ICSA Professional Programme Part 1

IQS LOCAL VARIATIONS

ICSA Professional Programme Part 1

FINANCIAL ACCOUNTING

Aim

In professional practice, the Chartered Secretary has to be competent in Financial Accounting to a high standard and in a number of different contexts.

Expertise is demanded in the boardroom setting to contribute to the analysis and interpretation of corporate financial performance and results. Corporate reporting in compliance with legal and stakeholder requirements, including financial statements, is a core responsibility of the Chartered Secretary. In public practice, and in many organizations, the Chartered Secretary is also sometime called upon to fulfil the role of the Corporate Finance Officer. This will ensure that top managers can assess the extent to which they are being properly informed, take decisions to protect resources entrusted to them and help direct the successful future development of the entity for whose affairs they share responsibility.

The aim of this module is to develop the knowledge and skills necessary for the Chartered Secretary to carry out these professional responsibilities.

Learning outcomes

The stated purpose of the module is ‘To develop understanding of the concepts and practices associated with financial reporting in companies, groups of companies and other organizational entities’.

At the conclusion of the module, candidates will be able to:

Understand the language, concepts and use of financial accounts and reports.
Identify and utilize the sources of accounting data and information.
Understand and apply standards of accounting practices.
Prepare financial statements for different forms of organizations in compliance with legal and regulatory requirements
Apply financial information and statements in corporate reporting.
Undertake the corporate accounting role for employers and clients.
Contribute to boardroom analysis of corporate financial performance
assimilate and interpret the outputs from an entity’s accounting system;
initiate and participate in decision-making based on accounting information;
initiate and suggest improvements in the entity’s accounting system and its outputs;
provide advice on the significance for the entity of contemporary accounting developments including regulatory changes;
counsel senior management on the significance of (proposed) published information for external user groups.

Pre-requisite learning

This module is a component of the ICSA Professional Programme Part 1. It is designed to enable aspiring Chartered Secretaries to:

Demonstrate required standards of competence for professional practice in a key discipline, and
Acquire essential knowledge and skills to underpin the relevant components of the ICSA Professional Programme.

Evidence of assessed knowledge and understanding must be demonstrated through the examinations, or those of equivalent qualifications which have been approved as meeting the Institute’s required curriculum and standards. The module specification is based on the assumption of some relevant prior knowledge, and candidates will find it helpful to have familiarized themselves particularly with:

An introduction to the principles of book-keeping and fundamentals of business accounting.

Learning contents

Introduction

In recent years, there is a growing recognition of the importance of the accounting function; witness the rapid growth in the representation of accountants and others with specialist financial expertise at board level. Company secretaries and professional administrators are naturally expected to make informed comments on the wide range of financial data increasingly made available for the purposes of planning performance, assessment and control. Within this context, the specific purpose of this module is to help candidates develop the required understanding of the concepts and practices underlying the financial reports prepared for internal consumption and published by an entity for external use.

Chartered secretaries and other senior administrators interface with accounting as consumers as well as being generators of financial data. It is for this reason that the syllabus stresses understanding of:

the nature and limitations of financial information,
how the numbers are computed,
where there is scope for subjective judgement and bias, and
techniques which can be used to endow financial facts with greater meaning.

Fundamentals of Financial Accounting

Basic accounting reports and profit recognition is concerned with whether candidates are able to:

explain the difference between financial accounting and management accounting;
identify and distinguish between the main reporting entities operating in Singapore;
describe the content of the principal accounting statements prepared and published by business entities and non-profit organizations;
identify and describe the information requirements of internal and external users of accounting statements;
explain the difference between the two alternative methods of profit recognition;
prepare the profit and loss account, income and expenditure account and balance sheet;
distinguish between the three points at which profit may be recognized and apply this knowledge to a simple range of business transactions.

Methods of Financial Measurement

Alternative methods of financial measurement are concerned with whether candidates are able to:

demonstrate a knowledge of attempts to introduce systems of inflation accounting in Singapore;
compare and contrast historical cost accounting, current purchasing power accounting and current cost accounting in terms of their significance for the measurement of reported profit and capital;
apply the techniques of current purchasing power accounting and current cost accounting to a limited range of business transactions;
show an understanding of the relative strengths and limitations of the three measurement systems.

Accounting Theory and Regulation

Accounting theory and regulation is concerned with whether candidates are able to:

outline moves to establish a sound theoretical basis for financial reports through the issue of accounting standards;
identify the contents of and explain the role of accounting standards in enhancing the informative value of published financial reports;
show an understanding of market imperfections and the need for regulation in ensuring adequate accountability from agents to principals;
explain the nature, purpose and framework of the accounting regulatory structure in Singapore;
describe and evaluate the purpose and limitations of accounting standards;
be aware of the fact that modified accounting requirements apply to the affairs of small or medium-sized companies;
describe the nature and purpose of the value added statement, prepare such a statement and show an understanding of the reasons for its lack of adoption today in the Singapore;
demonstrate an understanding of the nature and significance for the content of financial reports of related party transactions.

Structure and Content of Financial Statements

Structure and content of financial statements is concerned with whether candidates are able to:

describe the content of the annual report prepared and published by limited companies and distinguish between the purpose of each of the documents that it contains;
outline some of the main limitations of published financial reports;
describe the requirements for presentation of financial statements;
distinguish between recurring and non-recurring transactions and demonstrate the application of relevant accounting regulations for the content of the profit and loss account;
distinguish between continuing and discontinued operations and demonstrate the application of relevant accounting regulations for the content of the profit and loss account;
explain the importance of being able to differentiate between recurring and non-recurring transactions and between continuing and discontinued operations;
prepare segmental financial reports and explain the purpose of analysing published financial data in this manner;
prepare a statement of total recognised gains and losses and explain its role within the context of the annual report;

Valuation of Assets and Liabilites

Asset valuation and profit measurement is concerned with whether candidates are able to:

demonstrate a basic knowledge of the rules relating to the accounting treatment of capital instruments, taxation, post-balance sheet events, investments costs and show how they are reported in published accounts;
demonstrate a theoretical and practical knowledge of standard accounting practice as applied to valuing and reporting stocks, long-term contracts, research and development expenditure, provisions and contingencies in the profit and loss account and balance sheet;
show full appreciation of, and be able to apply, provisions contained accounting standards relating to the re-measurement of assets and liabilities;
demonstrate a theoretical and practical knowledge of standard accounting practice as applied to valuing and reporting both tangible and intangible fixed assets in the profit and loss account and balance sheet;
understand and apply to the treatment of goodwill and fixed assets the rules relating to impairment.

Group Accounts

Group accounts and foreign currency translation is concerned with whether candidates are able to:

understand the difference between combinations based on assets and shares;
explain the purpose and limitations of group accounts;
identify minority interests and other consolidation adjustments;
prepare consolidated balance sheet in accordance with the acquisition method and merger method;
identify the circumstances that justify the application of the acquisition method or the merger method;
distinguish between the relative effect on consolidated balance sheets when applying each of the two methods;
explain the advantages and disadvantages of the two methods;
identify and account for associated companies and joint ventures;
interpret consolidated balance sheets;
describe investment in associates.

Foreign Currency Translation

Foreign currency translation is concerned with whether candidates are able to:

explain the effects of currency movements on the financial statements of a company engaged in foreign transactions;

cunderstand and explain what is meant by foreign-based operations;
understand and account for foreign-based operations under the temporal and the closing rate methods of foreign currency translation;
reveal an understanding of the appropriate use and relative merits of the two methods;
offer insights into some unresolved problems in the area of foreign currency translation.

Capital Reduction, Reorganisation and Reconstruction

Capital reduction, reorganisation and reconstruction are concerned with whether candidates are able to:

show a knowledge of the provisions of the Companies Act relating to the calculation of distributable profit and apply the rules to a set of financial facts;
understand the nature and purpose of a bonus issue of shares and be able to incorporate the financial effects of an issue into the content of the balance sheet;
explain the nature and role of the concept of permanent capital and explain the circumstances in which a reduction of capital must take place;
demonstrate an understanding of the effect of a share purchase or redemption on the content of the balance sheet;
outline the causes of business failure and explain the effect on the financial stability of a business of a series of operating losses and capital erosion;
prepare a statement showing the allocation of resources available on liquidation among the stakeholders in an enterprise;
prepare a scheme of capital reconstruction and incorporate its effects on the content of a business balance sheet.

Interpretation of Accounts – Cash Flow

Interpretation of accounts (cash flow) is concerned with whether candidates are able to:

identify the source of cash available to a business and explain the ways in which cash resources may be applied;
prepare a cash flow statement in accordance with the requirements of standard accounting practice;
demonstrate an understanding of the importance of properly financing business investment in fixed assets and working capital and explain the role of the depreciation charge in this process;
identify and explain the causes of unbalanced financial development resulting in over capitalization of the business or over-trading;
calculate the full range of cash flow-based accounting ratios based on the content of the cash flow statement and, where relevant, other financial reports;
analyse business performance, using cash flow-based accounting ratios, by comparison with previous periods, other companies, industry averages and predetermined standard performance.

Interpretation of Accounts - Ratios

Interpretation of accounts (ratios) is concerned with whether candidates are able to:

explain the nature, purpose and limitations of ratio analysis;
calculate the full range of traditional accounting ratios based on the content of the profit and loss account and balance sheet;
analyse business performance, based on accounting ratios, by comparison with previous periods, other companies, industry averages and predetermined standard performance;
compute the cash operating cycle and explain its significance;
explain the nature and purpose of the earnings per share calculation and make calculations which take account of past changes and possible future changes in share capital.

Study materials and resources

Study Text

Financial Accounting in Singapore and Malaysia

Walter T Harrison Jr / Charles T Horngren / Zubaidah Bte Ismail / Chng Chee kiong / Fazilah Samad / Mak Yuen Teen

Pearson Education South Asia Pte Ltd

Statutes and Regulations

Singapore Financial Reporting Standards

Interpretation of Financial Reporting Standards

Companies Act (Cap 50)

Income Tax (Cap 134)

Magazines, journals and newsletters

There is a wide variety of magazines and journals servicing the accountancy market. Some of these are quite academic and will be of limited use to ICSA students. Others, particularly the regular magazines and newsletters produced by the accountancy professional bodies, are worth regular review. In many cases, article archives are posted on these organisations’ web-sites – see below for url details. Newsletters specifically targeted at professional accounting students are also often available in downloadable format.

Accountancy - The monthly journal of the ICAEW. (

Accountancy Age - Weekly news and developments digest.

Accounting & Business

Accounting & Business Research

Accounting Technician (

Financial Accountant - Journal of The Institute of Financial Accountants .

Web Resources

The Ministry of Finance of Singapore (MOF)

The Monetary Authority of Singapore (MAS)

The Inland Revenue Authority of Singapore (IRAS)

The Council for Corporate Disclosure and Governance (CCDG)

The Singapore Legislations

The Institute of Certified Public Accountants in Singapore (ICPAS)

Accountancy

Accounting Standards Board (ASB)

Accounting-Web

Association of Accounting Technicians

Association of Certified Chartered Accountants (ACCA)

Chartered Institute of Management Accountants

Financial Reporting Review Panel

The Chartered Institute of Public Finance and Accountancy

The Institute of Chartered Accountants in England and Wales (ICAEW)

The Institute of Directors