Syllabus for CPD - L4 Certificate - Financial Statements & Corporation Tax

Financial Statements

Underpinning Knowledge

Explain the purpose of financial statements, the legal framework that govern these and the role of accounting standards: Define the purpose of financial statements; explain the need to comply with the Companies Act; outline the role of the Financial reporting Council (FRC).

Explain the statutory returns that need to be made for an incorporated entity: The company Confirmatory Report; Annual accounts to Companies House; Corporation tax return to HMRC

Explain the objectives of financial statements and their use and users: Outline the elements of the conceptual framework for financial reporting; Identify the elements of financial statements; Understand and apply the qualitative characteristics of financial statements; Understand and apply the accounting concepts; Identify the user groups and state clearly the way in which they use financial statements

Explain the elements of company finance: Define the terms: Share capital, Reserves & Equity; Distinguish between ordinary shares and preference shares; Explain the process of a share issue; Explain what is meant by issuing shares at a premium; Define the term loan notes

Limited Company Financial Statements

Prepare financial statements for a limited company and/or a limited liability partnership to ensure they comply with the relevant accounting standards and company legislation: Produce a set of internal management accounts to include all year-end adjustments; Post relevant entries to the accounts for the provision and payment of corporation tax; Complete details for the fixed assets register; Understand and apply the accounting concepts that are contained in FRS105 Sections 2 and 3and FRS102 Section 1A; Prepare a Statement of Financial Position with the relevant minimum accompanying notes under any of the formats in FRS 105 (Section 4) and FRS102 Section 1A (Appendix A); Prepare a Statement of Incomes per the format in FRS 105(Section 5) and FRS102 Section 1A (Appendix B); Prepare a set of notes to the accounts as per the format in FRS 105(Section 6) and FRS102 Section 1A (Appendix C); Understand the nature of voluntary disclosures

An Introduction To Consolidated (Group Accounts)

Explain the general principles of consolidation and prepare a set of group accounts to include both a subsidiary and an associate under frs102 section 9 – note: this is a voluntary disclosure under frs 102 section 1 (a): Explain what is meant by the single entity concept; Establish the group structure: Apply what is meant by fair value adjustments and fair value consideration, Determine the net assets of the subsidiary, Calculate the goodwill on acquisition, Calculate the non-controlling interest, Determine the retained earnings of the group, Draft a Consolidated Statement of Financial Position; Define the term Control; Explain the treatment of pre and post-acquisition reserves and acquisition of a subsidiary part way through the year; Explain the treatment of inter-company trading; Prepare a Consolidated Income Statement; Explain what is meant by the terms Associate and significant influence; Explain the principle equity accounting; Identify an Associate in a group structure.

The Statement Of Cash Flows

Explain the purpose of the statement of cash flows and prepare the statement based on frs102 section 7 – note: this is a voluntary disclosure under frs 102 section 1 (a): Explain the need and purpose of The Statement of Cash Flows; Outline the elements of The Statement of Cash Flows as detailed in FRS102 Section 7; Prepare a Statement of Cash Flows showing clearly cash flow from: Operating Activities, Investing Activities, Financing Activities, The subsequent increase/decrease in cash or cash equivalent; Interpret and prepare a set of notes on a company’s cash position as outlined in The Statement of Cash Flows

Interpretation Of Financial Statements

Analyse and interpret limited company financial statements using performance indicators and ratio analysis: Calculate Profitability Ratios: Return on Capital Employed (profits before interest and tax divided by capital employed (total assets less current liabilities), Gross Profit % of Sales, Net Profit % of Sales; Calculate Liquidity Ratios and Asset utilisation: Current Ratio, Acid Test, Receivables Collection Period, Payables Payment Period, Inventory Turnover, Asset Turnover; Calculate the following financial structure ratios: Gearing, Interest Cover, Analyse and interpret a set of performance indicators for a limited company over a series of years and comment on the financial performance; Compare a set of figures with other organisations and industry figures

Corporation Tax (Ctax)

Underpinning Knowledge

Identify the duties and responsibilities of a tax agent: Understand that ICB expects its members to maintain a high ethical standard; Understand the requirements needed to act as a tax agent online with HMRC

Identify the elements of a Corporation Tax Computation: Explain the principle of a chargeable accounting period

Calculate Adjusted Trading Profits

Outline the purpose of adjusted trading profits and identify disallowable expenditure: Explain how profits are adjusted; Identify expenditure considered disallowable; Explain the treatment of dividends; Identify bad debts as an allowable deduction; Explain the treatment of interest payable on trading loans; Explain treatment of hire and lease charges; Identify income in the accounts but not taxable as trading profit.

Compute adjusted trading profit for the period: Correctly compute adjusted trading profit for accounting periods of longer or shorter than twelve months.

Capital Allowances – Plant and Machinery

Explain the nature and purpose of capital allowances: Distinguish between depreciation and capital allowances; Identify qualifying expenditure; Identify the main types of capital expenditure and the capital allowances available.

Prepare a computation for capital allowances: Prepare a computation for the following capital allowances (Expenditure not pooled, General or main pool, FYA – First Year Allowance, AIA – Annual Investment Allowance, WDA – Writing Down Allowances, Balancing Charges, Motor Vehicles v Motor Cars, Expensive Cars, Short Life Assets); Apply cessation rules for capital allowances in the closing years of business.

Calculation of Profits Chargeable to Corporation Tax

Determine profits chargeable to corporation tax: Identify adjusted profit and capital allowances; Explain the treatment of dividends paid; Explain the treatment of interest received and interest paid; Explain the treatment of (Royalties, Dividend Income, Property Income).

Determine the Corporation Tax Liability: Calculate profits chargeable to corporation tax; Apply relevant tax rates.

Complete a CT return: Complete elements of a CT return.

Gains, losses and reliefs

Explain the procedure for determining gains and losses: Apply Indexation allowance; Explain the following special rules (Enhancement expenditure, Part- disposals,Non-wasting chattels).

Distinguish between Trading and Non-Trading Losses: Determine adjusted trading losses; Apply types of loss relief (Current year relief, Carry back relief, Carry forward relief, Terminal Loss Relief), Calculate Non-Trading and Capital Losses.

Apply reliefs, deferrals and exemptions: Explain the principle of Entrepreneurs’ relief; Identify qualifying business disposals qualifying; Ownership period; and apply the relief; Apply the principle of Rollover relief (Conditions for relief, Partial reinvestment); Identify the principles of, and conditions for, gift relief.

Payment and Administration

Explain the process of payment and administration: Explain the process of Corporation Tax Self-Assessment; Understand how to (File the return, Amend the return, Deal with errors, Identify interest on late payment, Identify interest on tax overpaid); Explain the penalty process; Explain HMRC powers of enquiry, Identify the payment date and when payment by instalments is appropriate; Explain the records which companies must keep and the timescales for keeping them.