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CIMA Managerial Level. Paper 8 - Financial Analysis. February 2006. Paper P6 Management Accounting Business Strategy. Paper P3 Management Accounting Risk & Control Strategy. Paper P9 Management Accounting Financial Strategy. Business Management Pillar. Management Accounting Pillar.

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Paper 8 - Financial Analysis

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CIMA Managerial Level

Paper 8 - Financial Analysis

February 2006


Paper P6

Management Accounting

Business Strategy

Paper P3

Management Accounting

Risk & Control Strategy

Paper P9

Management Accounting

Financial Strategy

Business Management Pillar

Management Accounting Pillar

Financial Management Pillar



Test of Professional Competence in Management Accounting


Paper P5

Integrated Management

Paper P2

Management Accounting

Decision Management

Paper P8

Financial Analysis


Paper P4

Organisational Management & Information Systems

Paper P1

Management Accounting Performance Evaluation

Paper P7

Financial Accounting & Tax Principles

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Paper P8

Financial Analysis

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cima paper p8 financial analysis

CIMAPaper P8Financial Analysis

Examination Structure - There will be a written examination paper of three hours

Section A - 20 marks

A variety of compulsory objective test questions, each worth between two and four marks. Mini-scenarios may be given, to which a group of questions relate.

Section B – 30 marks

Three compulsory medium answer questions, each worth 10 marks. Short scenarios may be given, to which some or all questions relate.

Section C – 50 marks

Two questions, from a choice of three, each worth 25 marks. Short scenarios may be given, to which questions relate.

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paper 8 financial analysis

Group Financial Statements


The Measurement of

Income and Capital


Paper 8

Financial Analysis

Analysis and Interpretation of

Financial Accounts


Developments in External Reporting


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Group Financial Statements


The accounting entries for mergers, demergers and capital reconstruction schemes

The accounting treatment of associates and joint ventures (IAS 28 & 31) using the equity method and proportional consolidation method

The treatment in consolidated financial

statements of minority interests, pre and

post acquisition reserves, goodwill (including its impairment), fair value adjustments, intragroup

transactions and dividends, piecemeal

and mid-year acquisitions, and disposals to include sub-subsidiaries and

mixed groups

The preparation of consolidated financial

statements (including the group cash flow

statement) involving one or more subsidiaries, sub-subsidiaries and

associates, under the acquisition and pooling

of interests methods (IAS 7, 22 & 27)

Foreign currency translation (IAS 21) to include overseas transactions and investments in

overseas subsidiaries


The Measurement of

Income and Capital


The measurement and disclosure of financial instruments (IAS 39)

Financial instruments classified as liabilities

or shareholders funds and the allocation of

finance costs over the term of the borrowing

(IAS 32 & 39).

The principle of substance over form (IAS 1) and its influence in dealing with transactions such as sale and repurchase agreements,

consignment stock, debt factoring, securitised assets, loan transfers and public and private sector financial collaboration

The problems of profit measurement and the

effect of alternative approaches to asset

valuation; current cost and current purchasing power bases and the real terms system; accounting for changing prices (IAS

15) and hyper inflation (IAS 29)

Retirement benefits, including pension

schemes - defined benefit schemes and

defined contribution schemes, actuarial

deficits and surpluses (IAS 19).

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Environmental and social accounting issues, differentiating between environmental measures and environmental losses,

capitalisation of environmental expenditure,

and the recognition of future environmental

costs by means of provisions

The Global Reporting Initiative: non-financial

measures of environmental impact

Pressures for improved quality of financial

reporting following large scale corporate

collapses in the US and UK, and implications

for corporate governance and external audit

Major differences between IAS’s and US


Human resource accounting

Increasing stakeholder demands for information that goes beyond historical

financial information and the model for an expanded Operating and Financial Review (OFR) proposed by the UK government

Developments in External Reporting


The influence of different cultures on financial reporting

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Ratios in the areas of performance, profitability, financial adaptability, liquidity, activity, shareholder investment and financing, and their interpretation

Limitations of ratio analysis (e.g.

comparability of businesses and accounting


Segment analysis: inter-firm and

international comparison (IAS 14)

The identification of information required to

assess financial performance and the extent

to which financial statements fail to provide

such information

Calculation of earnings per share under IAS

33, to include the effect of bonus issues, rights issues and convertible stock

Analysis and Interpretation of

Financial Accounts


The effect of short-term debt on the measurement of gearing

Interpretation of financial statements via the

analysis of the accounts and corporate reports

Reporting the results of analysis