CPA Prerequisite Education Program Syllabus

Transcription

1 CPA Prerequisite Education Program Syllabus (Effective as of December 15, 2015) Chartered Professional Accountants of Canada, CPA Canada, CPA are trademarks and/or certification marks of the Chartered Professional Accountants of Canada. 2015, Chartered Professional Accountants of Canada. All Rights Reserved.

2 Provincial/regional contact information for the CPA Prerequisite Education Program and the CPA Professional Education Program CPA Western School of Business CPA Ontario Phone: Phone: Ordre des comptables professionnels agréés du Québec (CPA PEP only) Phone: [4] or [2615] CPA Atlantic School of Business Phone: CPA Canada International Phone: N/A CPA Canada Toronto Head Office Phone: or i

3 Table of Contents Guide to the Syllabus... iii Purpose... iii Contents... iii CPA Prep... iv Mission... iv Program features... iv Competency-based program... iv Program structure... v Module descriptions and outlines... vi Financial Accounting Modules... 1 Module 1: Introductory Financial Accounting... 2 Module 5.1: Intermediate Financial Reporting Module 5.2: Intermediate Financial Reporting Module 5.3: Advanced Financial Reporting Management Accounting Modules Module 2: Introductory Management Accounting Module 9: Intermediate Management Accounting Finance Module Module 6: Corporate Finance Audit Module Module 7: Audit and Assurance Taxation Module Module 8: Taxation Performance Management Module Module 10: Performance Management General Business Modules Module 3: Economics Module 4: Statistics Module 11: Business Law Module 12: Information Technology ii

4 GUIDE TO THE SYLLABUS Purpose The purpose of this Syllabus is to provide detailed information on the content of the CPA Prerequisite Education Program (CPA PREP). This document has been produced for education administrators, module authors, module facilitators, committee members and resource people in the CPA education system; current and potential students, and those who advise them; and others in the professional, academic and general community. Contents The introductory sections of the Syllabus provide background information on the major features of CPA PREP. The main part of the Syllabus outlines the module descriptions and content in the following subjects areas: financial accounting management accounting auditing finance taxation economics business law information technology statistics Students are not required to complete all modules only the ones in which they lack subject area coverage. The amount of information provided for each module in this edition of the Syllabus depends on the current status in the program. Modules under review or development may have only a provisional description. iii

5 CPA PREP Mission CPA PREP consists of high-quality educational material that is accessible for students wanting to complete the prerequisite education required to enter the CPA Professional Education Program (CPA PEP) or the CPA Advanced Certificate in Accounting and Finance (ACAF). Program features CPA PREP meets the standards of education and examination required for individuals to enter the CPA PEP or ACAF. The CPA profession is recognized internationally as a leading developer and provider of competency-based professional accounting education. Competency-based program CPA PREP is a competency-based program that emphasizes development of the key areas of knowledge and enabling competencies required of accountants and senior financial managers, including: professional expertise in accounting and related areas interpretive, judgmental and analytical skills management of change in the technologies, processes and structures of organizations the use of complex information systems in decision-making The CPA profession is committed to the concept of lifelong learning. Its competency-based approach is maintained in professional development modules and career development following certification. iv

6 Program structure The structure of CPA PREP is as follows: Non-core modules Core modules Noncore modules Module 1 Module 2 Module 3 Module 4 Module 5.1 Module 5.2 Module 5.3 Module 6 Module 7 Module 8 Module 9 Module 10 Module 11 Module 12 Introductory Financial Accounting Introductory Management Accounting Economics Statistics Intermediate Financial Reporting 1 Intermediate Financial Reporting 2 Advanced Financial Reporting Corporate Finance Audit and Assurance Taxation Intermediate Management Accounting Performance Management Business Law Information Technology Admission requirements (as of December 2015) To be admitted to CPA PREP, applicants require: a bachelor s or master s degree 90 credit hours 1 or equivalent of education (30 credit hours / academic year) good character To be admitted to the CPA PEP, applicants require: a bachelor s or master s degree completion of prerequisite learning 120 credit hours 1 or equivalent of education (30 credit hours / academic year) good character 1 Credit hours are an input measure meant to reflect student time required to earn credit for the course. Generally, a three-credit course requires 33 hours of contact time (such as lectures) or 132 hours of student engagement time (such as lectures, tutorial, practice activities, testing or assessment, or preparation). v

7 Module descriptions and outlines The pages that follow contain the module descriptions, prerequisites and outlines for each module in CPA PREP. Some modules may still be under development; consequently, this information may change. CPA Canada reserves the right to make changes to the Syllabus without prior notice. vi

8 FINANCIAL ACCOUNTING MODULES Module 1: Introductory Financial Accounting Module 5.1: Intermediate Financial Reporting 1 Module 5.2: Intermediate Financial Reporting 2 Module 5.3: Advanced Financial Reporting 1

9 MODULE 1: INTRODUCTORY FINANCIAL ACCOUNTING Non-core module Prerequisites None Module description Module 1: Introductory Financial Accounting is the first financial accounting module in CPA PREP. It provides an integrated introduction to accounting principles and practices and is designed to help students begin to understand accounting information and gain an appreciation for its uses and limitations. Resources Harrison, Horngren, Thomas, Berberich, and Seguin, Financial Accounting, Fifth Canadian Edition (Pearson, 2015) Grading MyAccountingLab quizzes (four quizzes, 5% each) 20% Final examination (three hours) 80% 100% Quiz grades are based on the marks that students receive. An overall grade of 50% is required to pass the module (with an average of 65% across all core prerequisite modules required for entry into the CPA Professional Education Program). Module outline Chapter 1 The Financial Statements Explain why accounting is the language of business Explain accounting s conceptual framework and underlying assumptions Describe the purpose of each financial statement and explain the elements of each one Explain the relationships among the financial statements Make ethical business decisions 2

10 Chapter 2 Recording Business Transactions Describe common types of accounts Record the impact of business transactions on the accounting equation Record business transactions in T-accounts Record business transactions in the journal and post them to the ledger Prepare a trial balance Chapter 3 Accrual Accounting and the Financial Statements Explain how accrual accounting differs from cash-basis accounting Apply the revenue and expense-recognition principles Record adjusting journal entries Prepare the financial statements Record closing journal entries Analyze and evaluate a company s debt-paying abilities Chapter 4 Internal Control and Cash Describe fraud and its impact Explain the objectives and components of internal control Prepare and use a bank reconciliation Apply internal control to cash receipts and cash payments Construct and use a budget to manage cash Chapter 5 Short-Term Investments and Receivables Account for short-term investments Account for and control receivables Estimate and account for uncollectible accounts receivable Account for notes receivable Explain how to improve cash flow from sales and receivables Evaluate a company s liquidity 3

11 Chapter 6 Inventory and Cost of Goods Sold Account for inventory using the perpetual and periodic inventory systems Explain and apply three inventory costing methods Explain how accounting standards apply to inventory Analyze and evaluate gross profit and inventory turnover Use the cost-of-goods sold (COGS) model Analyze how inventory errors affect the financial statements Chapter 7 Property, Plant, and Equipment, and Intangible Assets Describe the types of tangible and intangible assets a business may own Measure and account for the cost of property, plant and equipment Calculate and record depreciation on property, plant and equipment Explain additional topics in accounting for long-lived assets Account for intangible assets Analyze and evaluate a company s return on assets Interpret tangible and intangible asset activities on the statement of cash flows Chapter 8 Long-Term Investments and the Time Value of Money Analyze and report non-strategic investments Analyze and report investments in affiliated companies using the equity method Analyze and report controlling interests in other corporations using consolidated financial statements Analyze and report long-term investments in bonds Report investing activities on the statement of cash flows Explain the impact of the time value of money on certain types of investments 4

12 Chapter 9 Liabilities Explain and account for current liabilities Explain the types, features and pricing of bonds payable Account for bonds payable Calculate and account for interest expense on bonds payable Explain the advantages and disadvantages of financing with debt versus equity Analyze and evaluate a company s debt-paying ability Describe other types of long-term liabilities Report liabilities on the balance sheet Chapter 10 Shareholders Equity Explain the main features of a corporation Account for the issuance of shares Explain why a company repurchases shares Account for retained earnings, dividends and stock splits Distinguish between fair value and book value per share Evaluate a company s return on equity using DuPont analysis Evaluate equity transactions and events in the financial statements Chapter 11 The Income Statement, the Statement of Comprehensive Income and the Statement of Shareholders Equity Evaluate the quality of earnings Account for other items on the income statement Compute earnings per share Analyze the statement of comprehensive income and the statement of changes in shareholders equity Differentiate between management s and the auditor s responsibilities in financial reporting Chapter 12 The Statement of Cash Flows Explain the uses of the statement of cash flows Explain and classify cash flows from operating, investing and financing activities Prepare a statement of cash flows using the indirect method of determining cash flows from operating activities 5

13 Chapter 13 Financial Statement Analysis Perform a horizontal analysis of financial statements Perform a vertical analysis of financial statements Prepare common-size financial statements Use the statement of cash flows in decision making Use ratios to make business decisions 6

14 MODULE 5.1: INTERMEDIATE FINANCIAL REPORTING 1 Core module Prerequisites Module 1: Introductory Financial Accounting Module 2: Introductory Management Accounting Module 3: Economics Module 4: Statistics Module description This six-week module builds on the introductory financial accounting skills that students acquired in introductory financial accounting (Module 1). It primarily focuses on the assets side of the statement of financial position. As students progress through this module, they can expect to develop and strengthen both technical and enabling competencies. The main focus will be on the technical competencies found in the financial reporting section of The CPA Competency Map; students will develop these competencies at A, B and C levels in preparation for entry into the CPA PEP. Mastering these competencies will provide a solid foundation for entry into the CPA PEP. Resources Students will be provided with access to the Virtual Professional Library (VPL), a collection of standards, rules and guidelines published by CPA Canada. Students are encouraged to start becoming familiar with the standards as currently provided through the CPA Canada Handbook. In Canada, practitioners follow the standards in the CPA Canada Handbook Accounting. Grading Quizzes 12% Assignments 18% Final examination 70% 100% An overall grade of 60% is needed to pass this module (with an average of 65% across all core prerequisite modules required for entry into the CPA PEP). 7

15 Module outline TOPIC 1.1: INTRODUCTION Prerequisite knowledge Structure of module materials TOPIC 1.2: ACCOUNTING STANDARDS IN CANADA Generally accepted accounting principles Development of new and revised accounting standards Effect of legislation on accounting standards TOPIC 1.3: THE CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING Components of the IFRS Conceptual Framework for Financial Reporting Users of financial reporting Objectives of financial reporting Fundamental qualitative characteristics Enhancing qualitative characteristics The cost constraint (cost versus benefit) Underlying assumption going concern Capital maintenance The elements of financial statements Measurement of the elements of financial statements TOPIC 1.4: THE ASPE FRAMEWORK ASPE framework contrasted with IFRS conceptual framework TOPIC 1.5: FINANCIAL STATEMENTS Required financial statements ASPE Financial statements general requirements Statement of financial position The statement of profit or loss and other comprehensive income (statement of comprehensive income) Statement of changes in equity Events after the reporting period (subsequent events) TOPIC 1.6: INTERNAL CONTROL Bank reconciliations 8

16 TOPIC 1.7: ACCOUNTING INFORMATION SYSTEMS AND INFORMATION TECHNOLOGY Accounting software Information technology Current trends in computerized accounting information systems TOPIC 1.8: ETHICS TOPIC 1.9: THE ACCOUNTING CYCLE APPENDIX A: PROVINCIAL SALES TAX, GOODS AND SERVICES TAX AND HARMONIZED SALES TAX TOPIC 2.1: GOVERNING STANDARDS TOPIC 2.2: REVENUE RECOGNITION Revenue recognition general criteria Initial and subsequent measurement Multiple performance obligations (deliverables) Revenue recognition construction contracts Principal-agent arrangements Consignment arrangements Bill-and-hold arrangements Revenue recognition under ASPE Presentation and disclosure TOPIC 3.1: CASH AND CASH EQUIVALENTS TOPIC 3.2: ACCOUNTS RECEIVABLE Recognition Initial measurement Subsequent measurement Allowance for doubtful accounts Derecognition of accounts receivable Presentation and disclosure TOPIC 3.3: NON-TRADE RECEIVABLES OTHER RECEIVABLES 9

17 TOPIC 3.4: NON-TRADE RECEIVABLES NOTES RECEIVABLES Recognition Initial measurement Subsequent measurement IFRS Subsequent measurement ASPE Interest rate conventions Derecognition Presentation and disclosure TOPIC 3.5: INVENTORY Inventory systems Initial measurement Subsequent measurement Recognition as an expense using cost formulas (derecognition) Cost formula and cash flow Methods of estimating inventory Inventory errors Presentation and disclosure TOPIC 4.1: PROPERTY, PLANT AND EQUIPMENT Recognition (PPE) Initial measurement (PPE) Subsequent measurement (PPE) replacements versus repairs Subsequent measurement (PPE) cost and revaluation models Subsequent measurement (PPE) depreciation and depletion Derecognition (PPE) Disclosure (PPE) TOPIC 4.2: INTANGIBLE ASSETS Recognition (intangible assets) Initial measurement (intangible assets) Derecognition (intangible assets) Disclosure (intangible assets) TOPIC 4.3: GOODWILL 10

18 TOPIC 4.4: IMPAIRMENT Recoverable amount Recognition of an impairment loss individual asset Recognition of an impairment loss CGU Reversal of impairment losses Disclosure impairments Impairment ASPE TOPIC 4.5: NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Recognition Initial measurement Subsequent measurement Derecognition Presentation and disclosure non-current assets held for sale and discontinued operations Accounting for abandoned assets TOPIC 4.6: GOVERNMENT GRANTS Recognition Initial measurement Subsequent measurement Derecognition Presentation and disclosure accounting for government grants and disclosure of government assistance TOPIC 5.1: GOVERNING STANDARDS TOPIC 5.2: STRATEGIC INVESTMENTS IN FINANCIAL ASSETS Subsidiaries control Joint arrangements joint control Associates significant influence TOPIC 5.3: THE EQUITY METHOD Initial measurement Subsequent measurement Other requirements of the equity method 11

19 TOPIC 5.4: PASSIVE INVESTMENTS IN FINANCIAL ASSETS Financial assets exclusions from IFRS Recognition financial assets Classification financial assets Initial measurement financial assets Subsequent measurement financial assets Subsequent measurement impairment Reclassification of financial assets Derecognition of financial assets Presentation and disclosure TOPIC 5.5: FINANCIAL ASSETS ASPE TOPIC 6.1: TOPIC 6.2: TOPIC 6.3: STATEMENT OF CASH FLOWS INTRODUCTION GOVERNING STANDARDS CASH AND CASH EQUIVALENTS Foreign currency cash and cash equivalents Cash equivalents Options for investments that qualify as cash equivalents Overdraft facilities TOPIC 6.4: CLASSIFICATION OF CASH FLOWS Operating activities Investing activities Financing activities Classification alternatives for certain cash flows Non-cash transactions TOPIC 6.5: FORMAT OF THE STATEMENT OF CASH FLOWS Direct and indirect methods of presentation TOPIC 6.6: PREPARING A STATEMENT OF CASH FLOWS The process for preparing a statement of cash flows using the indirect method The process for preparing a statement of cash flows using the direct method 12

20 TOPIC 6.7: EFFECTS OF SPECIFIC ITEMS ON THE STATEMENT OF CASH FLOWS Discontinued operations Discounts and premiums on financial assets and liabilities Investments in associates and joint ventures Investments at FVPL not designated as cash equivalents unrealized gains and losses TOPIC 6.8: TOPIC 6.9: COMPREHENSIVE EXAMPLE PRESENTATION AND DISCLOSURE TOPIC 6.10: CASH FLOW STATEMENT ASPE 13

21 MODULE 5.2: INTERMEDIATE FINANCIAL REPORTING 2 Core module Prerequisites Module 5.1: Intermediate Financial Reporting 1 Module description This six-week module builds on the financial accounting skills that students acquired in introductory financial accounting (Module 1) and Module 5.1: Intermediate Financial Reporting 1. Module 5.2: Intermediate Financial Reporting 2 is an intermediate-level module that focuses on the liabilities and equities side of the statement of financial position along with topics such as accounting for income taxes, leases, employee benefits, earnings per share and accounting changes. Resources Students will be provided with access to the Virtual Professional Library (VPL). This is a collection of standards, rules and guidelines published by CPA Canada. Students are encouraged to start becoming familiar with the standards as currently provided through the CPA Canada Handbook. In Canada, practitioners follow the standards in the CPA Canada Handbook Accounting. Grading Quizzes 12% Assignments 18% Final examination 70% 100% An overall grade of 60% is needed to pass the module (with an average of 65% across all core prerequisite modules required for entry into the CPA PEP). 14

22 Module outline TOPIC 1.1: PREREQUISITE KNOWLEDGE TOPIC 1.2: STRUCTURE OF COURSE MATERIALS TOPIC 1.3: FINANCIAL CALCULATORS TOPIC 1.4: GOVERNING STANDARDS Financial liabilities exclusions from IFRS 9 TOPIC 1.5: LIABILITIES Liabilities definition Types of liabilities TOPIC 1.6: RECOGNITION TOPIC 1.7: FINANCIAL LIABILITIES THROUGH PROFIT OR LOSS IFRS Initial and subsequent measurement at fair value through profit or loss TOPIC 1.8: OTHER FINANCIAL LIABILITIES IFRS Initial and subsequent measurement other financial liabilities Other financial liabilities select transaction types Other financial liabilities bonds TOPIC 1.9: DERECOGNITION OF FINANCIAL LIABILITIES IFRS 9 TOPIC 1.10: SUMMARY IFRS 9 TOPIC 1.11: FINANCIAL LIABILITIES ASPE TOPIC 1.12: NON-FINANCIAL LIABILITIES IAS Initial and subsequent measurement Other non-financial liabilities select transaction types Commitments (onerous contracts) Derecognition of non-financial liabilities IAS 37 TOPIC 1.13: CONTINGENCIES IFRS IAS Contingent assets Contingent liabilities Contingencies ASPE 15

23 TOPIC 1.14: PRESENTATION AND DISCLOSURE Current and non-current liabilities Required disclosure APPENDIX A Time value of money Contrasting effective rate of interest and market rate of interest Interest rate conventions APPENDIX B APPENDIX C TOPIC 2.1: GOVERNING STANDARDS TOPIC 2.2: SHAREHOLDERS EQUITY IFRS and ASPE level of guidance each provides TOPIC 2.3: CONTRIBUTED CAPITAL Share capital authorized, issued, outstanding and treasury Classes of shares Issuance (sale) of shares recognition Issuance (sale) of shares initial and subsequent measurement Derecognition reacquisition of shares TOPIC 2.4: RETAINED EARNINGS Dividends description Dividends dates Dividends types Dividends cumulative and non-cumulative TOPIC 2.5: RESERVES ACCUMULATED OTHER COMPREHENSIVE INCOME TOPIC 2.6: STATEMENT OF CHANGES IN EQUITY TOPIC 2.7: COMPLEX FINANCIAL INSTRUMENTS TOPIC 2.8: DERIVATIVES Forwards and futures Swaps Options 16

24 TOPIC 2.9: STOCK-BASED COMPENSATION PLANS Terminology Employee stock option plans equity settled Stock appreciation rights cash settled Stock appreciation rights equity settled and multiple settlement options Stock-based compensation plans ASPE TOPIC 2.10: COMPOUND FINANCIAL INSTRUMENTS Recognition and initial measurement Subsequent measurement Derecognition Compound financial instruments ASPE TOPIC 2.11: PRESENTATION AND DISCLOSURE Financial liabilities Equity instruments and share-based payments TOPIC 3.1: ACCOUNTING FOR INCOME TAXES AN INTRODUCTION TOPIC 3.2: GOVERNING STANDARDS TOPIC 3.3: ACCOUNTING FOR INCOME TAXES TOPIC 3.4: RECOGNITION AND INITIAL MEASUREMENT Permanent differences Temporary differences Interrelationships: Accounting and tax bases, temporary differences and deferred taxes (SFP) Recognition and initial measurement accrual method of tax allocation Initial measurement probability of realizing a deductible temporary difference Initial measurement time value of money TOPIC 3.5: SUBSEQUENT MEASUREMENT Reassessment of a previously unrecognized deferred tax asset Change in tax rates TOPIC 3.6: DERECOGNITION 17

25 TOPIC 3.7: ACCOUNTING FOR TAX LOSSES Strategic considerations Recognition and initial measurement taxable losses Subsequent measurement taxable losses TOPIC 3.8: INSTALMENT PAYMENTS TOPIC 3.9: PRESENTATION AND DISCLOSURE Interperiod tax allocation Intraperiod tax allocation TOPIC 3.10: SUBSTANTIVE DIFFERENCES BETWEEN IFRS AND ASPE Recognition and initial measurement taxes payable method APPENDIX A: GLOSSARY OF TERMS TOPIC 4.1: ACCOUNTING FOR LEASES AN INTRODUCTION Benefits of leasing Tax implications of leasing Governing standards for leases TOPIC 4.2: LEASE CLASSIFICATION TOPIC 4.3: ACCOUNTING FOR LEASES PREAMBLE TOPIC 4.4: ACCOUNTING FOR OPERATING LEASES LESSOR Disclosure of operating leases lessor TOPIC 4.5: ACCOUNTING FOR OPERATING LEASES LESSEE Disclosure of operating leases lessee TOPIC 4.6: ACCOUNTING FOR FINANCE LEASES LESSOR Nature of the finance lease offered by the lessor Recognition and initial measurement Subsequent measurement Derecognition Presentation and disclosure of finance leases lessors 18

26 TOPIC 4.7: ACCOUNTING FOR FINANCE LEASES LESSEE Recognition and initial measurement Subsequent measurement Derecognition Presentation and disclosure of finance leases lessees TOPIC 4.8: ACCOUNTING FOR SALE AND LEASEBACK TRANSACTIONS Operating leaseback Finance leaseback TOPIC 4.9: SUBSTANTIVE DIFFERENCES BETWEEN IFRS AND ASPE LEASES TOPIC 4.10: ACCOUNTING FOR PENSION PLANS AND OTHER LONG-TERM EMPLOYEE BENEFITS AN INTRODUCTION Advantages and disadvantages of benefit packages TOPIC 4.11: GOVERNING STANDARDS TOPIC 4.12: ACCOUNTING FOR OTHER LONG-TERM EMPLOYEE BENEFITS TOPIC 4.13: ACCOUNTING FOR PENSION PLANS OVERVIEW Overview of pension plans Types of pension plans TOPIC 4.14: ACCOUNTING FOR DEFINED CONTRIBUTION PLANS Recognition and measurement Disclosure of defined contribution plans TOPIC 4.15: ACCOUNTING FOR DEFINED BENEFIT PLANS Preamble Recognition and measurement pension expense Journal entries to record pension expense Summary Additional complexities in accounting for defined benefit plans TOPIC 4.16: PRESENTATION AND DISCLOSURE 19

27 TOPIC 4.17: SUBSTANTIVE DIFFERENCES BETWEEN IFRS AND ASPE EMPLOYEE BENEFITS Other long-term employee benefits Defined contribution plans Defined benefit plans APPENDIX A: GLOSSARY OF TERMS LEASES APPENDIX B: GLOSSARY OF TERMS PENSION PLANS TOPIC 5.1: EARNINGS PER SHARE INTRODUCTION TOPIC 5.2: GOVERNING STANDARDS Substantive differences between IFRS and ASPE EPS TOPIC 5.3: EPS MEASUREMENT BASIC Basic earnings per share earnings Basic earnings per share shares TOPIC 5.4: EPS MEASUREMENT DILUTED Step 1: Ascertain all potential ordinary shares Step 2: Calculate incremental EPS for each potential ordinary share Step 3: Order the incremental EPS Step 4: Determine diluted EPS TOPIC 5.5: EPS MEASUREMENT COMPLICATING FACTORS Contingently issuable shares Continuing and discontinued operations Convertible bonds issued at a premium or discount Correction of errors and changes in accounting policy Dilutive EPS when basis EPS is negative Other comprehensive income POS issued, redeemed, expired or converted during the period POS with more than one conversion option Stock splits and dividends after year end but before the financial statement date TOPIC 5.6: EPS PRESENTATION AND DISCLOSURE Presentation Disclosure 20

28 TOPIC 5.7: ACCOUNTING CHANGES INTRODUCTION TOPIC 5.8: GOVERNING STANDARDS TOPIC 5.9: SELECTION OF ACCOUNTING POLICIES In the absence of an applicable IFRS Disclosure of accounting policies TOPIC 5.10: METHODS OF ACCOUNTING FOR ACCOUNTING CHANGES Retrospective adjustments Prospective adjustments TOPIC 5.11: DETERMINING THE NATURE OF THE ACCOUNTING CHANGE TOPIC 5.12: ACCOUNTING FOR CHANGES IN ACCOUNTING POLICY Acceptable reasons for changes in accounting policy Accounting for a voluntary change in accounting policy Accounting for a change in accounting policy required by IFRS Disclosure related to a change in accounting policy TOPIC 5.13: ACCOUNTING FOR CHANGES IN ESTIMATES Disclosure related to a change in estimate TOPIC 5.14: ACCOUNTING FOR PRIOR PERIOD ERRORS Disclosure related to the correction of prior period errors TOPIC 5.15: SUBSTANTIVE DIFFERENCES BETWEEN IFRS AND ASPE ACCOUNTING CHANGES APPENDIX A: GLOSSARY OF TERMS EARNING PER SHARE 21

29 TOPIC 6.1: STATEMENT OF CASH FLOWS Governing standards Foreign currency cash flows Contingent liabilities and assets Decommissioning obligations Treasury shares Property dividends Compound financial instruments Deferred tax expense Leases Pensions TOPIC 6.2: FINANCIAL STATEMENT USERS TOPIC 6.3: INTERIM FINANCIAL REPORTING Introduction and governing standards Recognition and measurement Presentation Disclosure Substantive differences TOPIC 6.4: MANAGEMENT DISCUSSION AND ANALYSIS (MD&A) Introduction and governing standards Why is MDA required? Objectives of the MD&A Recommended practice Substantive differences between IFRS and ASPE MD&A TOPIC 6.5: FINANCIAL STATEMENT ANALYSIS Introduction and governing standards Ratio analysis and benchmarking Vertical and horizontal analysis Pro forma financial statements 22

30 MODULE 5.3: ADVANCED FINANCIAL REPORTING Core module Prerequisites Module 5.2: Intermediate Financial Reporting 2 Module description This six-week module deals with financial accounting topics such as consolidations, foreign currency and not-for-profit accounting. As students progress through this module, they can expect to develop and strengthen both technical and enabling competencies. The main focus will be on the technical competencies found in the financial reporting section of The CPA Competency Map; students will develop these competencies at A, B and C levels in preparation for entry into the CPA PEP. Mastering these competencies will provide a solid foundation for entry into the CPA PEP. Resources Students will be provided with access to the Virtual Professional Library (VPL), a collection of standards, rules and guidelines published by CPA Canada. Students are encouraged to start becoming familiar with the standards as currently provided through the CPA Canada Handbook. In Canada, practitioners follow the standards in the CPA Canada Handbook Accounting. Grading Quizzes 12% Assignments 18% Final examination 70% 100% An overall grade of 60% is needed to pass this module (with an average of 65% across all core prerequisite modules required for entry into the CPA PEP). 23

31 Module outline TOPIC 1.1: PREREQUISITE KNOWLEDGE TOPIC 1.2: STRUCTURE OF COURSE MATERIALS TOPIC 1.3: GOVERNING STANDARDS TOPIC 1.4: OVERVIEW OF STRATEGIC INVESTMENTS IN FINANCIAL ASSETS Strategic versus non-strategic investments. TOPIC 1.5: INVESTMENTS IN ASSOCIATES TOPIC 1.6: THE EQUITY METHOD INVESTMENTS IN ASSOCIATES Initial measurement Subsequent measurement statement of comprehensive income Subsequent measurement statement of financial position Change in ownership interest of an associate including derecognition Presentation Disclosure TOPIC 1.7: BUSINESS COMBINATIONS Forms of business combinations TOPIC 1.8: BUSINESS COMBINATIONS BY WAY OF PURCHASE OF NET ASSETS Initial measurement Subsequent measurement and derecognition TOPIC 1.9: BUSINESS COMBINATIONS BY WAY OF CONTRACTUAL AGREEMENT TOPIC 1.10: BUSINESS COMBINATIONS BY WAY OF SHARE ACQUISITION Preamble Consolidation framework TOPIC 1.11: SUMMARY OF CONSOLIDATION PROCEDURES Overview Consolidation framework 24

32 TOPIC 1.12: ALLOCATING THE ACQUISITION DIFFERENTIAL Identifying the acquirer Determining the acquisition date Recognition and initial measurement of the net identifiable assets acquired Recognition and initial measurement of the non-controlling interests (NCI) and goodwill TOPIC 1.13: PREPARING AN ACQUISITION DIFFERENTIAL AMORTIZATION AND IMPAIRMENT SCHEDULE TOPIC 1.14: PREPARING A CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT ACQUISITION DATE. TOPIC 2.1: CONTROL INVESTMENTS SUBSEQUENT MEASUREMENT OVERVIEW Simplifying assumptions TOPIC 2.2: ACQUISITION DIFFERENTIAL AMORTIZATION AND IMPAIRMENT SCHEDULE TOPIC 2.3: CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 100% OWNERSHIP Verification of consolidated net income TOPIC 2.4: CONSOLIDATED STATEMENT OF RETAINED EARNINGS TOPIC 2.5: CONSOLIDATED STATEMENT OF FINANCIAL POSITION 100% OWNERSHIP TOPIC 2.6: CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME < 100% OWNERSHIP TOPIC 2.7: ON-CONTROLLING INTEREST SUBSEQUENT MEASUREMENT TOPIC 2.8: CONSOLIDATED STATEMENT OF FINANCIAL POSITION < 100% OWNERSHIP 25

33 TOPIC 2.9: PREPARING CONSOLIDATED FINANCIAL STATEMENTS OTHER FACTORS Fixed assets net method versus gross method impact on consolidation procedures Uniform accounting policies Acquisition of a subsidiary at other than its year end Changes in the level of share ownership APPENDIX A : THE WORKSHEET APPROACH TOPIC 3.1: INTERCOMPANY TRANSACTIONS AND BALANCES INTRODUCTION TOPIC 3.2: INTERCOMPANY BALANCES TOPIC 3.3: INTERCOMPANY REVENUES AND EXPENSES Intercompany items working paper schedule TOPIC 3.4: UNREALIZED PROFITS ON THE INTERCOMPANY SALE OF NON- DEPRECIABLE ASSETS INCLUDING LAND Adjustments in year of intercompany sale non-depreciable assets Adjustments in intervening years non-depreciable assets Adjustments in the year of sale to an outside party non-depreciable assets Upstream versus downstream sales impact on consolidated net income ATP and the NCI reported on the consolidated statement of financial position TOPIC 3.5: UNREALIZED PROFITS ON THE INTERCOMPANY SALE OF DEPRECIABLE ASSETS Adjustments in year of intercompany sale depreciable assets Adjustments in subsequent years depreciable assets Adjustments in the year of sale to an outside party depreciable assets Upstream versus downstream sales impact on consolidated net income ATP and the NCI reported on the consolidated statement of financial position TOPIC 3.6: UNREALIZED PROFITS ON THE INTERCOMPANY SALE OF INVENTORY Adjustments in year of intercompany sale inventory Adjustments in the year of sale to an outside party inventory Upstream versus downstream sales impact on consolidated net income ATP and the NCI reported on the consolidated statement of financial position Summary of required adjustment for intercompany sales of inventory 26

34 TOPIC 3.7: COMPREHENSIVE EXAMPLE APPENDIX A: INTERCOMPANY SALE OF DEPRECIABLE ASSETS EXTENDED EXAMPLE APPENDIX B: INTERCOMPANY SALE OF INVENTORY EXTENDED EXAMPLE TOPIC 4.1: SUBSIDIARY WITH PREFERENCE SHARES OUTSTANDING TOPIC 4.2: INDIRECT SHAREHOLDINGS TOPIC 4.3: DEFERRED TAXES ARISING ON ACQUISITION TOPIC 4.4: CONSOLIDATED STATEMENT OF CASH FLOWS TOPIC 4.5: OPERATING SEGMENTS Operating segments Reportable segments Quantitative thresholds Required disclosure for reportable segments TOPIC 4.6: JOINT ARRANGEMENTS Accounting for joint ventures TOPIC 4.7: SUBSTANTIVE DIFFERENCES BETWEEN IFRS AND ASPE STRATEGIC INVESTMENTS Subsidiaries Associates Joint arrangements TOPIC 4.8: PRESENTATION AND DISCLOSURE Presentation of consolidated financial statements Disclosure requirements for business combinations Disclosure of interests in other entities TOPIC 5.1: GOVERNING STANDARDS 27

35 TOPIC 5.2: FOREIGN CURRENCY TRANSACTIONS Foreign currency transactions initial measurement monetary and nonmonetary items Foreign currency transactions subsequent measurement Foreign currency transactions derecognition TOPIC 5.3: HEDGING FOREIGN CURRENCY EXPOSURE Accounting for hedging items of foreign currency exposure hedge accounting not adopted Gross method versus net method TOPIC 5.4: HEDGE ACCOUNTING Types of hedges Qualifying criteria for hedge accounting Accounting for fair value hedges Accounting for cash flow hedges Comparison of journal entries hedge accounting not adopted, fair value hedge, and cash flow hedge TOPIC 5.5: TRANSLATION AND CONSOLIDATION OF FOREIGN SUBSIDIARIES Determining the entity s functional currency Translation methods Allocating and amortizing the acquisition differential Subsidiary accounted for using the foreign currency transactions approach (temporal method) Self-sustaining foreign operation (current rate method) APPENDIX A: GLOSSARY OF TERMS TOPIC 6.1: GOVERNING STANDARDS Governing standards private sector NFPOs Governing standards public sector TOPIC 6.2: ACCOUNTING FOR NFPOs Required financial statements Fund accounting Types of contributions to NFPOs Contributions revenue recognition 28

36 6.2-4 Accounting for NFPOs other considerations Presentation and Disclosure CPA Canada s financial statements TOPIC 6.3: GOVERNMENT ACCOUNTING Public Sector Accounting Board (PSAB) Objectives of government financial reporting Major reporting issues with respect to government accounting Internal and external users of government accounting information Government financial statements APPENDIX A: GLOSSARY OF TERMS 29

37 MANAGEMENT ACCOUNTING MODULES Module 2: Introductory Management Accounting Module 9: Intermediate Management Accounting 30

38 MODULE 2: INTRODUCTORY MANAGEMENT ACCOUNTING Non-core module Prerequisites None Co-requisites Module 1: Introductory Financial Accounting Module description Module 2: Introductory Management Accounting examines how accounting information is used within organizations to plan, monitor and control. Managers in all functional areas, whether they like it or not, will have to deal with the management accounting system of the organization they work for. The purpose of this module is to ensure that students have a basic understanding of how such systems operate, the language they use, and their limitations. Resources Horngren, Sundem, Stratton, Beaulieu, Management Accounting, Sixth Canadian Edition (Pearson, 2012) Grading MyAccountingLab quizzes (four quizzes, 5% each) 20% Final examination (three hours) 80% 100% Quiz grades are based on the marks that students receive. An overall grade of 50% is needed to pass this module (with an average of 65% across all core prerequisite modules required for entry into the CPA PEP). 31

39 Module outline Chapter 1 Management Accounting and Management Decisions Management Accounting for Managers A Management Decision Process The Management Accountant s Role Management Accounting and Service Organizations Planning and Control for Product Life Cycles and the Value Chain The Role of the Accountant in the Organization Management Accounting and Financial Accounting Adapting to Change Current Trends Chapter 2 Cost Behaviour and Cost-Volume Relationships Cost Drivers Comparison of Variable and Fixed Costs Cost-Volume-Profit Analysis Sales Mix Analysis Impact of Income Taxes Uses and Limitations of Cost-Volume Analysis Non-Profit Application Chapter 3 Measurement of Cost Behaviour Cost Drivers and Cost Behaviour Management s Influence on Cost Functions Measuring Cost Behaviour Methods of Measuring Cost Functions Least Squares Regression Analysis Chapter 4 Cost Management Systems Classification of Costs Cost Accounting for Financial Reporting 32

40 Cost Behaviour and Income Statements Variable Versus Absorption Costing Appendix 4: More on Labour Costs Chapter 5 Cost Allocation and Activity-Based Costing Systems Cost Allocation in General Allocation of Service Department Costs Allocating Costs to Outputs Allocating Joint Costs and By-Product Costs Activity-Based Costing (ABC) Chapter 6 Job-Costing Systems Distinction Between Job Costing and Process Costing Illustration of Job-Order Costing Accounting for Factory Overhead Problems of Overhead Application Activity-Based Costing in a Job-Order Environment Product Costing in Service and Non-Profit Organizations Chapter 8 Relevant Information and Decision Making: Marketing Decisions The Meaning of Relevance: The Major Conceptual Lesson The Special Sales Order Deleting or Adding Products or Departments Optimal Use of Limited Resources Pricing Decisions Influences on Pricing in Practice Advantages of Various Approaches to Pricing Decisions Target Costing Chapter 9 Relevant Information and Decision Making: Production Decisions Opportunity, Outlay, and Differential Costs Make-or-Buy Decisions Joint Product Costs 33

41 Irrelevance of Past Costs Irrelevance of Future Costs that Will Not Differ Beware of Unit Costs Conflicts Between Decision Making and Performance Evaluation Chapter 10 Capital Budgeting Decisions Capital Investment Decisions Discounted-Cash-Flow Models Using DCF Models Chapter 11 The Master Budget Budgets: What They Are and How They Benefit the Organization Preparing the Master Budget Difficulties of Sales Forecasting Making a Budget Work: Anticipating Human Behaviour Financial Planning Models Chapter 12 Flexible Budgets and Variance Analysis Flexible Budgets: The Bridge Between Static Budgets and Actual Results Budget Variances and Their Causes Flexible-Budget Variances in Detail Variable Overhead Variances Chapter 13 Management Control Systems, the Balanced Scorecard, and Responsibility Accounting Management Control Systems Design, Plan, and Execute Management Control Systems Motivating Employees to Excel and Achieve Goal Congruence Controllability Criterion of Measuring Financial Performance Non-Financial Measures of Performance Management Control Systems in Service, Government, and Not-For-Profit Organizations The Future of Management Control Systems 34

42 Chapter 14 Management Control in Decentralized Organizations Centralization Versus Decentralization Transfer Pricing Performance Measures and Management Control Measures of Profitability A Closer Look at Invested Capital Keys to Successful Performance Measures 35

43 MODULE 9: INTERMEDIATE MANAGEMENT ACCOUNTING Core module Prerequisites Module 1: Introductory Financial Accounting Module 2: Introductory Management Accounting Module 3: Economics Module 4: Statistics Module description This module is six weeks long and covers a variety of intermediate management accounting topics. The objective of Module 9: Intermediate Management Accounting is to assist students to develop the professional competence and skills that will enable them to understand the requirements of management reporting. This module will also help to develop the ability to assess a situation, identify issues and alternatives, and formulate recommendations using professional judgment. Students will develop and strengthen their: technical knowledge of issues in management accounting and reporting ability as a professional to focus clearly on the concerns of management application of a systematic methodology in solving a range of problems Grading Quizzes 12% Assignments 18% Final examination 70% 100% An overall grade of 60% is needed to pass this module (with an average of 65% across all core prerequisite modules required for entry into the CPA PEP). Module outline TOPIC 1.1: ROLE OF THE MANAGEMENT ACCOUNTANT Management accounting versus financial accounting The mid-20th-century roles of management accounting Management accounting and cost accounting Role of management accounting in management of the organization 36

44 TOPIC 1.2: COST CLASSIFICATIONS Cost distinctions important to financial accounting Costing terms critical in costing system design Costing system architecture Cost terms used to describe and predict cost behaviour Cost terms needed in manufacturing costing systems Cost terms used in planning and control Cost terms used in decision-making TOPIC 1.3: COST ESTIMATION Judgment approaches Data approaches TOPIC 1.4: COST-VOLUME-PROFIT ANALYSIS The cost-volume-profit-model Using the cost-volume-profit units model Sensitivity analysis for CVP Developing and using the revenue CVP model The CVP chart Taxes and the CVP equations Using the profit equation for what-if analysis Multi-product CVP analysis Spreadsheets Scenario planning TOPIC 2.1: CAPACITY TOPIC 2.2: SERVICE DEPARTMENT COST ALLOCATION Support and production departments Methods of allocating support department costs Direct method of support cost allocation Step method of support cost allocation Reciprocal method of support cost allocation Support department allocations variable and fixed costs 37

45 TOPIC 2.3: JOB ORDER COSTING Overview of job order costing Components of a job costing system Job order costing steps Actual and normal overhead rates Choosing the denominator activity and its level Analysis of activity level choices for the cost driver Multiple overhead cost pools and system design Recording manufacturing overhead Dealing with over- and under-applied overhead Highlighting idle capacity costs Variable manufacturing overhead The accounting entries underlying job order costing Spoilage, reworked units and scrap TOPIC 2.4: JOINT AND BY-PRODUCT COSTING Joint costs, joint products and by-products Why allocate joint costs? Joint cost allocation methods Physical output method Sales value at split-off method Net realizable value method Constant gross margin percentage method By-products Conclusion TOPIC 3.1: PROCESS COSTING Process costing systems Process costing steps: Establishing physical flow and equivalent units Process costing approaches Weighted average cost flow assumption Spoilage Transferred-in costs First-in first-out (FIFO) cost flow assumption Hybrid and operations costing systems TOPIC 3.2: INDIRECT COST ALLOCATION SYSTEMS Indirect cost allocation systems design Objective in indirect cost allocation system design Cost allocation system improvement 38

46 TOPIC 3.3: ACTIVITY-BASED COSTING SYSTEMS Activity-based costing systems design The ABC cost hierarchy ABC differences from traditional costing Activity-based management Costs/benefits of ABC and ABM TOPIC 3.4: OTHER METHODS FOR DETERMINING AND CONTROLLING COSTS Kaizen costing Product life cycle costing2 TOPIC 4.1: VARIABLE (DIRECT) AND ABSORPTION (FULL) COSTING Financial reporting differences between variable and absorption costing Objections to absorption costing Absorption and variable costing and CVP analysis TOPIC 4.2: BUDGETING Definition and objectives The budgeting process The budget period Budget participants Budget terms budgets, forecasts and pro forma financial statements The master budget The recursive nature of master budget development Master budget components Sales (revenue) budget Production budget (purchases budget merchandiser) Direct materials purchases budget Direct labour budget Manufacturing overhead budget Ending inventory budget Cost of goods sold budget Selling and administrative expenses budget Capital budget Cash budget Budgeted income statement Budgeted balance sheet Activity-based budgeting Zero-based budgeting 39

47 TOPIC 4.3: PRICING The role of cost information in pricing Cost information and short- and long-term pricing Varying demand and varying prices The management accountant s role in supporting revenue control The management accountant s role in revenue control TOPIC 4.4: CONTRACTUAL SETTINGS WHERE COST INFORMATION DETERMINES THE PRICE Cost-plus contracts Insurance claims Legal settings Bidding TOPIC 5.1: STANDARD COSTS AND COST VARIANCES Standard costs Flexible budgets Cost variances Manufacturing cost variances Variance analysis with substitutable inputs Standard (budgeted rate) absorption costing and standard variable costing Investigating variances Variances and presentation of net income TOPIC 5.2: REVENUE VARIANCES Sales price variance Sales volume related variances TOPIC 5.3: SUMMARY OF VARIANCE ANALYSIS APPENDIX 1: COST VARIANCE FORMULAS APPENDIX 2 : REVENUE VARIANCE FORMULAS 40

48 TOPIC 6.1: UNCERTAINTY Decision-making under uncertainty The elements of decision-making under uncertainty Probability forms Payoff tables Modelling uncertainty in cost-volume-profit (CVP) analysis Contracts and bidding under uncertainty Decision analysis approach to investigating a variance Conclusion TOPIC 6.2: RELEVANT COSTS The sunk cost effect Importance of both quantitative and qualitative analysis Relevant cost applications Make-or-buy decisions (outsourcing) Add-or-drop decisions Special order decisions Sell-or-process-further decisions Scarce resource allocation decisions Theory of constraints Problems with relevant costing Conclusion TOPIC 6.3: TRANSFER PRICING Potential interpersonal conflicts in transfer pricing Approaches to setting the transfer price Market price based approaches Cost-based approaches Negotiated transfer prices Other transfer prices A general transfer pricing model International transfer pricing 41