In this tutor interview series, we chat to ACCA F7 tutor Wojtek Lyjak and get his tips on how to pass the Financial Reporting exam first time!
Wojtek Lyjak has a decade of experience designing and delivering courses on financial reporting. He’s helped thousands of students pass Financial Reporting (formerly F7), largely due to his passion, engaging teaching style and an exceptional grasp of the subject matter.
This approach makes him a favourite amongst students, who find they’re better able to grasp challenging concepts when Wojtek brings them to life. Read on, and you might just catch the financial reporting bug
Introducing… How to Pass ACCA F7 with Wojtek Lyjak
Learnsignal: Wojtek, hi! Thanks for making time to chat. So, you’re the learnsignal course tutor for ACCA F7?
Wojtek: Yes, that’s me. I’ve had many years’ experience as a financial trainer, particularly specialising in financial reporting.
Learnsignal: Which brings us to F7.
Wojtek: Indeed. The ACCA exam syllabus is layered with a couple of major strands, and financial reporting is one of the most important. The strand starts with F3, Financial Accounting and then continues through F7, Financial Reporting, before finishing with P2, Corporate Reporting.
F3 is fairly basic, and F7 directly builds on what students learnt at that level. Then P2 is the pinnacle. The other major strand, by the way, is Management Accounting. That focusses on what you do inside the company, where financial reporting is about how you represent the business to people externally.
Financial reporting is about how you portray what’s happening in your business to interested third parties. Shareholders for example, or banks, or investors.
Learnsignal: So to pass ACCA F7, students need to learn how to prepare a financial statement for those external parties?
Wojtek: Yes, but that makes it sound very straightforward. In reality, there’s much more complexity there. That’s what makes it interesting, in my opinion.
To be honest, I originally hated financial reporting. Back when I took my exams, I never entertained the idea of building my career here. I really didn’t ‘get’ financial reporting, and I was glad to see that back of it.
It turned out I probably just wasn’t taught very well! I ended up coming back to it in an investment setting and realising that it’s very different in practice.
The interesting thing about accounting is that you’re trying to show things that happened in real life through the numbers, using your financial statements. You’re trying to tell a story and paint a picture; however you want to put it.
You’re trying to show things that happened in real life through the numbers, using your financial statements. You’re trying to tell a story and paint a picture
Learnsignal: Can you share an example?
Wojtek: Sure. Say you’ve got a freehold building, as part of your organisation. How do you show that in your financial statements? How do you measure what that asset is worth to you? You could consider what you paid for it, or you could consider current market rate, but even different surveyors will give you different answers.
Or imagine you’ve just issued an invoice to a client. That’s a receivable, and you show it as an asset because it will be an asset when they pay. It will bring you benefits in the future, you assume. What if they don’t pay though? When do you decide to write that figure off from your balance sheet? You’re taking intangible things – promises and assumptions – and assigning value.
(Source) The ACCA F7 Syllabus
ACCA F7 gets students into a world where financial reporting stops being black and white, because you face these sorts of dilemmas constantly. There’s no wrong or right – just different perspectives. Accounting has lots of shades of grey.
F7 encourages students to understand that there are many choices you have to make, using different tools or methods depending on the situation. Accountants still don’t know how to show certain things accurately, and so these rules change regularly too.
Learnsignal: So ACCA F7 covers all these different methods?
Wojtek: Exactly that. The ACCA F7 syllabus covers that whole spectrum of different ways to make decisions.
Learnsignal: Decisions about how to value certain assets within the business?
Wojtek: Accountants “measure”, they don’t “value”. But yes, it’s showing students the spectrum of methods you could use to measure different assets, in order to prepare your financial reports.
Accountants “measure”, they don’t “value”
We basically focus on two things – assets and liabilities on the balance sheet, and revenue and profit on the income statement. ACCA F7 takes students through everything that can appear in both of those places. For instance, intangible items like branding; property, plant and equipment; stock/inventory; investments; biological assets.
Everything can be measured – or needs to be measured – so it can be translated onto the financial report. That’s where the ambiguity comes in. How much is a logo worth? How much is a brand worth?
Learnsignal: So there are no rules, only opinions?
Wojtek: There are rules, but sometimes you have to make an informed choice about which rules apply. Often there are strict guidelines dictating how you’d measure a certain asset, and students have to know all of these, but they also have to know when they’d need to make a judgement call.
You have to make an informed choice about which rules apply
In ACCA F7 students are exposed to more and more instances where they have to apply judgement. Say I’ve issued you an invoice but you haven’t taken delivery yet, for example. Is it your stock or mine? Have I sold it to you yet? Can I recognise the profit on the sale, and remove that inventory from my balance sheet?
The rules are sometimes very difficult to apply in practice. Buying yoghurt from a supermarket is one thing: I pick up your product, take it to a till, pay for it, and it becomes my product. In other situations, it’s rarely that simple.
Buying yoghurt from a supermarket is one thing. In other situations, it’s rarely that simple.
You see that ambiguity in the real world all the time, as an accountant. To know how to handle them, you have to understand the spectrum of rules that could apply.
Learnsignal: How does that ambiguity work in practice?
Wojtek: Do you remember the Greek crisis, a couple of years back? That’s a great example. Greece almost went bankrupt but was bailed out, but at that time Greek bonds were only trading at around 50%. The market believed that Greece wouldn’t pay back the debt, and so the worth of the bonds dropped.
If you’re a bank holding those Greek bonds, how do you measure that asset? You’re now holding, in market terms, only 50% of what you held before. How do you represent this situation in your financial reports?
That’s where the grey areas of financial reporting come in, because the answer depends how you value the loss. For example, some banks valued their bonds at 80%, believing that the market was wrong, while other institutions trusted the market and went to 50%. You can’t say one was ‘more right’ than the other, although the same asset is measured differently depending on the perspective.
You can’t say one was ‘more right’ than the other, although the same asset is measured differently depending on the perspective
Learnsignal: And that’s considered ethical?
Wojtek: There is a line, definitely. The ACCA are very keen to emphasise that you have to be ethical. That’s why you have to understand the intricacies of the rules so you can make a judgement call that is as objective, fair and correct as possible.
As I said though, it’s not black and white. Most of the companies you’re doing financial reports for are on the stock exchange, so they have a vested interest in appearing a certain way externally.
Here’s a good analogy for you: companies on the stock exchange are like models on the catwalk. They do their hair, put on make-up, pretty themselves up as best they can. Is that cheating? No – you’re still you. You’re not lying. You’re just, presenting the most flattering view of yourself.
Here’s a good analogy for you: companies on the stock exchange are like models on the catwalk
A balance sheet is like taking a photo at a certain point in time. You’re trying to look as good as possible, but then a minute later you sprawl out back on the sofa again. That photo is a true and accurate representation of you, at that point in time: that’s ethical. Where that becomes unethical is if you stuck someone else’s head onto your own body.
Learnsignal: How much does the ACCA F7 paper go into these nuances?
Wojtek: Not much. ACCA F7 is much more dry! It’s like a medical student learning the bones of a skeleton, versus their first day in the operating theatre. Once you get into practice, financial reporting is much more interesting.
ACCA F7 is like a medical student learning the bones of a skeleton, versus their first day in the operating theatre
It’s important to talk about though. So many students – like me, when I took my own exams – switched off during financial reporting, and didn’t find it interesting. You’re much more likely to pass ACCA F7 if you’re engaged, interested and invested.
Knowing the wider application of your financial reporting knowledge can help you get in touch with that passion.
Learnsignal: Is lack of interest a major reason why students don’t pass ACCA F7?
Wojtek: I think so. Many students don’t find the topic very interesting. If you’re not interested in it, you’ll find ACCA F7 much more difficult. That’s the real challenge as a tutor: to catch the imagination. That’s why I’m trying to give you a flavour of what financial reporting means, once you get beyond the textbook.
That’s the real challenge as a tutor: to catch the imagination
Learnsignal: Why else do students fail to pass ACCA F7?
Wojtek: Time allocation is a massive problem. The reason F7 has a low pass rate is because it covers such a wide scope of topics. Students often run out of learning time because it’s so broad. The ACCA F7 exam can get quite detailed – the examiners expect you to really understand the rules.
You can’t get away with giving a cliché or knowing with broad brushstrokes. You have to really know in depth and know all of the exceptions and all of the little intricacies. You can’t get away with knowing a little about a lot if you want to pass ACCA F7, and for that reason, it takes longer to learn than students expect. There’s a huge leap from F3 level to F7, with no interim step. Students just underestimate how much they’ll need to get to grips with.
There’s a huge leap from F3 level to F7, with no interim step. Students just underestimate how much they’ll need to get to grips with.
Then secondly, there can be a real issue with exemptions. Remember what I said about the strands of financial reporting, starting with F3? Well, many students never sit F3, because of exemptions based on previous education. The problem is that many courses don’t go into the same detail as F3 on important concepts.
It’s assumed that when you sit F7 you’ve already sat F3, but many students haven’t. A lot of people struggle with fundamentals that it’s assumed they know. That’s why, when I’m recording the course videos for learnsignal, I work hard not to be too assumptive, because often people won’t know those founding principles.
Learnsignal: Which areas, in particular, do students struggle with?
Wojtek: If students haven’t previously taken F3, they’ll often struggle with consolidated financial statements. For example, preparing a group financial statement for a capital group with a parent company and subsidiaries. It can be quite tricky, and there’s a certain… structure and thought pattern needed.
It can be quite tricky, and there’s a certain… structure and thought pattern needed.
Examiners look for a certain flow of thinking, and it’s very difficult if you don’t know how that works. That understanding really only comes from doing F3. You’ll be very unlikely to have learnt it if you’ve never done an ACCA financial reporting paper before.
This is where is really pays off to listen to a tutor. Invest that time to get it right, basically. I used to work for EY as their financial trainer, and I was part of the management for their huge business academy. We always, always had the highest numbers of people enrolled for ACCA F7 courses, because F7 is one of the areas that really does benefit from a tutor.
There’s a way of thinking that you need to be taught; you can’t just know the content. It’s very hard to teach yourself this stuff through a textbook. I’d say that to anyone who’s on a budget – ACCA F7 really is worth investment, and will stand you in very good stead for the next step.
I’d say that to anyone who’s on a budget – ACCA F7 really is worth investment, and will stand you in very good stead for the next step
Learnsignal: Amazing, thank you Wojtek. Hopefully this will have caught the imagination of some of our students, and inspired them to take ACCA F7 a little more seriously.
Wojtek: Happy to help. I go into more detail in the learnsignal F7 course, so students preparing to take the paper should check it out!
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Wojtek Lyjak is a financial tutor and exam preparation expert with a decade of experience helping students master financial reporting. His previous roles include managing financial training for EY. Wojtek is a CFA Charterholder and Fellow Member of the ACCA.
Wojtek is a highly respected tutor with a reputation for an engaging and knowledgeable approach, making him the perfect partner for learnsignal.