Play it like Kaka

June 2020

Martin Jones explains the challenges of the Strategic Business Reporting exam, outlining a technique that will improve your chances of passing.

In a football world before Messi and Ronaldo there was the elegant Kaka. Let’s see what he can teach us about SBR.

The March 2020 SBR exam was the usual mix of the impossible and the accessible. There was enough technical content to keep a team of expert auditors busy for three weeks, but there was enough accessible content for a well-drilled student to turn out a pass within three hours… provided that student knew the tricks. So, let us look at the tricks in the context of the first requirement in the exam which was on foreign currency translation. Here is the question with the background followed by the requirement:


Hummings Co is the parent company of a multinational listed group of companies.

Hummings Co uses the dollar ($) as its functional currency. Hummings Co acquired 80% of the equity shares of Crotchet Co on 1 January 20X4 and 100% of Quaver Co on the same date. The group’s current financial year end is 31 December 20X4.

Crotchet Co: functional currency

The head office of Crotchet Co is located in a country that uses the dinar as its main currency.

However, its staff are located in a variety of other locations. Consequently, half of their employees are paid in dinars and the other half are paid in the currency of grommits. Crotchet Co has a high degree of autonomy and is not reliant on finance from Hummings Co, nor do sales to Hummings Co make up a significant proportion of their income.

All of its sales and purchases are invoiced in grommits and therefore Crotchet Co raises most of its finance in grommits. Cash receipts are retained in both grommits and dinars. Crotchet Co does not own a dollar ($) bank account. Crotchet Co is required by law to pay tax on its profits in dinars.


Draft an explanatory note to the directors of Hummings Co, addressing the following:

(1)(a) how the functional currency of Crotchet Co should be determined.

(5 marks)

Here is a suggested answer:

Functional currency

The functional currency is the currency of the primary economic environment. This means that the functional currency is the currency that dominates the functions.


So, the functional currency is determined by looking at the functions and the currencies of those functions. This means looking at the currencies the entity uses with its customers and suppliers.


Subsidiary functions are sometimes dominated by their parent. This does not apply to Crochet.

Crochet has independence from its parent and does not even have a dollar bank account. The functional currency is not the dollar.


Most entities function in the currency of their head office. But this does not apply to Crochet. Half the salaries are in dinars and some receipts are held in dinar. But everything else happens in grommits. The functional currency is not the dinar.


The sales and purchases and finance are in
grommits. Grommits dominate the functions. The
grommit is the functional currency of Crochet.

(5 marks for 5 points)

If you read the question and then the answer like reading a story then that probably looked fairly easy. But don’t be fooled. Actually, delivering an answer like the above in the exam within the exam time is a real challenge. Let’s look at the two principle tricks at play:


Probably the most conspicuous feature of the answer is the layout. The examiner refers to these packages of heading followed by sentence followed by sentence as ‘points’. It is a style he has recommended for years, but now his advice is explicitly given in the articles under the button ‘Exam Technique’ on the ACCA SBR webpage.

The idea is that for a five marker like this you slap down five points; thus meaning that for SBR your role for the three hours of the exam is to be a mechanical point slapper.


Less obvious in the answer above is the mix of knowledge and application. All SBR answers must include relevant knowledge and that knowledge must then be applied to the scenario.

This applies to all the requirements in the whole exam. This requirement is repeated fervently in the ‘Exam Technique’ articles referred to above, but the message is further reinforced in examiner’s comments.

Often answers following this advice will result in a metronomic rhythm of knowledge then application then knowledge then application. This is why I refer to this examination technique as ‘KAKA’. But there is no need to flip backward and forward between knowledge and application. Whacking down the knowledge in full and then applying that to the scenario also often works well and that is the rhythm used above. Can you see it now? The first two points are relevant knowledge and the subsequent three points apply that knowledge. So stick to the point and play it like Kaka.

• Martin Jones is a tutor at LSBF