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ACCA Financial Reporting (FR) 2022 past questions and answers

This 2022 ACCA Financial Reporting (FR) set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2022 set with instant marking.

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Sample ACCA Financial Reporting (FR) 2022 questions

1. At 31 December 20X2, a lender assesses whether a retailer can repay its loan. The retailer's financial statements include a note explaining a major uncertainty affecting its cash forecasts. Which fundamental qualitative characteristic is most directly enhanced by this disclosure?
  1. Comparability
  2. Verifiability
  3. Relevance
  4. Understandability

Answer: C. Relevance

Information about a material uncertainty can influence the lender's decisions and therefore is relevant. The disclosure may also aid understanding, but decision usefulness is the defining reason it is relevant.

2. A finance manager at a technology supplier is instructed by the chief executive to record revenue for equipment that has not yet been delivered, solely to meet a bonus target. The contract transfers control only on delivery. What is the most appropriate initial response by the manager?
  1. Record the revenue because the chief executive approved it
  2. Explain that recognition would be inconsistent with the contract and reporting requirements, and use the organisation's escalation process if pressure continues
  3. Record half the revenue as a compromise
  4. Ignore the instruction but make no record of the issue

Answer: B. Explain that recognition would be inconsistent with the contract and reporting requirements, and use the organisation's escalation process if pressure continues

Recognising revenue before control transfers would misstate the financial statements and threaten integrity and professional behaviour. The manager should explain the issue and follow appropriate escalation procedures rather than comply or compromise.

3. A pharmaceutical company spends $240,000 researching a new compound. On 1 July it first demonstrates technical feasibility, intention and ability to complete and use the compound, probable future economic benefits, and reliable measurement of relevant expenditure. It then incurs a further $600,000 of qualifying development expenditure before the asset is ready for use. What amount may be recognised as an intangible asset?
  1. $840,000
  2. $600,000
  3. $240,000
  4. $0

Answer: B. $600,000

Research expenditure is expensed, and development expenditure is capitalised only from the date all recognition criteria are first met. The qualifying $600,000 incurred after 1 July can be recognised; the earlier research cost cannot be reinstated.

4. A cash-generating unit has a carrying amount of $1.20 million. Its value in use is $1.05 million and its fair value less costs of disposal is $1.10 million. What impairment loss should be recognised for the unit, before considering any allocation limits for individual assets?
  1. $150,000
  2. $100,000
  3. $50,000
  4. $0

Answer: B. $100,000

Recoverable amount is the higher of value in use and fair value less costs of disposal, which is $1.10 million. The impairment loss is $1.20 million less $1.10 million, or $100,000; using the lower recoverable measure would overstate the loss.

5. A property company applies the IAS 40 fair value model to a building held to earn rentals. The building's fair value rises by $90,000 during the year, and there are no related disposal costs. How should the gain be recognised?
  1. In profit or loss for the year
  2. In other comprehensive income and accumulated in revaluation surplus
  3. Directly in retained earnings without appearing in performance
  4. Only when the building is sold

Answer: A. In profit or loss for the year

Under IAS 40's fair value model, changes in fair value of investment property are recognised in profit or loss in the period in which they arise. The IAS 16 revaluation treatment in other comprehensive income does not apply to this fair value gain.

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