Chartered Global Management Accountant (CGMA) Financial Pillar: Financial Reporting and Taxation Syllabus

Financial Pillar: Financial Reporting and Taxation syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Financial Pillar: Financial Reporting and Taxation in Chartered Global Management Accountant (CGMA), not a summary of it.

1. 1

   Regulatory and Conceptual Framework of Financial Reporting

   4 topics

   • Purpose and Users of Financial Statements
     • Qualitative characteristics of useful information
     • The IASB Conceptual Framework
   • Standard-Setting and Regulation
     • Role of the IASB and IFRS Foundation
     • IFRS versus US GAAP convergence considerations
   • Elements of Financial Statements and Recognition
     • Assets, liabilities, equity, income, and expenses
     • Recognition and measurement bases
   • Ethics and the Role of the Accountant in Reporting
2. 2

   Preparation of Single-Entity Financial Statements

   4 topics

   • Statement of Financial Position and Profit or Loss
     • Structure, presentation, and IAS 1
     • Statement of changes in equity
   • Property, Plant, and Equipment and Intangibles
     • IAS 16: depreciation, revaluation, and disposals
     • IAS 38 intangible assets and IAS 36 impairment
   • Revenue and Inventory
     • IFRS 15 five-step revenue model
     • IAS 2 inventory valuation
   • Leases, Provisions, and Financial Instruments
     • IFRS 16 lessee accounting
     • IAS 37 provisions and contingencies
3. 3

   Consolidated Financial Statements

   4 topics

   • Principles of Consolidation
     • Control, parent, and subsidiary definitions (IFRS 10)
     • Goodwill calculation and non-controlling interests
   • Consolidated Statement of Financial Position
     • Fair value adjustments at acquisition
     • Intra-group balances and unrealized profit elimination
   • Consolidated Statement of Profit or Loss
   • Associates and the Equity Method (IAS 28)
4. 4

   Statement of Cash Flows and Financial Analysis

   3 topics

   • Preparing the Statement of Cash Flows
     • Operating activities: direct and indirect methods
     • Investing and financing activities (IAS 7)
   • Ratio Analysis
     • Profitability and efficiency ratios
     • Liquidity and gearing ratios
     • Investor and market ratios
   • Interpretation and Limitations of Analysis
5. 5

   Principles of Taxation

   4 topics

   • Concepts and Types of Taxation
     • Direct versus indirect taxes
     • Tax bases and the canons of taxation
   • Corporate Income Tax
     • Computation of taxable profit and adjustments
     • Capital allowances and loss relief
   • Indirect and Employment Taxes
     • Value added tax and consumption taxes
     • Payroll and employment taxation
   • Deferred Tax and International Tax Issues
     • IAS 12 deferred tax basics
     • Double taxation and transfer pricing fundamentals

Financial Pillar: Financial Reporting and Taxation flashcards for Chartered Global Management Accountant (CGMA)

23 of 60 cards from the Financial Pillar: Financial Reporting and Taxation deck — real questions with worked answers.

1. What is the primary objective of general purpose financial statements according to the IASB Conceptual Framework?

   To provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity (e.g., buying, selling, or holding equity and debt, or providing loans).

2. Who are the primary users of financial statements under the Conceptual Framework, and why are they prioritized?

   Existing and potential investors, lenders, and other creditors. They are prioritized because they cannot demand information directly from the entity and must rely on general purpose financial statements.

3. What are the two fundamental qualitative characteristics of useful financial information?

   Relevance (capable of making a difference in decisions, includes materiality) and Faithful representation (complete, neutral, and free from error).

4. Name the four enhancing qualitative characteristics of useful financial information.

   Comparability, Verifiability, Timeliness, and Understandability.

5. What is the going concern assumption underlying financial statements?

   The assumption that the entity will continue to operate for the foreseeable future and has neither the intention nor the need to liquidate or curtail materially the scale of its operations.

6. Which body issues International Financial Reporting Standards (IFRS), and which body advises it on technical matters?

   The International Accounting Standards Board (IASB) issues IFRS, advised by the IFRS Interpretations Committee (IFRIC) and overseen by the IFRS Foundation Trustees.

7. In the US, which body sets accounting standards (US GAAP) and which body oversees it?

   The Financial Accounting Standards Board (FASB) sets US GAAP, overseen by the Financial Accounting Foundation (FAF); the SEC has statutory authority and recognizes FASB standards for public companies.

8. Distinguish between a principles-based and a rules-based approach to standard-setting.

   A principles-based approach (IFRS) relies on broad principles and professional judgment; a rules-based approach (US GAAP) provides detailed specific rules and bright-line thresholds, reducing judgment but increasing complexity.

9. List the five elements of financial statements defined in the IASB Conceptual Framework.

   Asset, Liability, Equity, Income, and Expenses.

10. How does the Conceptual Framework define an asset?

    A present economic resource controlled by the entity as a result of past events, where an economic resource is a right that has the potential to produce economic benefits.

11. How does the Conceptual Framework define a liability?

    A present obligation of the entity to transfer an economic resource as a result of past events.

12. What are the two recognition criteria an element must meet to be recognized in the financial statements?

    Recognition is appropriate if it provides users with relevant information about the asset/liability and income/expense, and a faithful representation, while considering cost constraints.

13. Define equity as residual interest under the Conceptual Framework, expressed as a formula.

    Equity is the residual interest in the assets after deducting liabilities: $$\text{Equity} = \text{Assets} - \text{Liabilities}$$

14. What is the fundamental ethical role of the accountant in financial reporting?

    To act with integrity and objectivity, ensuring financial statements faithfully represent the entity's position and performance, free from bias or manipulation, in the public interest.

15. Name the five fundamental principles of the IFAC/CIMA Code of Ethics for professional accountants.

    Integrity, Objectivity, Professional competence and due care, Confidentiality, and Professional behavior.

16. What is 'creative accounting' (earnings management) and why is it an ethical concern?

    Using accounting choices, estimates, or transaction structuring to present a desired (often misleading) picture of performance or position. It threatens faithful representation and can mislead users.

17. What are the two formats permitted for presenting expenses in the statement of profit or loss under IAS 1?

    By nature (e.g., raw materials, employee costs, depreciation) or by function (e.g., cost of sales, distribution costs, administrative expenses).

18. What is the basic accounting equation reflected in the statement of financial position?

    $$\text{Assets} = \text{Liabilities} + \text{Equity}$$

19. How is a current asset classified under IAS 1?

    An asset is current if it is expected to be realized, sold, or consumed within the normal operating cycle; held primarily for trading; expected to be realized within 12 months; or is cash/cash equivalent (unless restricted).

20. What is the distinction between profit or loss and other comprehensive income (OCI)?

    Profit or loss includes all income and expenses except those required to be recognized in OCI (e.g., revaluation surpluses on PPE, certain remeasurements). Total comprehensive income = profit or loss + OCI.

21. Under IAS 16, what is the initial measurement (cost) of an item of property, plant, and equipment?

    Purchase price (less trade discounts) plus directly attributable costs of bringing the asset to working condition and location, plus the initial estimate of dismantling/restoration costs.

22. State the formula for the annual straight-line depreciation charge.

    $$\text{Depreciation} = \frac{\text{Cost} - \text{Residual value}}{\text{Useful life}}$$

23. Under IAS 38, what are the criteria for recognizing an intangible asset?

    It must be identifiable (separable or arising from contractual/legal rights), controlled by the entity, and expected to generate future economic benefits, with cost measured reliably.

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