state Margin or Markup?

Lets start with a simple subsidiary sells goods to the parent during the post acquisition period for $5.4million.

The Goods are marked up by 50% on cost.

At the end of the year the parent still has a third of the goods in inventory.

Calculate the PURP in inventory and tell me where in the working the figures would go and the effect that those figures will have on the financial statements.

I've got to go out now but will check in on your progress later and talk through the answer before we go onto the next example.

(note that you will also have similar issues with inter co. transfers of Property, plant and equipment) but we'll do those later as well.

I would suggest we take this off line but then you'll be the only one who benefits from the discussion. However, if you would rather do it that way drop me an email at croxley.morris@virginmedia.com

All the best,

Shaun.

Spamkebab wrote:

---

after sitting 13 exams you can only gain exemptions from the 3 foundation ACCA papers

---

 And after passing ACCA, AAT will give you MAAT status without sitting any AAT exams!

You can also get MAAT after five ACCA exams (F1, F2, F3, F7 and one of F6 or F8) but at that level you would also have to sit a skillscheck module under exam conditions.

Come on Neil, come to the dark side, it's really cool. (Imagine that in Darth Stewie's voice. lol).

Next step Neil, sign up for your free monthly copy of PQ magazine to get the inside track on ACCA, CIMA, ICAEW, ATT and AAT qualifications from an unbiased non affiliated magazine that tells it as it is. (they were the one's who broke the cash for books news).

Sometimes, just sometimes, despite my problems passing my final paper it does actually feel as though I have made the right choice.... Love it when a plan comes together.

 

 

 

 

Hi Steve,

Nope.

ACCA F1 to F3 assume no prior knowledge of Accountancy or Bookkeeping and they cover everything in the AAT qualification.

If you have a grounding in Accountancy (i.e. AAT) then you can skip the fundamentals papers and start at F4.

Selling Price $5.4

Cost of Goods sold 5.4x100/150 = 3.6

5.4

(3.6)

1.8              1.8 x 1/3 = $600,000 left in Parents inventories.

Now i've only got an example of a P to S transaction, and that shows me that on the CSFP i would deduct the PUP from retained earnings and also from inventories.

The CSCI, i would remove the inter co. trans from both revenue and cost of sales ie ($5.4) and add back the PUP to cost of sales $600 000

These examples are for P to S transactions, i'm looking for more examples.

This may just well be gobble-de-gook.

I hope you're keeping up Steve lol.

I understand the need to present fairly and hence the removal of inter sales. Also if the P always bought goods from S at cost then when the statements are produced we'd have massive profit for P and S would be bumbling along paying overheads and so i realise why there needs to be a profit on sales from S.

-- Edited by Spamkebab on Tuesday 21st of February 2012 08:09:28 AM

You don't know how much i was dreading your response Shaun.

There is nothing at this level for Parent Sub and Sub and so on. I've got the calculation for (lets say) 90% control x the pup figure and know how and where to present this etc.

You know, i am thoroughly enjoying this, it is far superior to the content at level 3, i feel like i'm actually doing something. The only thing frightening me at the moment is the amount of information i need to retain in order to answer the written questions comfortably, and also my inability (or ability to write in council estate kid English) to write in accountancy speak.

I'll keep your email if you don't mind as i wanted to speak with you about my Engage account at some point.

Tis a shame we live so far apart, having a person such as yourself as a mentor would be a once in a lifetime opportunity.

Thanks for the boost,

Neil.

Today i have covered impairment of goodwill, fair values, i already know pre and post aquisition calcs. So i think that about covers consolidated accounts for this level. Thats SCFs, CSFP and CSCI all done in less than a week, i've also passed an AAT mock and a Kaplan mock. On with the written parts of the exam now. I'd like to learn the ins and outs right now but being time pressured, i'll have to wait til ACCA.

-- Edited by Spamkebab on Tuesday 21st of February 2012 04:58:03 PM

Spamkebab wrote:

---

I hope you're keeping up Steve lol.

---

 Of course, it's all about the CSI and NCIS, P's and Q's and parents owning a company, which ultimately will mean the answer is 42.

 

Next question, I'm on a roll.

Ok it's been a few days now, so last night i picked up my revision kit and battered out the Statement of cashflows section. I was going good, everything worked out an then ...DUN DUN DUUUUUUUUN..I've got an example thats 2k out...ok ive had silly calculator mistakes in the past, my calculator is actually so dumb but thats another story. I erased my figures and started again......2k out.

Peeking at the answers it seems that Kaplan have left out a 2k dividends received from operating activities, its there in financing but not operating. Is this most probably a mistake? or am i missing something?

I've also found a figure of 32000 in a Kaplan mock that after a little work and replacing said figure with 3200 everything is fine. The only trouble with this Financial Statements text is i have only apparently according to an A4 update sheet, got one mistake in all my texts for this module.

When i first read this, i was going to send my full study kit back as it smelled of fish.

In the Ethics text book one of the questions was something like 'What happens if a student member brings the profession in to disrepute?' and one of the answers was 'public flogging'

I had to look again as i thought i was studying from an ACCA book lol.

Ok, received confirmation of being competent in the Financial Statements module (AAT level4). Thank god for that, there was so much to study and learn, i'm glad i don't have to take a resit. Looks like my system of "book the first one to see what it's like" works for me. 5 short weeks to receive the result.

I must say a big thank you to Shaun, who directed me to the opentuition site, i have been using the ACCA papers along with the Kaplan AAT study texts ever since.

So thats one down and five to go.

Neil.

Nope, no cashflow statements in the exam. I was going to demand a new exam lol. I know what you mean, i practised statement of cashflows until they became enjoyable only to not be tested on them. Mind you, i'm happy enough in the knowledge that i'm well versed in 21 of the IFRSs. I've not looked at the Dummies book yet, have you? I've been busy studying the next lot of material, well actually i sat budgeting last week and have moved onto financial performance. I have discovered however (for anybody studying AAT) that the Kaplan financial performance text is worth studying alongside the budgeting text for the budgeting exam, as it contains a lot more information which is relevant to the written parts of the budgeting exam.


BTW have i missed anything whilst away?

Spamkebab wrote:

---

I know what you mean, i practised statement of cashflows until they became enjoyable only to not be tested on them.

---

Same here with group accounts.

First there was not understanding them and thinking that I would never understand them.

Then there was understanding them, realising it's all about pro forma's but getting all of the answers wrong.

Then there was understanding them and realising that it was Kaplan that had got the answers wrong

Then there is loving them.

---

i'm happy enough in the knowledge that i'm well versed in 21 of the IFRSs. I've not looked at the Dummies book yet, have you?

---

 Its on my Amazon list but it got bumped by the 2012 complete text for ACCA paper P7 (advanced Audit) that has a brief overview of every standard in the appendices.

After spending £35 on that one the Dummies guide went back on the back burner for now.

---

have moved onto financial performance. I have discovered however (for anybody studying AAT) that the Kaplan financial performance text is worth studying alongside the budgeting text for the budgeting exam, as it contains a lot more information which is relevant to the written parts of the budgeting exam.

---

Definitely excellent advice there Neil.

Any issues with Performance management yet?

Personally I'm fine with things like Residual Income, Ratio's, Variances, EVA, IRR, NPV etc. but Maximin, Maximax, Minimax regret questions always threw me. I totally undersstand the concept but the questions always seem to have too many variables leaving me stuck for how to format the answers... I know, should just practice more but there are so many more interesting toys to play with (see groups accounts answer above).

---

BTW have i missed anything whilst away?

---

Nothing major as far as I can recall but as I seem to have the memory of a gnat at the moment that's not saying much... Then again, never spoken with a gnat so as far as I know one could find that they all have the mental agility of Albert Einstein. If only we could understand them! (And then keep one stored in ears during exams).

Right, think we're about caught up there.

Talk later,

Shaun.