ACCA Financial Reporting UPDATED ACTUAL Questions and CORRECT Answers
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Course
ACCA Financial Reporting
Institution
ACCA Financial Reporting
ACCA Financial Reporting UPDATED
ACTUAL Questions and CORRECT
Answers
How is revenue treated that is receivable 2 years after the goods are delivered? - CORRECT
ANSWER- The amount of revenue initially recognised is the amount receivable
discounted to present value.
Interst is then applied...
ACCA Financial Reporting UPDATED
ACTUAL Questions and CORRECT
Answers
How is revenue treated that is receivable 2 years after the goods are delivered? - CORRECT
ANSWER- ✔✔The amount of revenue initially recognised is the amount receivable
discounted to present value.
Interst is then applied to the receivable as interest income over 2 years
IFRS 9 requires investments in equity instruments to be measured and accounted for ( in the
absence of any election at initial recognition)? - CORRECT ANSWER- ✔✔Fair value with
changes going through profit or loss
What are acceptable methods of accounting for a goverment grant relating to an asset in
accordance with IAS? - CORRECT ANSWER- ✔✔set up the grant as deffered income
deduct the grant from the carrying amount of the asset
A sale and leaseback transaction involves the sale of an asset and the leasing back of the same
asset. If the arrangement meets the IFRS 15 criteria to be recognised as a sale, how should
any 'profit' on the sale be treated? - CORRECT ANSWER- ✔✔Recognise proportion to
related to right-of-use transferred.
How is a gain or loss arising on a biological transformation according to IAS 41? -
CORRECT ANSWER- ✔✔Included in profit or loss for the year.
What is a constructive obligation? - CORRECT ANSWER- ✔✔An obligation whereby past
practice has created a valid expectation that the entity woll discharge responsibilities.
Company has decided its deprecetion method to better reflect pattern of use its equipment.
How this change should be applied? - CORRECT ANSWER- ✔✔It's change of accounting
estimate and should be applied prospectively
To recognise provision we need - CORRECT ANSWER- ✔✔present obligation
past event
,reliable measured
Is irrecoverable debt allowance required to be shown on the face of sofp according to IAS 1?
- CORRECT ANSWER- ✔✔Not
A contingent liability is normally simply disclossed but IAS 37 makes an exception for
contigent liabilities assumed as part of business combination then it should be - CORRECT
ANSWER- ✔✔recognised.
The gain or loss arising froam a change in the fair value of an investment property should be
recognised in - CORRECT ANSWER- ✔✔profit or loss
An aircraft requires a planned overhaul. How should be cost of the overhaul be treated in the
financial statements? - CORRECT ANSWER- ✔✔The expenditure should be capitalised
when takes place and depreciated over period to the next overhaul. It should not be provided
for in advance because there is no obligation arising from apast event -the overhaul could be
avoided by ceasing to operate aircraft.
A pre-production prototype is classified as a development cost, so it is eligible to be -
CORRECT ANSWER- ✔✔capitalised. Internally generated customer lists and goodwill
cannot be capitalised. IAS 38 does not allow capitalisation of research costs.
In order for capitalisation to be allowed is not necessary for development to be completed,
patents to be registered or sales contracts signed. However, an intangible asset can only be
recognised if its cost can be realiably - CORRECT ANSWER- ✔✔measured.
What is the correct treatment of equity dividends paid under IAS 1? - CORRECT ANSWER-
✔✔Dividends paid are deducted from retained earnings.
A discountinued operation was disposed of in the current. How should this be presented in the
statement of profit or loss? - CORRECT ANSWER- ✔✔A one-line entry showing post-tax
profit of the operation and the post-tax gain or loss on disposal
What may be treated as part of the cost of inventories? - CORRECT ANSWER- ✔✔Import
duties on raw materials
,Labour involved in production
Fixed production overheads
Distribution, storage and wastage costs will all be treated as expenses and not subsumed.
What are the recognition criteria for non-current asset held for sale for the sale to be
considered high probable? - CORRECT ANSWER- ✔✔The asset must be marketed at a
reasonable price
Management must be commited to a plan to sell the asset.
The sale must be expected to take place within the next six months.
What meet the definition of financial asset in accordance with IFRS9? - CORRECT
ANSWER- ✔✔An equity iinstrument of another entity
A contract to exchange financial instruments with another entity under conditions which are
potentially favourable
Cash
When a single entity makes purchases or sales in foreign currency, it will be necassary to
translate the transactions into its functional currency before the transactions can be included
in its financial records.
In accordance with IAS, which foreign rates may be used to transalte the foreign currency
purchases and sales? - CORRECT ANSWER- ✔✔a)The rate that which existed on the day
that ourchase or sale took place
b)An average rate for the year, provided there have been no significant fluctuations
throughout the year
How are financial assets initially measured under IFRS 9? - CORRECT ANSWER- ✔✔Fair
value plus transaction costs
What criticism apply to historical cost financial statements during a period of rising prices? -
CORRECT ANSWER- ✔✔They contain mixed values; some items are at current values and
some are at out of date values.
They understate assets and overstate profits.
They overstate gearing in the statement of financial position
, Explain how the goodwill would have been treated if the calculation had resulted in a
negative figure , and how such a negative figure may arise - CORRECT ANSWER-
✔✔Where the goodwill calculations results in a negative figure (ie where the fair value of net
assets at acquisition exceeds the consideration paid and value attributed to non-controling
interest) the full amount is treated as a 'bargain purchase'. It's credited directly to profit or loss
(and retained earnings) attributable to the parent. there is no controling interest effect.
how are sales of goods with a right of return accounted for? - CORRECT ANSWER-
✔✔Revenue is not recognised for the items expected to be returned. Instead a refund liability
is recognised and the goods remain as an asset in the seller's financial statements.
What does substance over form mean? - CORRECT ANSWER- ✔✔It means recognising the
underlying economic reality of a transaction or event rather than simply what the contract
says(the legal form).
For example a sale with an obligation to repurchase on a specified date at a higher price is not
in a substance a sale , but a loan which must be paid back including accrued interest.
How are goverment grants relating to the purchase of assets accounted for? - CORRECT
ANSWER- ✔✔the proceeds received are either credited to deffered income and then
amortised to profit or loss over the useful life of the asset , or they are treated as a reduction
in the carrying amount of the asset(reducing future depreciation)
the 2 fundamental qualitative characteristics are - CORRECT ANSWER- ✔✔relevance and
faithful representation
relevance. relevant information is capable of making a difference in the decision made by
users. it is capable of making a difference in decisions if it has - CORRECT ANSWER-
✔✔predictive value , confirmation value or both.
the relevance of information is affected by its nature and its materiality. materiality .
information is material if - CORRECT ANSWER- ✔✔omitting it or mistating it could
influence decisions that users make on the basis of financial information about a specific
reporting entity
what is the most common basis of measurement used in financial statements? - CORRECT
ANSWER- ✔✔historical cost.
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