FAE September 2012

MPBC123

That was tough going, cudnt believe how quick the time went either! Def gave me the wake up call i needed! I have so much to cover.

Indicators i identified were:
Advs / Disadvs of cloud platform
Revenue - financial reporting & dsiclosure issues
ICDI proposal
Executive Summary of business plan
Venture Capital offer
Bank Facility
Issues re auditors & in particular Pat
Staffing issues - also discussed the LookBack system

Re the bank facility - didnt really know what was supposed to do here - were we meant to say if it was good deal or not? How r u supposed to know?

Re venture capital - were we supposed to value the company ourselves and if so how?

This just showed me i really need to brush up on mgmt acctg & finance!

ferike1

I went with operating segment for the revenue, since we were given a breakdown of clients and as per IFRS 8 you are meant to disclose when a client is > 10 % of total revenue. Could be completely wrong and could be IAS 18. Thinking about it, I reckon that it probably is a management accounting thing because they had those stupid work equivalent things at the bottom which I didn't use at all and also since the institute is focusing on management accounting more this year. Ah sure. The only reason I am uncertain now is management accounting is more about costs than revenue.

I hate management accounting.

Didn't value the company myself and I don't think we had enough info to do that, no dividend growth model, EPS P/E etc. only asset based but that is just the lowest value anyway. I calculated cost of interest vs cost of VC and discussed a few pros/cons.

funkymonkey9

I got generally the same indicators mentioned above however I could only form an answer for two of them,I really struggled today and it has definitely given me the kick I needed,does anyone know when the solution will be given?will we have to wait for them to mark it first?for that cloud platform indicator,where would you go for an answer to that?the Imp book?I didn't know what that even meant :-(

Jame Gumb

mrduffy wrote: »

what did you do for financial reporting treatment of revenue / disclosures I took it more as performance management issue since I was financial controller. I worked out the gross margins and compared them across jobs and clients and told him about value creation. I would like to know what you done ? for my own awareness

I just drafted a disclosure as an appendix to my memo...just saying its recognised on an accruals basis and listing the various income streams.

I threw in that the parcel company would be a related party under IAS 24 if DASL took the VC money.

Generic sh1te TBH...RC at best

MPBC123

yea the cloud accounting is an IMP indicator.

So we were supposed to compare the bank with the venture capital & decide which one was best??

I said that there was no rush in getting back to the venture capitalist as the company was very profitable & there was a lot of potential for growth - there would probably be a lot of other investors interested. Also said that the non-negotiable terms weren't that - everything is open to negotiation!

Jame Gumb

MPBC123 wrote: »

Re the bank facility - didnt really know what was supposed to do here - were we meant to say if it was good deal or not? How r u supposed to know?

Re venture capital - were we supposed to value the company ourselves and if so how

I just kind of said that the terms were worse than previous and to go back to the bank and seek better terms.

For the VC, I said it had the makings of a good deal but as 2012 was gonna be better to use it as the multiplier.

Very hard to know.

Clueless re the cloud computing stuff - As if you'd need to know that in real life. They claim you need to do you can engage with the IT people...first thing Id be askin the IT guy is what the hell does all this jargon mean?

Jame Gumb

MPBC123 wrote: »

yea the cloud accounting is an IMP indicator.

So we were supposed to compare the bank with the venture capital & decide which one was best??

I said that there was no rush in getting back to the venture capitalist as the company was very profitable & there was a lot of potential for growth - there would probably be a lot of other investors interested. Also said that the non-negotiable terms weren't that - everything is open to negotiation!

It was hard to know what the relationship between the bank stuff and the VC was...was it a choice or did they just want cash...they didn't even have a definite plan for the cash...vague stuff about hiring staff and maybe buying a building

ferike1

TBH I found a lot of it vague and a good bit of guesswork. I think once you do more and more cases you figure out the direction the institute wants you to take. I think there is a lot of stuff open to interpretation but the institute think that everyone on the planet thinks like them and its obivious what is being asked.
But again once you do more and more cases you being to see the method behind the madness.

MPBC123

Yea it was pretty vauge alrite.

Absolutely dreading 2moro - having 3 cases to work through, its going to be hard to switch off from one and move onto the next!

froggatt2011

Jame Gumb wrote: »

Hi Folks

How did you get on? Tough going and a much needed kick up the you know what...

I'll stick my head above the parapet - These are the indicators I went with:

- HR / Tax - Ways to attract / keep staff. I accept that this may not be an indicator.

- Look Back system - Should it be replaced?

- Switch to cloud computing - Pros and cons.

- Financial reporting treatment of revenue / disclosures.

- Offer of venture capital

- Offer from bank

- Take Look Back stuff in house

- Ethical issues re dodgy auditor

- Assess car dealer proposal

There may be some duplication above and the HR one mightn't exist at all. Be interested to hear other people's perspectives...Probably another FR one too re yer man's pontificating about not invoicing people.

I swore I wouldn't do a post mortem.... but here goes. I found it a pretty tough paper but to be honest it could have been a helluva lot worse.


- HR / Tax - Ways to attract / keep staff. I accept that this may not be an indicator.

I took that as an indicator. If enough people got that as an indicator they well amend the marking I would imagine?

- Look Back system - Should it be replaced?


Discussed this along with need to bring time recording 100% in house with appropriate authorisation etc.

- Switch to cloud computing - Pros and cons.
Vague in my view. IT experts asking the accountant, but there ya go. My answer was pretty generic although I tied it back to the current leasing cost of the servers.

- Financial reporting treatment of revenue / disclosures.
Didn't get this as an FR indicator (this is why I didn't want to do a post mortem!!), more management accounting. Did analysis of activities which generate most revenue, as they mentioned something like the value creating activities.

- Offer of venture capital
Did a valuation based on this year's figures and suggested going back and negotiating a better deal. Also stated that under no obligation to go along with this offer bla bla.

- Offer from bank
Found this tricky. Basically just said that last year's deal was better - didn't say to go back and negotiate better terms - d'oh! Mentioned that invoice discounting wasn't part of the original deal but suggested better credit control and implementing credit control policy bla bla as debtors had risen significantly on last year, also due to lack of financial controls and not having had an in house FC. Get the cash in and no need for the bank facility. Probably not the right thing to say... ah well. It's done now.

- Take Look Back stuff in house
Yup.

- Ethical issues re dodgy auditor
Dodgy indeed although didn't put it quite like that Mentioned ethical issues in relation to non accounting services, building deal, bank, connection to ICDI and "inside track". I may have been waffling at this stage!

- Assess car dealer proposal
Found this also to be vague but gave it a bash anyway. I have no idea whatsoever about intellectual property but waffled some nonsense about it anyway and to establish who owns the rights to the website features and to safeguard intellectual property rights, especially in light of wanting to expand abroad. I was definitely talking out of my ar$e at this stage.

There may be some duplication above and the HR one mightn't exist at all. Be interested to hear other people's perspectives...Probably another FR one too re yer man's pontificating about not invoicing people.

Totally missed that whole revenue recognition thing.

I totally suck at FR.

I made sure to mention that the figures weren't reliable and where taken at face value for the purposes of what I was doing.

What was the craic with redrafting the revenue? Did anyone know what to do with that?

I also briefly mentioned that the business premises were too small and to consider selling and moving to a larger place and negotiating a deal out of the additional lease. I was really clutching at straws at this point. Just thought I'd throw something in there in regards to that point.

MPBC123

Were they able to recognise the full amount as revenue? Wat about the contingent fee?

I also mentioned about the weak system of the customers reporting the invoicing info - maybe I was way off the mark with this!

Jame Gumb

They must mark them pretty quickly for the whole process to be of any benefit.

Can't wait to hear Paul Monahan telling us how great he is and how the FAE Board told him that it's the best case they've ever read...

MPBC123

Jame Gumb wrote: »

They must mark them pretty quickly for the whole process to be of any benefit.

Can't wait to hear Paul Monahan telling us how great he is and how the FAE Board told him that it's the best case they've ever read...

Lol. So true!

froggatt2011

Jame Gumb wrote: »

They must mark them pretty quickly for the whole process to be of any benefit.

Can't wait to hear Paul Monahan telling us how great he is and how the FAE Board told him that it's the best case they've ever read...

Ha! Indeed

Username2011

froggatt2011 wrote: »

Jame Gumb wrote: »

They must mark them pretty quickly for the whole process to be of any benefit.

Can't wait to hear Paul Monahan telling us how great he is and how the FAE Board told him that it's the best case they've ever read...

Ha! Indeed

Even more ironic since he copied the venture capital question straight out of primus pet foods case.

ferike1

Its gonna be cases from here on in for me. I need to improving timing and technique and also hopefully be able to copy answers that I remember in the main exam

R0N BURGUNDY

How long were u all reading for? I think I was reading and making notes for about 75 minutes. Maybe longer. Need to quicken that up a bit!!

FAE_UCH

Would anyone mind please posting this year's mock paper when they get a chance plase?

Jame Gumb

R0N BURGUNDY wrote: »

How long were u all reading for? I think I was reading and making notes for about 75 minutes. Maybe longer. Need to quicken that up a bit!!

An hour - Could have probably done with doing 75 mins like yourself but was terrified of getting caught on the other end.

EveT

I went with these as far as I rermem (not in this order),

1. FR - revenue recognition, accrue for audit fees, vat not recognised, kinda waffled tiny bit on are they registered for vat here (could be off the wall), anyway mainly FR
2. Tax remuneration etc - like BIKs, pensions, canteen, etc
3. HR - staff retention etc
4. Draft a business plan exec summary - left my strategy book at home so say NC at best!
5. VC finance v bank finance - struggled here a bit, valued the CO based on net assets, when worked out 2012 ebitda got a higher value than they had so said they were undervaluing it. Waffled about costs of factoring, O/D repayable on demand etc.
6. Invest in project - did few figures and said theyd stuggle staffing wise.
7. IMP - straight from the book! hadnt a breeze here
8. auditors, conflict of interest regarding bringing look back in house etc

Think thats about it, I didnt pick up on any management accounting :-( would be expecting mgt accounting, ethics/corp gov, more tax and FR anyway tomorrow. It was fairly light on tax today I thought. I ran out of stuff to write by 2pm, well I could have waffled more but decided to leave it cause really would have been waffle!

Jame Gumb

There was definitely something up with the fee note - Otherwise, why would they include it?vI've no idea what it is though.

Thought about the VAT but thought it was okay...doesn't mean I'm right though!

Thought that the fee for the audit (24k from memory) was low relative to the fee for CT compliance (12k from memory) but didn't feel it warranted comment. Maybe we were supposed to comment on the level of fees for other services relative to the audit and link that the the ESs?

Defo think that they could have made it clearer regarding the VC vs the bank...I'm still unclear whether it was an either / or, or whether they potentially wanted both. It muddied the waters too that the company seemed unclear regarding how much they needed and what they needed it for.

Username2011

Jame Gumb wrote: »

There was definitely something up with the fee note - Otherwise, why would they include it?

I've no idea what it is though. Thought about the VAT but think it's okay. Thought that the fee for the audit (24k from memory) was low relative to the fee for CT compliance (12k from memory) but didn't feel it warranted comment. Maybe we were supposed to comment on the level of fees for other services relative to the audit and link that the the ESs?

The audit company were completely against changing from the look back system. When u look at their invoice you see that the look back system was by far the biggest fee

Jame Gumb

Username2011 wrote: »

The audit company were completely against changing from the look back system. When u look at their invoice you see that the look back system was by far the biggest fee

Agreed...thought that there was more to it than that...maybe not though.

R0N BURGUNDY

The look back system was their big earner = no wonder the auditors were totally opposed to them getting their own system in.

BESman

Any repercussions for not sitting these and should you notify the Institute?

Jame Gumb

BESman wrote: »

Any repercussions for not sitting these and should you notify the Institute?

None I'd have thought - If your employer is ponying up for the course, the Institute may let them know?

I'd just leave it.

R0N BURGUNDY

I couldn't understand people leaving after half an hour or an hour. I mean - it wasn't even technical. Worth a practice at bull$hitting if nothing else.

7upfree

All I know is if I do what I did today in September I'll def fail. Knew to a certain extent what they were asking but defo missed one or 2 points.

What I don't understand is all the suitcases and boxes of books even if I had of had them with me they would of been no benefit as I would have spent half the time looking through it

R0N BURGUNDY

Didn't look up one thing but when I get off on study and make notes for the exam, I'll have quick reference material. Prob only need one file and a few text books with tags for quick reference also. But yeah - wastes time that u can't afford. Ideally not use anything -= but if u want something specific, might be worth a quick flick.

froggatt2011

7upfree wrote: »

All I know is if I do what I did today in September I'll def fail.

Good to sit these mocks then and try to develop your technique. Although I'm sure I messed up on many points and waffled a load of nonsense here and there, I think we'll all be much better off for having gone through it.

All the best for the next few days peeps