P3 wider reading: IT resources

Information Technology (IT) is a crucial part of the ACCA P3 Business Analysis syllabus, and indeed is a part of business in general that is growing exponentially. A lack of comfort in this area will hurt you on exam day and in your career. Today's accountants and finance analysts already use IT heavily in their day-to-day work, and the leaders in the C-suite have to approach IT as something that can give their business a strategic advantage.

P3 candidates would do well to read more widely on IT so real-life examples are on ready recall in the examination hall. More importantly, to be knowledgeable and conversational on contemporary business IT is an asset that will serve candidates well once they've completed the ACCA qualification.

In terms of IT articles to read ahead of the P3 exam, as always the starting point is the relevant technical article published by the ACCA itself, available here.

Wider reading
For further reading, I would recommend this recent report by Deloitte on technology trends. This is the 2014 edition, notably arguing why Chief Information Officers (CIOs) need to be more like venture capitalists when designing their firms' portfolio of IT solutions. A quick Google search should yield the previous years' editions.

I'd also recommend keeping an eye out for The Economist's Technology Quarterly which is, as you might have guessed, released quarterly.

A familiarity with the business IT issues of the day should help you approach IT-related questions in the P3 exam with confidence. 

ACCA optional papers - best combinations

Throughout the ACCA qualification, candidates have to decide which papers they will attempt at which sitting. But throughout the Fundamental and Essential stages, no real choice is necessary: you may sit a paper in winter or in summer, but ultimately you will have to sit the paper one way or another in order to progress. 

That changes when it comes to the Optional stage, at which point students must choose which two of four papers they will complete. This is an important and often stressful decision for candidates to make, and so it is surprising that nowhere on the web gives a comprehensive review of each combination of Optional exams. What follows, then, is such a review. 

As a reminder, there are four papers to choose from:

1. P4 Advanced Financial Management

2. P5 Advanced Performance Management

3. P6 Advanced Taxation

4. P7 Advanced Audit and Assurance

This means that there are six possible combinations. 

Combination 1: P4 and P5

Ideal for: aspiring management accountants and financial managers

One of the great things about ACCA relative to CIMA is that candidates have the option to specialise at the end of the qualification. This combination allows students to cover the bulk of the meatier areas of the CIMA program without committing to management accounting too early in their qualification.

As a bonus, candidates who complete this combination will be able to...

Combination 2: P4 and P6

Ideal for: aspiring technical specialists

With all due respect to management accountants, after a certain knowledge base is mastered, you can't delve in too much further (this is not to suggest that management accountants and strategy advisors are not important - on the contrary!).

The tax and treasury worlds, however, offer rich opportunities for specialism. Compared to management and statutory accountants, the supply of these professionals is limited and so employees armed with this knowledge have lots of bargaining power. On the other hand, tax and treasury teams often tend to be smaller and niche, so may have fewer direct career paths to managing a large team and having direct reports. 

This paper combination will serve you well if you intend to do an additional qualification after your ACCA journey - there are a number of tax and treasury (or treasury-related) professional qualifications out there, and these papers can help you get exemptions for parts of these. 

This paper combination will also suit candidates who feel more comfortable with computations and calculations (though be aware that there are still considerable descriptive/discursive portions of the papers).

Combination 3: P4 and P7

Ideal for: externally-oriented finance professionals 

What do both financial management and audit have in common? Much of the work financial managers and corporate reporters working with auditors do is externally focused. Treasurers deal with banks and the capital markets; corporate reporters deal with auditors and externally published accounts. If you want to be involved with how your organisation is viewed by and interacts with the outside world, this is a good combination.

If you are going the auditor route, this combination can also give you the necessary knowledge to audit complex areas such as financial instruments, including derivative/hedging instruments. 

During the studying phase, this combination will also allow you to divide your time between a number crunching paper (P4) and a largely discursive paper (P7). 

Combination 4: P5 and P6

Ideal for: those who can't make up their mind

This combination straddles the division between generalist and technical a bit, and would likely make for a well-rounded accountant (rare is the management accountant who truly understands a tax computation). 

Career-wise this should keep the tax door open upon qualification, but also leave you conversant with the management accounts whenever you need to work with them. 

Like the P4/P7 combination, during the studying phase candidates will get a nice mix of number crunching with P6 and discursive practice with P5.

Combination 5: P5 and P7

Ideal for: accountants who are strong writers

Some finance professionals are Excel masters, but most of us have met accountants who seem surprisingly weak in this area. Well, that's because the accountant as Excel guru is a myth - many accountants make their careers in writing-heavy roles, preparing narrative reports for board committees and strategic advisory documents. 

Content-wise P5 and P7 have very little in common, but both will require strong writing and reporting skills so the practice phase of exam prep should help you improve those.

Unfortunately with this combination, there is little to no overlap so you will not get much help for one when studying the other.

Like the P5/P6 combination, these two taken together should make for a well-rounded accountant. 

Combination 6: P6 and P7

Ideal for: the accountant's accountant 

Tax and audit - this is surely the most conventional pairing of optional exams, and indeed, these are the subject areas that the wider public expects you to know when you say you are an accountant.

Like P4/P7, this is a solid combination for those who like dealing with the outside world (namely, the tax authorities and auditors). 

It is worth noting, however, that Paper P3 explicitly added content on management accounting because the ACCA worried that candidates taking P6 and P7 would have no exposure to management accounting at the professional level.

This combination could be said to be the least like CIMA - up to you to decide whether that's a good or bad thing.

Conclusion

There is a dearth of resources on the web helping students select their optional ACCA paper combinations; I hope this helped provide some food for thought. 

Should the ACCA release the numbers behind their pass rates?

The ACCA releases its global pass rates every six months following the release of exam results. There is a breakdown by exam paper, but no further disaggregation. Should the ACCA give students more information about the numbers behind the pass rates? My answer is an emphatic yes.

For instance, pass rate per paper by geographic location. ACCA exams are all written in English, so it is reasonable to assume that pass rates for the more discursive papers (e.g. F8, P3, P5, P7) are on average lower in countries in which English is not a common native language. If this is indeed the case, shouldn't students be aware of this when they are selecting their exams? Rightly or wrongly, many students may opt not to sit an optional paper (say, the largely discursive P5) due to a low pass rate. It should be up to the ACCA to make sure that these students are aware what is driving the trends behind the pass rates (e.g. language skills) so that decisions can be made in an informed manner.

A second proposal is that salient facts about the pass rates as they relate to other papers should be released. What I mean by this is that the ACCA ought to provide statistics about which exam combinations lead to success, and which to failure. Surely the ACCA has the resources to let students know that, say, candidates who sat F8 with F7 were more likely to pass F8 statistically than those who sat F8 with F5. Similarly, the ACCA can indicate the variance in student success between students who sit 1, 2, 3, or 4 papers during an exam sitting. Offering students the statistics on the best paper combinations and presenting the realities of how much taking an additional paper on affects the chances of success is surely in students' best interests. So why not provide it?

A third proposal is that note only should pass rates be released, but averages should be published (and perhaps quintiles) so students have a better idea of where they measure relative to their peers. Pass rates are a black and white measure and can mask the true realities behind how challenging or simple a particular exam diet was. Especially if there is not a lognormal distribution of results, then class averages might be very informative.

The ACCA files away the results of thousands of students every six months, ignoring that they sit on a treasure trove of data in those results. It is about time they analyse and present the results to provide the insights that will help ACCA students become ACCA members sooner. 

P4 book review: A. Chisolm's An Introduction to Capital Markets

Andrew M. Chisolm's An Introduction to Capital Markets: Products, Strategies, Participants appears on the old P4 Advanced Financial Management examiner's list of recommended readings. Is it worth introducing to your P4 study plan?

This is a comprehensive textbook covering the capital markets and ambitious P4 students will be rewarded if they choose to use it to enhance their studies. There are very detailed chapters on the money markets and bond markets which should be useful when covering the sections of the syllabus on cost of capital and raising finance. There is also an exceptionally detailed chapter on options which should help a well-prepared candidate ace any question on them.

The main benefit that students will get out of this textbook, however, is its thorough coverage of FX and interest rate swaps, forwards and futures. These provide almost all that is necessary to know for the risk management section of the syllabus, and indeed Chisolm devotes the most time and space to these topics.

The book isn't perfect, and some students may find it too long-winded and too detailed for the likely depth at which certain P4 syllabus areas are examined. That may be a fair criticism, and so for that reason the text should be used more as a reference piece than as something they must read start to finish. The topics are approached in an accessible style suitable for undergraduates with some knowledge of financial markets. It is easy to read but denser than most ACCA-specific texts.

If a student were to use this text selectively (i.e. only for a few topics), it would make sense to use it for options and risk management/hedging; it beats most approved learning providers' texts in both these areas.

Overall, this book is recommended for candidates who would like more in-depth knowledge on hedging and options, and for those whose ambitions are to achieve significantly higher than 50% on the exam. If you're just looking to pass and move on, then indeed, move on away from An Introduction to Capital Markets as well. 

P2 wider reading: international convergence of accounting standards

The current issue in P2 Corporate Reporting to which all other current issues at times seem subservient is the international convergence of accounting standards. Capital markets are more global than ever, and global capital itself very agnostic – it is ever seeking its investors desired sweet spot of risk/returns. However, transaction costs may stop capital from migrating to those places where it can do the most good. Interpreting and comparing investment opportunities prepared under different sets of accounting standards is not easy, and often represents a cost that investors are not willing to incur. Hence the demand for standardisation and international convergence of standards.

Many countries have adopted IFRS as the required reporting standards for their listed firms, but in the United States (the world’s largest single capital market) US GAAP reigns supreme, and this situation does not seem likely to change in the near term. In the absence of the US adopting IFRS, the FASB (the US accounting body) and the IASB instead work jointly on amending their standards to make them more similar to one another when the need is pressing.

In any P2 examination question that asks why changes to an existing IFRS are being discussed and/or proposed, it is a safe bet that referencing the IASB and FASB’s convergence project will earn a candidate some marks.

Wider reading

Any accountancy publication will feature stories on international convergence and progress thereto (or lack thereof) quite regularly. The more mainstream media will feature these less frequently, although they occasionally pop in the Business pages of The Economist. For your reading pleasure: an article about the new head of the US’s FASB, who is tasked with helping with the convergence project; and two articles about the challenges that still face the global harmonisation of accounting standards.

With regards to your exam preparation, I would only recommend delving deeply into this topic if you are quite certain you will attempt the current issue question of your P2 examination – the topic is unlikely to feature in any great detail elsewhere on the paper.

F9 wider listening: Essentials of Corporate Financial Management podcast

Sometimes you want to fit some studying but can’t (or don’t want to) read or write. You could be commuting to work, or just be exhausted after a day of it. It may be worth fitting in an audio podcast to your study plan in such instances. This is definitely a more passive way of studying and cannot replace proper studying, but can be used as a good supplement.

Wider listening

For F9 Financial Management, the podcast Essentials of Corporate Financial Management is very useful. The content in many places overlaps with the F9 syllabus and the episodes follow a logical order. Perhaps enticingly, they are short episodes (about 10 minutes each), so they are easily digestible in short chunks when you only have a few minutes of spare time. The podcast is meant to accompany the Pearson textbook of the same name; however I do not believe this needs to be purchased in order to find value in the freely available podcast. The textbook is well reviewed so it might be worth consideration, however it would appear to be at the same intellectual depth as the ACCA F9 syllabus and so one might be better off sticking to the approved learning provider texts.

If you have access to Apple podcasts, definitely download/subscribe to this one.

P1 wider reading: boardroom diversity

Diversity in the boardroom is a topic that is relevant both to your P1 studies and, of course, to the wider corporate world. The P1 syllabus asks students to contemplate the value of a diversified board and also to keep diversity in mind when it comes to board member nominations. Diversity can refer to many things – diversity of race, age, sexual orientation, religion – but inarguably the most discussed issue in corporate governance diversity is gender. In short, there is a push to get more women in the boardroom. Some jurisdictions (particularly in continental Europe) have gone as far as imposing quotas and targets percentages of women in executive and non-executive positions. Opponents to such quotas are those who believe the most senior positions should be reserved for the most qualified personnel, and they suggest that unfortunately a historical lack of women in the management pipeline means that there are fewer eligible female candidates for these positions. 

Wider reading

This is a topic worth reading around, not least because there is an ACCA examiner’s article on the topic. This should indicate to you that the topic is a highly examinable one. That article, of course, should be the starting point for wider reading. Further reading comes from a couple of articles published by The New Yorker, the first of which examines board diversity quotas in Germany and the second of which looks at the lack of diversity in Twitter and other tech firms’ boards. The first linked article in particular looks at the controversial claim that board diversity might improve corporate performance. Be sure to read this in concert with the section in the examiner’s article on the costs of diversity.

The Economist has also published relevant articles in the past few years, one of which also deals with diversity in Germany, and another two that examine women in business.
  
Both articles on Germany are also relevant when it comes to P1’s focus on varying board structures, namely the two-tier board system that is popular in Europe.