Financial Management (FM)

Financial
Management
(FM)
Syllabus and study guide
September 2020 to June 2021

Designed to help with planning study and to provide

detailed information on what could be assessed in
any examination session

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 Financial Management (FM)

Summary of content
Introduction
1. Intellectual levels
2. Learning hours and educational recognition
3. The structure of the ACCA Qualification
4. Guide to ACCA examination structure and
delivery mode
5. Guide to ACCA examination assessment
Financial Management syllabus
6. Relational diagram linking Financial
Management with other exams
7. Approach to examining the syllabus
8. Introduction to the syllabus
9. Main capabilities
10. The syllabus
Financial Management study guide
11. Detailed study guide
12. Summary of changes to Financial
Management (FM)

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 Financial Management (FM)

1.Intellectual levels 2.Learning hours and

The syllabus is designed to progressively
education recognition
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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 Financial Management (FM)

3.The structure of ACCA qualification

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 Financial Management (FM)

4.Guide to ACCA Strategic Professional

Strategic Business Leader is ACCA’s case
examination structure study examination at Strategic Professional
and delivery mode and is examined as a closed book exam of
four hours, including reading, planning and
The structure and delivery mode of reflection time which can be used flexibly
examinations varies. within the examination. There is no pre-seen
information and all exam related material,
Applied Knowledge including case information and exhibits are
The Applied Knowledge examinations available within the examination. Strategic
contain 100% compulsory questions to Business Leader is an exam based on one
encourage candidates to study across the main business scenario which involves
breadth of each syllabus. These are candidates completing several tasks within
assessed by a two-hour computer based which additional material may be introduced.
examination. All questions are compulsory and each
examination will contain a total of 80
Applied Skills technical marks and 20 Professional Skills
The Corporate and Business Law exam is a marks.
two-hour computer-based objective test
examination for English and Global. For the The other Strategic Professional exams are
format and structure of the Corporate and all of three hours and 15 minutes duration.
Business Law or Taxation variant exams, All contain two sections and all questions
refer to the ‘Approach to examining the are compulsory. These exams all contain
syllabus’ in section 9 of the relevant syllabus four professional marks.
and study guide. For the format and
structure of the variant exams, refer to the From March 2020, Strategic Professional
‘Approach to examining the syllabus’ section exams will become available by computer
below. based examination. More detail regarding
what is available in your market will be on
The other Applied Skills examinations (PM, the ACCA global website.
TX-UK, FR, AA, and FM) contain a mix of
objective and longer type questions with a With Applied Knowledge and Applied Skills
duration of three hours for 100 marks. These exams now assessed by computer based
are assessed by a three hour computer- exam, ACCA is committed to continuing on
based exam. Prior to the start of each exam its journey to assess all exams within the
there will be time allocated for students to be ACCA Qualification using this delivery mode.
informed of the exam instructions.
The question types used at Strategic
The longer (constructed response) question Professional again require students to
types used in the Applied Skills exams effectively mimic what they would do in the
(excluding Corporate and Business Law) workplace and, with the move to CBE, these
require students to effectively mimic what exams again offer ACCA the opportunity to
they do in the workplace. Students will need focus on the application of knowledge to
to use a range of digital skills and scenarios, using a range of tools – spread
demonstrate their ability to use spread sheets, word processing and presentations -
sheets and word processing tools in not only enabling students to demonstrate
producing their answers, just as they would their technical and professional skills but
use these tools in the workplace. These also their use of the technology available to
assessment methods allow ACCA to focus today’s accountants.
on testing students’ technical and application
skills, rather than, for example, their ability to
perform simple calculations. 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

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 Financial Management (FM)

candidates may start producing their

answer.

Time should be taken to ensure that all the

information and exam requirements are
properly read and understood.

The pass mark for all ACCA Qualification

examinations is 50%.

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 Financial Management (FM)

5.Guide to ACCA In addition, for exams in the period 1 June

2020 to 31 March 2021, all questions will
examination assume that the UK remains in the
assessment European Union.

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
None of the current or impending devolved
publish examinable documents once a year
taxes for Scotland, Wales, and Northern
to indicate exactly what regulations and
Ireland is, or will be, examinable.
legislation could potentially be assessed
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 exam
(where relevant) for further information.

Regulation issued or legislation passed in

accordance with the above dates may be
examinable even if the effective date is in
the future.

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 2020 to
31 March 2021 will examine the Finance Act
2019 and any examinable legislation which
is passed outside the Finance Act before 31
May 2019.

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 Financial Management (FM)

6.Relational diagram linking Financial Management (FM)

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 syllabus is assessed by a three-hour computer based examination.

All questions are compulsory. The exam will contain both computational and discursive
elements.

Some questions will adopt a scenario/case study approach.

Prior to the start of the exam candidates are given an extra 10 minutes to read the exam
instructions.

Candidates are provided with a formulae sheet and tables of discount and annuity factors.

Section A

Section A of the computer-based exam comprises 15 objective test questions of 2 marks

each.

Section B

Section B of the computer-based exam comprises three questions each containing five
objective test questions.

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 Financial Management (FM)

Section C

Section C of the exam comprises two 20-mark constructed response questions. The two 20-
mark questions will mainly come from the working capital management, investment appraisal
and business finance areas of the syllabus. The section A and section B questions can cover
any areas of the syllabus.
Total 100 marks

8.Introduction to the syllabus

The aim of the syllabus is to develop the knowledge and skills expected of a finance
manager, in relation to investment, financing, and dividend policy decisions.

The syllabus for Financial Management is designed to equip candidates with the skills that
would be expected from a finance manager responsible for the finance function of a
business. It prepares candidates for more advanced and specialist study in Advanced
Financial Management.

The syllabus, therefore, starts by introducing the role and purpose of the financial
management function within a business. Before looking at the three key financial
management decisions of investing, financing, and dividend policy, the syllabus explores the
economic environment in which such decisions are made.

The next section of the syllabus is the introduction of investing decisions. This is done in two
stages - investment in (and the management of) working capital and the appraisal of long-
term investments.

The next area introduced is financing decisions. This section of the syllabus starts by
examining the various sources of business finance, including dividend policy and how much
finance can be raised from within the business. It also looks at the cost of capital and other
factors that influence the choice of the type of capital a business will raise. The principles
underlying the valuation of business and financial assets, including the impact of cost of
capital on the value of business, is covered next.

The syllabus finishes with an introduction to, and examination of, risk and the main
techniques employed in managing such risk.

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 Financial Management (FM)

9.Main capabilities

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

A Discuss the role and purpose of the financial management function

B Assess and discuss the impact of the economic environment on financial management

C Discuss and apply working capital management techniques

D Carry out effective investment appraisal

E Identify and evaluate alternative sources of business finance

F Discuss and apply principles of business and asset valuations

G Explain and apply risk management techniques in business.

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

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 Financial Management (FM)

E Business finance
10.The syllabus
1. Sources of, and raising, business
A Financial management function finance

1. The nature and purpose of financial 2. Estimating the cost of capital

management
3. Sources of finance and their relative
2. Financial objectives and relationship with costs
corporate strategy
4. Capital structure theories and practical
3. Stakeholders and impact on corporate considerations
objectives
5. Finance for small- and medium-sized
4. Financial and other objectives in not-for- entities (SMEs)
profit organisations
F Business valuations
B Financial management environment
1. Nature and purpose of the valuation of
1. The economic environment for business business and financial assets

2. The nature and role of financial markets 2. Models for the valuation of shares
and institutions
3. The valuation of debt and other financial
3. The nature and role of money markets assets

C Working capital management 4. Efficient market hypothesis (EMH) and

practical considerations in the valuation
1. The nature, elements and importance of of shares
working capital
G Risk management
2. Management of inventories, accounts
receivable, accounts payable and cash 1. The nature and types of risk and
approaches to risk management
3. Determining working capital needs and
funding strategies 2. Causes of exchange rate differences
and interest rate fluctuations
D Investment appraisal
3. Hedging techniques for foreign currency
1. Investment appraisal techniques risk

2. Allowing for inflation and taxation in 4. Hedging techniques for interest rate risk
DCF

3. Adjusting for risk and uncertainty in

investment appraisal

4. Specific investment decisions (lease or

buy, asset replacement, capital
rationing)

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 Financial Management (FM)

ii) changes in dividends and share

11.Detailed study guide prices as part of total shareholder
return.
A Financial management e) Explain ways to encourage the
function achievement of stakeholder objectives,
including:[2]
1. The nature and purpose of financial i) managerial reward schemes such as
management share options and performance-
related pay.
a) Explain the nature and purpose of ii) regulatory requirements such as
financial management.[1] corporate governance codes of
best practice and stock
exchange listing regulations.
b) Explain the relationship between
financial management and financial and 4. Financial and other objectives in not-
management accounting.[1] for-profit organisations

2. Financial objectives and the a) Discuss the impact of not-for-profit status

relationship with corporate strategy on financial and other objectives.[2]

a) Discuss the relationship between b) Discuss the nature and importance of

financial objectives, corporate objectives Value for Money as an objective in not-
and corporate strategy.[2] for-profit organisations.[2]

b) Identify and describe a variety of c) Discuss ways of measuring the

financial objectives, including: [2] achievement of objectives in not-for-
profit organisations.[2]
i) shareholder wealth maximisation
ii) profit maximisation B Financial management
iii) earnings per share growth. environment
3. Stakeholders and impact on 1. The economic environment for
corporate objectives business

a) Identify the range of stakeholders and a) Identify and explain the main
their objectives.[2] macroeconomic policy targets.[1]

b) Discuss the possible conflict between b) Define and discuss the role of fiscal,
stakeholder objectives.[2] monetary, interest rate and exchange
rate policies in achieving
c) Discuss the role of management in macroeconomic policy targets.[1]
meeting stakeholder objectives,
including the application of agency c) Explain how government economic
theory.[2] policy interacts with planning and
decision-making in business.[2]
d) Describe and apply ways of measuring
achievement of corporate objectives d) Explain the need for, and the interaction
including:[2] with, planning and decision-making in
i) ratio analysis, using appropriate business of:
ratios such as return on capital i) competition policy [1]
employed, return on equity, earnings ii) government assistance for
per share and dividend per share business [1]
iii) green policies [1]

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 Financial Management (FM)

iv) corporate governance profitability, and discuss the conflict

regulation.[2] between them.[2]

2. The nature and role of financial c) Discuss the central role of working
markets and institutions capital management in financial
management.[2]
a) Identify the nature and role of money
and capital markets, both nationally and 2. Management of inventories, accounts
internationally.[2] receivable, accounts payable and
cash
b) Explain the role of financial
intermediaries.[1] a) Explain the cash operating cycle and the
role of accounts payable and accounts
c) Explain the functions of a stock market receivable.[2]
and a corporate bond market.[2]
b) Explain and apply relevant accounting
d) Explain the nature and features of ratios, including: [2]
different securities in relation to the i) current ratio and quick ratio
risk/return trade-off.[2] ii) inventory turnover ratio, average
collection period and average
3. The nature and role of money markets payable period
iii) sales revenue/net working capital
a) Describe the role of the money markets
ratio.
in:[1]
c) Discuss, apply and evaluate the use of
i) providing short-term liquidity to relevant techniques in managing
the private sector and the public inventory, including the Economic Order
sector Quantity model and Just-in-Time
ii) providing short-term trade finance techniques.[2]
iii) allowing an organisation to
manage its exposure to foreign d) Discuss, apply and evaluate the use of
currency risk and interest rate relevant techniques in managing
risk. accounts receivable, including:
i) assessing creditworthiness [1]
b) Explain the role of banks and other
ii) managing accounts receivable [1]
financial institutions in the operation of
iii) collecting amounts owing [1]
the money markets.[2]
iv) offering early settlement
c) Explain and apply the characteristics and discounts [2]
role of the principal money market v) using factoring and invoice
instruments:[2] discounting [2]
i) interest-bearing instruments vi) managing foreign accounts
ii) discount instruments receivable.[2]
iii) derivative products.
e) Discuss and apply the use of relevant
techniques in managing accounts
C Working capital management payable, including:
i) using trade credit effectively [1]
1. The nature, elements and importance ii) evaluating the benefits of early
of working capital settlement and bulk purchase
discounts [2]
a) Describe the nature of working capital iii) managing foreign accounts
and identify its elements.[1] payable.[1]

b) Identify the objectives of working capital f) Explain the various reasons for holding
management in terms of liquidity and cash, and discuss and apply the use of

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 Financial Management (FM)

relevant techniques in managing cash, c) Calculate discounted payback and

including:[2] discuss its usefulness as an
i) preparing cash flow forecasts to investment appraisal method.[2]
determine future cash flows and
cash balances d) Calculate return on capital
ii) assessing the benefits of employed (accounting rate of return)
centralised treasury management and discuss its usefulness as an
and cash control investment appraisal method.[2]
iii) cash management models, such
as the Baumol model and the e) Calculate net present value and discuss
Miller-Orr model its usefulness as an investment
iv) investing short-term. appraisal method.[2]

3. Determining working capital needs f) Calculate internal rate of return and

and funding strategies discuss its usefulness as an
investment appraisal
a) Calculate the level of working capital method.[2]
investment in current assets and discuss
the key factors determining this level, g) Discuss the superiority of
including:[2] discounted cash flow (DCF)
methods over non-DCF methods.[2]
i) the length of the working capital
cycle and terms of trade h) Discuss the relative merits of NPV
ii) an organisation’s policy on the and IRR.[2]
level of investment in current assets
iii) the industry in which the 2. Allowing for inflation and
organisation operates. taxation in DCF

b) Describe and discuss the key factors in a) Apply and discuss the real-terms
determining working capital funding and nominal-terms approaches to
strategies, including: investment appraisal.[2]
i) the distinction between
permanent and fluctuating current b) Calculate the taxation effects of
assets [2] relevant cash flows, including the
ii) the relative cost and risk of short- tax benefits of tax-allowable
term and long-term finance [2] depreciation and the tax liabilities of
iii) the matching principle [2] taxable profit.[2]
iv) the relative costs and benefits of
aggressive, conservative and c) Calculate and apply before- and
matching funding policies [2] after-tax discount rates.[2]
v) management attitudes to risk,
previous funding decisions and 3. Adjusting for risk and uncertainty
organisation size.[1] in investment appraisal

a) Describe and discuss the difference

D Investment appraisal between risk and uncertainty in relation
to probabilities and increasing project
1. Investment appraisal techniques life.[2]
a) Identify and calculate relevant cash b) Apply sensitivity analysis to
flows for investment projects.[2] investment projects and discuss the
usefulness of sensitivity analysis in
b) Calculate payback period and discuss assisting investment decisions.[2]
its usefulness as an investment
appraisal method.[2]

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 Financial Management (FM)

c) Apply probability analysis to i) equity finance

investment projects and discuss the ii) debt finance
usefulness of probability analysis in iii) lease finance
assisting investment decisions.[2] iv) venture capital.

d) Apply and discuss other techniques c) Identify and discuss methods of

of adjusting for risk and uncertainty raising equity finance, including:[2]
in investment appraisal, including: i) rights issue
i) simulation [1] ii) placing
ii) adjusted payback [1] iii) public offer
iii) risk-adjusted discount rates. [2] iv) stock exchange listing.

4. Specific investment decisions d) Identify and discuss methods of raising

(Lease or buy, asset replacement, short- and long-term Islamic finance,
capital rationing) including:[1]

a) Evaluate leasing and borrowing to i) major differences between Islamic

buy using the before- and after-tax finance and the other forms of
costs of debt.[2] business finance.
ii) the concept of riba (interest) and
b) Evaluate asset replacement how returns are made by
decisions using equivalent annual Islamic financial securities.
cost and equivalent annual iii) Islamic financial instruments
benefit.[2] available to businesses
including:
c) Evaluate investment decisions under i) murabaha (trade credit)
single-period capital rationing, ii) ijara (lease finance)
including:[2] iii) mudaraba (equity
finance)
i) the calculation of profitability iv) sukuk (debt finance)
indexes for divisible investment v) musharaka (venture
projects capital).
ii) the calculation of the NPV of (note: calculations are not required)
combinations of non-divisible
investment projects e) Identify and discuss internal sources of
iii) a discussion of the reasons for finance, including:[2]
capital rationing. i) retained earnings
ii) increasing working capital
E Business finance management efficiency
iii) the relationship between dividend
1. Sources of, and raising, business policy and the financing decision
finance iv) the theoretical approaches to, and
the practical influences on, the
a) Identify and discuss the range of dividend decision, including legal
short-term sources of finance constraints, liquidity, shareholder
available to businesses, including:[2] expectations and alternatives to cash
i) overdraft dividends.
ii) short-term loan
iii) trade credit 2. Estimating the cost of capital
iv) lease finance.
a) Estimate the cost of equity
b) Identify and discuss the range of including:[2]
long-term sources of finance i) application of the dividend
available to businesses, including:[2] growth model, its

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 Financial Management (FM)

assumptions, advantages and e) Impact of cost of capital on

disadvantages. investments including:[2]
ii) explanation and discussion of i) the relationship between
systematic and unsystematic company value and cost of
risk capital.
iii) relationship between portfolio theory ii) the circumstances under which
and the capital asset pricing model WACC can be used in
(CAPM) investment appraisal
iv) application of the CAPM, its iii) the advantages of the CAPM
assumptions, advantages and over WACC in determining a
disadvantages. project-specific cost of capital.
iv) the application of the CAPM in
b) Estimating the cost of debt:[2] calculating a project-specific
i) irredeemable debt discount rate.
ii) redeemable debt
iii) convertible debt 4. Capital structure theories and
iv) preference shares practical considerations
v) bank debt.
a) Describe the traditional view of capital
c) Estimating the overall cost of capital structure and its assumptions.[2]
including:[2]
i) distinguishing between average b) Describe the views of Miller and
and marginal cost of capital Modigliani on capital structure, both
ii) calculating the weighted average without and with corporate taxation, and
cost of capital (WACC) using their assumptions.[2]
book value and market value
weightings. c) Identify a range of capital market
imperfections and describe their impact
3. Sources of finance and their relative on the views of Miller and Modigliani on
costs capital structure.[2]
a) Describe the relative risk-return d) Explain the relevance of pecking order
relationship and the relative costs of theory to the selection of sources of
equity and debt.[2] finance.[1]
b) Describe the creditor hierarchy and 5. Finance for small and medium sized
its connection with the relative costs entities (SMEs)
of sources of finance.[2]
a) Describe the financing needs of small
c) Identify and discuss the problem of businesses.[2]
high levels of gearing.[2]
b) Describe the nature of the financing
d) Assess the impact of sources of finance problem for small businesses in terms of
on financial position, financial risk and the funding gap, the maturity gap and
shareholder wealth using appropriate inadequate security.[2]
measures, including:[2]
i) ratio analysis using statement of c) Explain measures that may be taken to
financial position gearing, ease the financing problems of SMEs,
operational and financial gearing, including the responses of government
interest coverage ratio and other departments and financial institutions.[1]
relevant ratios
ii) cash flow forecasting d) Identify and evaluate the financial impact
iii) leasing or borrowing to buy. of sources of finance for SMEs, including

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 Financial Management (FM)

sources already referred to in syllabus a) Distinguish between and discuss weak

section E1 and also [2] form efficiency, semi-strong form
i) Business angel financing efficiency and strong form efficiency.[2]
ii) Government assistance
iii) Supply chain financing b) Discuss practical considerations in the
iv) Crowdfunding / peer-to-peer valuation of shares and businesses,
funding. including:[2]
i) marketability and liquidity of shares
ii) availability and sources of
F Business valuations information
iii) market imperfections and pricing
1. Nature and purpose of the valuation
anomalies
of business and financial assets
iv) market capitalisation.
a) Identify and discuss reasons for valuing
c) Describe the significance of investor
businesses and financial assets.[2]
speculation and the explanations of
investor decisions offered by behavioural
b) Identify information requirements for
finance.[1]
valuation and discuss the limitations of
different types of information.[2]
G Risk Management
2. Models for the valuation of shares
1. The nature and types of risk and
a) Discuss and apply asset-based valuation approaches to risk management
models, including:[2]
i) net book value (statement of a) Describe and discuss different types of
financial position) basis foreign currency risk:[2]
ii) net realisable value basis i) translation risk
iii) net replacement cost basis. ii) transaction risk
iii) economic risk.
b) Discuss and apply income-based
valuation models, including:[2] b) Describe and discuss different types of
i) price/earnings ratio method interest rate risk:[1]
ii) earnings yield method. i) gap exposure
ii) basis risk.
c) Discuss and apply cash flow-based
valuation models, including:[2] 2. Causes of exchange rate differences
i) dividend valuation model and the and interest rate fluctuations
dividend growth model
ii) discounted cash flow basis. a) Describe the causes of exchange rate
fluctuations, including:
3. The valuation of debt and other i) balance of payments [1]
financial assets ii) purchasing power parity theory [2]
iii) interest rate parity theory [2]
a) Discuss and apply appropriate valuation iv) four-way equivalence.[2]
methods to:[2]
i) irredeemable debt b) Forecast exchange rates using:[2]
ii) redeemable debt i) purchasing power parity
iii) convertible debt ii) interest rate parity.
iv) preference shares.
c) Describe the causes of interest rate
4. Efficient Market Hypothesis (EMH) fluctuations, including: [2]
and practical considerations in the i) structure of interest rates and
valuation of shares yield curves
ii) expectations theory

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 Financial Management (FM)

iii) liquidity preference theory

iv) market segmentation.

3. Hedging techniques for foreign

currency risk

a) Discuss and apply traditional and basic

methods of foreign currency risk
management, including:
i) currency of invoice [1]
ii) netting and matching [2]
iii) leading and lagging [2]
iv) forward exchange contracts [2]
v) money market hedging [2]
vi) asset and liability management.[1]

b) Compare and evaluate traditional

methods of foreign currency risk
management.[2]

c) Identify the main types of foreign

currency derivatives used to hedge
foreign currency risk and explain how
they are used in hedging.[1]

(No numerical questions will be set on

this topic)

4. Hedging techniques for interest rate

risk

a) Discuss and apply traditional and basic

methods of interest rate risk
management, including:
i) matching and smoothing [1]
ii) asset and liability management [1]
iii) forward rate agreements.[2]

b) Identify the main types of interest rate

derivatives used to hedge interest rate
risk and explain how they are used in
hedging.[1]

(No numerical questions will be set on

this topic)

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 Financial Management (FM)

12.Summary of changes to Financial Management (FM)

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.

Amendments to FM

Section and subject area Syllabus content

B3c) The nature and role of money Apply has been added to the
markets learning outcome to make it clear
that calculations can be tested
D1b) Investment appraisal Wording changed for consistency
techniques with other learning outcomes
E2a)i) Estimating the cost of capital Wording changed for consistency with
other learning outcomes

There have been no deletions to the FM study guide from the 2019 – 2020 study guide.

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