Unit Plan Paper P7: Financial Accounting and Tax Principles

Paper P7 Financial Accounting and Tax Principles

Learning Outcomes Describe the features of the principal types of taxation likely to be of relevance to an incorporated business in a particular country (e.g. in terms of who ultimately bears the tax cost, withholding responsibilities, principles of calculating the tax base) Describe sources of tax rules and explain the importance of jurisdiction Identify the principal types of taxation likely to be of relevance to an incorporated business in a particular country, including direct tax on the companys trading profits and capital gains, indirect taxes collected by the company, employee taxation, withholding taxes on international payments Unit 1 Topics 1.1 Introduction 1.2 *Tax as a source of government revenue 1.3 *Principles of tax 1.4 Basic tax terminology 1.5 Tax bases and classification of taxes 1.6 *Sources of tax rules 2.1 Introduction 2.2 The corporate tax base 2.3 *Nominal corporate tax rates 2.4 Interaction of the corporate tax system with the personal tax system 2.5 *Rules recharacterising interest as dividends 2.6 Treatment of losses 2.7 *Concept of tax consolidation 3.1 Introduction 3.2 Indirect taxes collected by the enterprise 3.3 Consumption taxes 3.4 Value added tax (VAT) 3.5 *Indirect taxes paid by the enterprise 3.6 *Employee tax 3.7 *Use of employer reporting and withholding to ensure compliance and assist tax collection 4.1 *Introduction 4.2 *Record keeping and retention 4.3 *Need for deadlines for reporting (filing Class Questions Home Work Questions Q1 to 6

Q3,4 &7

Identify the principal types of taxation likely to be of relevance to an incorporated business in a particular country, including direct tax on the companys trading profits and capital gains, indirect taxes collected by the company, employee taxation, withholding taxes on international payments

Q2,4 & 5

Describe the likely record keeping, filing and tax payment requirements associated with the principal types of taxation likely to be of relevance to an incorporated business in a particular

Q1 to 3

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.

Unit Plan Paper P7: Financial Accounting and Tax Principles Learning Outcomes country Describe the possible enquiry and investigation powers of taxing authorities Explain the difference in principle between tax avoidance and tax evasion Unit Topics returns) and tax payments *Types of powers of tax authorities to ensure compliance with tax rules * Tax avoidance and tax evasion * Forum on tax administration Introduction The OECD Model tax convention The concept of corporate residence * The OECD Articles of the model convention with respect to taxes on income and on capital Withholding tax Underlying tax Means of establishing a taxable presence in another country * Double taxation treaties Introduction Calculation of current tax Accounting for current tax Calculation of deferred tax Accounting for deferred tax *Income tax charge *Disclosure The need for regulation of financial statements Variation from country to country Harmonisation v standardisation *Elements that might Class Questions Home Work Questions

4.4

4.5 4.6

Identify situations in which foreign tax obligations (reporting and liability) could arise and methods for relieving foreign tax

5.1 5.2 5.3 5.4

Q1 & 2

5.5 5.6 5.7

5.8 Explain and apply the accounting rules contained in IAS 12 for current and deferred taxation 4 6.1 6.2 6.3 6.4 6.5 6.6 6.7 7.1 7.2 7.3 7.4

Q1,4,5 & 9

Explain the need for regulation of published accounts and the concept that regulatory regimes vary from country to country Explain potential elements that might be expected in a regulatory framework for published accounts Describe the role and structure of the

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.

Unit Plan Paper P7: Financial Accounting and Tax Principles Learning Outcomes International Accounting Standards Board (IASB) and the International Organisation of Securities Commissions (IOSCO) Describe the process leading to the promulgation of an international accounting standard (IAS) Describe ways in which IASs can interact with local regulatory frameworks Unit Topics be expected in a regulatory framework for published accounts 7.5 *Generally accepted accounting practice 7.6 *IASC Foundation 7.7 Objectives of the IASC 7.8 *IOSCO 7.9 *Local regulatory bodies 7.10 *Standard-setting process 7.11 *Ways in which IFRSs are used by countries 8.1 Introduction 8.2 *The development of the Framework 8.3 The Framework 8.4 Usefulness of a conceptual framework 8.5 The IASBs Framework and the standard-setting process 9.1 The role of the external auditor 9.2 *The audit report 9.3 *Qualified reports 10.1 Introduction 10.2 General requirements 10.3 The balance sheet 10.4 The income statement 10.5 Changes in equity 10.6 Notes to financial statements 10.7 An illustrative question 11.1 Introduction 11.2 IAS18 Revenue Recognition 11.3 Profit or loss for the period 11.4 Definitions Class Questions Home Work Questions

Explain the IASBs Framework for the Presentation and Preparation of Financial Statements

Q1 & 3

Explain in general terms, the role of the external auditor, the elements of the audit report and types of qualification of that report Prepare financial statements in a form suitable for publication, with appropriate notes

6 7

Q1 to 4

Q5

Q4

Explain and apply the accounting rules contained in IASs dealing with reporting performance.

Q4

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.

Unit Plan Paper P7: Financial Accounting and Tax Principles Learning Outcomes Unit Topics accounting policies, accounting estimates and errors 11.5 Changes in accounting policies 11.6 Changes in accounting estimates 11.7 Errors 11.8 Discontinuing operations 11.9 Segment reporting 12.1 Introduction 12.2 Objective of IAS7 Cash Flow Statements 12.3 Cash flow statements 12.4 A worked example 12.5 *Interpreting a cash flow statement 13.1 IAS 16 Property, Plant and Equipment 13.2 *Revision of some definitions in IAS16 13.3 Recognition 13.4 Measurement 13.5 Subsequent expenditure 13.6 Accounting for depreciation 13.7 Retirements and disposals 13.8 Revaluation of assets 13.9 *Disclosure requirements 13.10 *IAS 23 Borrowing Costs 14.1 Introduction 14.2 Key definitions 14.3 Characteristics of leases 14.4 Accounting for operating leases 14.5 Disclosures for operating leases 14.6 Accounting for finance leases 14.7 Calculating the Class Questions Home Work Questions

Prepare a cash flow statement in a form suitable for publication

10

Q12

Explain and apply the accounting rules contained in IASs dealing withtangible fixed assets

11

Q1 Q8 Q9

Explain the principles of the accounting rules contained in IASs dealing with.leases (lessee only)

12

Q1 Q6

Q4 Q5

13

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.

Unit Plan Paper P7: Financial Accounting and Tax Principles Learning Outcomes Unit Topics implied interest on finance leases Disclosures for finance leases introduction IAS 2 Inventories IAS 11 Construction Contracts Introduction *Purchased goodwill IAS 36 Impairment of Assets *Disclosure of impairments Class Questions Home Work Questions

14.8 Explain and apply the accounting rules contained in IASs dealing with ..inventories Explain the principles of the accounting rules contained in IASs dealing with disclosure of..research and development expenditure, intangible fixed assets (other than goodwill on consolidation), impairment of assets.... Explain the accounting rules contained in IASs governing share capital transactions 14 & 15 16 15.1 15.2 15.3 16.1 16.2 16.3 16.4 17

15.3.13

Q2,3 & 4 Q7 Q1 to 5 Q8

18

Explain the principles of the accounting rules contained in IASs dealing with disclosure of related parties to a business..post-balance sheet events, contingencies...

19

17.1 Introduction 17.2 IAS1 requirements 17.3 Different classes of shares 17.4 *IAS 32 Financial Instruments Disclosure and Presentation 17.5 Issue of shares 17.6 Bonus shares 17.7 Accounting for a rights issue 17.8 Accounting for treasury shares 17.9 The purchase and redemption of shares 18.1 introduction 18.2 IAS 10 Events After the Balance Sheet Date 18.3 Proposed dividends 18.4 *Going concern 18.5 *Disclosure requirements of IAS 10 18.6 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 18.7 Contingent liabilities and contingent assets

Q1,4 & 5

Q2 & 4

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.

Unit Plan Paper P7: Financial Accounting and Tax Principles Learning Outcomes Unit Topics 18.8 Problems with IAS 37 as regards contingencies 18.9 *Related party disclosures 18.10 *Definitions 18.11 *Disclosure 19.1 Introduction 19.2 Working capital management 19.3 Working capital ratios 19.4 Efficiency ratios 19.5 The working capital cycle 19.6 *Shortening the working capital cycle 20.1 Introduction 20.2 Sources of short term finance 20.3 Export finance 20.4 Managing cash surpluses 20.5 *Debt yields 20.6 *Short term investments 21.1 Introduction 21.2 Managing receivables 21.3 The credit cycle 21.4 Age analysis of trade receivables 21.5 *Credit insurance 21.6 Factoring 21.7 Assessing the effectiveness of credit control 21.8 Evaluating a change in credit policy 21.9 *Trade payables 21.10 *The payment cycle 21.11 *Age analysis of trade payables 22.1 Introduction 22.2 Inventory management 22.3 *The nature of Class Questions Home Work Questions

Calculate and interpret working capital ratios for business sectors

20

Q1,5 & 10

Identify alternatives for investment of short-term cash surpluses Identify sources of short-term funding Identify appropriate methods of finance for trading internationally

21

Q4 & 6

Analyse trade debtor information Evaluate debtor and creditor policies

22

Q1,2 & 5

Evaluate appropriate methods of stock management

23

22.11

Q2,3 & 6

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.

Unit Plan Paper P7: Financial Accounting and Tax Principles Learning Outcomes Unit Topics inventory 22.4 *The costs of inventory 22.5 *Inventory control policy 22.6 Inventory control systems 22.7 Economic order quantity 22.8 The economic batch quantity 22.9 Quantity discounts 22.10 Lead times 22.11 Exercises 22.12 *Just-in-time purchasing 23.1 Introduction 23.2 Cash management 23.3 Cash budgets 23.4 Cash management models 23.5 Efficient cash management 23.6 The link between cash, profit and the balance sheet Class Questions Home Work Questions

Prepare and analyse cash-flow forecasts over a twelve-month period Identify measures to improve a cash forecast situation Compare and contrast the use and limitations of cash management models and identify when each model is most appropriate

24

Q5,6 & 9

* Denotes areas that could be designated self study if the full 26 units are not available Chapter and Question references refer to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Unit plan extracted from CIMA Lecturer Resource Kit. Kits are supplied on CDROM and contain Lecture Plans and extensive Powerpoint slides. Their use ensures that all the learning outcomes of the new syllabus are covered in tuition sessions. They provide tutors with confidence, structure and reduced preparation time in teaching the new CIMA syllabus. Use is granted free of charge for teaching purposes to colleges adopting CIMA Official Study Systems as the core reading for the module. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the lecturer support material, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com

Chapter and Question references relate to CIMAs Official Study Systems, the only texts written and endorsed by the CIMA Faculty. Extracted from the CIMA Lecturer Resource Kit for the new 2005 CIMA syllabus. For more information on the use or adoption of CIMAs Official Study Systems, or to gain full access to the Lecturer Resource Kit, please contact Caron Horsgood. Tel: 01865 314948 c.horsgood@elsevier.com. www.cimapublishing.com Elsevier 2005. All rights reserved.