Examiner approach

The aims of F7, Financial Reporting are to develop knowledge and skills in understanding and applying accounting standards and the conceptual and regulatory frameworks in the preparation of financial statements of single and group entities. The analysis and interpretation of the operating performance and financial position of financial statements will also be tested. The exam also forms the basis of the assumed knowledge required in P2, Corporate Reporting.

On successful completion of F7, candidates should be able to:  

  • discuss the need for a conceptual framework for financial reporting and prepare and present financial statements that conform with International Financial Reporting Standards (IFRS)
  • account for business combinations in accordance with IFRS, and
  • analyse and interpret the financial statements of a single entity and a group.

F7 builds on the knowledge and skills acquired from F3, Financial Accounting. F7 will provide the platform for progression to P2, Corporate Reporting and (to a lesser extent) to P3, Business Analysis.

As indicated, a substantial element of F7, Financial Reporting is the requirement to understand and apply accounting standards. Not all extant accounting standards are examinable; the examinable documents for each exam are regularly updated and published on the ACCA website.

Some International Financial Accounting Standards are very detailed and complex and it would be inappropriate to expect candidates at this level to have a complete knowledge of such standards. Therefore, candidates will be expected to understand the main principles and objectives of accounting standards, and to be able to apply these when required to produce financial statements that are made available publicly (often referred to as published accounts questions) and in scenario questions.

Further important aspects of the syllabus are the conceptual issues and definition of the elements of financial statements that underpin IFRSs and generally accepted accounting principles. Much of the conceptual knowledge is to be found in the IASB’s Conceptual Framework for Financial Reporting (Framework). The role of the IASB is an important element of the regulatory framework.

The concept of business combinations and the preparation of consolidated financial statements (group accounts) is an important element of the F7 exam. Accounting for business combinations can be seen as a progression from preparing the financial statements of a single entity. Consolidation questions will be limited to a parent company and one subsidiary, with the possible inclusion of an associate that will require equity accounting.

It should be noted that joint ventures are not examinable in F7.

Candidates may observe that some accounting standards appear in all three financial accounting exams. This illustrates the relationship between the exams, and reflects the continuity and progression of the syllabus. Where a topic that appears in F3 is also included in F7, any examination of that topic will be at more advanced level, requiring greater understanding and appropriately higher level skills.

The final element of the syllabus is the analysis and interpretation of the financial statements of a single entity or a group. Although candidates will be expected to calculate various accounting ratios, F7 places emphasis on the interpretation of what particular ratios are intended to measure and the impact that consolidation adjustments may have on any comparisons of group financial statements.

To summarise, candidates need to understand the concepts underlying the preparation of an entity’s financial reports, to apply their knowledge of accounting standards to prepare financial statements of both single and group entities, and finally, to demonstrate their analytical skills to assess aspects of the performance of single entities and groups based on their financial statements and accounting ratios derived from them.

Format and structure of the examination

The revised structure of the three-hour examination will comprise of three sections, A, B and C.

All questions are compulsory.

Section A will contain 15 multiple-choice questions (MCQ) of two marks each representing 30% of the examination.

Section B of the exam comprises three 10 mark case-based questions.  Each case has five objective test questions of 2 marks each, representing 30% of the examination.

Section C of the exam comprises two 20 mark questions.

One of the reasons for the change, particularly the use of Sections A and B multiple choice questions, is to ensure that candidates adequately cover the whole of the syllabus. This is intended to counter what seemed to be a growing practice of many candidates only studying the ‘core’ topics (groups, published accounts, and interpretation).  

Such a strategy is very short term; it does not provide the breadth of knowledge required for progression to the Professional level nor does it provide the background knowledge required for workplace development and professional life as an accountant. 

The 15 two-mark questions in this section can potentially test any area of the syllabus. They may be narrative or computational and test both knowledge and application. The exact composition of the questions will depend on the topics examined in the other sections of the exam such that an overall balance  is achieved.

The three case questions in Section B will be based on a scenario. All five questions in the case might be related to a single topic area or a few syllabus topics might be contained in each scenario. These case questions allow syllabus topics to be examined in depth and can be drawn from any part of the syllabus.

Again the questions in this section could be on any area of the syllabus. One 20-mark question will require the preparation of the financial statements of a single entity or a group, whereas the other will require the interpretation of the financial statements of a single entity or a group.

Section C questions on group financial statements will be largely computational but there may also be a short written element.

Aspects of group accounting can also be examined in Sections A and B.

The consolidation question might require the preparation of the consolidated statements of profit or loss and other comprehensive income and/or the consolidated statement of financial position. Usually, the group will include only a single subsidiary, but may include an associate. It may be that ‘extracts’ of financial statements are required rather than the preparation of full financial statements.

Important consolidation topics to master are: the concept of pre- and post-acquisition profits, calculation of goodwill and non-controlling interests, fair value adjustments and elimination of intra-group transactions.

Section C questions on the preparation of single entity financial statements are a good example of where several syllabus areas can be tested in a single question, for example such questions are likely to cover several IFRS topics.

Commonly information will be in the form of a trial balance (or extracts) accompanied by several notes that will need to be taken into account in preparing the financial statements. Topics that often appear in these questions are: accounting for leases, the revaluation or impairment of non-current assets, dealing with financial instruments, taxation including deferred tax and calculating earnings per share.

Candidates may also be asked to comment on the appropriateness or acceptability of management’s proposed accounting treatment of a transaction or event.

Questions on the analysis and interpretation of financial statements may require the calculation of certain ratios prior to their analysis. Candidates should be prepared to interpret the comparative performance of an entity over periods of time, one entity against a competitor entity or against industry sector averages. Candidates will need an understanding of how certain transactions or events, including consolidation adjustments, may have affected a valid comparison. For example, there is a question in the Specimen exam where a subsidiary has been purchased during the current year.

Please remember the above is not an exhaustive list of the topics that may appear in Section C, virtually the whole of the syllabus may be examined here.

Specimen exam

Many of the above points and observations are illustrated by the September 2016 Specimen Exam. It is largely based on adaptations of past questions which illustrate the implementation of changes to the structure of the exam. In particular, candidates should observe how some of the multiple choice questions and cases (Sections A and B) are based on what were previously long questions.


I hope the above will be of assistance to candidates and tutors. This article should be read in conjunction with other related published material including the syllabusstudy guide, and past exams and question practice

Written by a member of the F7 examining team