PassSparkACCA Financial Reporting (FR) 2025 past questions and answers
This 2025 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 2025 set with instant marking.
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Sample ACCA Financial Reporting (FR) 2025 questions
1. At the year end, the finance director asks a financial controller to retain an asset value that the controller knows is materially overstated, so that a bank covenant will not be breached. Which fundamental ethical principle is most directly threatened if the controller agrees?
- Integrity
- Confidentiality
- Professional behaviour
- Professional competence and due care
Answer: A. Integrity
Integrity requires the accountant to be straightforward and honest and not be associated with materially false or misleading information. Confidentiality concerns disclosure of information, while the other principles do not describe the central threat in this scenario.
2. A manufacturer buys a machine for 480,000. It also pays import duty of 24,000, delivery costs of 8,000, installation costs of 12,000, staff training costs of 6,000 and general administration costs of 5,000. The present value of a required site restoration obligation arising from installation is 15,000. What is the machine's initial cost under IAS 16?
- 530,000
- 545,000
- 535,000
- 539,000
Answer: D. 539,000
Initial cost is 480,000 + 24,000 import duty + 8,000 delivery + 12,000 installation + 15,000 restoration provision = 539,000. Training and general administration are expensed because they are not directly attributable costs of bringing the machine to the location and condition necessary for operation.
3. A software company spends 40,000 on research before a project meets IAS 38's development recognition criteria. It then incurs 160,000 of development expenditure after all recognition criteria are demonstrated. The software is available for use on 1 October 20X5, has a four-year useful life and no residual value. What is its carrying amount at 31 December 20X5, assuming straight-line amortisation?
- 150,000
- 160,000
- 190,000
- 197,500
Answer: A. 150,000
Only the 160,000 incurred after the development criteria are met is capitalised. Three months' amortisation is 160,000 / 4 x 3/12 = 10,000, leaving a carrying amount of 150,000. The earlier research expenditure is expensed.
4. A production asset has a carrying amount of 500,000 at the reporting date. Its fair value less costs of disposal is 410,000 and its value in use is 430,000. What impairment loss should be recognised, if any?
- No impairment loss
- 90,000
- 70,000
- 430,000
Answer: C. 70,000
Recoverable amount is the higher of fair value less costs of disposal and value in use, which is 430,000. The impairment loss is 500,000 - 430,000 = 70,000. Using the lower recoverable amount measure would incorrectly produce 90,000.
5. A company applies the IAS 40 fair value model to a rented office building classified as investment property. Its carrying amount at the start of the year was 700,000 and its fair value at year end is 760,000. What is the accounting treatment of the change in fair value, ignoring tax?
- Recognise a 60,000 gain in other comprehensive income
- Recognise a 60,000 gain in profit or loss
- Recognise a 60,000 revaluation surplus in equity
- Do not recognise a gain until disposal
Answer: B. Recognise a 60,000 gain in profit or loss
Under the IAS 40 fair value model, the gain of 760,000 - 700,000 = 60,000 is recognised in profit or loss for the period. It is not treated as an IAS 16 revaluation surplus or deferred until disposal.
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