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ACCA Financial Reporting (FR) 2023 past questions and answers

This 2023 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 2023 set with instant marking.

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Sample ACCA Financial Reporting (FR) 2023 questions

1. A company must estimate the fair value of a specialised asset because no active market exists. The estimate is relevant to lenders, but a range of outcomes is possible. Which reporting approach best supports faithful representation under the Conceptual Framework?
  1. Omit the asset because any estimate is inherently unreliable
  2. Use a supportable neutral estimate and explain material estimation uncertainty
  3. Select the highest estimate to avoid understating the asset
  4. Present the estimate as an exact amount and omit the assumptions

Answer: B. Use a supportable neutral estimate and explain material estimation uncertainty

A supportable, neutral estimate can faithfully represent an item even when measurement uncertainty exists, provided material uncertainty is explained. Omitting all estimates is not automatically more faithful, while selecting an optimistic value would compromise neutrality.

2. A finance director threatens to dismiss a management accountant unless the accountant records a material revenue transaction before the performance obligation has been satisfied. Which fundamental ethical threat is most directly present?
  1. Self-review
  2. Familiarity
  3. Self-interest
  4. Intimidation

Answer: D. Intimidation

The explicit threat of dismissal is an intimidation threat that may impair objectivity and professional behaviour. It is not self-review, which arises when evaluating one's own previous work.

3. A manufacturer buys equipment for $600,000. The cost includes a major inspection component of $60,000, expected to be replaced every three years. The remaining equipment has a ten-year useful life. Both components have nil residual value and are depreciated straight-line. What is the total annual depreciation charge?
  1. $74,000
  2. $60,000
  3. $66,000
  4. $600,000

Answer: A. $74,000

Depreciate the equipment excluding the inspection component at ($600,000 - $60,000) / 10 = $54,000 per year, and the inspection component at $60,000 / 3 = $20,000. Total depreciation is $74,000; treating all components as having a ten-year life understates the charge.

4. A pharmaceutical company is investigating a new compound. At the reporting date it has not demonstrated technical feasibility, commercial viability or the other development recognition criteria. How should the costs of this investigative work be accounted for under IAS 38?
  1. Recognise an intangible asset once management approves the project
  2. Defer the costs until the product is launched
  3. Recognise the research expenditure as an expense when incurred
  4. Recognise the costs as goodwill

Answer: C. Recognise the research expenditure as an expense when incurred

Expenditure in the research phase is expensed as incurred because an internally generated intangible asset is not recognised at that stage. Management approval alone does not satisfy the development recognition criteria.

5. An entity recognised an impairment loss against goodwill allocated to a cash-generating unit in an earlier year. In the current year the unit's recoverable amount increases substantially. What is the IAS 36 treatment of the previous goodwill impairment?
  1. Reverse the impairment up to the original goodwill amount
  2. Do not reverse the impairment loss recognised against goodwill
  3. Reverse it only if the unit is sold within twelve months
  4. Transfer the impairment loss to other comprehensive income

Answer: B. Do not reverse the impairment loss recognised against goodwill

An impairment loss recognised for goodwill is never reversed in a subsequent period under IAS 36. Improved recoverable amount does not permit a reversal, even if the original impairment was caused by an external event.

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