My DFS Tips

Hi All,

Following a couple of PM's and threads on here I thought it appropriate to post a thread offering my advice on how I would approach the DFS paper now as students are tackling this paper in taught courses. DFS has a huge syllabus and can be quite daunting. Some of my online friends are doing DFS this time and hopefully this will assist them get through it in December.

You need a basic but broad knowledge of the entire syllabus. Question spotting is dangerous and is not a good exam strategy. Certain tuition providers offer "tips" as to what they think will come up. I don't think these are worth the paper they are written on and in my opinion they merely go to encourage question spotting.

You know you are going to be asked a question on: consolidated financial statements, ratio analysis, cash flow statement (possibly) and be asked to write a report/memo. It is worth mentioning that marks will be available if you do what you are asked by the examiner i.e. write a report or a memo. A report should be laid out as a "report" which your tuition provider will tell you how to do. A memo is an informal document and should be laid out as a memo.

The key skills, I think, you need to focus on to pass are as follows:

- good consolidation techniques (income statement and balance sheet)
- know what an associate/joint venture/subsidiary is and what %age holding/controlling interest constitutes an associate/joint venture/subsidiary
- ratio analysis
- relevant IAS's
- cash flow statements
- incomplete records
- commentaries on financial statements/ratio analysis

I have mentioned in previous postings and PM's that numbers only form PART of a professional accountant's role. The ability to communicate what the numbers represent and communicating to non-financial orientated individuals about financial statements is a critical aspect of an accountants position. DFS recognises this hence a mix of computational/discursive requirements. Concentrating wholly on numbers is not advised - you need to know what the numbers are communicating. Failure on DFS can happen due to the following:

- not answering the question asked, merely answering a question you would like to be asked
- not relating a given scenario to relevant accounting standards
- having the ability to calculate the numbers but not explaining them thoroughly enough
- the dangerous "question spotting"
- not having a thorough knowledge of the syllabus
- bad time management

The IASB has produced a summary of the international accounting standards which can be found at:

http://www.iasb.org/Summaries+of+International+Financial+Reporting+Standards/Technical+Summaries+of+International+Financial+Reporting+Standards.htm

I would suggest you print a copy of these out for those standards which are examinable and refer to them as an aide memoir during the revision process. A comprehensive guidance of those standards which are examinable can be found at:

http://www.aat.org.uk/servlet/file/Support booklet for DFS (unit 11).pdf?ITEM_ENT_ID=30862&COLLSPEC_ENT_ID=34
A few weeks prior to the exam I will publish an article in Accounting Technician on consolidation techniques and the approach you should adopt in tackling a consolidation question. It is important that you revise both consolidated income statements and balance sheets. Do not question spot and assume that because an income statement came up in June, that a balance sheet will come up in December.

Finally, DFS is a tough paper. I found areas of the June paper very demanding when I was preparing my suggested answers. It is a technician level paper so it is technically demanding - however don't let that put you off.

Feel free to PM me if you need guidance on any aspect of DFS.

Kind regards
Steve