ACCA Financial Reporting
Past Questions
27+ verified Financial Reporting past questions for ACCA. Step-by-step worked answers in 5 Nigerian languages.
Financial Reporting topics (2)
Sample Financial Reporting past questions
1. IFRS stands for:
- A. International Free Reporting System
- B. International Financial Reporting Standards
- C. Internal Finance Reform Series
- D. International Funds Records Service
Answer: B
AI Explanation
**The reasoning** IFRS is a globally recognized accounting framework used to ensure consistency and transparency in financial reporting across different countries. The full meaning is **International Financial Reporting Standards**. Think of it as the "rulebook" that companies worldwide follow when preparing their financial statements — so investors in Nigeria can compare a company here with one in London or New York using the same standards. Nigeria adopted IFRS in 2012 for publicly listed companies, making it crucial knowledge for accounting and business exams. **Why the wrong options tempt you** All options start with "International" and use finance-related words, which can confuse you if you're guessing. **Option A** ("Free Reporting System") sounds plausible but "free" doesn't relate to accounting standards. **Option C** uses "Reform" which sounds official but isn't the correct term. **Option D** ("Funds Records Service") mixes genuine finance words but creates a non-existent acronym. **Quick takeaway** Remember: IFRS = **International Financial Reporting Standards** — the global accounting language that keeps financial statements honest and comparable worldwide.
2. Consolidated financial statements are for:
- A. One company
- B. A group of companies
- C. Government only
- D. Banks only
Answer: B
3. Liquidity refers to:
- A. Profitability
- B. Ease of converting assets to cash
- C. Tax rate
- D. Growth rate
Answer: B
AI Explanation
## **The reasoning** Liquidity is all about **how quickly you can turn what you own into cash without losing value**. Think of it like this: if you urgently need ₦50,000 today, which is easier to convert — money in your savings account or a house you own? The savings account is highly liquid (you just withdraw it); the house is not (you'd need weeks or months to sell). In finance, liquid assets = assets that become cash fast. Examples: cash itself, bank deposits, stocks you can sell immediately. Non-liquid assets: land, buildings, cars — they take time to sell. **The principle: Liquidity measures ease of conversion to cash, not profit or growth.** ## **Why the wrong options tempt you** - **Profitability (A)** — Confuses liquidity with how much money a business makes. A profitable company can still have liquidity problems if all its money is tied up in unsold inventory! - **Tax rate (C) / Growth rate (D)** — These measure completely different things (government charges and expansion speed). Just distractors. ## **Quick takeaway** **Liquidity = Speed to cash.** If you can't pay bills quickly with it, it's not liquid — even if it's valuable.
4. Depreciation is best described as:
- A. An increase in asset value
- B. Allocation of cost over useful life
- C. A cash payment
- D. A liability
Answer: B
5. The going concern assumption means the business will:
- A. Close soon
- B. Continue operating in the foreseeable future
- C. Sell all assets
- D. Merge
Answer: B
6. IFRS stands for International Financial Reporting:
- A. Standards
- B. Systems
- C. Services
- D. Statements
Answer: A
7. Revenue is recognized when control of goods passes to the:
- A. Supplier
- B. Customer
- C. Bank
- D. Auditor
Answer: B
8. An asset is a resource controlled as a result of past events expected to bring:
- A. Losses
- B. Future economic benefits
- C. Tax
- D. Debt
Answer: B
9. Depreciation applies to:
- A. Land
- B. Non-current tangible assets
- C. Cash
- D. Inventory
Answer: B
10. The IASB issues:
- A. GAAP only
- B. International Financial Reporting Standards (IFRS)
- C. Tax laws
- D. Audit standards
Answer: B
AI Explanation
IASB issues IFRS — single set of high-quality, globally accepted accounting standards.
11. The IFRS Conceptual Framework defines an asset as:
- A. Something the entity owns
- B. A present economic resource controlled by the entity as a result of past events
- C. Any item with future value
- D. Cash only
Answer: B
AI Explanation
2018 Framework: asset = present economic resource controlled by the entity as a result of past events.
12. Revenue recognition under IFRS 15 follows:
- A. A single step
- B. A five-step model
- C. Cash basis only
- D. An eight-step framework
Answer: B
AI Explanation
IFRS 15 — 5 steps: identify contract → identify POs → determine price → allocate → recognise revenue when POs satisfied.
13. Under IFRS 16, a lessee recognises on its balance sheet:
- A. Operating expenses only
- B. Right-of-use asset and lease liability
- C. Cash inflows
- D. Goodwill
Answer: B
AI Explanation
IFRS 16 eliminated operating-lease off-balance-sheet treatment for lessees — ROU asset + lease liability recognised.
14. Property, plant and equipment is dealt with under:
- A. IFRS 9
- B. IAS 16
- C. IAS 38
- D. IFRS 15
Answer: B
AI Explanation
IAS 16 covers PPE recognition, measurement, depreciation and derecognition.
15. Borrowing costs directly attributable to a qualifying asset should be:
- A. Expensed always
- B. Capitalised as part of that asset's cost
- C. Recognised in equity
- D. Ignored
Answer: B
AI Explanation
IAS 23: directly attributable borrowing costs on qualifying assets are capitalised; others expensed.
16. An intangible asset is recognised under IAS 38 only if:
- A. Held for sale
- B. Identifiable, controllable, future economic benefits, cost measurable reliably
- C. Internally generated brand
- D. Contingent asset
Answer: B
AI Explanation
IAS 38 recognition criteria; internally generated brands and goodwill are NOT recognised.
17. Impairment under IAS 36 occurs when:
- A. Carrying amount exceeds recoverable amount
- B. Asset is sold
- C. Asset is depreciated
- D. Asset is donated
Answer: A
AI Explanation
Impairment loss = carrying amount − recoverable amount (higher of fair value less costs of disposal, and value in use).
18. Provisions under IAS 37 are recognised when:
- A. Present obligation from past event exists, outflow probable, amount reliable estimate
- B. Management plans an expense
- C. Possible event might occur
- D. CEO approves
Answer: A
AI Explanation
IAS 37 requires three criteria; otherwise the obligation is contingent (disclosed unless remote).
19. A contingent liability is:
- A. Always recognised
- B. Disclosed in notes unless remote
- C. Treated as revenue
- D. Capitalised
Answer: B
AI Explanation
Contingent liabilities are disclosed (not recognised) unless the outflow possibility is remote.
20. Deferred tax arises from:
- A. Cash flows
- B. Temporary differences between accounting and tax bases
- C. Permanent differences
- D. Foreign exchange
Answer: B
AI Explanation
IAS 12: deferred tax arises from temporary differences and is recognised at applicable rates.
21. Statement of cash flows is prepared under:
- A. IFRS 9
- B. IAS 7
- C. IAS 1
- D. IFRS 16
Answer: B
AI Explanation
IAS 7: classifies cash flows into Operating, Investing, Financing; allows direct or indirect method.
22. Under the indirect method, cash flow from operations begins with:
- A. Cash received
- B. Profit before tax
- C. Sales
- D. Gross profit
Answer: B
AI Explanation
Indirect method starts with PBT and adjusts for non-cash items and working-capital changes.
23. Basic EPS (IAS 33) =
- A. Profit ÷ total assets
- B. Profit attributable to ordinary shareholders ÷ weighted average ordinary shares
- C. Revenue ÷ shares
- D. Dividend ÷ share price
Answer: B
AI Explanation
IAS 33: Basic EPS divides earnings attributable to ordinary shareholders by weighted average ordinary shares outstanding.
24. Related-party disclosures are required under:
- A. IAS 24
- B. IAS 1
- C. IFRS 7
- D. IAS 16
Answer: A
AI Explanation
IAS 24 mandates disclosures of related-party relationships, transactions and outstanding balances.
25. Events after the reporting period providing evidence of conditions at year-end are:
- A. Non-adjusting
- B. Adjusting events — accounts should be adjusted
- C. Always immaterial
- D. Never disclosed
Answer: B
AI Explanation
IAS 10: adjusting events arise from year-end conditions; non-adjusting events are disclosed but not adjusted.
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