Relevant to: 1.1Professional scheme As usual, the paper consisted of 25 compulsory multiple choice questions in Section A and 5 compulsory questions in Section B worth between 8 and 12 marks. Performance was broadly in line with previous sittings. There was no evidence that candidates did not have time to complete the paper. Several questions in Section A were poorly answered, revealing weaknesses among candidates on goodwill, provisions and contingencies, and consolidations. Section A questions which only a small number of candidates answered correctly are reviewed below Computational questions 1 and 3 in Section B were reasonably well answered. One encouraging feature was that far fewer candidates lost marks by failing to provide workings. Section A Questions in Section A intentionally varied in their level of difficulty and ranged as usual over the whole syllabus, with less emphasis on topics examined in Section B. Questions proving to be difficult for candidates included: . Q7 This question concerned accounting for a change in accounting policy. Many candidates got this wrong because they thought such changes should be disclosed as extraordinary items. . Q12 The topics here were provisions, contingencies and events after the balance sheet date. The correct answer was that only one of the four statements offered was true, but the majority answer was that all four were correct, revealing worldwide misunderstanding of these topics. . Q20 Although computational questions on consolidations in Section B are usually well answered, this question on non-computational aspects was poorly answered, with many candidates believing, for example, that goodwill arising on consolidation would appear as an item in the parent company’s individual balance sheet. Q22 In questions on accounting ratios in Section B , candidates are usually good at calculating the ratios, but poor at explaining their meaning. This question on the receivables/debtors collection period caught many candidates out. Section B Q1 This was an incomplete records question calling for the preparation of an income statement/profit and loss account. It involved calculating the amount of inventory/stock taken by the proprietor, and few candidates were able to do this correctly. However, most obtained a reasonable mark by dealing well with other aspects of the question. It was surprising that so few candidates could correctly calculate the amount to be included for expenses, for which opening and closing accruals and prepayments were given. Q2 This question called for a statement of changes in equity/statement of movements in reserves. The information provided included some easy items and some more difficult ones. The five matters to be dealt with were: 1. An error in the inventory/stock at the beginning of the period covered. Some candidates adjusted for this correctly, but many added the amount to the opening balance instead of deducting it. 2. An issue of shares at a premium. This was one of the easier matters. Some candidates failed to split the proceeds of the issue between share capital and share premium. 3.A sale of some land that had been revalued. This was the most difficult adjustment and very few correctly handled both aspects. 4.The overstatement of the opening inventory/stock meant that profit for the year was understated and had to be increased by £.6m. Many candidates incorrectly reduced the profit by £.6m. instead. 5. The calculation of the dividend payable for the year. This was thought to be one of the easiest points in the questions, but surprisingly few got it right. Q3 The examination often includes the preparation of a basic consolidated balance sheet, and many candidates got this question completely correct. Errors made included leaving the parent’s investment in the subsidiary in the consolidated balance sheet and failing to write off the goodwill as instructed in the question Q4 Questions on research and development are often poorly answered, and this one was no exception. Candidates failed to distinguish correctly between the items to be written off and those to be capitalised. Answers to part (b) often gave a narrative description of each project, or figures for each project, rather than the summary required by IAS38/SSAP13. Q5 Candidates have in the past performed relatively badly on non-computational questions, but this fairly basic question on historical cost accounting was somewhat better answered this time which is emcouraging