How to Pass ACCA Advanced Financial Management

In this tutor interview series, we chat with ACCA P4 tutor Wojtek Lyjak and get his tips on what you need to do to pass Advanced Financial Management. You probably remember us talking to experienced financial trainer Wojtek Lyjak just before Christmas about ACCA F7. That interview went down so well that we got him back to talk about Advanced Financial Management (formerly P4). Wojtek has an exceptional track record of helping students pass ACCA P4, so he’s definitely worth your time and attention.

Introducing… How to Pass ACCA P4 with Wojtek Lyjak

Learnsignal: Hi Wojtek! Thanks for making time to chat a second time. Last year, we spoke to you about the ACCA F7 course, but we’re here now to chat about ACCA P4, right?

Wojtek: Yes, we are indeed. As you know, I’m a financial trainer with experience spanning various areas, largely financial reporting and financial management. ACCA P4 falls into that latter category.

Learnsignal: When we spoke before, you mentioned that the ACCA exam syllabus comprises two major strands, financial reporting and management accounting. Where does ACCA P4 fall?

Wojtek: Ah, well, P4 isn’t either of the two main strands. You could call it a minor strand if you want to name it! Those two we talked about before are the huge ones with three exams for each, but this topic has two – ACCA F9, Financial Management, and P4, Advanced Financial Management.

This is actually a technical paper, but it’s not accounting. For me, this and F9 represent a very welcome break from accounting, as such. It’s still very numerical, though. It’s not the type of “soft paper” that most accountants hate.

Learnsignal: So what’s ACCA P4 about, and how is it different from accounting?

Wojtek: The two main ACCA strands are the two types of accounting: financial reporting and management accounting. Financial reporting is all about taking what has already happened – events, transactions – and working out how to reflect those in your financial statements.

Read more: ACCA Tutor Interview: How To Pass Audit and Assurance.

Management accounting is all about collecting information about the business – sales, costs – and using that information internally to help with business decision-making. Cost-cutting, identifying redundant processes, and so on. Financial reporting is external; you’re making reports to show external stakeholders. Management accounting is for internal stakeholders. What’s important about both is the time order. The accountant relies on information about things that have already happened to report on and develop insights based on those events.

ACCA P4 is nothing to do with the past. It’s about making pure business decisions. Should we acquire a new business, and if so, how should we value it? We’re a UK company selling internationally; how can we mitigate foreign exchange risk? It’s not about looking backwards. Rather you’re looking forward, making strategic decisions. For me, that’s much more exciting. I’m an accountant by training, but I’m also an investment analyst.

Read more: The Essential Guide to Passing Your Financial Management Exam

Management accounting is all about collecting information about the business – sales, costs – and using that information internally to help with business decision-making.

Learnsignal: But management accounting is also forward-looking, right?

Wojtek: Yes, that’s true, but management accounting is mainly concerned with computing costs. This is how much profit we made, for instance. Where did we incur costs; are we using time effectively? It’s about using the information you already have to make decisions moving forward.

Whereas financial management isn’t relying on past numbers in the same way; it’s more about projections and forecasts. Should we invest in another office in China? How much cash should we keep on hand? How much should we pay shareholders in dividends? Should we hire or buy equipment? Should we take a loan or sell shares? Should we acquire or form alliances? It’s about making intelligent business decisions.

Learnsignal: That makes good sense, thanks. Shall we get into the nitty-gritty? Talk me through what’s involved in the ACCA P4 paper.

Wojtek: OK. The ACCA P4 syllabus has 5 parts, A to E.
A – the role of a financial advisor is a reasonably straightforward overview. You start getting into the more hard-core technical stuff from B onwards – the techniques you need to know to make financial decisions like those we’ve discussed. Forward agreements, swaps, risk adjustment – any specific financial instruments used in the market.

(Source) ACCA P4 Syllabus 

Most of these things will be familiar to students from the previous paper, F9, but you need to know them at a much higher level. In F9, you just have to understand that these techniques exist, roughly how they work, and what they do. In ACCA P4, you have to know how to do those calculations and compute an outcome using those financial instruments. There is a right and wrong answer – it’s quite black and white. This paper is different from the accounting papers; it’s an entirely different story.

Learnsignal: Why is ACCA P4 important? Is it relevant to your future accounting career?

Wojtek: Yes and no. On the one hand, ACCA is an accounting qualification, and this has more with investment than accounting. P4 is ACCA’s attempt to include some of that investment into an accounting course so students have a broader knowledge of finance as a whole. You‘ll find the same in an investment course – a module dedicated to accounting. It’s not able to be totally comprehensive, but it’s an overview.

P4 is ACCA’s attempt to include some of that investment into an accounting course so students have a broader knowledge of finance as a whole

It is essential, though. You just can’t be an accountant without some knowledge of this stuff. You could be brilliant at showing historical data, but you also need to add value as a decision-maker. The ACCA is trying to prepare students better for the future – for the Head of Finance role, the CFO role. That’s why I’d say that this is one of the most essential non-accounting papers in the ACCA. It makes you a well-rounded professional. The better you are at this, the better you’ll be as your career progresses.

Learnsignal: Are there any areas of the syllabus that students especially struggle with?

Wojtek: That last syllabus section, E. Students often really struggle here because a lot of this will be relatively new – especially the depth you have to go into. It’s very technical – things like forwarding rate agreements. You have to know how they work, which calculations you need and how to calculate them correctly. You have to know all these things because they’re how you protect yourself from risk in real life.

Learnsignal: A lot of ACCA P4 comes down to black and white calculations, then?

Wojtek: Yes, but it’s rarely the case that you’re expected to come up with the exact answer the examiners have. It’s not just basic maths. It’s very complicated, and you’re often rounding, using powers. There’s plenty of room to make a computational mistake. That’s why the examiners are most interested in how you structure your answer and the steps you take

You must resist the urge to cut corners because you need to clarify your process. You need to show your logic because you can get close to full points even if your final outcome is completely wrong. You’ll use different tools to calculate in real life, so small mistakes are less relevant than your logic.

Learnsignal: How should students best prepare for ACCA P4?

Wojtek: A lot of the preparation is learning the structure of calculations; learning the logic required of you. Often these computations will be done slightly differently in real life because, as I said, this is only an overview. They might be more complex out in the real world, but the basic logic is correct, and that’s what you’re learning.

This exam is very much about exam technique. Do lots of practice questions to get used to the flow of answering questions in a certain way. That’s why the Learnsignal courses are fantastic because we’re talking students through answering and structuring questions. That’s really important, especially for ACCA P4.

This exam is very much about exam technique. Do lots of practice questions to get used to the flow of answering questions in a certain way.

Learnsignal: Why do you think students struggle to pass ACCA P4? What lets them down?

Wojtek: I think the sheer complexity of the topic has a lot to answer for. When you talk to accountants, some things typically cause complete panic – one of those is derivatives. They’re very complex things. You use them in the first place to protect you from risk, but they can also be used to take huge gambles. There are a lot of use cases. Often students don’t really understand how they work and maybe weren’t taught well in university. It’s not an area that many people have experienced in real life, so often, the people teaching haven’t got that hands-on background and understanding. The mechanics of it aren’t really understood. It’s an entirely different language.

That’s why I’m working with an ex-trader on the Learnsignal P4 course because you really want someone with real-world experience to explain the logic.

Learnsignal: So students aren’t learning from the right people. Why else do people fail?

Wojtek: Again, this is related to the complexity of the paper, but time. You have to give yourself enough time to learn this material and revisit it a couple of times so it can sink in. There’s a danger that students just focus on the easy things and don’t give this paper as long as it needs. You can’t neglect the problematic bits and bury your head in the sand!

I’d recommend that students are careful about which papers they do together because you need to leave plenty of study time for P4. This really is one of the most challenging papers, so don’t underestimate your learning time. For instance, I think you’d be making your life unnecessarily difficult by taking P2 and P4 together. It’s doable, but it’ll be a killer!

You used to have to pass your final three professional papers concurrently in one sitting to pass the ACCA, but thankfully you don’t anymore. Take advantage of that, and avoid sitting 2 or 3 tough papers together. Also, make sure you look at the exam schedule. ACCA exams are often well-paced, but if you wind up with two tough exams on two concurrent days, you will really struggle. It’s better to psychologically space things out, in my experience.

Learnsignal: Thanks Wojtek. Do you have any final advice for students currently preparing for ACCA P4?

Wojtek: I said the same thing about F7 because I think it’s a really fundamental point, but discover what you find interesting about this. If you can find that passion, it’ll be easier to learn and understand the real-world application. This might be one of the most challenging papers, but it’s also one of the most interesting, with exciting uses in the real world. Tap into that, and you’ll be more likely to get to grips with the material.

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.