The global body for professional accountants

Where a question requires the adjustment of profits, candidates will be told in the requirements what figure to start their computation with (normally the net profit figure for an unincorporated business, or the profit before taxation figure for a limited company). They will also be told that they should list all of the items referred to in the notes to the question, indicating by the use of zero (0) any items, which do not require adjustment. Please see the end of this article for different wording used in variant papers.

This approach has been adopted so that candidates avoid wasting time, and to help them score full marks.

Previously, candidates sometimes rewrote the entire statement of profit or loss from the question, thus taking more time with their answers than was necessary. This problem should be avoided if candidates are asked to start their computation with a given figure.

There are obviously marks available for adjusting items that require adjustment, but also marks for making no adjustment where an adjustment is unnecessary. For example, in Question 2 from the June 2009 Paper F6 (UK) exam, the following items were included in gifts and donations:




Gifts to customers (pens costing £60 each and displaying the company’s name)


Gifts to customers (hampers of food costing £25 each)



Donation to a charity where the company received free advertising in the charity’s magazine. This was not a qualifying charitable donation.


There was a half mark each for adding back the first two items (as they are not allowable), but also a half mark for making no adjustment in respect
of the third item (as it is allowable). Previously, there have been many problems with candidates’ answers to this type of question. Taking the above gifts and donations as an example, a typical approach would have been to include £2,300 in the adjusted profit computation, and then to support this with a set of explanatory notes. Not only does this approach take longer for candidates, but it can also often be very difficult to mark. Another common problem is where no mention is made of items which do not require any adjustment. This again makes marking very difficult as it is not clear if such items have been considered or simply forgotten, and means that candidates may not gain as many marks as they would have if a better approach had been adopted. The new required approach will standardise candidates’ answers, and should avoid all of the above problems. Based on Question 2 from the Paper F6 (UK) exam from June 2009, answers should, therefore, be presented as in Table 1.

Table 1: Trading profit for the year ended 31 March 2009

Profit before taxation640,000  
Amortisation of leasehold property 6,000  
Deduction for lease premium 4,920  
Gifts of pens to customers1,200   
Gifts of hampers to customers 1,100  
Non-qualifying charitable donation0  
Legal fees
- Renewal of lease
- Issue of debentures

Entertaining suppliers1,300   
Entertaining employees0  
Income from property 20,600 
Bank interest 12,400 
Dividends 54,000 
Profit on disposal of shares  80,700 
Interest payable0  
Capital allowances 62,640 
Trading profit 500,000  

An alternative layout would be to have just one column, and to show deductible items (those making up the figure of £235,260) with brackets.

Where a question requires the adjustment of profits, and candidates are told in the requirement to follow this approach, they will not be able to obtain full marks if the layout/approach suggested here is not followed. However, it will be possible for some credit to be awarded, since markers will be instructed to give some credit where candidates present their answers using explanatory notes but to give no credit where no mention is made of items not requiring adjustment.

Variant papers

The same wording will apply in Paper FTX (SGP) and Paper F6 (VNM), as above in Paper F6 (UK).

The instruction in Paper F6 (SGP) will be included in the supplementary instructions at the start of the paper, and shall be worded as follows: ‘All computations should indicate, by the use of ‘0’, any item of income or expense that is tax exempt, not taxable, or which does not require adjustment, as appropriate.’

The instruction will be slightly different in Paper FTX (MYS) and Paper F6 (MYS). In these papers, candidates will be instructed to indicate, by the use of the word ‘nil’, any item referred to in the question for which no adjustment needs to be made in the computation.

In Paper FTX (LSO), candidates will be told that their answer should list all of the items (income and expenditure) referred to in the question, indicating (by the use of ‘0’) any that are not taxable or not deductible.

Written by a member of the Paper F6 (UK) examining team

Last updated: 22 Sep 2014