Assessment Report

New Zealand Scholarship
Accounting 2016

Standard 93203

 

Part A: Commentary

Although a number of candidates continue to appear unaware of the contents of the assessment specifications, this did not appear to be as marked as in previous years. However, a number of candidates did not appear to be as familiar with the material on integrated reporting as perhaps they might have.  As with previous years, a number of candidates appear to equate quantity with quality. A nine-page answer that repeats itself suggests that candidates are not familiar with answering this type of question.  A number of the best answers from Outstanding and successful Scholarship candidates amount to just over a page and sometimes not longer than two pages.

Question One provided a scenario of an individual who had started a garden design and landscaping business. An invoice had been issued and payment had been received before the work had been completed. By making reference to the New Zealand Equivalent to the IASB Conceptual Framework for Financial Reporting 2010, candidates had to explain how the event should be recognised.

This was a question that required careful reading, as there were two parts. There was the invoicing of the client, and whether the invoiced amount met the definition of revenue and, if not, whether a liability existed. The majority of candidates were happy to provide a detailed exposition of why the amount received in advance was a liability but did not consider the initial transaction.

Question Two asked candidates to “Critically evaluate how well Sanford Limited has addressed the reporting for natural capital in its 2015 Integrated Annual Report”. Critical thinking requires providing an opinion/viewpoint of the extent to which one agrees with a position. Candidates should provide evidence from a wide range of sources that agree or contradict an argument. Candidates should be able to come to a conclusion based on the most important facts and they need to justify the choices. It is not a detailed description of something.

Although the majority of candidates reproduced a great deal of information from the annual report, they did not critically evaluate how well the company addressed the reporting for natural capital. Providing extensive examples does not amount to a critical evaluation. As with the 2015 year’s paper, a number of candidates explained how a number of well-known international companies account for natural capital. Although this is, of course, interesting, this material needs to somehow be integrated into answering the question.

Question Three asked for the completion of a Statement of Financial Position, together with accompanying notes, in a format suitable for external reporting purposes. This was a straightforward question which was generally answered well. However, a number of candidates did not adjust the retained earnings for the allowance for doubtful debts. As a result, they could not balance. Of some concern was the inability to prepare the property, plant and equipment note.

Question Four comprised two parts. Part (a) required candidates to provide the journal entries and narrations necessary to correctly account for a number of transactions. Part (b) asked for the completion of a Statement of Comprehensive Income by function in a single statement format, together with accompanying notes in a format suitable for external reporting purposes. This question – and, in particular, part (a) – was generally answered quite well. However, as in previous years, a number of candidates did not read the question properly and provided a Statement of Comprehensive Income by nature. Of some concern was the lack of understanding of how a statement of financial comprehensive income should be presented.

In Question Five, candidates were expected to use the resource material as well as their knowledge of analysis and interpretation and of the company to critically evaluate Sanford Limited’s management of the three areas of its 2015 cash flows and future operating plans. As with previous years, resources were provided for candidates to use when crafting their answer. As mentioned in the previous reports, it remains disappointing that a large number of candidates still did not incorporate the resource material into their answers. Additionally, where the resources are used, a number of candidates merely reproduced the material from the resources. 


Part B: Report on Performance

Candidates who were awarded Scholarship with Outstanding Performance commonly:

In Question One, candidates who achieved Outstanding Scholarship generally recognised that there were two issues that required attention. The first was the issue surrounding the recognition of revenue when the invoicing took place. These candidates were able to provide the definition of revenue and provide the recognition criteria but were then able to correctly argue that, as the revenue had not yet been earned at the date the money was received, it could not be recognised. Even though cash had been received, a liability would need to be recognised. These candidates were able to apply the liability definition and recognition criteria contained in the New Zealand Equivalent to the IASB Conceptual Framework for Financial Reporting 2010 to revenue received in advance.

In Question Two, candidates who achieved Outstanding Scholarship were able to critically evaluate how well Sanford Limited has addressed the reporting for natural capital in its 2015 Integrated Annual Report. The extent and depth of the answers of these candidates provided evidence of independent research and deep thinking. The answers provided by candidates who achieved Outstanding Scholarship showed evidence of careful planning and included an introduction to contextualise the solution and a conclusion.

In Question Three, candidates who achieved Outstanding Scholarship exhibited the technical skills necessary to correctly prepare the Statement of Financial Position using the correct terminology, including accompanying notes, in a format suitable for external reporting purposes. These candidates had the technical ability to make the correct calculations and adjustments, set out their answer clearly, neatly, and showed all the required accompanying notes to the financial statements. The candidates who achieved Outstanding Scholarship illustrated evidence of convincing communication in that they provided complete and technically correct accompanying notes.

In Question Four, candidates who achieved Outstanding Scholarship exhibited the technical skills necessary to correctly prepare the statement of comprehensive income including accompanying notes in a format suitable for external reporting purposes. These candidates had the technical ability to correctly prepare the adjusting journal entries and narrations, correctly follow these through to the Statement of Comprehensive Income, set out their answer clearly, neatly and detail all the accompanying notes. That is, provided evidence of convincing communication.

Candidates who achieved Outstanding Scholarship in Question Five had the ability to use the information in the resources provided and integrate the material from them to critically evaluate how well Sanford Limited managed the three areas of operating, investing, and financing cash flow activities for the 2015 reporting period as well as its future operating plans. These candidates provided evidence of independent research and deep thinking through drawing on their knowledge of the company’s Integrated Annual Report and incorporating it into their answer. As with Question One, the answers provided by candidates who achieved Outstanding Scholarship showed evidence of careful planning, and included an introduction to contextualise the solution and a conclusion.

Candidates who were awarded Scholarship commonly demonstrated the following skills and/or knowledge:

Candidates who achieved Scholarship in Question One generally were able to apply the definition and recognition criteria of the financial elements contained in the New Zealand Equivalent to the IASB Conceptual Framework for Financial Reporting 2010 to the $9500 and argue that as it had been received in advance of the service being performed, it should be accounted for as income received in advance and recognised as a liability. Where journal entries were provided to support a particular argument, these generally did not take the originating entry into account.

In Question Two, candidates who achieved Scholarship were able to evaluate how well Sanford Limited has addressed the reporting for natural capital in its 2015 Integrated Annual Report. Some evidence of independent research and deep thinking was apparent from the candidate’s answers. In addition, some evidence of planning was evident.

In Question Three, candidates who achieved Scholarship exhibited the technical skills necessary to correctly prepare the Statement of Financial Position including accompanying notes in a format suitable for external reporting purposes. These candidates had the technical ability to make the majority of calculations correctly, and provide some evidence of convincing communication in that they set out their answer clearly and showed the majority of accompanying notes to match the financial statement extracts.

In Question Four, candidates who achieved Scholarship exhibited the technical skills necessary to correctly prepare the statement of comprehensive income including accompanying notes as well as the statement of changes in equity in a format suitable for external reporting purposes. These candidates had the technical ability to correctly prepare the majority of the adjusting journal entries and ensured that the adjustments flowed through to the final statement of comprehensive income. The candidates provided some evidence of convincing communication in that they set out their answer clearly and showed the majority of accompanying notes to match the financial statement extracts.

Candidates who achieved Scholarship in Question Five had the ability to use some of the information in the resources provided and integrate the material from them to describe how well Sanford Limited managed the three areas of operating, investing, and financing cash flow activities for the 2015 reporting period. These candidates usually did not consider Sanford Limited’s future operating plans. These candidates provided some evidence of independent research and deep thinking in their answer. These answers tended to be more descriptive and were often not contextualised or concluded when compared to those provided by candidates who achieved Outstanding Scholarship.

Other candidates commonly lacked the following skills and/or knowledge:

In Question One, candidates who did not achieve Scholarship were unable to make use of the definition and recognition criteria of the financial elements contained in the New Zealand Equivalent to the IASB Conceptual Framework for Financial Reporting 2010, and argue that the $9500 received should have been recognised as income received in advance which is a liability. The answers were generally descriptive and did not analyse the scenario in any detail. Where journal entries were provided to support their argument these were generally incorrect.

In Question Two, candidates who did not achieve Scholarship were unable to evaluate how well Sanford Limited has addressed the reporting for natural capital in its 2015 Integrated Annual Report. A number of these candidates merely detailed what natural capital was in the context of Sanford Limited and, as such, did not answer the question.

In Question Three, candidates who did not achieve Scholarship did not exhibit the technical skills necessary to correctly prepare the Statement of Financial Position including accompanying notes, in a format suitable for external reporting purposes. These candidates did not illustrate the technical ability to make the correct calculations and adjustments, set out their answer clearly, neatly or show any workings. These candidates often did not provide evidence of convincing communication in that they failed to set out the statements clearly, neatly or use the correct terminology.

In Question Four, candidates who did not achieve Scholarship did not exhibit the technical skills necessary to correctly prepare the Statement of Comprehensive Income including accompanying notes, in a format suitable for external reporting purposes. Although a substantial number of the candidates correctly prepared the adjusting journal entries, these candidates lacked the ability to ensure that the adjustments flowed through to the final Statement of Comprehensive Income. These candidates often failed to provide evidence of convincing communication in that they did not set out the statements clearly, neatly or use the correct terminology.

Candidates who did not achieve Scholarship in Question Five lacked the knowledge to critically evaluate how well Sanford Limited managed the three areas of operating, investing, and financing cash flow activities for the 2015 reporting period as well as its future operating plans. There was no evidence of planning an answer.  A number of these candidates merely described the changes in the various lines of the cash flow statement and, as such, did not answer the question.


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