Martin Jones explains how sitters should tackle the SBR exam – just answer the requirement.
It is easy to score zero in any exam. We can give it a go in ACCA Strategic Business Reporting and see what we can learn.
Let us look at the hot topic of sustainability reporting. Here is an illustrative question based loosely upon the example in the excellent ACCA SBR Technical Article on IFRS Sustainability Disclosure Standards:
Requirement
Critically assess the usefulness to investors of Gemma’s disclosure on sustainability.
Your answer should outline any areas of non- compliance with IFRS Sustainability Disclosure Standards. (5 marks)
Exhibit
Gemma discloses the following in management commentary regarding sustainability. This is the entire sustainability disclosure:
“There is a risk of the sea rising. The company is considering moving some warehouses.
“There is risk of global temperature rising. There is a programme to look into alternative materials.”
Semantics
So now we shall look at the words in the requirement and understand what the examiner is asking:
Assess
This means weigh up with a list of good things and bad things.
Critically assess
In SBR, this means a lot more bad things in your list than good.
Investors
Take the viewpoint of an investor. Think how an investor would relate to the disclosure.
Usefulness
This means the examiner wants you to say what is helpful and what is not helpful to investors.
5 marks
This means make 5 points, perhaps 1 positive and 4 negatives.
Disclosure
Assess the disclosure. Assess the sustainability reporting. Assess the exhibit.
Non-compliance with IFRS Sustainability Disclosure Standards
Identify the elements that do not follow IFRS.
Outline
Briefly touch on these compliance failures.
Suggested answer
Something like this:
“This short list of risks is helpful because this gives investors a flavour of some sustainability problems facing Gemma.
But the list is so vague that it does not explain how temperatures and rising seas effect warehouses and raw materials. The standards require clarity and usefulness. This has neither.
The disclosure needs to tell investors where the warehouses are, why they are at risk and where the company is considering moving to.
The disclosure needs to tell investors what is wrong with the current materials and what alternatives are being considered.
The disclosure needs to identify costs: costs of moving and costs of alternative materials.”
And there are an enormous number of other points that could be made criticising the sustainability disclosure. However, the above would be sufficient to score full marks.
Zero
Now let us look at a number of illustrative answers that score zero.
Sustainability
There is always a risk in Strategic Business Reporting that students might write about strategy rather than reporting. For example, a weaker student when presented with an exhibit that describes a factory closure might discuss the labour negotiations rather than the provision. But the risk of taking the wrong turn in sustainability reporting is even higher. Here is an illustrative answer that takes that wrong turn:
“Gemma should build sea defences for the warehouses.
Gemma should monitor sea levels.
Gemma should look into ecofriendly materials.
Gemma should consider alternative suppliers.
Gemma should monitor greenhouse gas emissions.”
This looks good at first. But on re-reading the requirement you realise that this answer is advising on the sustainability strategy and not the sustainability reporting. Here is the critical component of the requirement again: “Critically assess Gemma’s disclosure” – and that is the key. Re-read the requirement before you commit fingers to keyboard and re-read the requirement again in the middle of your answer.
Company
There is a risk that students might talk about how the disclosure can improve matters for the benefit of the company. The requirement references ‘usefulness to investors’. There is a risk of a viewpoint error. For example, the unwary student might talk about how the disclosure pushes up the brand value to the advantage of the company, instead of how the disclosure is useful for the investor’s understanding.
IFRS
There is a risk that students dump everything they know about the sustainability standards; and then completely ignore the exhibit. For example, a knowledge dump answer might reference the GHG Protocol or Scope 1/2/3 without referencing this to Gemma. This will generally score zero. The requirement referred to “Gemma’s disclosure” and almost all SBR requirements are scenario specific.
Criticisms
And, lastly, there is a risk that students produce a list of only positives regarding the disclosure, with no negatives at all. For example, an overly positive answer might celebrate that the disclosure enables the investor to understand the company response to rising sea levels, when the disclosure does not do that. The disclosure only flags the risk and mentions warehouses. In SBR, the requirement phrase “critically assess” does essentially mean produce a list of negatives.
So there you go. It is easy to score zero. It turns out that there are a number of traps that can capture the unwary. But it also possible to score very high marks with concise answers. All you have to do is answer the requirement.
- Martin Jones is an ACCA SBR expert and current PQ award winner
