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ICAN Financial Reporting 2024 past questions and answers

This 2024 ICAN Financial Reporting set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2024 set with instant marking.

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Sample ICAN Financial Reporting 2024 questions

1. A manufacturer depreciated a machine over 10 years. At the end of year 4, after reviewing the machine's condition, management revises its remaining useful life to 3 years. The original estimate was reasonable when made. How should the change be reported under IAS 8?
  1. Restate prior years as a change in accounting policy.
  2. Recognise the entire effect immediately in other comprehensive income.
  3. Apply the revised estimate prospectively in the current and future periods.
  4. Reverse depreciation charged in prior periods.

Answer: C. Apply the revised estimate prospectively in the current and future periods.

A revision to useful life based on new information is a change in accounting estimate and is applied prospectively. Prior depreciation is not restated because the original estimate was reasonable.

2. A factory buys a machine for 500,000 naira. It pays 10,000 naira to deliver it to the site, 20,000 naira for installation, 5,000 naira for staff training and 4,000 naira of general administration costs. What amount should be included in the machine's initial cost under IAS 16?
  1. 530,000 naira
  2. 535,000 naira
  3. 534,000 naira
  4. 539,000 naira

Answer: A. 530,000 naira

Delivery and installation are directly attributable to bringing the machine to the location and condition necessary for use: 500,000 + 10,000 + 20,000 = 530,000 naira. Training and general administration are expensed, so including training (option B) would be incorrect.

3. A technology company has completed research on a new software product. From 1 July, it demonstrates technical feasibility, intends and is able to complete and use the product, has probable future economic benefits and adequate resources, and can measure development costs reliably. How should qualifying development costs incurred from 1 July be treated under IAS 38?
  1. Expense all research and development costs, even after the criteria are met.
  2. Capitalise all project costs from the date research began.
  3. Capitalise the costs only when the software is first sold.
  4. Recognise qualifying development expenditure as an intangible asset from 1 July.

Answer: D. Recognise qualifying development expenditure as an intangible asset from 1 July.

Development expenditure is capitalised only from the date all IAS 38 recognition criteria are demonstrated; earlier research expenditure is expensed. Waiting until the first sale is not required once the criteria are met.

4. A courier leases a delivery van for five years. The contract conveys the right to control the use of an identified van, and the short-term and low-value exemptions do not apply. What does the lessee generally recognise at the commencement date under IFRS 16?
  1. Rental expense only when each payment is made.
  2. A right-of-use asset and a lease liability.
  3. A right-of-use asset without any lease liability.
  4. No asset or liability, but a commitment note.

Answer: B. A right-of-use asset and a lease liability.

For a lease within IFRS 16 and outside the stated exemptions, the lessee recognises a right-of-use asset and a lease liability at commencement. Recognising only payments as rent (option A) is not the general lessee model.

5. At year end, equipment has a carrying amount of 500,000 naira and a tax base of 400,000 naira. The temporary difference will be taxable when recovered, and the enacted tax rate is 30%. What deferred tax balance arises, assuming no recognition exemption applies?
  1. A deferred tax asset of 30,000 naira.
  2. A deferred tax liability of 100,000 naira.
  3. A deferred tax liability of 30,000 naira.
  4. No deferred tax balance.

Answer: C. A deferred tax liability of 30,000 naira.

The taxable temporary difference is 500,000 − 400,000 = 100,000 naira. The deferred tax liability is 100,000 × 30% = 30,000 naira; 100,000 is the temporary difference, not the tax balance.

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