LSBF’s David Laws explains how you can get those professional skills marks for AFM.
The ACCA regularly update the ways subjects are tested, changing the syllabus and/ or the way the material is tested.
As part of this process, in September 2022 the AFM paper was changed so there are now 20 professional skills marks. These are allocated so Q1 contains 10 professional skills marks (instead of the previous four) and that Q2 and Q3 now have five marks where previously they had zero.
In order to create an extra 16 professional skills marks, the examiner has to drop marks for other things. Based on the practice exams the ACCA have published, there are now going to be very few marks available for just repeating theory.
For example, the September/ December 2021 exam Q3 included:
b) Discuss the advantages and disadvantages for Gogarth in using exchange-traded currency options compared with using overthe- counter currency options (5 marks). Although this question appeared again in Practice Exam 2, this requirement had disappeared and the five marks allocated to the professional skills instead.
Before looking at WHAT these skills are in detail, it may help to look at WHY this change has been made.
The ACCA website encourages employers to hire ACCA qualified accountants because “…ACCA accountants are forward-looking strategic thinkers with a unique blend of business and finance skills making them valuable commercial and strategic problem solvers within your business.” 1
Given this is a promise the ACCA make to the companies that will employ you, the exams need to test that you actually have these qualities. The AFM syllabus “prepares candidates to advise management and/ or clients on complex strategic financial management issues”2, namely, to consider THIS organisation’s situation when making a decision.
As to WHAT the skills actually are, the four areas are analysis and evaluation; communication; commercial acumen; and scepticism. I will illustrate these by referring to Specimen Exam Q1, a company called Kingtim.
Analysis and evaluation marks will be awarded for calculating something (usually whatever the requirements have asked for), but also for commenting on the value.
This illustrates that as a senior Financial Executive (such as the FD) you need to explain to others how the figure might help a decision or what the significance of the value is. In other words, evaluating WHY the number was calculated.
Kingtim Q1b requires you to calculate revised costs of debt, equity and capital (the WACC) after an issue of debt, this is the analysis part. The requirement then asks you to evaluate how shareholders and debtholders will react, in other words to evaluate what the numbers show to decide whether Kingtim should proceed with the debt issue.
Communication marks will be awarded for the way you convey this information to others. As an FD you may need to explain issues to non-finance staff or perhaps to persuade them that a particular decision will be a good (or bad) one for the organisation to take. It is also important to consider who will be the reader.
In Kingtim Q1b, you need to prepare a report for the Board which might criticise what the CEO has suggested. This needs to be explained in a way that will not upset the CEO (i.e. your boss).
Commercial acumen marks will be awarded for applying your theoretical knowledge to the organisation in the question.
In Kingtim Q1a, you need to discuss two methods of defending against an acquisition.
The key is to say why they may or may not work for THIS company in THIS situation.
This might include thinking about the industry the company is in or their objectives.
An answer that simply repeats theory will not score any professional marks.
Scepticism marks are like the antiacumen marks, they will be awarded for pointing out areas where someone else is suggesting something that would NOT be appropriate for the organisation.
In Kingtim Q1c, you need to say why some of the justifications for Kingtim’s remuneration policy are not appropriate.
The introduction of the professional skills means that AFM is becoming more like SBL but with some technical calculations to provide more detail to the Board.
One piece of advice would be to do AFM AFTER taking the SBL paper rather than straight after FM, as this will increase your experience of identifying which issues to include from the exhibits to demonstrate acumen and scepticism as well as how to communicate ideas to different groups of people.
• David Laws is a Senior Lecturer at LSBF teaching AFM and SBL. He is a former PQ magazine Lecturer of the Year
1 Ref for the ACCA website is https://www.accaglobal.com/ubcs/en/employer/reasons-to-hire-acca-members/eight-reasons-to-hire-an-acca-member.html – in case that is needed.
2 Ref for the syllabus is page 9 of the AFM syllabus