AAT L4 Study Guide 2026

FRS 102 Section 25 gives an accounting policy choice: entities may expense borrowing costs as incurred (the benchmark) or capitalise those directly attributable to qualifying assets (the allowed alternative).

Key payroll controls: HR maintains the personnel records (starters and leavers) separately from those who process payroll; payroll is independently authorised and reconciled; and payroll data is securely stored.

VaR is a statistical measure quantifying the maximum potential loss on a portfolio over a specified period (e.g., 1 day, 10 days) at a given confidence level (e.g., 95%, 99%) under normal market conditions.

The main distinction between the two services is control over the sales ledger and debt collection. With invoice factoring, the finance provider takes over these responsibilities, and the arrangement is usually disclosed to the end customer. With invoice discounting, the business retains control over its sales ledger and chases payments itself, making it a confidential service.

The AIA provides a 100% first-year deduction on qualifying plant and machinery expenditure, permanently set at £1,000,000 per year from April 2023, incentivising business investment.

Small companies under the Companies Act 2006 may prepare and file abridged accounts. They are also exempt from mandatory audit if they meet the size thresholds (turnover not exceeding £10.2m, assets not exceeding £5.1m, not more than 50 employees - meeting two of three).