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    Focus On: Po 11: Interpret Financial Transactions and Financial Statements

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    Mian Ahmad Sajjad Shabbir
    Professionally qualified accountants must be able to intelligently analyze and interpret financial statements in order to reach valid conclusions and make informed decisions. They are expected to identify unusual financial indicators, deduce relationships between different aspects of financial reports, and suggest reasons for financial results and trends. Effectively demonstrating this competency involves calculating and interpreting ratios to evaluate performance, analyzing financial statements and inventory levels to draw conclusions, and identifying trends to raise issues with management.

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    Focus On: Po 11: Interpret Financial Transactions and Financial Statements

    Uploaded by

    Mian Ahmad Sajjad Shabbir
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    Professionally qualified accountants must be able to intelligently analyze and interpret financial statements in order to reach valid conclusions and make informed decisions. They are expected to identify unusual financial indicators, deduce relationships between different aspects of financial reports, and suggest reasons for financial results and trends. Effectively demonstrating this competency involves calculating and interpreting ratios to evaluate performance, analyzing financial statements and inventory levels to draw conclusions, and identifying trends to raise issues with management.

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    Professionally qualified accountants must be able to intelligently analyze and interpret financial statements in order to reach valid conclusions and make informed decisions. They are expected to identify unusual financial indicators, deduce relationships between different aspects of financial reports, and suggest reasons for financial results and trends. Effectively demonstrating this competency involves calculating and interpreting ratios to evaluate performance, analyzing financial statements and inventory levels to draw conclusions, and identifying trends to raise issues with management.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    21 views1 page

    Focus On: Po 11: Interpret Financial Transactions and Financial Statements

    Uploaded by

    Mian Ahmad Sajjad Shabbir
    Professionally qualified accountants must be able to intelligently analyze and interpret financial statements in order to reach valid conclusions and make informed decisions. They are expected to identify unusual financial indicators, deduce relationships between different aspects of financial reports, and suggest reasons for financial results and trends. Effectively demonstrating this competency involves calculating and interpreting ratios to evaluate performance, analyzing financial statements and inventory levels to draw conclusions, and identifying trends to raise issues with management.

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    © All Rights Reserved
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    of 1

    Professionally qualified

    accountants must be able


    to do more than simply post
    transactions correctly and
    prepare accurate financial
    statements intelligent
    analysis and interpretation of
    these, with a view to reaching,
    presenting and explaining a valid
    conclusion, is just as necessary.
    Whether youre dealing
    with company-wide financial
    information or data and records
    from specific divisions, sites or
    accounting periods, its likely
    that youll also be required to
    identify and investigate unusual
    or alarming indicators, make
    deductions based on how
    different aspects of financial
    reports interrelate, and suggest
    reasons for certain financial
    results or trends reflected
    in the figures. End users of
    financial statements whether
    internal or external need to be
    confident they can make sound,
    informed decisions based on
    the information with which they
    are presented.
    To effectively demonstrate your
    competency, you might:
    Calculate and interpret ratios
    for meaningful comparison
    of year-on-year figures or
    benchmarking against relevant
    departments of industry
    competitors for instance, to
    evaluate profitability, efficiency
    or investor yield
    Analyse and draw conclusions
    from inventory levels, revenue
    figures and balance sheets
    Identify trends and use your
    knowledge of the business
    and industry sector to raise
    issues management may
    want to address (eg common
    features of under-performing
    or significantly over-performing
    profit centres)
    Meet with external clients or
    internal stakeholders to present
    and discuss your findings.
    The next step is to answer
    the challenge questions for
    this objective in the trainee
    development matrix (TDM):
    Outline your contribution
    to interpreting financial
    transactions or
    financial statements:
    State your individual
    responsibility within the
    context of the team or
    overall process who uses
    the information you prepare,
    and for what purpose?
    What were you asked to do
    and how might you have
    exceeded the demands made
    on you in a positive way?
    How has this interpretation
    helped your department
    or organisation?
    Provide examples
    of decisions or
    recommendations that
    have arisen from your
    findings, made by you, your
    colleagues or management
    Consider the impact
    of those decisions or
    recommendations
    such as saving costs,
    improving cash flow,
    generating extra revenue or
    securing investment
    What business decisions have
    or could be made based on this
    interpretation?
    These could include new
    capital purchases, piloting
    new products or services,
    opening new sites/branches
    (or even closure of sites
    or lines of business) or
    calculation of commission
    payments to sales and
    business development staff
    Also relevant would be
    instructions to keep a
    watching brief on specific
    trends where you may have
    identified potential threats or
    opportunities but which need
    observation over a longer
    period before any decisions
    might be taken.
    Performance objective 11 is
    linked to Paper F3, Financial
    Accounting, Paper F7, Financial
    Reporting, and Paper P2,
    Corporate Reporting.
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    PO 11: INTERPRET FINANCIAL TRANSACTIONS AND FINANCIAL STATEMENTS
    For PER support and advice on answering challenge questions
    www.accaglobal.com/students/acca/per/support
    FOCUS ON PER
    01
    STUDENT ACCOUNTANT ISSUE 01/2010

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