Module 3, Session 1, 2012 Report For All CASB Students

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1 Date : 18/07/2012 Module 3, Session 1, 2012 Report For All CASB Students Student # Tasks FFIS Evaluation OVERALL Proceed *** CNA *** *** CNA *** *** CNA *** *** CNA *** Not eligible to Proceed *** CNA *** BC *** CNA *** *** CNA *** Not eligible to Proceed MC BC BC BC Eligible to Proceed

2 *** CNA *** BC *** CNA *** *** CNA *** Not eligible to Proceed BC BC INC INC Not eligible to Proceed

3 MC BC BC BC Eligible to Proceed *** CNA *** BC *** CNA *** *** CNA *** Not eligible to Proceed

5 Date : 18/07/2012 Module 3, Session 1, 2012 Report For All CASB Students Task FFIS Evaluation Overall Competency With Distinction Basic Competency Marginal Competency Incomplete Competency Not Yet Achieved Total Number of Students Overall 17% 7% 21% 54% Competency With Distinction Basic Competency Marginal Competency Competency Not Achieved Task FFIS Evaluation 1% 1% 3% 17% 7% 21% 96% 99% 54%

6 Date: 07/18/2012 Result By Attempt Module 3, Session 1, 2012 Count Pass % 1st Attempt 2nd Attempt 3rd Attempt Incomplete 1 Total: 148

Overall Assessment EXPLANATION OF TRANSCRIPT Competency Not Achieved Marginal Competency Basic Competency Competency With Distinction CNA in any of face-to-face, tasks, or evaluation MC in

7 Overall Assessment EXPLANATION OF TRANSCRIPT Competency Not Achieved Marginal Competency Basic Competency Competency With Distinction CNA in any of face-to-face, tasks, or evaluation MC in face-to-face, tasks, and evaluation MC in evaluation; BC in one of face-to-face or tasks; MC in one of face-to-face or tasks MC in evaluation; BC in face-to-face and tasks BC in evaluation; MC in face-to-face and tasks BC in evaluation; BC in one of face-to-face or tasks; MC in one of face-to-face and tasks CWD in evaluation; MC in one of face-to-face or tasks; BC in one of face-to-face or tasks CWD in evaluation; BC in face-to-face and tasks Face-To-Face Assessment Facilitators assess the student's professional skills at the face-to-face session Online Tasks Assessment Facilitators determine whether the student has met the learning objective(s) for the tasks. Evaluation Assessment Written questions consist of several issues, with each one having several elements associated with it. Each element corresponds with one competency. Written question assessment considers breadth (the number of issues at a level of marginal competency or higher) and the depth on all issues. Evaluation summary Each competency is assessed based on student performance in the corresponding elements in the written questions, and in modules 1, 2, and 3, performance on the multiple choice questions. The evaluation summary lists the total number of competencies assessed at each level (per the written question and MCQ summary documents).

8 Module 3 Case Exam Review Centre Comments July 2012 July 2012 Module 3 Case Exam Review Centre Comments Simulation 1: Cribs and Carriages Inc. (Cribs) Overall Comments This simulation required students to take the role of the assistant controller for a private Canadian corporation, Cribs. The company had a newly-acquired subsidiary, Seat, as well as a new 19% investment in Baby, both of which were financed through the issuance of preferred shares. The new subsidiary needed help with recording some foreign exchange transactions. Students were also expected to: Analyze the proper treatment of the preferred shares, and prepare the related entries Record the 19% investment, and discuss the proper method to use for recording the investment (i.e. cost or equity) Make the various entries, and then calculate a consolidated net income for the entities Analyze the variances presented on the declining profitability of a product line, and provide explanations for the decline. This simulation was fairly directed, and the breadth of coverage was generally addressed well. Our general observations relating to the student responses are as follows. Issue #1 Financial statement adjustments for foreign exchange and preferred shares are prepared and analyzed. This issue required candidates to analyze the characteristics of the preferred shares, and to determine whether they should be treated as debt or equity. Candidates were expected to prepare the related adjusting journal entries for the preferred shares and the dividend payment. They were also required to prepare journal entries for US sales, including a one-time sale and regular sales. Candidates generally performed well in calculating the translated amounts, and used the correct foreign exchange rates. Some candidates failed to realize that the client had recorded the entries already in US dollars, and that the adjusting entry should only record the incremental differences to the balances, as well as the foreign exchange. Some candidates had difficulty calculating the proper accounts receivable and cash balances, or failed to explain the currency adjustments. Many candidates were able to discuss accounting for hybrid financial instruments effectively, and to compute the relevant adjustments. Candidates generally did not demonstrate an understanding of the concept of accretion; although they prepared the entry to reclassify the dividends as interest, with the difference recorded to the preferred share liability account, they failed to explain that the value of the debt needed to be brought up to the face value of the shares over time. Page 1 of 5 Copyright 2012 CA School of Business (CASB) All rights reserved. All contents are restricted for authorized CASB candidates, contractors, and employees, and are not to be released without the express written consent of CASB.

9 Module 3 Case Exam Review Centre Comments July 2012 Some candidates discussed hybrid financial instruments in general terms, but did not analyze the case facts, or had a one-sided discussion, identifying debt-like components of the shares, but not equity components. Issue #2 The adjusting entries for the equity investment in Baby are prepared and appropriately analyzed, in the context of completing the 2012 consolidated financial statements. This issue required candidates to analyze the case facts, and determine how to record the investment. Candidates needed to discuss that a 19% investment is generally below the normal threshold of 20% for equity accounting, but that other factors could result in significant influence. Based on the other factors, candidates should have concluded that the investment be recorded as an equity investment, calculated the equity income, and prepared the required journal entries. While most candidates were able to discuss the concepts of equity accounting, some either inappropriately treated this as another consolidation, or concluded that a 19% ownership precluded significant influence, despite the clear case facts indicating otherwise. Some candidates discussed the factors that showed significant influence, but failed to conclude that equity was the appropriate method. Candidates also seemed to struggle with the calculation of the equity income. They struggled with the net income, fair value increments, and dividends, and whether the calculation should include the full amount or the 19% that was purchased. Some candidates calculated the correct dividend amount, but failed to prepare the journal entry. Most candidates did a decent job of discussing the factors that demonstrated significant influence. Issue #3 Crib s consolidated net income is calculated for the June 30, 2012, year-end. For this issue, candidates were expected to calculate a consolidated net income for Crib. This involved making adjustments to Seat s income for the foreign exchange adjustments previously calculated, fair value differentials, unrealized profit in ending inventory, as well as the equity income adjustments for Baby. Most candidates did a decent job of calculating the adjustments to Seat s net income, and recognized the need to remove the NCI portion when calculating the combined net income. Many students failed to include the adjustments for the foreign exchange transactions, or included them in the calculation after the NCI calculation, rather than before. Some candidates calculated the fair value differentials and unrealized profit correctly, but included them in the calculation in the wrong direction. As some candidates had not recognized that Baby should be recorded as an equity investment, they did not include equity income in the consolidated net income. Those that did include the equity income often failed to deduct the dividend. Many candidates failed to integrate the interest expense adjustments from the preferred shares into their calculation. Page 2 of 5 Copyright 2012 CA School of Business (CASB) All rights reserved. All contents are restricted for authorized CASB candidates, contractors, and employees, and are not to be released without the express written consent of CASB.

10 Module 3 Case Exam Review Centre Comments July 2012 The calculations were generally well-formatted and organized. Issue #4 Variance analysis is performed to determine the reason for the declining profitability of the Safety Pro line. For this issue, candidates were expected to calculate four variances, and interpret the results. Candidates needed to include a reasonable discussion of the affect of the competitor s lowered price, and the use of a new supplier, on the variances. An overall conclusion was required, with recommendations. Candidates were generally able to compute and discuss variances, but many struggled with the specifics of the computations. Candidates are expected to be well-versed with these computations, and a high standard was set for the correct computations. Most candidates struggled more with the material variances, and were able to correctly calculate the sales variances. Candidates who assessed their variance analyses in light of the case facts (e.g., competitor pricing; the new supplier s higher prices; quality) performed well on this issue. Some candidates performed an analysis at a high level, and did not integrate the case facts, specifically the affect of the competitor and supplier. Candidates often failed to provide meaningful recommendations and an overall conclusion. While most candidates attempted the calculations, many neglected to analyze the variances on a combined basis. Most candidates failed to recognize that the increased cost paid to the supplier, and the decreased material used, may be due to a higher-quality material. This needed to be integrated with the sales analysis, and the fact that sales could have increased due to a higher-quality product. Issue #5 The response demonstrates basic professional communication skills. Candidates needed to demonstrate strong communication skills, in both the written component and the calculations. With respect to candidate communication skills, few significant issues were noted. Some candidates merged unrelated topics in narrative discussions, numerical exhibits, or both. Segregating the issues makes them more readable by the audience, and also assists the candidate in focusing his/her discussions. Candidates need to ensure that their numerical exhibits are clear, by showing their work and explaining computations. Exhibits with numbers and analyses in various unrelated locations tend to be difficult to follow. Some candidates lacked depth in their written response, or did not attempt enough of the calculations required; they therefore failed to provide a meaningful response to the controller. Page 3 of 5 Copyright 2012 CA School of Business (CASB) All rights reserved. All contents are restricted for authorized CASB candidates, contractors, and employees, and are not to be released without the express written consent of CASB.

11 Module 3 Case Exam Review Centre Comments July 2012 Simulation 2: Westcoast Bicycles (Westcoast) Overall Comments This simulation required students to take the role of the assistant controller for a private Canadian corporation. Students were requested to prepare the corporate tax return, and to calculate the entry to record the corporate taxes payable. In addition, students were presented with information for a sale and lease of a building, which required both quantitative and qualitative analysis. This simulation was fairly directed, and the breadth of coverage was generally addressed well. Our general observations relating to the student responses are as follows. Issue #1 The corporate tax return is prepared, including the determination of corporate taxes payable, dividend refund, and RDTOH. This issue required candidates to prepare a corporate tax return. There were several adjustments required to reconcile net income for tax purposes. In order to complete the journal entry, candidates were required to calculate the tax payable, and to consider RDTOH and installments paid during the year. Candidates generally recognized that adjustments would be required, to adjust financial statement income to net income for tax purposes, but there were frequent errors in the adjustments that were made. The meals and entertainment/golf add-back calculation often had errors in it. As this was a straightforward calculation, the correct amount was required. CCA calculations on Class 10.1 assets often contained errors, and students did not understand when to apply the half-year rule, and how to treat disposals from this class. While Excel worksheets were generally well-prepared and organized, candidates should strive to show their work more clearly; it was sometimes difficult for markers to follow the analysis that was completed. Many candidates spent excessive time explaining the tax calculations. As this was not required, it was not an effective use of time. It is important that students take time to understand the individual components of the tax calculations, to ensure they calculate tax on each type of income correctly. The aggregate investment income (AII) calculation was often attempted, but students did not go one step further and calculate active business income (ABI). When recording the journal entry for the RDTOH, it is important to recognize that the net change in the RDTOH would be recorded to retained earnings. Many candidates did not properly record the journal entry, and recorded the final balance instead of the net change from the opening. When recording the entry to adjust the corporate tax payable, it is necessary to look at what has been recorded in the financial statements, and to adjust the incremental difference. Page 4 of 5 Copyright 2012 CA School of Business (CASB) All rights reserved. All contents are restricted for authorized CASB candidates, contractors, and employees, and are not to be released without the express written consent of CASB.

12 Module 3 Case Exam Review Centre Comments July 2012 Issue #2 The sale and lease of a building is evaluated both quantitatively and qualitatively. This issue required students to analyze the sale and lease of a building, using a net present value calculation. Additional work was needed to compute some of the components required for the analysis. Once the analysis was completed, students needed to evaluate the transaction, incorporating both positive and negative considerations, and to provide a supported conclusion. Overall, this issue was addressed reasonably well. Candidates generally organized the response for this issue well, and transactions were usually reported in the correct year. Almost all students applied the correct PV factors. The calculations of the various components of the analysis were generally not well done. This included the CCA tax shield, tax on recapture, and taxable capital gains. Instead of discussing the tax impact of the transaction, students often included the full amount of recapture and taxable capital gains in their cash flow analysis. To enable the markers to follow your work, it is critical that calculations be documented sufficiently. In the qualitative analysis, students needed to analyze both positive and negative considerations, and not just provide a list of factors. Students usually attempted the narrative discussion; however, it often lacked depth, and did not tie into case facts. Students were required to provide a supported conclusion that incorporated the results of both their qualitative and quantitative analyses. Students need to ensure that the conclusion is consistent with their analysis. Page 5 of 5 Copyright 2012 CA School of Business (CASB) All rights reserved. All contents are restricted for authorized CASB candidates, contractors, and employees, and are not to be released without the express written consent of CASB.

Module Practical Application Checklist:

Module Practical Application Checklist: MODULE 1 The Practical Application Checklists outline specific workplace tasks, by competency area, that CASB students are able to perform upon completion of each