“Cracking the Case”How to Pass the ICAN Case

StudyPaper C5

Presentation At: ICAN New Professional Examinations Syllabus Sensitisation Programme

Lagos Airport Hotel, 16 August, 2014

BY: ISMA’ILA M. ZAKARI mni, FCA – CHAIRMAN, ICAN PROFESSIONAL EXAMINATIONS COMMITTEE

Content Case Study Objectives Case Study Syllabus Learning Materials Pilot Case Study Examinations Solution to Examinations The Marking Key Teaching and Learning Conclusion Question Time

Case Study Objectives

The ICAN case study requires students to demonstrate their professional ability and skills to respond to a business scenario, with accounting and finance issues at its core, as though they were dealing with real client situation. This will normally require the drafting of a report dealing with the issues presented in the business scenario to a client or other equivalent recipient.

The case study is marked by reference to a Competency Based Assessment (CBA) Key. All marks are awarded for the demonstration of professional skills. Where students are required to demonstrate technical knowledge, marks will be awarded in the context of how they analyse the problem and develop and present their solutions.

Case Study Syllabus

Case Study Vision Case Study Approach Student Position The Case Study Overview Competences - 24 Case Study Tools - 5 Case Study Scenario Types - 13 Case Study Tasks - 11 Ethics Component

Case Study Vision

The case study approach is based on a vision of a newly qualified ICAN member as:

A rounded business professional capable of contributing real value in business management.

A professional accountant with the core values that enable him/her to act in the public interest as well as the interest of his/her employer and or client.

Someone possessing the competences that include sound knowledge and higher value technical skills expected of a finance professional.

Case Study Approach

A four hour paper

A scenario and information pack limited to no more than 15 pages including context, market and entity information with extracts of financial statements and management information which will be provided for candidates on the day of the exam.

The case study exam will comprise the production of a report, without an executive summary, in accordance with a request from, or on behalf of, a client. There will normally be two exam requirements for candidates to answer:

Each requirement will be an assessment of the business scenario and issues arising considering different factors and perspectives which candidates will identify and comment on from their analysis and evaluation of the material.

Limited appendices may be required where relevant and these may be financial or non-financial in content.

The Case Study Overview

The Case Study Overview – Cont’d

Students’ Output

The Case Study Overview – Cont’d

Students’ Output Assessment Criteria – 8 or 9 UDIA – Using Data and Information Appropriately UPTK – Using Professional Tools and Knowledge UAS – Using Analytical Skills IIO – Identifying Issues and Options ASE – Applying Scepticism and Ethics ESJ – Evaluative Skills and Judgement DCR – Drawing Conclusions and Making Reservations MCR – Making Clear Recommendations CAR – Communicating Appropriately with the Recipient

Competences - 24 Demonstrate understanding of a scenario

Demonstrate understanding of data

Demonstrate understanding of information

Make sense of data as information

Select and use a tool appropriately

Identify and state opportunities, risks, problems and issues

Explain them

Identify that there are options

Identify and state the options

Explain the options

Evaluate the options

Compare the choice of options

Demonstrate understanding of drivers of choice

Assess the risks of using given data, information and tools

Explain risks of using given data, information and tools

Make reasoned and reasonable inferences

Show professional skepticism

Demonstrate ethical awareness and good understanding of professional and business ethics

Know when to and how to constructively challenge

Move to and state conclusions

Make appropriate qualifications and reservations

Devise and state appropriate recommendations

Create a required deliverable

Draft a defined report with two requirements

Case Study Tools - 5

The case study tools are the basic underlying process elements of knowledge and skills that students will apply in the case study examination to support the content of the report they produce as an output.

Those to analyse a basic set of financial statements consisting of statement of profit or loss, statement of financial position, cash flow statement and supporting notes

Those that can be used with management information such as budgets and forecasts

Strategic tools such as PESTEL, Five Force analysis and SWOT analysis

Financial engineering assessment tools

Business valuation tools

Case Study Tools – Strategic Tools

PESTEL: Political, Economic, Social, Technological, Environmental, Legal

SWOT: Strengths, Weaknesses, Opportunities, Threats

Porter’s Five Forces: Threat of New Entrants, Rivalry, Threat of

Substitution, Supplier Power, Buyer Power

The scenario and requirements will be in the context of a business advisory situation that includes few issues relating to disclosure, reporting, assurance or tax. It may require or embrace the following 13 scenario types:

Informed business judgment Managerial judgment Professional skepticism Professional ethics Business ethics Risk assessment Due diligence

Corporate Social Responsibility Governance Social issues Efficiency, economy and effectiveness Stakeholder and shareholder balancing Globalisation issues

Case Study Scenario Types - 13

Case Study Tasks - 11

The tasks that students perform may include financial statement analysis, financial data analysis, and the analysis of operational and strategic issues, including:

Financial statement analysis

Identifying financial strengths and weaknesses

Setting a price for a product

Valuing a business

Analysing costs

Break-even analysis

Cash flow analysis

Setting key performance indicators (KPI)

Sensitivity analysis

Strategic analysis

Efficiency, economy and effectiveness analysis

Ethics Component

Ethics is a component of the ICAN case study. It will be assessed in a contextual and broad way.

Students will not be asked about ethics directly. They will have to recognise and discuss ethical matters identified within the case scenario and present their concerns as part of their output of the case.

Ethical issues may relate to their own or their employers position and may be within the client they are advising. They may include not only professional issues but also matters of how business is conducted, issues of business trust, social impact, environmental impact and sustainability.

Ethics may be seen in the context of regulations, regulatory oversight, professional duties, public interest and reputation.

Learning Materials

ICAN has developed case study learning materials which will be available for students to purchase in form of a hardcopy book of four chapters: Chapter 1 – Introduction

Chapter 2 – Financial Statement Analysis

Chapter 3 – Financial Data Analysis

Chapter 4 – Operational and Strategic Analysis including Business Trust and Ethical Awareness

Learning Materials – Cont’d

Not a textbook

More of a tool and support

Communicates what students are looking for

Advice on how to achieve it

It’s the learning process that really counts

Only for supported learning and may not really work for distance learning

Pilot Case Study Examinations

Pilot Paper 1: Clear Grow Limited

Pilot Paper 2: LAG Film & DVD Limited (LAG)

Solution to Examinations

There is no right answer

We do not give a solution

There is no solution?

There isn’t just one way but there is a solution in mind

But I won’t tell you!!!

Students try to obtain ‘model answer’ but that is not the right way to learn!!!

Suggested Time Allocation – In Minutes

  Overall

Requirement 1

Requirement 2

TOTAL

Reading & Planning

30 15 15 60

Calculations - 30 30 60

Drafting Report - 60 60 120

  30 105 105 240

Case Study Assessment and Marking Key

Competency Based Assessment (CBA) and Marks Allocation

It is important for candidates to understand that in the Case Study exam the assessment uses a process known as Competency Based Assessment (CBA). This means that it is the evidence of a candidate’s professional skills (or competence) that is being assessed.

The starting-point for developing the assessment of a specific case is the generic competencies that are set out in the introduction which are then tailored to the Case Study requirements. The list of assessed skills indicates the areas in which professional skills might be assessed in a Case Study exam and that list is combined with the case requirements to create a tailored list for the specific exam requirement.

The Marking Key

In order to assess candidates objectively a specific marking key is developed for each exam. This will assess a candidate’s professional skills in the following way:

There will be two main requirements for which marks are given, together with marks for integrative and multidisciplinary skills (including relevant financial appendices).

There will be 8 Skills Assessment Boxes (SABs or more commonly referred to just as boxes) – see below for definition and an example – for each of the two requirements,

There will be 4 skills boxes for integrative and multidisciplinary skills that apply to the document as a whole (2 of which are for the financial appendices). (See below for an example).

Across the whole paper, there will thus be 20 skills boxes.

The Marking Key – Cont’d

Requirements Boxes

Requirement 1 8

Requirement 2 8

  16

Overall Paper: Report 2

Overall Paper: Appendices 2

TOTAL 20

A typical allocation of grade boxes is therefore as follows:

The Marking Key – Cont’d

Marks Within Skills Boxes

Within each skills box there will be a number of assessment criteria (ranging from 4 – 8) which will be the basis for assessing candidates under each box (an example is shown below)

Not all will be relevant to any given Case Study; the examiners select those that are relevant to ensure that the marking of successive cases is comparable.

Candidates will only have to demonstrate 4 of these assessment criteria to achieve the maximum assessment marks for that specific box and to demonstrate adequate competency in that box.

The Marking Key – Cont’d

Constructing the Marking Key

Having selected the required competencies for the exam, the examiners will then set out the specific criteria on which each competency is to be assessed.

This will comprise a set of the possible facts, technical and ethical knowledge, outputs from analysis, implications from the analysis, professional judgement, conclusions and recommendations, which are relevant to the case.

The Marking Key – Cont’d

An example of the marking key The Case Study usually entails the need to challenge assumptions or to apply professional scepticism to

facts and figures supplied by people or entities that may have vested interests.

It is likely that the exam requirements will comprise components that interact in a number of ways. For example, you might be required to prepare a report that comprises:

An assessment of current financial information, in whole or in part, with or without adjustments by comparison with previous results, forecasts or other criteria. The application of professional scepticism

An evaluation of a current problem or proposal based on some element of the financial information provided in the context of current or future options by considering criteria such as the possible benefits and risks and any ethical considerations.

The marking key would thus comprise three sections being: Requirement 1: Financial statement analysis and related issues

Requirement 2: Financial data analysis and related issues

Overall paper: Appendices; Structure and Communication criteria

The Marking Key – Cont’d

SA Superior Achievement At Least 4 5

CA Competent Achievement At Least 3 4

BC Below Competent 2 or Less 2

NC Not Competent Only 1 1

V Void Nothing 0

Grades Structure

The Marking Key – Cont’d

How are grades awarded?

Competency is assessed by reference to four levels in each box: Superior achievement (SA) – candidates have to show that they have understood the requirement and have

provided relevant evidence relating to most (at least 4 items) of the assessment criteria in the box.

Competent achievement (CA) – candidates have to show that they have understood the requirement and have provided relevant evidence (some or enough – usually 3 or more items) relating to the assessment criteria in the box.

Below competent achievement (BC) – candidates have shown only a partial understanding of the requirement and/or provided less than sufficient evidence (2 or fewer items) relating to the assessment criteria in the box.

Not competent (NC) – candidates have made an attempt to demonstrate the skill required but there is little or sparse evidence (only 1 item) of their understanding of what is required in the box.

If there is no evidence of a candidate having addressed the competency, it will be marked as 'Void':

Void (V) – candidates have not provided any evidence to show that they have understood the requirement or demonstrated the skill required. Void means that under that box nothing relevant has been provided.

The Marking Key – Cont’d

1) USING DATA AND INFORMATION APPROPRIATELY

 

Uses data identifying business entity in context

Uses data identifying position in industry

Uses data identifying point(s) in lifecycle

Identifies wider context

Identifies impact of new competition in sector

Identifies impact of new IT on retail sales sector

 

 

V   NC BC CA SA   

2) USING PROFESSIONAL TOOLS AND KNOWLEDGE

 

Identifies & uses appropriate key numerical information

Uses appropriate analytical tools Key ratios calculated (cross referenced to

appendix) Identifies issue of inventory valuation on GP Comments on changed revenue mix (new ↓ old

↑) Comments on other case scenario information Integrates numbers and words  V   NC BC CA SA   

The Marking Key – Cont’d

3) USING ANALYTICAL SKILLS

 

• Analysis of revenue trend in N and percentages

Comment on sales of core items up: N 3,254k (13.7%)

Comment on sales of imported items up: N 368k (2.1%)

Comment on analysis of GP trend in N and percentages

Overall decrease due to growth in old core business

· Comments on high GP in other sales

· Appropriate explanations of work conducted

V   NC BC CA SA   

4) IDENTIFYING ISSUES AND OPTIONS

 

• Older revenue streams driven by footfall· Identifies need to maintain existing customer

base· Newer revenue streams attract younger

customers

• Importance of IT and internet (pros and cons)

Discusses marketing options Identifies materiality of investment issue for

IT   V   NC BC CA SA   

The Marking Key – Cont’d

5) APPLYING SCEPTICISM AND ETHICS

 

• Figures to be used for extending bank loan

Closing inventory high due to ‘price fluctuations’

No inventory write off this year

Branch activity/information interdependent (A ↓ X ↑)

Branch X manager just achieves sale bonus criteria

Questions changing ‘seasonality’ of retail sales

 

V   NC BC CA SA   

6) EVALUATIVE SKILLS AND JUDGEMENT

 

Growth in established revenue lines = good value

Success of overall growth in a recession = strength

Diverse revenue streams = business strength

Evaluates impact on GP of stream mix (old ↓ new ↑)

Importance of maintaining old core business

Evaluates slow growth/decline in new sales

Considers any provenance factors

 

V  NC BC CA SA   

The Marking Key – Cont’d

7) CONCLUSIONS AND RECOMMENDATIONS

 

Draws conclusions (under a heading)

Concludes on strength of diverse revenue streams

Concludes on overall revenue growth

Concludes on GP% OP%

Concludes on customer profile and IT

Concludes on impact of recession

 

 

V   NC BC CA SA   

8) MAKING RECOMMENDATIONS

 

Maintain diverse revenue streams Create new interactive website Invest in appropriate IT and staff training

Maintain / improve contact with established customers

Consider more varied retail locations Other sensible / commercial

recommendations

  V   NC BC CA SA   

The Marking Key – Cont’d

REPORT: STRUCTURE

 

 

Sufficient appropriate headings Appropriate use of paragraphs /

sentences

Legible Correctly / sequentially numbered pages

 

    V   NC BC CA SA   

REPORT: STYLE AND LANGUAGE

 

Needs appropriate disclaimer (if external report)

Suitable (formal) language for audience

Tactful / ethical comments

Acceptable spelling and punctuation

 

 

 

 

V   NC BC CA SA   

The Marking Key – Cont’d

APPENDIX 1: R1 FINANCIAL STATEMENT ANALYSIS

 

Tabulated and mix of N and %s

Revenue trend overall and change in revenue mix

GP calculation overall and by stream

Calculation of inventory days

 

 

 

 

V   NC BC CA SA   

APPENDIX 2: R2 FINANCIAL DATA ANALYSIS

 

Logical approach and numbers clearly derived

Well-presented and labelled

Calculates [contribution] for next 2 years / SWOT

Flexes critical material assumption

 

 

 

 

V   NC BC CA SA   

The Marking Key – Cont’d

Assessment of Professional SkillsThe professional skills that are assessed in the Case Study are interrelated. In general: If your assimilation and use of data and information is weak it will lead to poor analysis

Inadequate analysis of the problems and poor identification of solutions will leave you without a proper basis for evaluating any issues and exercising accurate judgement

If you are unable to evaluate accurately and exercise appropriate judgement, it is unlikely that you will provide adequate support for your conclusions

Without developing critically relevant conclusions, you will have no basis for stating any reservations or making any recommendations.

The Marking Key – Cont’d

Assessment of Communication Skills

In the grades for the overall paper, your integrative and communication skills will be assessed. Make sure that you know to whom you are writing. Having identified your audience,

keep it in mind throughout. Each audience will have different requirements and expectations. Regardless of the

audience, you will need to: Avoid technical terminology, jargon and colloquialisms – use simple language

Be professional – remember you are addressing a client or a partner or your boss

Avoid casual or indiscreet comments – imagine having to read the report aloud to the recipient

Be succinct – try to avoid lengthy, convoluted or unnecessary explanations

Be relevant – only deal with the facts relating to the work you have been asked to do

Be tactful – imagine having to read the report aloud to anyone mentioned in it

Teaching and Learning

Learning by DoingFacilitating not TeachingAssessing and AdvisingTalking and DebatingPractice Makes PerfectThe Case Study Exam is Different

Learning Issues

Student Who Lack Context and Experience Theoretical Learning Legacy Gaps in Knowledge and Skills Hesitating to Ask Questions Not Willing to Practice Fearing Mistakes Looking for an Answer Looking for an Answer from the Lecturer

Conclusion – Case StudyKey Success Factors

Good planning and strict time management to ensure the whole exam is completed

Good-quality written financial statement analysis that explains the financial facts derived from the financial information to the appropriate audience

Good-quality financial data analysis properly explained to its intended audience

Good quality financial appendices cross referenced in the body of the report

Appropriate use of relevant material from throughout the case scenario

Development of analysis through judgement into reasoned recommendations and conclusions

An absence of irrelevant material and answers to non-existent questions

References to appropriate economic and industry factors including ethical issues

Demonstration of professional scepticism and the ability to challenge assumptions

Application of common sense to ensure proposals are reasonable

Question Time