Week 8: Financial Reporting and Analysis

After 7 weeks of dedicated work we are now more than half way through the curriculum (52.3% to be exact). The remaining 47.7% of the curriculum is spread over the next 8 weeks, so if you have managed to keep the pace so far, there is no reason to fear the upcoming challenge. Please remember to fill in your week 7 progress report, if you haven’t already. The upcoming week is going to be a pretty heavy session before we ease into some shorter study sessions.

The week to come

This week we are covering what remains of the last two Financial Reporting and Analysis study sessions (9 and 10). 3 readings from study session 9 (Long-Lived Assets, Income Taxes and Non-current long-term Liabilities) and 2 readings from study session 10 (Financial Reporting Quality and Financial Statement Analysis: Application). Each reading in study session 9 covers the financial reporting treatment for some of the more difficult to understand assets and liabilities on a standard corporate balance sheet. The last study session has been abbreviated this year from three readings to two short readings (Financial Reporting Quality and Financial Statement Analysis: Applications) covering pretty much what the titles imply.

Financial Reporting and Analysis – love it? hate it?

As I have said before FRA really divides opinion and in my experience study session 9 is the one that really gets a lot of people frustrated. If you can keep your cool and learn this study session then you will be ahead of many candidates. The readings in study session 9 are actually shorter than the ones in study session 8, but the material is more complex, and it is easy to loose track as the complexity increases. Please do reach out if you see any signs of this happening to you, and we can try and break it down. Otherwise my one piece of advice would be what I mentioned in week 7, to pick a listed company that you have some level of understanding about. It could be a company that you are personally invested in, a company you have researched at work or perhaps a company that you have done a case about at university. Then pull up their latest annual reports and as you work through the 4 readings this week try and see how the different concepts that you are learning are reflected in their annual reports. In my experience this makes learning these concepts a little bit more tangible. Especially when dealing with some of the more complex topics in study session 9. That said, don’t spend hours on this, and don’t worry if you cannot find certain items in the annual reports.

The 4 readings combined contain 90 end of chapter questions (a bit more than 2 hours’ worth). This is the largest weekly challenge remaining in the program (in terms of the length of the content), so if you can manage to get through this week, then it is all going to be downhill from here:

  • Please ensure that you write down and answer the LOS on flashcards as you work your way through each reading (note the relevant book-, reading-, LOS- and page number on the flip side of the flashcard along with the answer). Also create similar flashcards with any key concepts and formulas that you discover in the readings. The combined effort of question practice and LOS statement “hunting” will ensure that you are focused on seeking out the most important information as you progress through each reading. Once created revise the flashcards and make a note of those that you struggle to answer.
  • As always please ensure that you attempt the end of chapter questions in the underlying curriculum as you wrap up each reading. As you answer the questions make a note of the most difficult ones in your question log (especially whenever you resort to guessing). Review your answers thoroughly (particularly those that you got wrong) and add these questions to your question log as well.
  • Lastly the day after you have wrapped up each reading attempt only the challenging flashcards and end of chapter questions from your question log. Revise your answers and make a note of the ones that you are still struggling with. Continue this process for as many days as required until you can confidently answer all of them. Read the explanations thoroughly and make sure you learn the underlying concepts rather than just the ability to parrot the answer.

Once you are done with this week’s tasks please fill in the week 8 progress report as per usual.

Good luck this week and talk soon.

In week 9 we are starting Corporate Finance.

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