Advanced Financial Management (AFM)

Advanced
Financial
Management
(AFM)
Syllabus and study guide

September 2022 to June 2023

Designed to help with planning study and to provide

detailed information on what could be assessed in
any examination session

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 Advanced Financial Management (AFM)

Contents
1. Intellectual levels .....................................3
2. Learning hours and education recognition
...................................................................3
3. The structure of ACCA qualification ........4
4. Guide to ACCA examination structure and
delivery mode .............................................5
5. Guide to ACCA examination assessment7
6. Relational diagram linking Advanced
Financial Management (AFM) with other
exams .........................................................8
7. Approach to examining the syllabus ........8
8. Introduction to the syllabus......................9
9. Main capabilities ...................................11
10. The syllabus ........................................12
11. Detailed study guide............................13
12. Summary of changes to Advanced
Financial Management (AFM) ...................20

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 Advanced Financial Management (AFM)

1. Intellectual levels 2. Learning hours and

education recognition
The syllabus is designed to progressively
broaden and deepen the knowledge, skills
The ACCA qualification does not prescribe
and professional values demonstrated by
or recommend any particular number of
the student on their way through the
learning hours for examinations because
qualification.
study and learning patterns and styles vary
greatly between people and organisations.
The specific capabilities within the detailed
This also recognises the wide diversity of
syllabuses and study guides are assessed at
personal, professional and educational
one of three intellectual or cognitive levels:
circumstances in which ACCA students find
themselves.
Level 1: Knowledge and
comprehension
As a member of the International Federation
Level 2: Application and analysis
of Accountants, ACCA seeks to enhance the
Level 3: Synthesis and evaluation
education recognition of its qualification on
both national and international education
Very broadly, these intellectual levels relate
frameworks, and with educational authorities
to the three cognitive levels at which the
and partners globally. In doing so, ACCA
Applied Knowledge, the Applied Skills and
aims to ensure that its qualification is
the Strategic Professional exams are
recognised and valued by governments,
assessed.
regulatory authorities and employers across
all sectors. To this end, ACCA qualification
Each subject area in the detailed study
is currently recognised on the education
guide included in this document is given a 1,
frameworks in several countries. Please
2, or 3 superscript, denoting intellectual
refer to your national education framework
level, marked at the end of each relevant
regulator for further information.
learning outcome. This gives an indication of
the intellectual depth at which an area could
Each syllabus is organised into main subject
be assessed within the examination.
area headings which are further broken
However, while level 1 broadly equates with
down to provide greater detail on each area.
Applied Knowledge, level 2 equates to
Applied Skills and level 3 to Strategic
Professional, some lower level skills can
continue to be assessed as the student
progresses through each level. This reflects
that at each stage of study there will be a
requirement to broaden, as well as deepen
capabilities. It is also possible that
occasionally some higher level capabilities
may be assessed at lower levels.

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 Advanced Financial Management (AFM)

3. The structure of ACCA qualification

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 Advanced Financial Management (AFM)

4. Guide to ACCA Strategic Professional

Essentials:
examination structure and Strategic Business Leader is ACCA’s case
delivery mode study examination at Strategic Professional
and is examined as a closed book exam of
four hours, including reading, planning and
The pass mark for all ACCA Qualification reflection time which can be used flexibly
examinations is 50%. within the examination. There is no pre-seen
information and all exam related material,
The structure and delivery mode of including case information and exhibits are
examinations varies. available within the examination. Strategic
Business Leader is an exam based on one
Applied Knowledge main business scenario which involves
The Applied Knowledge examinations candidates completing several tasks within
contain 100% compulsory questions to which additional material may be introduced.
encourage candidates to study across the All questions are compulsory and each
breadth of each syllabus. These are examination will contain a total of 80
assessed by a two-hour computer based technical marks and 20 Professional Skills
examination. marks.

Applied Skills Strategic Business Reporting is a three-

The Corporate and Business Law exam is a hour 15 minutes exam. It contains two
two-hour computer-based objective test sections and all questions are compulsory.
examination for English and Global. This exam contains four professional marks.

For the format and structure of the Options:

Corporate and Business Law or Taxation The Strategic Professional Options are all
variant exams, refer to the ‘Approach to three hours and 15 minutes computer-based
examining the syllabus’ section of the exams. All contain two sections and all
relevant syllabus and study guide. questions are compulsory.

The other Applied Skills examinations From September 2022, AFM, APM and AAA
(PM, TX-UK, FR, AA, and FM) contain a mix will contain a total of 80 technical marks and
of objective and longer type questions with a 20 Professional Skills marks.
duration of three hours for 100 marks. These
are assessed by a three hour computer- From June 2023, ATX will similarly contain a
based exam. Prior to the start of each exam total of 80 technical marks and 20
there will be time allocated for students to be Professional Skills marks.
informed of the exam instructions.
The question types used at Strategic
The longer (constructed response) question Professional require students to effectively
types used in the Applied Skills exams mimic what they would do in the workplace.
(excluding Corporate and Business Law) These exams offer ACCA the opportunity to
require students to effectively mimic what focus on the application of knowledge to
they do in the workplace. Students will need scenarios, using a range of tools including
to use a range of digital skills and word processor, spreadsheets and
demonstrate their ability to use spread presentation slides - not only enabling
sheets and word processing tools in students to demonstrate their technical and
producing their answers, just as they would professional skills but also their use of the
use these tools in the workplace. These technology available to today’s accountants.
assessment methods allow ACCA to focus
on testing students’ technical and application
skills, rather than, for example, their ability to
perform simple calculations.

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 Advanced Financial Management (AFM)

Time management
ACCA encourages students to take time to
read questions carefully and to plan answers
but once the exam time has started, there
are no additional restrictions as to when
candidates may start producing their
answer.

Time should be taken to ensure that all the

information and exam requirements are
properly read and understood.

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 Advanced Financial Management (AFM)

31 March 2023 will examine the Finance Act

5. Guide to ACCA 2021 and any examinable legislation which
examination assessment is passed outside of the Finance Act before
31 May 2021.

ACCA reserves the right to examine any For additional guidance on the examinability
learning outcome contained within the study of specific tax rules and the depth in which
guide. This includes knowledge, techniques, they are likely to be examined, reference
principles, theories, and concepts as should be made to the relevant Finance Act
specified. For the financial accounting, audit article written by the examining team and
and assurance, law and tax exams except published on the ACCA website.
where indicated otherwise, ACCA will
publish examinable documents once a year None of the current or impending devolved
to indicate exactly what regulations and taxes for Scotland, Wales, and Northern
legislation could potentially be assessed Ireland is, or will be, examinable.
within identified examination sessions.

For most examinations (not tax), regulations

issued or legislation passed on or before
31 August annually, will be examinable from
1 September of the following year to 31
August of the year after that. Please refer to
the examinable documents for the
examination (where relevant) for further
information.

Regulations issued or legislation passed in

accordance with the above dates will not be
examinable if the effective date is in the
future, unless explicitly stated otherwise in
the syllabus and study guide or examinable
documents.

The term issued or passed relates to when

regulation or legislation has been formally
approved.

The term effective relates to when regulation

or legislation must be applied to an entity
transactions and business practices.

The study guide offers more detailed

guidance on the depth and level at which the
examinable documents will be examined.
The study guide should therefore be read in
conjunction with the examinable documents
list.

For UK tax exams, examinations falling

within the period 1 June to 31 March will
generally examine the Finance Act which
was passed in the previous year. Therefore,
exams falling in the period 1 June 2022 to

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 Advanced Financial Management (AFM)

6. Relational diagram linking Advanced Financial

Management (AFM) with other exams

This diagram shows links between this exam and other exams preceding or following it.
Some exams are directly underpinned by other exams such as Advanced Financial
Management with Financial Management. This diagram indicates where students are
expected to have underpinning knowledge and where it would be useful to review previous
learning before undertaking study.

7. Approach to examining the syllabus

The Advanced Financial Management exam builds upon the skills and knowledge examined
in the Financial Management exam. At this stage candidates will be expected to
demonstrate an integrated knowledge of the subject and an ability to relate their technical
understanding of the subject to issues of strategic importance to the organisation. The study
guide specifies the wide range of contextual understanding that is required to achieve a
satisfactory standard at this level.

• Communication
• Analysis and Evaluation
• Scepticism
• Commercial Acumen

Examination Structure

The syllabus is assessed by a three-hour 15 minutes examination.

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 Advanced Financial Management (AFM)

Section A

Section A will always be a single 50 mark case study. The 50 marks will comprise of 40
technical marks and 10 professional skills marks. All of the professional skills will be
examined in Section A.

Candidates should understand that they will be expected to undertake calculations, draw
comparison against relevant information where appropriate, analyse the results and offer
recommendations or conclusions as required.

Financial managers are required to look across a range of issues which affect an
organisation and its finances, so candidates should expect to see the case study focus on a
range of issues from at least two syllabus sections from A - E. These will vary depending on
the business context of the case study.

Section A questions will ask candidates to produce a response in a specific format, , for
example a report to the Board of Directors.

Section B

Section B will consist of two compulsory 25 mark questions. All section B questions will be
scenario based and contain a combination of calculation and narrative marks. There will not
be any wholly narrative questions. The 25 marks will comprise of 20 technical marks and 5
professional skills marks. Section B questions will contain a combination of professional
skills appropriate to the question. Each question will contain a minimum of two professional
skills from Analysis and Evaluation, Scepticism and Commercial Acumen.

All topics and syllabus sections will be examinable in either section A or section B of the
exam, but every exam will have question(s) which have a focus on syllabus sections B and
E.

Total 100 marks

8. Introduction to the syllabus

The aim of the syllabus is to apply relevant knowledge, skills and exercise professional
judgement as expected of a senior financial executive or advisor, in taking or recommending
decisions relating to the financial management of an organisation in private and public
sectors.

This syllabus develops upon the core financial management knowledge and skills covered in
the Financial Management syllabus and prepares candidates to advise management and/or
clients on complex strategic financial management issues facing an organisation.

The syllabus starts by exploring the role and responsibility of a senior executive or advisor in
meeting competing needs of stakeholders within the business environment of multinationals.
The syllabus then re-examines investment and financing decisions, with the emphasis
moving towards the strategic consequences of making such decisions in a domestic, as well
as international, context. Candidates are then expected to develop further advisory skills in
planning strategic acquisitions and mergers and corporate re-organisations.

The next part of the syllabus re-examines, in the broadest sense, the existence of risks in
business and the sophisticated strategies which are employed in order to manage such

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 Advanced Financial Management (AFM)

risks. It builds on what candidates would have covered in the Financial Management
syllabus.

The professional skills section of the syllabus links to all others and provides a range of
professional skills which the candidate must demonstrate in the exam. These professional
skills will make candidates more employable, or if already in work, will enhance their
opportunities for advancement.
Section G of the syllabus contains outcomes relating to the demonstration of appropriate
digital and employability skills in preparing for and taking the AFM examination. This
includes being able to access and open exhibits, requirements and response options from
different sources and being able to use the relevant functionality and technology to prepare
and present response options in a professional manner. These skills are specifically
developed by practicing and preparing for the AFM exam, using the learning support content
for computer-based exams available via the practice platform and the ACCA website and will
need to be demonstrated during the live exam.

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 Advanced Financial Management (AFM)

9. Main capabilities

On successful completion of this exam, candidates should be able to:

A Explain and evaluate the role and responsibility of the senior financial executive or
advisor in meeting conflicting needs of stakeholders and recognise the role of
international financial institutions in the financial management of multinationals

B Evaluate potential investment decisions and assessing their financial and strategic
consequences, both domestically and internationally

C Assess and plan acquisitions and mergers as an alternative growth strategy

D Evaluate and advise on alternative corporate re-organisation strategies

E Apply and evaluate alternative advanced treasury and risk management

techniques

F Apply a range of professional skills in addressing requirements within the Advanced

Financial Management exam, and in preparation for, or to support, current work
experience

G Demonstrate employability and technology skills

Relational diagram of the main capabilities

This diagram illustrates the flows and links between the main capabilities (sections) of the syllabus
and should be used as an aid to planning teaching and learning in a structured way.

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 Advanced Financial Management (AFM)

10. The syllabus E Treasury and advanced risk

management techniques

A Role of senior financial adviser in the 1. The role of the treasury function in
multinational organisation multinationals

1. The role and responsibility of senior 2. The use of financial derivatives to hedge
financial executive/advisor against forex risk

2. Financial strategy formulation 3. The use of financial derivatives to hedge

against interest rate risk
3. Ethical and governance issues
F Professional skills
4. Management of international trade and
finance
1. Communication
5. Strategic business and financial planning
for multinational organisations 2. Analysis and evaluation

6. Dividend policy in multinationals and

3. Scepticism
transfer pricing

B Advanced investment appraisal 4. Commercial acumen

1. Discounted cash flow techniques

G Employability and technology skills
2. Application of option pricing theory in 1. Use computer technology to efficiently
investment decisions access and manipulate relevant
information.
3. Impact of financing on investment
decisions and adjusted present values 2. Work on relevant response options,
using available functions and
4. Valuation and the use of free cash flows technology, as would be required in the
workplace.
5. International investment and financing
decisions 3. Navigate windows and computer
screens to create and amend responses
C Acquisitions and mergers to exam requirements, using the
appropriate tools.
1. Acquisitions and mergers versus other
growth strategies 4. Present data and information effectively,
using the appropriate tools.
2. Valuation for acquisitions and mergers

3. Regulatory framework and processes

4. Financing acquisitions and mergers

D Corporate reconstruction and re-

organisation

1. Financial reconstruction

2. Business re-organisation

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 Advanced Financial Management (AFM)

11. Detailed study guide e) Assess the organisation’s exposure to

business and financial risk including
operational, reputational, political,
A Role of the senior financial economic, regulatory and fiscal risk.[3]
adviser in the multinational f) Develop a framework for risk
organisation management, comparing and contrasting
risk mitigation, hedging and
1. The role and responsibility of senior diversification strategies.[3]
financial executive/advisor
g) Establish capital investment monitoring
a) Develop strategies for the achievement and risk management systems.[3]
of the organisational goals in line with its
agreed policy framework.[3] h) Advise on the impact of behavioural
finance on financial strategies /
b) Recommend strategies for the securities prices and why they may not
management of the financial resources follow the conventional financial
of the organisation such that they are theories.[3]
utilised in an efficient, effective and
transparent way.[3] 3. Ethical and governance issues

c) Advise the board of directors or a) Assess the ethical dimension within

management of the organisation in business issues and decisions and
setting the financial goals of the advise on best practice in the financial
business and in its financial policy management of the organisation.[3]
development with particular reference
to:[3] b) Demonstrate an understanding of the
i) Investment selection and capital interconnectedness of the ethics of good
resource allocation business practice between all of the
ii) Minimising the cost of capital functional areas of the organisation.[2]
iii) Distribution and retention policy
iv) Communicating financial policy c) Recommend, within specified problem
and corporate goals to internal domains, appropriate strategies for the
and external stakeholders resolution of stakeholder conflict and
v) Financial planning and control advise on alternative approaches that
vi) The management of risk. may be adopted.[3]

2. Financial strategy formulation d) Recommend an ethical framework for

the development of an organisation’s
a) Assess organisational performance financial policies and a system for the
using methods such as ratios and assessment of its ethical impact upon
trends.[3] the financial management of the
organisation.[3]
b) Recommend the optimum capital mix
and structure within a specified business e) Explore the areas within the ethical
context and capital asset structure.[3] framework of the organisation which may
be undermined by agency effects and/or
c) Recommend appropriate distribution and stakeholder conflicts and establish
retention policy.[3] strategies for dealing with them.[3]

d) Explain the theoretical and practical f) Establish an ethical financial policy for
rationale for the management of the financial management of the
risk.[3] organisation which is grounded in good
governance, the highest standards of

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 Advanced Financial Management (AFM)

probity and is fully aligned with the to the free movement of capital; and the
ethical principles of the Association.[3] international regulations on money
laundering.[2]
g) Assess the impact on sustainability and
environmental issues arising from g) Demonstrate an awareness of new
alternative organisational business and developments in the macroeconomic
financial decisions.[3] environment, assessing their impact
upon the organisation, and advising on
h) Assess and advise on the impact of the appropriate response to those
investment and financing strategies and developments both internally and
decisions on the organisation’s externally.[2]
stakeholders, from a governance
perspective.[2] 5. Strategic business and financial
planning for multinationals
4. Management of international trade
and finance a) Advise on the development of a financial
planning framework for a multinational
a) Advise on the theory and practice of free organisation taking into account:[3]
trade and the management of barriers to i) Compliance with national regulatory
trade.[3] requirements (for example the London
Stock Exchange admission
b) Demonstrate an up to date requirements)
understanding of the major trade ii) The mobility of capital across borders
agreements and common markets and, and national limitations on remittances
on the basis of contemporary and transfer pricing
iii) The pattern of economic and other risk
circumstances, advise on their policies
exposures in the different national
and strategic implications for a given
markets
business.[3]
iv) Agency issues in the central
coordination of overseas operations and
c) Discuss how the actions of the World
the balancing of local financial
Trade Organisation, the International
autonomy with effective central
Monetary Fund, The World Bank and
control.
Central Banks can affect a multinational
organisation.[2]
6. Dividend policy in multinationals and
transfer pricing
d) Discuss the role of international financial
institutions within the context of a
a) Determine a corporation’s dividend
globalised economy, with particular
capacity and its policy given:[3]
attention to (the Fed, Bank of England,
i) The corporation’s short- and long-
European Central Bank and the Bank of
term reinvestment strategy
Japan).[2]
ii) The impact of capital reconstruction
programmes such as share
e) Discuss the role of the international
repurchase agreements and new
financial markets with respect to the
capital issues on free cash flow to
management of global debt, the financial
equity.
development of the emerging economies
iii) The availability and timing of central
and the maintenance of global financial
remittances
stability.[2]
iv) The corporate tax regime within
the host jurisdiction.
f) Discuss the significance to the
v) The organisational policy on the
organisation, of latest developments in
transfer pricing of goods and
the world financial markets such as the
services across international borders.
causes and impact of the recent financial
crisis; growth and impact of dark pool
trading systems; the removal of barriers

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 Advanced Financial Management (AFM)

b) Advise, in the context of a specified 2. Application of option pricing theory in

capital investment programme, on an investment decisions
organisation’s current and projected
dividend capacity.[3] a) Apply the Black-Scholes Option Pricing
(BSOP) model to financial product
valuation and to asset valuation:[3]
B Advanced investment i) Determine and discuss, using
appraisal published data, the five principal
drivers of option value (value of
1. Discounted cash flow techniques the underlying, exercise price,
time to expiry, volatility and the
a) Evaluate the potential value added to an risk-free rate)
organisation arising from a specified ii) Discuss the underlying
capital investment project or portfolio assumptions, structure,
using the net present value (NPV) application and limitations of the
model.[3] BSOP model.
Project modelling should include explicit
treatment and discussion of: b) Evaluate embedded real options within a
i) Inflation and specific price project, classifying them into one of the
variation real option archetypes.[3]
ii) Taxation including tax allowable
depreciation and tax exhaustion c) Assess, calculate and advise on the
iii) Capital rationing. Multi-period value of options to delay, expand,
capital rationing limited to discussion redeploy and withdraw using the BSOP
only model.[3]
iv) Probability analysis and
sensitivity analysis when
3. Impact of financing on investment
adjusting for risk and uncertainty
decisions and adjusted present
in investment appraisal
values
v) Risk adjusted discount rates
vi) Project duration as a measure of
a) Identify and assess the appropriateness
risk.
of the range of sources of finance
available to an organisation including
b) Outline the application of Monte Carlo
equity, debt, hybrids, lease finance,
simulation to investment appraisal.[2]
venture capital, business angel finance,
Candidates will not be expected to
private equity, asset securitisation and
undertake simulations in an examination
sale, Islamic finance and security token
context but will be expected to
offerings. Including assessment on the
demonstrate an understanding of:
financial position, financial risk and the
i) The significance of the
value of an organisation.[3]
simulation output and the
assessment of the likelihood of
b) Discuss the role of, and developments
project success
in, Islamic financing as a growing
ii) The measurement and
source of finance for organisations;
interpretation of project value at
explaining the rationale for its use, and
risk.
identifying its benefits and
deficiencies.[2]
c) Establish the potential economic return
(using internal rate of return (IRR) and
c) Calculate the cost of capital of an
modified internal rate of return) and
organisation, including the cost of equity
advise on a project’s return margin.
and cost of debt, based on the range of
Discuss the relative merits of NPV and
equity and debt sources of finance.
IRR.[3]
Discuss the appropriateness of using
the cost of capital to establish project

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 Advanced Financial Management (AFM)

and organisational value, and discuss 4. Valuation and the use of free cash
its relationship to such value.[3] flows

d) Calculate and evaluate project specific a) Apply asset based, income based and
cost of equity and cost of capital, cash flow based models to value equity.
including their impact on the overall cost Apply appropriate models, including term
of capital of an organisation. structure of interest rates, the yield curve
Demonstrate detailed knowledge of and credit spreads, to value corporate
business and financial risk, the capital debt.[3]
asset pricing model and the relationship
between equity and asset betas.[3] b) Forecast an organisation’s free cash flow
and its free cash flow to equity (pre and
e) Assess an organisation’s debt exposure post capital reinvestment).[3]
to interest rate changes using the
simple Macaulay duration and modified c) Advise on the value of an organisation
duration methods.[3] using its free cash flow and free cash
flow to equity under alternative horizon
f) Discuss the benefits and limitations of and growth assumptions.[3]
duration including the impact of
convexity.[3] d) Explain the role of option pricing models,
such as the BSOP model, in the
g) Assess the organisation’s exposure to assessment of the value of equity, the
credit risk, including:[3] value of debt and of default risk.[2]
v) Explain the role of, and the risk
assessment models used by the
principal rating agencies 5. International investment and
vi) Estimate the likely credit spread over financing decisions
risk free
vii)Estimate the organisation’s current a) Assess the impact upon the value of a
cost of debt capital using the project of alternative exchange rate
appropriate term structure of interest assumptions.[3]
rates and the credit spread.
b) Forecast project or organisation free
h) Assess the impact of financing and cash flows in any specified currency and
capital structure upon the organisation determine the project’s net present value
with respect to:[3] or organisation value under differing
i) Modigliani and Miller propositions, exchange rate, fiscal and transaction
before and after tax cost assumptions.[2]
ii) Static trade-off theory
iii) Pecking order propositions c) Evaluate the significance of exchange
iv) Agency effects. controls for a given investment decision
and strategies for dealing with restricted
i) Apply the adjusted present value remittance.[3]
technique to the appraisal of investment
decisions that entail significant d) Assess the impact of a project upon an
alterations in the financial structure of organisation’s exposure to translation,
the organisation, including their fiscal transaction and economic risk.[3]
and transactions cost implications.[3]
e) Assess and advise on the costs and
j) Assess the impact of a significant capital benefits of alternative sources of finance
investment project upon the reported available within the international equity
financial position and performance of and bond markets.[3]
the organisation taking into account
alternative financing strategies.[3]

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 Advanced Financial Management (AFM)

C Acquisitions and mergers present values and changing price-

earnings multipliers resulting from the
1. Acquisitions and mergers versus acquisition or merger, to the valuation
other growth strategies process where appropriate.[3]

a) Discuss the arguments for and against e) Demonstrate an understanding of the

the use of acquisitions and mergers as a procedure for valuing high growth start-
method of corporate expansion.[2] ups.[2]

b) Evaluate the corporate and competitive 3. Regulatory framework and processes

nature of a given acquisition proposal.[3]
a) Demonstrate an understanding of the
c) Advise upon the criteria for choosing an principal factors influencing the
appropriate target for acquisition.[3] development of the regulatory framework
for mergers and acquisitions globally
d) Compare the various explanations for and, in particular, be able to compare
the high failure rate of acquisitions in and contrast the shareholder versus the
enhancing shareholder value.[3] stakeholder models of regulation.[2]

e) Evaluate, from a given context, the b) Identify the main regulatory issues which
potential for synergy separately are likely to arise in the context of a
classified as:[3] given offer and
i) Revenue synergy i) assess whether the offer is likely
ii) Cost synergy to be in the shareholders’ best
iii) Financial synergy. interests
ii) advise the directors of a target
f) Evaluate the use of the reverse takeover entity on the most appropriate
as a method of acquisition and as a way defence if a specific offer is to be
of obtaining a stock market listing:[3] treated as hostile.[3]

2. Valuation for acquisitions and 4. Financing acquisitions and mergers

mergers
a) Compare the various sources of
a) Discuss the problem of overvaluation. [2] financing available for a proposed cash-
based acquisition.[3]
b) Estimate the potential near-term and
continuing growth levels of a b) Evaluate the advantages and
corporation’s earnings using both disadvantages of a financial offer for a
internal and external measures.[3] given acquisition proposal using pure or
mixed mode financing and recommend
c) Discuss, assess and advise on the value the most appropriate offer to be made.[3]
created from an acquisition or merger of
both quoted and unquoted entities using c) Assess the impact of a given financial
models such as:[3] offer on the reported financial position
i) ’Book value-plus’ models and performance of the acquirer.[3]
ii) Market based models
iii) Cash flow models, including free D Corporate reconstruction and
cash flows. re-organisation
Taking into account the changes in the
risk profile and risk exposure of the 1. Financial reconstruction
acquirer and the target entities
a) Assess an organisational situation
d) Apply appropriate methods, such as: and determine whether a financial
risk-adjusted cost of capital, adjusted net reconstruction is an appropriate

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 Advanced Financial Management (AFM)

strategy for a given business 2. The use of financial derivatives to

situation.[3] hedge against forex risk

b) Assess the likely response of the a) Assess the impact on an organisation to

capital market and/or individual exposure in translation, transaction and
suppliers of capital to any economic risks and how these can be
reconstruction scheme and the impact managed.[3]
their response is likely to have upon the
value of the organisation.[3] b) Evaluate, for a given hedging
requirement, which of the following is the
2. Business re-organisation most appropriate strategy, given the
nature of the underlying position and the
a) Recommend, with reasons, strategies for risk exposure:[3]
unbundling parts of a quoted company.[3] i) The use of the forward exchange
market and the creation of a money
b) Evaluate the likely financial and other market hedge
benefits of unbundling.[3] ii) Synthetic foreign exchange
agreements (SAFEs)
c) Advise on the financial issues relating to iii) Exchange-traded currency futures
a management buy-out and buy-in.[3] contracts
iv) Currency swaps
E Treasury and advanced risk v) FOREX swaps
vi) Currency options.
management techniques
c) Advise on the use of bilateral and
1. The role of the treasury function in
multilateral netting and matching as tools
multinationals
for minimising FOREX transactions costs
and the management of market barriers
a) Discuss the role of the treasury
to the free movement of capital and
management function within:[3]
other remittances.[3]
i) The short term management of
the organisation’s financial
3. The use of financial derivatives to
resources
hedge against interest rate risk
ii) The longer term maximisation of
corporate value
a) Evaluate, for a given hedging
iii) The management of risk
requirement, which of the following is the
exposure.
most appropriate given the nature of the
underlying position and the risk
b) Discuss the operations of the derivatives
exposure:[3]
market, including:[3]
i) Forward Rate Agreements (FRAs)
i) The relative advantages and
ii) Interest rate futures
disadvantages of exchange traded
iii) Interest rate swaps
versus OTC agreements
iv) Interest rate options (including
ii) Key features, such as standard
collars).
contracts, tick sizes, margin
requirements and margin trading
iii) The source of basis risk and how F Professional skills
it can be minimised.
iv) Risks such as delta, gamma and 1. Communication
theta, and how these can be
managed. a) Inform concisely, objectively and
unambiguously, adopting a suitable
style and format, using appropriate
technology.[3]

18 © ACCA 2022-2023 All rights reserved.

 Advanced Financial Management (AFM)

b) Persuade using compelling and c) Challenge and critically assess the

logical arguments, demonstrating the information presented or decisions
ability to counter argue where made, where this is clearly justified,
appropriate.[3] in the wider professional, ethical,
organisational, or public interest.[3]
c) Clarify and simplify complex issues
to convey relevant information in a 3. Commercial acumen
way that adopts an appropriate tone
and is easily understood by and a) Demonstrate awareness of
reflects the requirements of the organisational and external factors,
intended audience.[3] which will affect the financial
management decisions of an
2. Analysis and evaluation organisation.[3]

a) Investigate relevant information from b) Recognise key issues in a given

a range of sources, using appropriate scenario and use judgement in
analytical techniques to estimate proposing and recommending
outcomes, assist in decision-making commercially viable solutions.[3]
and to identify opportunities or
solutions.[3] c) Show insight and perception in
understanding financial issues and
b) Consider information, evidence and wider organisational matters,
findings carefully, reflecting on their demonstrating acumen in arriving at
implications and how they can be appropriate recommendations.[3]
used in the interests of the wider
organisational goals.[3]

c) Assess and apply appropriate G Employability and technology

judgement when considering skills
organisational issues, problems or
when making financial management
decisions; taking into account the 1. Use computer technology to
implications of such decisions on the efficiently access and manipulate
organisation and those affected.[3] relevant information

d) Appraise information objectively with 2. Work on relevant response options,

a view to balancing the costs, risks, using available functions and
benefits and opportunities, before technology, as would be required in
recommending appropriate solutions the workplace
or decisions.[3]
3. Navigate windows and computer
3. Scepticism screens to create and amend
responses to exam requirements,
a) Explore the underlying reasons for a using the appropriate tools
given situation, applying the attitude
of an enquiring mind, beyond what is 4. Present data and information
immediately apparent.[3] effectively, using the appropriate
tools
b) Question opinions, assertions and
assumptions, by seeking
justifications and obtaining sufficient
evidence for either their support and
acceptance or rejection.[3]

19 © ACCA 2022-2023 All rights reserved.

 Advanced Financial Management (AFM)

12. Summary of changes to Advanced Financial

Management (AFM)

ACCA periodically reviews its qualification syllabuses so that they fully meet the needs of
stakeholders such as employers, students, regulatory and advisory bodies and learning
providers.

The main changes which have been made to the syllabus are summarised in the table
below.

Table of amendments
A3h) Assess and advise on the Integrated reporting has been
impact of investment and removed from the learning
financing strategies and outcome.
decisions on the
organisation’s
stakeholders, from a
governance perspective
A6a) Determine a corporation’s New outcome added to A6a)
dividend capacity and its which replaces the previous A6c)
policy given:[3]

v) The organisational
policy on the transfer
pricing of goods and
services across
international borders

B1a) Evaluate the potential value Outcome has been revised to

added to an organisation make clear that multi-period
arising from a specified capital rationing is only
capital investment project or examinable through discussion.
portfolio using the net
present value (NPV)
model.[3]
Project modelling should
include explicit treatment
and discussion of:

iii) Capital rationing. Multi-

period capital rationing
to be limited to
discussion only

B3a) Identify and assess the Initial coin offering reference has
appropriateness of the been changed to security token
range of sources of finance offering.
available to an organisation
including equity, debt,

20 © ACCA 2022-2023 All rights reserved.

 Advanced Financial Management (AFM)

hybrids, lease finance,

venture capital, business
angel finance, private
equity, asset securitisation
and sale, Islamic finance
and security token
offerings. Including
assessment on the financial
position, financial risk and
the value of an
organisation.
B4d) Explain the role of option Previous outcomes B4d) and e)
pricing models, such as the have been reduced into one
BSOP model, in the outcome
assessment of the value of
equity, the value of debt
and of default risk
E1b) Discuss the operations of Vega and rho removed from the
the derivatives market, list of risks which are examinable.
including:[3]

iv) Risks such as delta,

gamma and theta, and
how these can be
managed.
F Professional skills This section has been added to
reflect the professional skills
required for the AFM
examination.

21 © ACCA 2022-2023 All rights reserved.