F2 Exam Essay
F2 - Financial Management
Some of the answers that follow are fuller and more comprehensive than would be expected from a well-prepared candidate. They have been written in this way to aid teaching, study and revision for tutors and candidates alike.
This question was intended to test two of the key areas in Syllabus Section B, being share-based payments and retirement benefits. The share-based part requires knowledge and practical application of IFRS 2 and an understanding of why the requirements are necessary.
The pension section focuses on the accounting rules for a defined benefit plan and includes the revised rules for accounting for past service costs. …show more content…
The statement of financial position will show the year-end position that MR has with the pension plan, either a net pension asset or liability. This will be calculated as the difference between the fair value of the pension plan assets and present value of the pension plan liabilities at the year-end date.
The revised IAS 19 requires the past service costs to be recognised immediately in full. The costs will be included in the charge in arriving at profit for the year and will also be included in pension plan liabilities from the date the improvements to the plan were announced.
This question tested consolidation and required candidates to calculate and draft sections of the statement of cash flows.
The question examined learning outcome A1(a) and (b).
The most time-efficient process would have been to annotate the question paper with the headings for the cash flows and then set up the pro-formas for the sections of the cash flow. Using the missing figure approach to calculate the cash flows would have been the most logical approach.
Consolidated statement of