An introduction to CIMA F1 Financial Operations
CIMA’s F1 is the intermediate financial accounting paper. It develops the knowledge tested in C02 Financial Accounting Fundamentals.
The syllabus is made up of 3 areas:
- Principles of business taxation – 25%
- Regulation & ethics of financial reporting – 15%
- Financial accounting & reporting – 60%
The format of the exam paper is:
- Section A: 10 OTQs (mainly multiple choice) for 2 marks each
- Section B: 6 short questions for 5 marks each
- Section C: 2 questions for 25 marks each
Principles of business taxation
This area of the syllabus requires students to explain the types of tax that apply to companies. Basic calculations of income tax for companies (the generic name for corporation tax) are also required together with knowing how to account for both current and deferred tax within company financial statements. This area of the syllabus is primarily tested in section A and section B of the exam although accounting for tax is also consistently tested in the published accounts question in section C. Typically nearly half of the OTQs in section A and two of the section B questions relate to this area of the syllabus.
Tip – make sure that you are able to write about the various taxes and the principles behind them. Students will often focus their attention on the calculations and so do not score well on questions that ask them to “explain”.
Regulation & ethics of financial reporting
Students are required to understand the need for regulation within financial reporting and know the structure and roles of the various committees that provide such regulation. This includes the role of the external auditor and knowledge of the various types of audit report that can be issued. Students are also required to be able to appreciate the importance of ethical behaviour and be able to apply CIMA’s code of ethics. Typically one question in section B tests this area of the syllabus with the remaining marks coming up in section A.
Tip – this is an area of the syllabus that is often overlooked by students. However if you can be the well-prepared student who has invested some time learning these topics you will be able to achieve some relatively straight forward marks in the exam.
Financial accounting and reporting
This is the bulk of F1 and requires students to be able to prepare a full set of financial statements for a single company and consolidated statements of financial position and comprehensive income for a simple group.
A full set of financial statements consists of a statement of financial position (SFP), statement of comprehensive income (SCI), statement of changes in equity (SOCIE) and statement of cash flows (SCF). In turn this requires knowledge & application of many accounting standards. Exampes would include IAS 16 Property, plant and equipment, IAS 17 Leases, IAS 11 Construction contracts and IAS 18 Revenue.
This syllabus area is mainly tested via a “published accounts” question in section C. Students are given a trial balance together with additional information and must use their knowledge of double entry bookkeeping and the accounting standards to produce a SFP, SCI and SOCIE. The preparation of a SCFs is tested less frequently but still comes up – so don’t ignore it! It is a different style of question in the sense that you are given SFPs and SCI and produce the SCF from this information rather than rather than from a trial balance.
The second question in section C is typically the preparation of consolidated financial statements for a simple group. Only 100% owned subsidiaries and associates are examinable in F1 and questions will only require the preparation of a consolidated SFP and/or consolidated SCI. Questions will require students to deal with any combination of fair value adjustments, intercompany transactions and provisions for unrealised profits (PUPs or PURPs).
Tip – both of these questions can be time pressured due to their volume. Plenty of question practice before the exam and good exam technique on the day is vital in ensuring that you can pass the questions in the time available.
F1 can be a challenging paper, especially for those that may have gained an exemption from C02 at the certificate level. But with a bit of hard work and lots of question practice, it is a very passable exam.