How to Pass the ICAEW ACA Financial Accounting and Reporting (FAR) Exam
Updated: Jan 7
This article offers advice on how students should prepare for the ACA Financial Accounting and Reporting (FAR) exam. Written by the ICAEW prize-winning ACA tutor who has a 94% student pass rate and won a prize for FAR after scoring 88%, this is a must read for any student preparing for their FAR exam.
How to Pass the ACA FAR Exam
Chartered Accountants are required to possess strong technical and reporting skills making this module fundamental in the training of ACA students. Therefore, the FAR exam is necessarily tough and along with BPT, is probably the Professional Level exam students find most challenging. Nevertheless, with pass rates normally around 80%, passing the FAR exam with a strong mark is very achievable provided that students deploy an effective strategy to tackling the exam.
In our experience, there are some crucial mistakes that students make which can severely impact their performance. This article summarises these main pitfalls in relation to each FAR exam question. Given the constraints of a written article and the practical nature of exam technique, it isn’t possible to explain everything students should and shouldn’t be doing so we have included the main points as well as video demonstrations.
Single Entity Financial Statements - Poor Exam Technique
This question is very time pressured as there are a lot of adjustments to work through. Students need to use an approach which scores as many marks in as little time as possible. Most students do not have such an approach and instead start by copying out a whole P&L, OCI and SFP proforma from IAS1 despite many of the headings being irrelevant to the question. This is a waste of time which could be allocated to working through the adjustments to score more marks.
In addition, most students fail to appreciate the relationships between the various financial statements and try to tackle each statement separately. For example, if the question requires a P&L, SFP and a PPE note, some students will try to complete the three statements one at a time. Instead, it is much more time efficient to work through each adjustment one at a time and include the impact on all three statements at the same time (obviously taking into account that the carried forward balance in the PPE note will be the SFP carrying amount, thus saving you from an extra working). This approach will save you a considerable amount of time as you won’t have to keep ‘switching’ between adjustments which is mentally exhausting and time consuming.
2. Explain the Accounting Treatment- Insufficient Narrative
Many students incorrectly believe that FAR is a computational exam whereas in reality, the marks for this question are weighted towards explanations rather than calculations. Given the wider scope for making valid points in an explanatory answer compared with a computational one, the mark scheme offers considerably more ‘available marks’ than ‘maximum marks’ which significantly increases the likelihood of scoring full marks on this question.
When we look at scripts from our students who use our exam technique guidance for this question, it is not uncommon for our students to score full marks despite making errors in the calculation. This is not possible in the other questions as the ‘available marks’ barely exceed the ‘maximum marks’.
3. Cash Flow Statements – Poor Knowledge and Understanding
It is quite common for students to go into the exam simply hoping that only a few marks are allocated to the Cash Flow question. This is a high-risk strategy as the mixed topic question may allocate as many as eighteen marks to a Cash Flow Statement. Students who are competent at double entry and financial statement preparation should have little difficulty when calculating the cash movement for each account given that it is simply the balancing figure in the ‘T account’.
Therefore, we think that much of this ‘fear of cash flows’ is misplaced and students would greatly improve their mark if they actually understood what they were doing when preparing a Cash Flow Statement and then practiced lots of questions.
4. Group Accounting - Rote Learning
We are aware that some large class tuition providers encourage students to memorise ‘steps’ when preparing group accounts, without developing an understanding of the principles and concepts of group accounting. Whilst this may get you through a standard ‘Prepare the Consolidated SFP’ question, you will soon become exposed if the question requires explanation or only requires certain extracts from the financial statements. It appears as though the examiners are moving towards these less standard group questions and it is our belief this is to catch out students who have rote learnt a proforma approach.
Contrary to this approach, we ensure that our students have a deep understanding of the concepts of group accounting so that they can explain and calculate any of the consolidated balances. This ensures our students go into the exam confident that they can answer any question on groups as well as preparing them for the advanced aspects of groups tested at Advanced Level.
Below is a video which demonstrates our point and teaches you how to tackle a 'Group Extracts' type question.
5. Dropping Easy Marks (Ethics, Conceptual Framework and UK GAAP Differences)
Given the difficulty of some of the other questions, notably the groups and mixed topic question, the marks for Ethics, Conceptual Framework and UK GAAP differences are relatively easy so students need to ensure that make sufficient points to get the full marks available here. As a rule of thumb, students should assume that a valid point will earn one mark.
Need Help Passing the ACA FAR Exam?
Our FAR courses focus on the most frequently examined technical content and demonstrate the optimal exam technique for each FAR exam question. Our Study Materials summarise the technical content in an easy-to-memorise format and list all the past exam questions for each topic. Several of our students scored over 80% in FAR and we've even had a prize winner!
One of the classes from the course and student feedback can be viewed here.
About the Author
Kieran Doe is a Senior ACA Tutor at ACA Masters. Kieran won ICAEW prizes for his performance in Financial Accounting and Reporting, Tax, Financial Management, Audit, Business Strategy and Case Study. This is in addition to winning several prizes at university for various Accounting, Management, Business and Economics subjects.
Kieran’s tuition is based around the learning techniques and exam strategies which enabled him to win prizes for all the subjects he teaches. Under his guidance, several of his ACA students have also won ICAEW prizes.