CMA (Cost & Management Accountancy) Final: Strategic Financial and Corporate Reporting Syllabus

Final: Strategic Financial and Corporate Reporting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Final: Strategic Financial and Corporate Reporting in CMA (Cost & Management Accountancy), not a summary of it.

1. 1

   Indian Accounting Standards (Ind AS)

   3 topics

   • Framework and Presentation under Ind AS
     • Ind AS 1 and Ind AS 7
     • Conceptual framework for financial reporting
   • Recognition and Measurement Standards
     • Ind AS 115 revenue; Ind AS 116 leases
     • Ind AS 109 financial instruments
   • Business Combinations and Consolidation
     • Ind AS 103, 110, 28 and 111
     • Consolidated financial statements
2. 2

   Corporate Financial Reporting

   4 topics

   • Accounting for Share-based Payments
   • Valuation of Goodwill and Shares
   • Integrated and Sustainability Reporting
     • ESG and triple bottom line
   • Government Accounting in India
3. 3

   Strategic Financial Management

   4 topics

   • Investment Decisions and Capital Budgeting
     • Risk analysis and real options
     • Capital rationing
   • Cost of Capital and Capital Structure
   • Working Capital Management
   • Security Analysis and Portfolio Management
     • CAPM and portfolio theory
4. 4

   Risk Management and Derivatives

   4 topics

   • Financial Risk Management Framework
   • Derivatives: Futures, Options and Swaps
     • Hedging strategies
     • Option valuation models
   • Foreign Exchange Risk Management
   • Corporate Restructuring: Mergers and Acquisitions

Final: Strategic Financial and Corporate Reporting flashcards for CMA (Cost & Management Accountancy)

23 of 68 cards from the Final: Strategic Financial and Corporate Reporting deck — real questions with worked answers.

1. Under Ind AS 1, what are the two bases of preparation an entity must follow, and what is the default presentation of the statement of financial position regarding current/non-current classification?

   Financial statements are prepared on the accrual basis of accounting and the going concern basis. By default, an entity presents assets and liabilities classified as current and non-current; a liquidity-based presentation is used only when it provides reliable and more relevant information.

2. Per Ind AS 1, what are the four conditions that classify an asset as 'current'?

   An asset is current if: (1) it is expected to be realised, sold or consumed in the normal operating cycle; (2) it is held primarily for trading; (3) it is expected to be realised within 12 months of the reporting period; or (4) it is cash or a cash equivalent (unless restricted from exchange for at least 12 months). All other assets are non-current.

3. Under Ind AS 7, how are the three classes of cash flows defined?

   Operating activities are the principal revenue-producing activities and other activities not investing or financing. Investing activities are the acquisition and disposal of long-term assets and other investments not in cash equivalents. Financing activities change the size and composition of contributed equity and borrowings of the entity.

4. Under Ind AS 7, contrast the direct and indirect methods of presenting cash flows from operating activities.

   The direct method discloses major classes of gross cash receipts and payments. The indirect method starts with profit or loss and adjusts for non-cash items (e.g. depreciation), deferrals/accruals, and items of investing or financing cash flow. Ind AS 7 encourages the direct method but permits both.

5. Under Ind AS 7, how may interest and dividends paid and received be classified?

   For a non-financial entity, interest and dividends received may be classified as investing or operating, and interest and dividends paid may be classified as financing or operating, applied consistently. For financial institutions interest paid/received and dividends received are usually operating.

6. According to the Conceptual Framework, what are the two fundamental qualitative characteristics of useful financial information?

   Relevance (information capable of making a difference in decisions, comprising predictive value, confirmatory value and materiality) and faithful representation (complete, neutral and free from error).

7. According to the Conceptual Framework, what are the four enhancing qualitative characteristics?

   Comparability, verifiability, timeliness and understandability. They enhance the usefulness of information that is already relevant and faithfully represented but cannot make non-useful information useful.

8. State the Conceptual Framework definitions of an asset and a liability (2018 revised framework).

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

9. Under the Conceptual Framework, what are the recognition criteria for an element?

   An item is recognised if it meets the definition of an element (asset, liability, equity, income, expense) and recognition provides users with relevant information and a faithful representation, considering the benefits exceeding the costs (the cost constraint).

10. List the measurement bases identified in the Conceptual Framework.

    Historical cost and current value. Current value comprises fair value, value in use (for assets) / fulfilment value (for liabilities), and current cost.

11. State the five-step revenue recognition model of Ind AS 115.

    Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations. Step 5: Recognise revenue when (or as) a performance obligation is satisfied.

12. Under Ind AS 115, what three criteria indicate that a performance obligation is satisfied over time (rather than at a point in time)?

    (1) The customer simultaneously receives and consumes the benefits as the entity performs; (2) the entity's performance creates or enhances an asset the customer controls; or (3) performance creates an asset with no alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

13. Under Ind AS 115, how is variable consideration measured and what constraint applies?

    Variable consideration is estimated using either the expected value (probability-weighted) or the most likely amount, whichever better predicts the entitlement. It is included in the transaction price only to the extent it is highly probable that a significant revenue reversal will not occur (the constraint).

14. Under Ind AS 116, what is the single recognition model for a lessee and the two recognised items at commencement?

    A lessee recognises almost all leases on-balance-sheet: a right-of-use (ROU) asset and a lease liability. The lease liability is measured at the present value of lease payments not yet paid, discounted at the interest rate implicit in the lease (or the lessee's incremental borrowing rate).

15. Under Ind AS 116, what two recognition exemptions are available to a lessee?

    Short-term leases (lease term of 12 months or less with no purchase option) and leases of low-value assets. For these the lessee may recognise payments as an expense on a straight-line or other systematic basis instead of recognising an ROU asset and liability.

16. Under Ind AS 116, how does a lessor classify and account for leases?

    A lessor classifies each lease as a finance lease (transfers substantially all risks and rewards of ownership) or an operating lease. For a finance lease the lessor derecognises the asset and recognises a net investment in the lease (receivable); for an operating lease it keeps the asset and recognises lease income, typically straight-line.

17. Under Ind AS 116, write the formula for the initial cost of a right-of-use asset.

    $$\text{ROU asset} = \text{Initial lease liability} + \text{Lease payments at/before commencement} - \text{Lease incentives received} + \text{Initial direct costs} + \text{Estimated dismantling/restoration costs}$$

18. Under Ind AS 109, what are the three classification categories for financial assets and the tests that drive them?

    Amortised cost, Fair Value through Other Comprehensive Income (FVOCI), and Fair Value through Profit or Loss (FVTPL). Classification depends on the entity's business model for managing the assets and the contractual cash flow characteristics (the SPPI test — solely payments of principal and interest).

19. Under Ind AS 109, describe the SPPI test.

    The 'solely payments of principal and interest' test assesses whether contractual cash flows are solely payments of principal and interest on the principal outstanding. Interest comprises consideration for time value of money, credit risk, other basic lending risks and a profit margin. If cash flows fail SPPI, the asset is measured at FVTPL.

20. Under Ind AS 109, what impairment model applies to financial assets and what are its three stages?

    The Expected Credit Loss (ECL) model. Stage 1: 12-month ECL for performing assets (no significant increase in credit risk). Stage 2: lifetime ECL where credit risk has increased significantly but not credit-impaired. Stage 3: lifetime ECL for credit-impaired assets, with interest on the net carrying amount.

21. Under Ind AS 109, what are the three types of hedging relationships?

    Fair value hedge (hedges exposure to changes in fair value of a recognised asset/liability or firm commitment), cash flow hedge (hedges variability in cash flows of a recognised item or highly probable forecast transaction), and hedge of a net investment in a foreign operation.

22. Under Ind AS 103, what method is required for accounting for business combinations and what are its steps?

    The acquisition method. Steps: (1) identify the acquirer; (2) determine the acquisition date; (3) recognise and measure the identifiable assets acquired, liabilities assumed and any non-controlling interest; (4) recognise and measure goodwill or a gain from a bargain purchase.

23. Under Ind AS 103, write the formula for goodwill arising on a business combination.

    $$\text{Goodwill} = (\text{Consideration transferred} + \text{NCI} + \text{Fair value of previously held interest}) - \text{Fair value of identifiable net assets acquired}$$

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