Category Archives: F2

How I Passed CIMA F2 Exam

It was a case of third time lucky when taking the CIMA F2 exam this week – I finally got the PASS mark I desperately needed – the official scaled score from CIMA was 108 out of 150 and proficient in all areas of the F2 syllabus!


Ah, what a relief!

How I Passed the F2 Exam

As you are probably aware, I am self studying the CIMA qualification without any classroom tuition and looking back at my first two sittings (especially the first one) I was under prepared despite feeling relatively confident on exam day.

I knew F2 would be a tough exam for me as I barely got a pass mark and scored just 50% on the F1 paper back in November 2014 when sitting it under the old syllabus (it was 50% needed to pass the exam!).

Despite covering all of the CIMA study text for F2 and taking a few mock exams I was missing some of the key theory behind F2 – in particular Financial Instruments, Group Accounts, and interpretation of Financial Ratio’s (so pretty much everything!). While I was confident after scoring quite well in the mock exams I wasn’t able to apply the theory to different scenario’s in the exam.

The second attempt I felt more prepared, spent more time studying the theory and using more exam questions (this time from Kaplan as well as Astranti). But I narrowly missed out with a score of 94.

For the third attempt, I really put the hours in and studied every day for two weeks leading up to the exam. Covering all 200 questions in the Kaplan exam kit and even purchased the Astranti F2 master class.

Fortunately it paid off in the end and there seems to be no shortcuts when trying to pass these CIMA objective tests!

Here are a few of my lessons learnt:

CIMA F2 Exam: Lessons Learnt

  • Study, Study, Study: to get the results and achieve the pass mark you really need to put the hours and study all areas of the syllabus with the right mix of theory and questions practice. You can never take enough practice questions or mock exams.
  • Push Yourself: tackle your weak areas when preparing for the exam, really focus on the parts of the syllabus you struggle with – otherwise you can expect to fail.
  • Speak to other students: speak to other students in the same boat as you, there are plenty of Facebook groups, whats-app groups and the CIMA connect site gives you the chance to contact other students. Do it and exchange ideas, tips and advice.
  • Never Give Up: after failing the F2 exam for the second time I was disheartened and was tempted to move on to a different paper – but someone actually commented on the site and suggested to re-take it as soon as possible as I was so close to the pass mark and the content will still be fresh in my mind. That was probably the best piece of advice I could have been given.

Keep going and if you put the hard hours of study in you will see the benefits when getting your results! 

My F2 Resources

Astranti F2 Master Class – ten hours worth of revision classes on the F2 syllabus including practice questions and exam tips.

Kaplan F2 Exam practice kit – 200 F2 exam style questions from Kaplan (you can access it online too).

I’ve also updated the My Progress page with the current status of my studies – one step closer to the end!

F2: Financial Instruments

When you hear the term “Financial Instruments” you generally think of some complex derivative or advanced accounting scenario. But it’s a quite a straight forward area of the syllabus to understand, what perhaps is more difficult is applying to exam style questions in an exam situation.

What is a Financial Instrument?

A Financial Instrument is the name given to any contract that gives rise to both a financial asset in one company and a financial liability or equity instrument in another entity.

A simple way to illustrate a financial instrument would be the example of sales of goods from one company to another – the sales contract entered gives rise to a financial asset in one company (the receivable this is classed under current assets on the SOFP), meanwhile the other entity would have a payable in their books for the corresponding receivable (classed under current liabilities on the SOFP)

This is a financial instrument.

Accounting Standards

There are three main accounting standards that should be remembered when approaching questions on finance instruments.

  1. IAS 32: Financial instrument; presentation
  2. IAS 39: Financial instrument; recognition and measurement
  3. IFRS 7: Financial instrument; disclosures.

The video below from BPP gives a good practical example and steps to follow when trying to understand what type of financial instrument we are talking about and how to recognise and measure it <—– key to ensuring you can tackle the questions that come up in the CIMA F2 objective test.


As mentioned in the above video, a useful tip is to remember the four step approach when defining what type of financial instrument we are talking about and how to measure it.

  1. Is it a financial asset “purchased” or is it a financial liability/equity “issued”
  2. Which category does it fall under?
  3. What’s the initial measurement?
  4. What’s the subsequent measurement?

Here is an overview of the different categories financial assets and liabilities can fall under and how the initial and subsequent measurement is impacted based on this.

Financial Assets


Financial Liabilities


Exam Style Question

Taking into consideration the points made above, we can now tackle a CIMA F2 exam style objective test question.


  • ABC Ltd. acquired 20,000 shares in another entity called DEF Ltd. during June 2000 for $3.52 per share.
  • The investment was classed as available for sale on initial recognition.
  • The shares were trading at $4.12 per share at year end 31 December 2000
  • Commission of 6% of the value of transaction is payable on all disposals and purchases of shares.

Calculate the gain that would be credited to reserves in the year ended 31 December 2000 in respect of the above financial instrument.


Using the four step approach above:

  1. We have identified it’s a financial asset as it mentioned ABC “acquired”
  2. The financial asset is classed under the available for sale category.
  3. Therefore, initial measurement is fair value + transaction costs.
  4. And the subsequence measurement is fair value.




The scenario in the exam question can and most probably will be packed with information but if you take a pragmatic approach and pick out the information you need, then answering the question will be easier.

By taking the four step approach as outlined, we have understood what type of instrument we are measuring and how it should be measured. This gives the right method in calcuation the answer we need.

As it was an available for sale financial asset we only needed to add the transaction costs to the initial measurement and NOT to the subsequent measurement. This give ABC a total gain of $7,776 that should be credited to reserves.

Equity Shares: Bonus Issue vs Rights Issue

Share price

It’s easy to mixup subjects within a topic when studying CIMA and I’ve found myself making silly mistakes when it comes to mock exams for the F2 subject. One particular area I found myself tripping up on was the difference between a rights issues and bonus issues of shares.

Here is a run down on the difference between the two.

Bonus Issue of Shares

A bonus issue of shares (also known as a script issue) is quite simply an issue of ordinary shares to existing shareholders at no additional cost.

This usually happens when a company has a surplus amount of reserves and they want to capitalise it into share capital. If a company is announcing it making a Bonus Issue of shares it usually means they are sitting on a large amount of funds.

No additional funds are raised by the company if they decide to make a bonus issue. However, the share price will be affected by the number of bonus shares issued. For example;

  •  Company X has 50,000 shares in issue at £10 per share
  • Which equates to a total for £500,000 in ordinary share capital
  • At the end of the year, Company X decides to offer a bonus issue on a 1 for 5 basis
  • Now the total number of shares in issue is 60,000
  • This gives a new share price of £8.33 (£500,000/60,000)

Why issue bonus shares?

It might seem a pointless exercise to issue shares for “free” but in fact it can serve a very useful performance. Firstly, it rewards current investors and encourages them to purchase more shares on the basis the company is performing well.

It might also be used to stimulate growth and generate extra investment, as the share price will drop this will encourage investors who may have been put off the higher share price while it also improves liquidity in the company by increasing the number of shares in issue without any extra cost to the company.

Rights Issue of Shares

A rights issue of shares is also to existing shareholders (the only common trait it has with a bonus issue), however, a rights issue will cost the existing shareholder money to purchase the shares – albeit at a lower price.

In this case, the rights issue is offered at a discounted price to the shareholder and is a way of raising additional capital into the business. So unlike a bonus issue, the purpose of a rights issue is to RAISE additional funds and it in fact could be seen as a sign the business is struggling due to the fact it’s looking to raise finance at a discounted price.

Here is a example of a rights issue and how it would affect the existing shareholders:

  • Company Y had £750,000 in share capital (100,000 shares@£7.50 each)
  • They offer a Rights Issue on a 1 for 4 basis at £5 each
  • All shareholders take up the option for rights issue
  • Company Y now has £875,000 in share capital (125,000 shares@£7 each)

You can see the share price has dropped to £7 per share with the rights issue but the company has raised an additional £125,000 in the process, so, in theory, if they put the investment to good use they will see their share price in the future.


  • A rights issue will have a negative impact on the existing shareholders who DO NOT take up the option of purchasing the additional shares through a rights issue.
  • For example;
  • Company ABC has in issue 1000 ordinary shares (10 shareholders have 100 shares)
  • The company offers a rights issue for 1 in 4 basis but only 9 shareholders take up the option.
  • This means there is now 1225 shares in issue: (9×25)+1000 = 1225
  • So the shareholder who didn’t take up the option only now owns 8.2% of the company, where previously they owned 10%.


CIMA F2: How to pass it?


Well, I failed the CIMA F2 objective test today and I must admit it has knocked me off my stride a bit. I got the dreaded fail message when the 90 minutes were up, although I’m still waiting for the % score out of 100.

I have a feeling I got around the 50% mark. The exam itself felt much tougher than I was expecting, which is disappointing considering I felt well prepared heading into it. It was my first attempt at the objective tests in the new syllabus and it’s been a steep learning curve.

Here are a few points about how I prepared for the exam and my thoughts on the day.

My CIMA F2 Exam Preparation

  • I spent around 10 weeks preparing for the exam (inc revision and mock exams)
  • I used the Astranti study text and mock exams.
  • No video lectures or any other tutor support.

I felt relatively prepared going into the exam but I knew my knowledge of the whole syllabus was not 100% especially when it came to Financial Instruments and Complex Groups. But I felt I could score enough for a pass.

Mock Exams

I took the three mock exams from Astranti and was quite horrified when I took the first one and scored just 41% (you need 70% to pass). This left me with three weeks before the actual exam to get up to speed. Each mock after that improved (58% then 75%) which gave me confidence heading into the exam.

I sat the exams to exact conditions so I could get my self use to the time pressure of answering 60 questions in 90 minutes

Final F2 Revision

I knew that the WACC (cost of debt and equity) was a weak area so I really focused on that and was comfortable answering these questions on exam day. In hindsight, I probably neglected some other areas of weakness too (instruments, NCI’s and complex groups).

I spent alot of time working out ratios, calculations of goodwill, NCI to ensure I could answer these types of questions. Although that was probably detrimental to the wordy side of the syllabus.

CIMA F2 Exam Reflection

  • The exam felt much harder than I was expecting – why? Not sure, perhaps a combination of nerves and not being 100% comfortable with the whole syllabus.
  • Study text and mock exams are not enough – personally, I think need more study resources than just a copy of the study text and mock exams. It looks like I need video lectures and perhaps even tutor support to make sure I am on the right track.
  • Was my study plan realistic? – having a study plan was helpful but perhaps it was too ambitious and I didn’t cover the required knowledge and moved on with the next area so not to fall behind on study plan. I need to be realistic and honest with myself with preparing for the next exam.
  • Was I overloaded with F2? – under the old syllabus I sat two exams at a time and it seemed to work OK. However, I just sat just one exam this time but would I benefit from studying two subjects at the subject? Would the diversity help?
  • Learn from previous experience – in hindsight, I knew this exam would be a big step up as I just scraped a pass 50% in F1 under the old syllabus so I should have redoubled my efforts when studying for F2.
  • Need to strike a balance – between the theory on the syllabus as well as the calculation side of things. I have a nagging feeling that I missed out on some easy marks by neglecting some of the simply theory in the syllabus, I had a feeling I was guessing at a few questions that I really should have known the answer too.


As already mentioned, I don’t know my exact score yet (I should receive it in 24 hours or so) but it’s been an eye opener for me. I am having the weekend off from thinking about CIMA then will think about how I will tackle the resit as well as looking ahead for the E2 paper I was planning to start studying next.

If you have any CIMA F2 exam tips or advice it would great fully received – feel free to leave any comments below.

IAS 24: Related Party Disclosures

This accounting standard is fairly straight forward and doesn’t involve any complex calculations or rules but it doesn’t mean you should neglect it in your studies. I found, when studying for F2 paper, I kept getting tripped up on questions on this accounting standard by making silly assumptions, so I thought it would be helpful to cover this on the site.

IAS 24: Related Party Disclosures

The purpose of this accounting standard is to ensure that the financial statements disclose to the shareholders the effect of the existence to related parties, any material transactions with them and outstanding balances.

I’ve highlighted the two key phrases above and will explain in a bit more detail what they mean in the context of IAS 24 Related Party Disclosures.

What is a related party?

Well, if a party is related to a company then it would have the following characteristics; if it has control over the entity, or the ability to exercise significant influence over it.

For instance; the subsidiary or an entity would be considered a related party and so would senior management (and even the family members – as they would be able to exercise significant influence over the senior management) of the entity would also be considered a related party.

Considered to be related parties:

  • Key Management
  • Close family members of key management
  • Shareholders controlling 20% or more of voting right of entity
  • Subsidiaries of an entity (although additional information is required to confirm)

NOT a related party to an entity:

  • Two entities that have a common director/key management
  • Finance providers (banks)
  • Customers and suppliers
  • Two joint venturers

What are related party transactions?

Quite simply put, it is the transfer of resources or obligations between related parties regardless whether a fee has been charged or not.

The key point here being the fact that money doesn’t have to change hands for it to be considered a related party transaction.

Examples of related party transactions:

  • Purchase/sale of goods  or services (parent to associate and vice versa)
  • Leasing arrangements
  • Management contracts
  • Transfers of finance arrangements (loans etc.)
  • Settlement of liabilities on behalf of the entity

Disclosure of Related Party Transactions

Now its been established who/what is a related party, we need to understand how this should be displayed in the financial statements. The minimum requirements for disclosure are as follows:

  • The amount of the transaction (even if it’s zero)
  • The amount of any outstanding balances.
  • Provisions for bad debts on outstanding amount
  • The expense recognised in the period in respect of the bad debts.


For further reading on IAS 24: Related Party Disclosures I would recommend this overview on the standard from BDO international.




Working Capital Ratios

The CIMA F1, F2 and F3 papers ALL consider financial ratios and how to interpret them. It can be a broad subject when looking at all types of ratios, their audience and how to draw meaningful conclusions from them.

Let’s take a look at the interested users and what type of financial ratios they would be concerned with.


I’ve highlighted the Suppliers user group and the working capital ratio as that’s the area I will focus on next. Generally speaking, though, there are TWO main areas for financial ratios:

  • Financial Performance: ratios based on the income statement that can be split into profitability ratios and shareholder investment ratios.
  • Financial Position: ratios based on the balance sheet (or SOFP), these can split into activity (day-to-day), liquidity (ability to meet current liabilities) and solvency (ability to meet long term debt) ratios.

Up next, I will look at the working capital cycle that a company’s suppliers (and management) would be interested in. This falls under the activity ratios in Financial Position as it’s concerned with current assets and liabilities.

Financial Position – Activity Ratios

The purpose of the working capital cycle is to ensure the business has enough cash to continue operations and produce goods. It involves managing the relationship between inventories and receivables (short term assets) against the payables (short term liabilities).

Inventory Days

This ratio tells us how long (on average) a company holds on to their inventory. The higher the number, the more likely we are able to meet customer demands but this also means we are keeping capital tied up in inventory longer and this could cause obsolescence and wastage.

 It’s calculated by dividing the inventory over the operating costs and multiplying it by 365 days. In the example below, you can see that the inventory days has improved in 2015 by 5 days, this is mainly due to holding less inventory in stock (43k from 60k).


Accounts Receivable Days

Much like the inventory days, this ratio will tell us (on average) how long a company takes to collect it’s receivables. The lower the number the better in terms of recycling cash back into the working capital cycle.

However, collecting the debt too quickly could cause a  strain on the customer relationship so this factor needs to be considered.

It’s calculated by dividing the receivables balances on the SOFP over the total revenue for the year and multiplying it by 365 days. 

Below, you can see the receivables balance has increased in 2015, so has the receivable days (up to 79), therefore this is a concern and should be addressed.


Accounts Payable Days

Again, the accounts accounts payable days ratio is calculated in the same manner as above. And the result is interpreted in the same manner too, but this time the higher the number, the more cash we will have on hand as we are paying our suppliers later.

Here the company should make sure they use their sensitising payment terms to the full extent without damaging the relationship with the supplier. 

Again, it’s the mirror image of the above ratio and is calculated by dividing the payables balance in current liabilities over the total operating costs and multiplying it by 365 days.

Here you can see our working capital cycle will have improved as they are now taking 61 days to pay their suppliers rather than 45 days – which has a positive affect on cash flow.


Working Capital Cycle

Finally, the working capital cycle can be calculated now we have the above three ratios. To calculate it you need to do the following:

  •  Inventory Days + Receivable Days – Payable Days = Working Capital Cycle



Using all of the information above, you can see the working capital cycle has improved from 51 days in 2014 to 47 days in 2015.

This is despite taking longer to collect receivables in 2015 (79 days from 62 days), it appears the positive impact of taking longer to pay suppliers (61 days from 45 days) and holding less inventory in stock (29 days from 34 days) has improved the working capital cycle to 47 days.

Which fundamentally means, in 2015, it took 47 days to turn raw materials into cash. Meanwhile, these ratios above highlight the fact that this can be further improved if better credit control procedures are put into place to reduce the accounts receivable days from 79.

F2: Useful Links and Resoruces


If you have passed the CIMA operational level you will be looking to tackle the management level next. With F2 Advanced Financial Reporting, you will be building on your knowledge gained from the F1 paper.

The bulk of the paper focuses on Financial Reporting – so topics like group accounts, complex group structures and the accounting standards around them will be tested. Meanwhile, the CIMA F2 syllabus also includes areas on sources of long-term finance and the analysis of financial performance and position.

F2 Useful Links and Resources

Astranti Managerial Membership – Free Study Text 2015 – Astranti provide free study texts for ALL of the CIMA  papers and I use them as a base for my exam preparation. They are easy to digest and can be accessed anywhere with an internet connection.

CIMA Connect F2 Group – the official CIMA site offers a specific group for F2 students where you can find resources, information and discuss key topics with other students. You should have this page bookmarked when studying for F2.

My F2 Study Plan – I started to study the F2 syllabus at the beginning of 2016 and here is my detailed study plan based using the Astranti study text.

Analysis of Financial Performance – an interesting article of financial performance and how to analyse it. It tells how to approach these kind of questions in the objective test itself.

Cash Flow Forecasting – a CIMA document that clearly explains how cash flows are prepared and the accouting treatment in regards of the F2 paper. Also shows preactical examples on how to answer exam questions.

Acorn Financial Training – Acorn provide class room tuition and home study materials. You can get an extra 10% off ALL of the acorn materials (including F2). Here can find the full the list of materials they offer and to claim the 10% discount please email thecimastudent[at] with the items you wish to order.

If you have any additional resources you would like to share with other students for the F2 CIMA paper then please then a link in the comments box below.


My CIMA F2 Study Plan

Now Christmas and the New Year celebrations are out of the way  I am plan to tackle the F2 paper next.

With this in mind I have created a study plan that will take up all the way up to the F2 Advanced Financial Reporting paper in March 2016.

  • I have given myself 10 weeks to prepare for the exam.
  • 6 weeks completing the F2 Astranti study text and questions.
  • 3 weeks covering mock exams.
  • 1 week slack (just in case I am behind schedule)


Here is a detailed plan of what I intend to cover and when:

Study Text and Chapter Questions

Week 1:  Joint ventures, complex groups and changes in group structure

Week 2: Foreign currency, group cash flows and consolidated statement changes in equity

Week 3: IAS 18 Revenue, IAS 24 Related party disclosures and IAS 37 Provisions, contingent liabilities and assets.

Week 4: Accounting for leases, deferred tax and long-term finance

Week 5: Cost of capital, financial instruments and share-based payments

Week 6: Earning per share, ration analysis and segment analysis

Mock Exams and Revision

Week 7: Mock Exam 1

Week 8: Mock Exam 2

Week 9: Mock Exam 3

Week 10: [catch up week]

End of Week 10: Sit F2 Advanced Financial Reporting Exam!!!

I haven’t used the official CIMA learning objectives as a guide but instead I have used the chapters in the Astranti study text as a guide to ensure I cover the whole syllabus in the first six weeks.

Then, I will concentrate on the mock exams in the final three weeks with revision of the topics I am struggling with during that time also.

If you have any suggestions or comments about my study plan please feel free to leave them below. Any advice would be great as it’s my first objective test under the new 2015 syllabus.

Good Luck for the exams you’re sitting next!