Be confident in Assurance and PMR – Part 2

PMR will make up 20-30% of the exam marks. It should go without saying that you should have some strength in this indicator in order to stay competitive and make the rest of the exam easier on yourself.

By now, you have probably encountered the majority of the types of situations you may encounter on your final and you’ll have some idea where you stand.

Within the PMR competency, here are some ways you might be able to stand out:

  • Quantify issues whenever possible – This doesn’t mean just in the quant questions but anywhere you get the numbers to work with is an opportunity to add some depth by giving numeric behind your qualitative response.
  • Ranking – Understand that material issues and numbers are more important while other more minor issues can be left behind when time is scarce. The real easy stuff is often in there to take up your time and doesn’t add a lot of value.
  • Using case facts to backup your discussion – By far, something that a lot of candidates struggle with at this point is not enough case facts. Whenever writing an issue, always do it in terms of the case fact. In PMR, I always wrote the criteria supported by the case fact in one sentence or bullet point.
  • Don’t be afraid to use that handbook – It’s an open-book test! I used the handbook like crazy for SOA and UFE. What an unbelievable source of technical. For specific issues, the technical is often already there.

What other PMR tips do you want to share?


  1. For the use of the hbk, I find that it is hard to use during Multis. There is barely time to read, plan and write. I usually freeze on multis if I see a PM topic I am not very familiar with (for example Financial Instruments). What tips, if any, do you have for using the hbk during the multis?

    • You should know the general structure of the handbook already and where the big stuff is found, for example: Financial Instruments. When it comes up then you can just have a look in that spot for any specific criteria and use that in your response. This shouldn’t take a lot of time and is better than the alternative of getting the criteria wrong and wasting time writing a response that’s technically wrong.

      So I guess the tip is to use the handbook in the right way. You’re not going to have time to do ‘research’ in the handbook during a multi but if you’ve id’d an issue in the case and need to lookup specific criteria to support your analysis (i.e. Fin. Instruments, Capital Lease, etc.) it’s a better alternative than memorizing or trying to guess.

      When I wrote the UFE we had a Folioviews software to work with – I understand that this has changed. So I’m going based on the assumption that you can search for things (please let me know if that’s incorrect). I’ve heard that you can copy-paste even now (something we couldn’t do before) which would be awesome. Just copy-paste criteria into your response and fill in the details with case facts.

  2. Hello:

    I want to know a good generic structure for addressing PMR issues. For example, should we be giving a title (ie: lease), then stating criteria and whether its being met or should we first start off by explaining how the client is currently accounting for the lease or is that just a waste of time? THank you

    • Yes – most definitly, repeating case facts just for the sake of repeating is a big waste of time. It adds no value. At minimum you should be saying that the “current accounting treatment is incorrect, it should be this…” but don’t repeat everything they are doing wrong. This part needs to be integrated with the analysis.

      I talked a few weeks ago about structure, check the post out here.

      Added tip:

      For PMR specific issues, I was always a big fan of copying the criteria from the Handbook, word for word almost (or shorten where obvious) and then just putting the case fact involved right after. Use titles where they will clarify and make it easier to follow. I’m adding a couple of example below that I found. Pay attention to style, not content as it may be outdated and (possibly) wrong. There are numerous accounting issues in the case.

      Related Party Transactions

      – Per HB 3840.04 CCL and the Calgary Sports Channel (CSC) are related parties through CRM because they are all three controlled by Crystal Roberts as she owns the shares to CRM and CCL and Sports Channel are subs.

      – Given that they are related parties we must decide how to record the transaction that has taken place at a discount between CSC and CCL.
      – GAAP: Is the transaction in the normal course of business of operations? — Yes, local broadcasting is constantly being used as the games are very popular and is renewed yearly.
      – GAAP: Is the transaction a non-monetary exchange? — No, cash is being transferred for broadcasting rights.
      – GAAP: Does the transaction have commercial substance? — Yes since the cashflows will change significantly when the transactions are entered into.

      – Under GAAP this is a related party transaction that must be measured at exchange value.
      – Measurement is the issue, whether it should be recorded at $8M value or the $1.5M exchange amount.
      – Per GAAP, FV must be independently substantiated. Given that CCL has received offers of $8M (committments) the criteria is met and the transaction should be recorded at $8M.
      – Result to the F/S is that revenue should be recorded at FV of $8M per year in 2008. This should be reviewed in 2007 as well to see if there was a similar broadcasting offer.

      Contingent Liability

      • The contingent liability criteria under GAAP requires that we examine both the probability of incurring the liability and also measuring the amount of the potential liability.
      • Probability — The legal team has advised us that there is an over 75% chance that we will lose the legal case which translates to a probable loss under GAAP. This means that we have to disclose the details of the lawsuit and accrue an amount (if possible) for the lawsuit.
      • Measurement — Under GAAP we must record the amount that we will likely be liable for if we lose the lawsuit (or the lower amount of a range). The legal team has stated that we will be liable for the full amount if we lose therefore we must accrue a liability of $800K.
      • Recommendation: We should accrue a liability of $800K (Add $200K to the already $600K) on our B/S for this quarter and disclose the details of the lawsuit.

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