ACCA Financial Reporting FR (F7) Mock Exam 2021

Financial Reporting FR, previously known as F7 is the advanced form paper of Financial Accounting FA (F3). This page contains a mock examination for paper FR (F7) and contains 20 MCQs. Make sure you solve the FR mock under strict exam conditions.

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#1. Which one is NOT an advantage of adopting IFRS?

Accountants and auditors would have more defence in case of litigation.

Accountants and auditors would have more defence in case of litigation.

Multinational companies could easily transfer staff to different locations.

Multinational companies could easily transfer staff to different locations.

IFRS makes comparisons easier

IFRS makes comparisons easier

Facilitates cross-border listings

Facilitates cross-border listings

#2. Comparability is an enhancing qualitative characteristic. Which of the following does NOT improve comparability?

Applying the entity's current accounting policy to a transaction that the entity has never engaged in before

Applying the entity's current accounting policy to a transaction that the entity has never engaged in before

Disclosing discontinued operations in financial statements

Disclosing discontinued operations in financial statements

Restating prior year statements when change in accounting policy takes place

Restating prior year statements when change in accounting policy takes place

Not changing the accounting policy unless required by IFRS or to give more relevant and reliable information

Not changing the accounting policy unless required by IFRS or to give more relevant and reliable information

#3. Conceptual Framework identifies an underlying assumption in preparing financial statements. Identify the assumption ____?

Matching Concept

Matching Concept

Going Concern

Going Concern

Substance over form

Substance over form

Materiality

Materiality

#4. Which one of the following would correctly describe the net realisable value of a two year old asset?

Amount that can be obtained from selling the asset

Amount that can be obtained from selling the asset

Carrying amount of the asset

Carrying amount of the asset

The cost of new asset of the same type

The cost of new asset of the same type

Cost minus depreciation

Cost minus depreciation

#5. Which of the following items should be included under intangible assets?

Select TWO

Patent for new drug

Patent for new drug

Licence for new vaccine

Licence for new vaccine

Specialist training courses

Specialist training courses

The Training course is an expense.

#6. Which of the following is one of the criteria for the recognition of development costs as an intangible asset?

The asset has been completed and available for use/sale

The asset has been completed and available for use/sale

There is possibility for the use/sale of the asset

There is possibility for the use/sale of the asset

The proceeds from the use/sale of the asset can be reliably measured

The proceeds from the use/sale of the asset can be reliably measured

Probable economic benefits are expected from the asset

Probable economic benefits are expected from the asset

#7. How is recoverable amount measured?

Book value less depreciation

Book value less depreciation

Lower of carrying amount and fair value less costs of disposal

Lower of carrying amount and fair value less costs of disposal

Higher of fair value less costs of disposal and value in use

Higher of fair value less costs of disposal and value in use

None

None

#8. Which TWO of the following might be the external indicators that impairment may have occurred

Unusually significant fall in the market value of one or more assets

Unusually significant fall in the market value of one or more assets

evidence of obsolescence

evidence of obsolescence

Decline in economic performance

Decline in economic performance

Increase in market interest rates.

Increase in market interest rates.

The other TWO options are internal indicators.

#9. Consignment inventory is held by one party but owned by another party. Which TWO might be the indicators of consignment inventory?

There is no right of the return of the inventory

There is no right of the return of the inventory

Dealer bears slow movement risk

Dealer bears slow movement risk

The manufacturer bears the obsolescence risk

The manufacturer bears the obsolescence risk

The manufacturer can require the dealer to return the inventory

The manufacturer can require the dealer to return the inventory

#10. Which TWO of the following statements are true for consolidated financial statements?

The NCI (non-controlling interest) share of profit is part of the consolidated statement of profit or loss

The NCI (non-controlling interest) share of profit is part of the consolidated statement of profit or loss

Goodwill on acquisition should be amortized over a period not exceeding 20 years

Goodwill on acquisition should be amortized over a period not exceeding 20 years

If during the year, a subsidiary is acquired, its results should be apportioned over the year of acquisition

If during the year, a subsidiary is acquired, its results should be apportioned over the year of acquisition

Only the group share of the subsidiary's Non-current assets is shown in the statement of financial position

Only the group share of the subsidiary's Non-current assets is shown in the statement of financial position

#11. Reduction is estimated value of contingent consideration has occurred. How would you account for it?

Debit Liability / Credit Profit or Loss

Debit Liability / Credit Profit or Loss

Debit Profit or loss / Credit Liability

Debit Profit or loss / Credit Liability

Debit Goodwill / Credit Profit or Loss

Debit Goodwill / Credit Profit or Loss

Debit Profit or Loss / Credit Goodwill

Debit Profit or Loss / Credit Goodwill

#12. In consolidation, which ONE of the following applies when NCI (Non-controlling interest) is measured at fair value.

Negative goodwill share will be allocated to NCI

Negative goodwill share will be allocated to NCI

Whole of the pre-acquisition profits will be allocated to NCI

Whole of the pre-acquisition profits will be allocated to NCI

Only the share of goodwill impairment will be allocated to NCI

Only the share of goodwill impairment will be allocated to NCI

If the subsidiary's share price falls, the non-controlling interest will be adjusted

If the subsidiary's share price falls, the non-controlling interest will be adjusted

#13. An entity is associate when an investor has significant influence over the company. Which ONE of the following might reflect significant influence?

The investor has representation on the board of directors of the investee.

The investor has representation on the board of directors of the investee.

Investor owns 30,000 shares out of the total 50 million shares

Investor owns 30,000 shares out of the total 50 million shares

Investor controls majority of the board members

Investor controls majority of the board members

Investor owns 100% shares

Investor owns 100% shares

• Investor controls majority of the board members : Denotes control.
• Investor controls majority of the board members : Denotes control.
• Investor owns 30,000 shares out of the total 50 million shares : Not a significant influence

 

#14. Where will the dividends paid be shown in the statement of cash flow?

Financing Activities

Financing Activities

Investing Activities

Investing Activities

Operating & Investing Activities

Operating & Investing Activities

Financing & Operating Activities

Financing & Operating Activities

#15. Which of the following will NOT be stakeholders in a Charity (Not-for profit entity)

Government

Government

Tax Payers

Tax Payers

Shareholders

Shareholders

Finance Providers

Finance Providers

#16. What are the TWO fundamental qualitative characteristics of financial information as per the conceptual framework?

Select TWO

Relevance

Relevance

Faithful representation

Faithful representation

Materiality

Materiality

Honesty

Honesty

#17. Why the discontinued operations are presented separately in financial statements?

To enhance the predictive nature of financial statements

To enhance the predictive nature of financial statements

To show the reports of the business accurately

To show the reports of the business accurately

The financial statements can be verified easily

The financial statements can be verified easily

To make the statements understandable

To make the statements understandable

#18. According to IAS 8 Accounting policies, changes in accounting estimates and errors, which one of the following represents a change in accounting policy

Classifying a commission as revenue in P/L, previously been classified as other operating income

Classifying a commission as revenue in P/L, previously been classified as other operating income

Leasing non-current assets (PPE), previously using cash to buy PPEs

Leasing non-current assets (PPE), previously using cash to buy PPEs

Revising the remaining useful lives of non-current assets

Revising the remaining useful lives of non-current assets

Changing the subsidiary's valuation of inventory to make it in-line with the group policy for inventory valuations

Changing the subsidiary's valuation of inventory to make it in-line with the group policy for inventory valuations

#19. For a debt investment to be held under amortised cost, which TWO tests must be passed?

Select TWO

Business model test

Business model test

Fair value test

Fair value test

Contractual cash flow characteristic test

Contractual cash flow characteristic test

amortisation test

amortisation test

#20. Select the ONE which does not belong to the five-step revenue model

Identify the contract

Identify the contract

Determine the transaction price

Determine the transaction price

Recognize revenue when the entity satisfies a performance obligation

Recognize revenue when the entity satisfies a performance obligation

Make sure whether the control over the goods has passed or not

Make sure whether the control over the goods has passed or not

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