My name is Steve Chen, FCCA and course director at APC teaching ACCA courses.

Have you heard of 'HUARONG Debacle' recently? HUARONG is a company in mainland China set up in about 20 years ago and the aim of the company was to buy 'bad debts' from commercial banks. 20 Years ago, there is a revolution in China to boost economy, at that time, in order for commercial banks such as INDUSTRIAL AND COMMERCIAL BANK OF CHINA to be listed on the stock exchange, bad debts should be reduced or removed and therefore, HUARONG was created to buy these bad debts enabling these commercial banks to be successfully listed.

Recently and interestingly, HUARONG decided to postpone to disclose its annual accounts, in other words, not meeting with timeliness according to conceptual framework requirement. In the past, a commercial bank called 'BAOSHANG BANK' in China was also doing the same thing, to delay in disclosing its accounts and later on, it was announced to go bankrupt because it could not repay its debts.

As we can see, the market is uncertain about HUARONG at all and the price of its issued debt has significantly decreased in the overseas market.

Timeliness in conceptual framework is an enhancing qualitative characterstic and companies following this requirement would give confidence to investors.

This is also an important topic in ACCA FA/FR and especially, SBR course.

If you studied/are studying ACCA FR/SBR, you may have heard of 'fair value option on financial asset/liabilities' - to avoid accounting mismatch. If you are not familiar with this concept, please let me explain.

Suppose a company issues debt (gets funds and financial liability) and then lends funds to customers (funds become financial assets). The fair value of the issued debt is affected by the changes in its credit ratings. If the business originally aims to collect interest and redemption payments from customers, the financial asset would be measured on an amortised cost basis.

In this case, credit rating changes affect fair value of issued debt(liability) but not financial asset value(as it is measured at amortised cost). To put it simply, the fair value of issued debt may decrease by $1 million resulting in $1 million expense in the P/L with no corresponding increase in P/L gain from financial asset if the financial asset is still measured at amortised cost. Profits are therefore significantly fluctuated and investors decisions are severely affected.

To solve this problem, the company may designate both financial liability and asset at fair value through P/L (FVTPL) so that both changes in fair value of financial assets and liabilities can be taken to P/L to avoid accounting mismatch (the impact of accounting for one element on the accounts is different from the other).

Do use frequently use exam techniques in your ACCA exams? If yes, I must explain the danger of this.

For example, an exam question from SBR required students to explain the accounting treatment when government gives free of charge green certificate to businesses for resale purposes.

Exam technique could be used, ie to explain the accounting treatment in IAS 20 Government grant and IAS 2 Inventories, however, if students answer only focus on the general accounting treatments, they could never pass this question.

I often require my students to give their insight to the answer, ie in this case, referring back to the IAS 20, either notional value or fair value of certificates could be used when measuring those certificates and this is the accounting policy used by the entity.

Examiners hope to see the depth of the answer in the P level papers rather than exam technique. Trust me, many ACCA examiners were lecturers in the past and they know these techniques/loopholes and they expect students to avoid these to a certain extent.

My name is Steve Chen, and I am the course director at APC and I am also a fellow ACCA member.

Have you heard of 'Crytocurrency'? For example, Bitcoin? Well, many start up businesses nowadays try to finance the business operation by issuing its own crytocurrency using blockchain technology.

In the past, Tencent - a public listed company in HK has been using its own currency (called Q Bi) allowing users to exchange these currencies in the secondary market, buying digital products using Q Bi. However, it is not using centralised technology.

Many start up businesses simply need a white paper detailing business plan, then the crytocurrency can be issued and traded on public exchange such as coinbase. Surely, risks are there!!!

However, from the accounting's perspective, when businesses issue these currencies and raise finance, depending on the characteristics of the currency itself - such as allowing buyer to own part of profits of the company (like equity) or can be refunded (contract liability), different accounting treatments applies. The key to the question is the concept of 'substance over form' in the conceptual framework.