Changes in ACCA F7 for 2011 exams – Explained!

Changes in ACCA F7 syllabus for 2011 exams - Explained!

Back in December 2010 when ACCA announced that changes will be made in 2011 in different subjects, we looked at it and made some guess work regarding the possible changes in subjects. But a long time has passed since ACCA has released the new syllabi of all the subjects. Except knowledge module subjects and ACCA F4 all subjects have been overhauled. In this article we will talk about the changes made in ACCA F7 syllabus. We will try to explain how these changes will affect the computational and theoretical aspect of ACCA F7 exam. Most importantly we will try to explain the changes itself so that students can understand what they actually are. As the changes are not that big, therefore, we will explain them right in this article.

Changes in ACCA F7 syllabus – Overview

Many of you might already know that changes made in ACCA F7 course can be seen at the end of new ACCA F7 2011 syllabus where additions and deletions are summarized.

So, if we go through the summary, nothing has been excluded i.e. no deletions are made. However, three additions have been made and all three additions are brought in Business Combinations area. This is the fourth area of the syllabus and discusses how group financial statements are made under different group structures. The additions made are as follows:

  1. The circumstances in which a group is required to prepare consolidated financial statements
  2. Exemptions from preparation of consolidate financial statements
  3. The reasons directors may not wish to consolidate a subsidiary and the circumstances where this is permitted

Even though, the above three additions are made in 2011 syllabus and were not officially part of F7 syllabus before, many of the publishers had these areas covered in their study texts in one way or another. And also those students who have done Paper 6 under CAT qualification might already be familiar with these three additions and should be able to answer the three questions.

Changes in ACCA F7 syllabus – Detail

All three additions basically form part of theoretical portion of ACCA F7 syllabus and are examinable from June 2011 onwards. And it is expected that one or two of them might pop-up as well in June 2011 exams as they are not only interesting but can also give the examiner flexibility in deciding the weightage of the question.

These changes can form part of a bigger question with 2-5 marks and are also capable of being asked in a full length question of 10-15 marks. So, students are advised NOT to ignore them.

What are the circumstances in which a group is required to prepare consolidated financial statements?

According to IAS 27, while preparing consolidated financial statements, Parents are required to consolidate all of their subsidiaries i.e. which are under Parent’s control. IAS 27 states that Control of the parent company on its subsidiaries is assumed when parent owns, directly or indirectly, more then half of the voting rights i.e. more then 50% of voting power in the entity. However, following four additional forms of control are stated by IAS 27:

  1. Parent has power over more than half of the voting rights by virtue of an agreement with other investors
  2. Parent has power to govern the financial and operating policies of the entity under a statute or agreement
  3. Where an entity is governed by a board of directors or governing body then parent has the power to appoint or remove majority of the members of such board or governing body.
  4. Where an entity is governed by a board of directors or governing body then parent has the power to cast majority of votes at meetings of such board of directors or governing body.

What are the circumstances in which a parent is exempted from preparing consolidated financial statements?

IAS 27 states FOUR different circumstances in which parent company is not required to prepare consolidated financial statements.

Please remember, that these are the circumstances in which parent is exempted from preparing consolidated financial statements and are NOT the circumstances in which subsidiary is exempted from consolidation.

Parent company is not required to prepare and present consolidated financial statements if and only if:

  1. Parent company itself is a subsidiary (wholly or partially) of another entity and its other owners (NCI, if any) are informed about the fact that parent will not present consolidated financial statements and they have no objection.
  2. The parent’s debt or equity instruments are not traded in a public market (i.e. listed company)
  3. The parent did not file or in the process of filing its financial statements with a securities commission or other regulatory body so that parent company can trade its instruments in a public market.
  4. The ultimate or any intermediate parent of the parent produces consolidated financial statements in compliance with International Financial Reporting Standards.

What are the reasons for which directors may not wish to consolidate a subsidiary or subsidiaries?

We all understand that businesses exist to make and maximize profits. As directors of the company are liable to operate the company in such manner that wealth of the shareholders is maximized. Because of this pressure, directors do not want any thing to affect the profitability of the parent company.

But as under consolidate financial statements, incomes and losses of parent and subsidiary are added together to give the picture of whole group instead of just a parent company then it might happen that profits of the parent company gets “diluted” if one or more subsidiary company is making losses. Usually this is one of the biggest reason why directors try to exclude a subsidiary or subsidiaries from consolidated financial statements. However, such reasons are not entertained by the relevant accounting and financial reporting standards.

Another reason why directors might be inclined to exclude a subsidiary is that operations of the parent and subsidiary are of differing nature and directors are of the opinion that nature of business and income of the companies is so different that financial statements might not give true and fair view of the group. However, IAS 27 categorically denies such claims if made by directors to exclude subsidiary and are not considered as valid reasons for exclusion.

IAS 27 gave only two reasons under which parents can exclude subsidiary or subsidiaries from consolidation. If you people know the two reasons under which the subsidiary can be excluded then write your answer in the comment box and in case if any addition will be required I will put that up here in this article as an update 🙂

Good News!

So here you have the whole story about the changes and the changes itself explained according to the standards. And the good news is that you can use your old books also now. Just keep these changes in front of you or write these somewhere so that you have the whole book according to 2011 exams.


  1. (a) control is temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future;
    (b) it operates under severe long-term restrictions which significantly impair its ability to transfer funds to its parent.

  2. If i have lectures from 2010june, r these the only things i need to keep in mind to proceed for june2012 exams? and can you give me similar guidance for f8 and f9 please?

  3. I’m using Dec10 exam book+kit
    Is there any change in numerical questions?
    n what’s the two reasons under which parents can exclude subsidiary??

    • It can still be used but there have been some changes in the standards which may require different presentation otherwise almost no difference in kit. I will write about the conditions under which parents can exclude subsidiary for consolidation shortly


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