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Free ACCA Strategic Business Reporting Practice Questions & Answers
400 exam-style Strategic Business Reporting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 271
Under IFRS 3, goodwill is recognised as an asset because:
Select an option first.
Correct answer: B — It represents the future economic benefits arising from assets that cannot be individually identified and separately recognised — the premium paid for expected synergies and going-concern value
Explanation: B is correct: goodwill represents synergies, assembled workforce, customer loyalty and other unidentifiable factors that together make the acquired business worth more than its identifiable net assets. IFRS 3 recognises it as an asset despite it not being separately identifiable. A is wrong — goodwill is not separable (it cannot be sold without selling the whole business). C is wrong — goodwill has an indefinite useful life under IFRS. D is wrong — goodwill measurement involves significant uncertainty.
Question 272
When a parent has a 60% subsidiary with a FCTR balance of $120,000 at year end, the FCTR attributable to NCI is:
Select an option first.
Correct answer: B — $48,000 — the NCI's 40% share of the FCTR is attributed to NCI in the consolidated equity
Explanation: B is correct: the FCTR is split between the parent ($72,000 = 60%) and NCI ($48,000 = 40%) in the consolidated equity. Each party bears its proportionate share of the translation gains/losses on the foreign operation. A is wrong — the NCI shares in the FCTR. C is wrong — $72,000 is the parent's share only. D is wrong — the split is disclosed.
Question 273
Under IFRS 3, acquisition-related restructuring provisions of the acquiree:
Select an option first.
Correct answer: B — Cannot be recognised as a liability in the business combination unless the acquiree had a pre-existing obligation at the acquisition date — post-acquisition restructuring is expensed as incurred
Explanation: B is correct: IFRS 3 prohibits recognising restructuring provisions in a business combination unless they are a pre-existing liability of the acquiree (i.e. the acquiree had already created a constructive obligation before the acquisition). Post-acquisition restructuring plans are separately expensed by the acquirer. A is wrong — without a pre-existing obligation, no provision is permitted. C is wrong — unrecognised provisions increase goodwill artificially if included. D is wrong — parent board approval is not a qualifying event for a pre-existing acquiree obligation.
Question 274
The purpose of eliminating intragroup dividends in consolidation is:
Select an option first.
Correct answer: B — To ensure the subsidiary's dividend (which the parent records as income) does not inflate consolidated income — from the group's perspective, dividends move wealth within the entity, not into it
Explanation: B is correct: the parent records dividend income when it receives a dividend from the subsidiary. In consolidation, this dividend income is eliminated because from the group's perspective, no third-party income has been received — the wealth has simply moved between group entities. A is wrong — the purpose is to correctly present group income, not to reduce profit artificially. C is wrong — all intercompany transactions are visible through disclosures. D is wrong — tax compliance is separate.
Question 275
Under IAS 21, the gain or loss on disposal of a foreign operation is calculated in:
Select an option first.
Correct answer: B — The presentation currency of the group — using proceeds at the spot rate on disposal date, derecognising net assets translated at closing rate, and recycling the FCTR
Explanation: B is correct: the consolidated disposal calculation uses presentation currency amounts. The FCTR attributable to the operation is recycled to P&L as part of the disposal gain/loss. This ensures the total economic gain (including previously deferred translation gains/losses) is captured in profit. A is wrong — calculation is in the presentation currency. C is wrong — historical cost of the investment is a parent-only accounts concept. D is wrong — the group presentation currency is used.
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Question 276
Under IFRS 10, a structured entity (special purpose entity) created to hold a specific pool of receivables for a securitisation is consolidated by the originator when:
Select an option first.
Correct answer: B — The originator has power over the entity, retains exposure to variable returns from the receivables, and has the ability to use its power to affect those returns — typically when the originator manages the servicing and retains residual interests
Explanation: B is correct: IFRS 10 applies regardless of legal form. If the originator retains servicing rights, retains subordinated notes (variable return exposure), and can direct the entity's credit and investment decisions (power), it controls the structured entity and must consolidate it. A is wrong — retained interest is a key indicator but power and the link are also required. C is wrong — 10% threshold is not an IFRS 10 test. D is wrong — profitability is irrelevant.
Question 277
A parent disposes of a subsidiary that has accumulated goodwill of $200,000 and a FCTR of -$30,000 (a cumulative loss). The disposal gain calculation includes:
Select an option first.
Correct answer: B — Deducting the full carrying amount of the subsidiary's net assets (including goodwill of $200,000) from proceeds, and recycling the -$30,000 FCTR loss to P&L (increasing the disposal loss / reducing gain)
Explanation: B is correct: the disposal gain/loss in the consolidated accounts deducts all net assets including goodwill. The cumulative FCTR (-$30,000) is reclassified from equity to P&L, worsening the disposal result by $30,000 (the previously deferred loss is now realised). A is wrong — the FCTR must be recycled. C is wrong — FCTR recycling goes through P&L. D is wrong — the FCTR is a loss here, not an addition to proceeds.
Question 278
Under IAS 28, if an associate makes a loss causing the investor's interest to reach zero and the investor has provided a guarantee of $50,000 for the associate's bank debt:
Select an option first.
Correct answer: B — The investor must recognise a liability of $50,000 (reflecting the guarantee obligation) even though the investment is at nil carrying amount
Explanation: B is correct: IAS 28 requires the investor to recognise losses beyond the nil carrying amount when the investor has incurred legal or constructive obligations on behalf of the associate. A guarantee creates such an obligation — the investor recognises a liability. A is wrong — the guarantee creates an obligation that must be recognised. C is wrong — the guarantee cannot be derecognised simply because the investment is at nil. D is wrong — recognition is required, not just disclosure.
Question 279
Under IFRS 3, deferred consideration payable to the former owners of an acquiree (not contingent on performance) is classified as:
Select an option first.
Correct answer: B — Part of the consideration transferred — recognised at fair value at acquisition date and subsequently measured at amortised cost (as a financial liability under IFRS 9) with interest expense in P&L
Explanation: B is correct: deferred (but not contingent) consideration is part of the consideration transferred in the IFRS 3 calculation — included at its fair value (present value). Subsequently, it accrues interest using the effective interest method as a financial liability, with interest recognised in P&L. A is wrong — acquisition costs are expenses; consideration is not. C is wrong — deferred consideration is not part of goodwill directly (it is in the consideration). D is wrong — it is recognised on the face of the statements.
Question 280
Basic EPS is calculated as:
Select an option first.
Correct answer: B — Profit attributable to ordinary equity holders ÷ weighted average number of ordinary shares
Explanation: B is correct: basic EPS = profit attributable to ordinary equity holders ÷ weighted average ordinary shares. Preference dividends are deducted from profit first. A is wrong — PBT is used, not PAT. C is wrong — total shares differs from weighted average. D is wrong — DPS × shares = total dividends, not EPS.
Question 281
Diluted EPS is lower than basic EPS because:
Select an option first.
Correct answer: B — All dilutive potential ordinary shares are included — increasing the denominator, reducing EPS
Explanation: B is correct: diluted EPS includes potential shares from options, convertibles etc. Denominator increases → EPS decreases (if dilutive). A is wrong — profits don't decrease on option vesting. C is wrong — closing count is not used. D is wrong — for convertibles, interest is added back to the numerator AND shares added to denominator.
Question 282
A rights issue at below market price under IAS 33 requires:
Select an option first.
Correct answer: B — Retroactive restatement of prior year EPS using the bonus fraction (TERP / pre-rights price)
Explanation: B is correct: a below-market rights issue has a bonus element — prior year EPS is restated by multiplying by (TERP / actual pre-rights price) to ensure comparability. A is wrong — bonus element requires restatement. C is wrong — rights issues increase shares. D is wrong — both periods are adjusted.
Question 283
Operating profit margin =
Select an option first.
Correct answer: B — Operating profit ÷ revenue × 100
Explanation: B is correct: operating profit margin = operating profit / revenue × 100. A is wrong — that is gross margin. C is wrong — net profit / assets is ROA. D is wrong — EBITDA/equity is not a standard margin.
Question 284
Return on equity (ROE) =
Select an option first.
Correct answer: B — Net profit attributable to ordinary shareholders ÷ average shareholders' equity × 100
Explanation: B is correct: ROE = PAT (attributable) / average equity × 100. A is wrong — that is ROA variant. C is wrong — that is ROCE. D is wrong — revenue/equity is not ROE.
Question 285
Return on capital employed (ROCE) =
Select an option first.
Correct answer: B — EBIT ÷ capital employed × 100 (capital employed = equity + long-term debt)
Explanation: B is correct: ROCE = EBIT / capital employed. A is wrong — dividing by liabilities is not ROCE. C is wrong — that is ROE. D is wrong — revenue/assets is asset turnover.
Question 286
Current ratio =
Select an option first.
Correct answer: B — Current assets ÷ current liabilities
Explanation: B is correct: current ratio = current assets / current liabilities. A is wrong — total assets/liabilities is a solvency ratio. C is wrong — cash/current liabilities is the cash ratio. D is wrong — net assets/current liabilities is not the current ratio.
Question 287
The quick ratio excludes inventories from current assets because:
Select an option first.
Correct answer: B — Inventories may not be quickly convertible to cash — giving a stricter liquidity test
Explanation: B is correct: inventories may take time to sell and convert to cash — the quick ratio excludes them to show the most liquid assets against current liabilities. A is wrong — overvaluation is a separate issue. C is wrong — inventories are current assets. D is wrong — IAS 2 does not require this.
Question 288
Gearing (debt-to-equity) ratio measures:
Select an option first.
Correct answer: B — Proportion of financing from debt relative to equity — financial leverage and risk
Explanation: B is correct: gearing = total debt / total equity. Higher gearing = more financial risk due to fixed interest obligations. A is wrong — liquidity is current/quick ratios. C is wrong — asset efficiency is asset turnover. D is wrong — NCI proportion is not gearing.
Question 289
Asset turnover =
Select an option first.
Correct answer: B — Revenue ÷ average total assets
Explanation: B is correct: asset turnover = revenue / average total assets. Measures revenue generation efficiency per $1 of assets. A is wrong — profit/assets is ROA. C is wrong — assets/revenue is the inverse. D is wrong — revenue/equity is not asset turnover.
Question 290
Inventory turnover =
Select an option first.
Correct answer: B — Cost of sales ÷ average inventory
Explanation: B is correct: inventory turnover = cost of sales / average inventory. Uses cost of sales to avoid margin distortion. A is wrong — revenue includes margin. C is wrong — gross profit is the wrong numerator. D is wrong — that gives inventory days.
Question 291
Receivables days =
Select an option first.
Correct answer: B — Trade receivables ÷ revenue × 365
Explanation: B is correct: receivables days = (trade receivables / revenue) × 365. Measures average collection period. A is wrong — that is receivables turnover (times). C is wrong — that is payables days. D is wrong — % of assets ratio.
Question 292
Under IFRS 8, operating segments are identified based on:
Select an option first.
Correct answer: A — Standard industrial classifications
Explanation: B is correct: IFRS 8 uses the management approach — segments are identified by how the CODM (CEO/management committee) reviews internal information. A is wrong — regulatory classifications don't drive IFRS 8. C is wrong — segments can be product or geographic. D is wrong — 10% threshold is reportability, not identification.
Question 293
Under IFRS 8, a segment is reportable if it meets the 10% threshold for:
Select an option first.
Correct answer: B — Revenue, profit/loss or assets — each relative to the total of all segments
Explanation: B is correct: the three 10% tests are revenue, profit/loss, or assets, each compared to corresponding totals across all segments. A is wrong — headcount is not an IFRS 8 criterion. C is wrong — any one of the three triggers reportability. D is wrong — geographic scope is not the criterion.
Question 294
The IFRS 8 75% revenue test requires:
Select an option first.
Correct answer: B — Enough segments reported so that reportable segment revenue ≥ 75% of total entity revenue
Explanation: B is correct: if identified reportable segments don't collectively reach 75% of total revenue, additional segments must be added until the threshold is met. A is wrong — individual 75% is not required. C is wrong — no upper segment limit. D is wrong — gross margin is not the criterion.
Question 295
Management commentary enhances financial reporting by:
Select an option first.
Correct answer: B — Providing narrative context on performance, strategy, risks and capital allocation — supplementing quantitative statements
Explanation: B is correct: management commentary is narrative supplementing quantitative financial statements — covering strategy, performance, risks, capital management and outlook. A is wrong — it supplements, not replaces. C is wrong — IAS 24 disclosures are notes to accounts. D is wrong — auditor reports are separate.
Question 296
IFRS S1 requires disclosure of sustainability-related information that could:
Select an option first.
Correct answer: B — Reasonably be expected to affect the entity's cash flows, access to finance or cost of capital over short, medium and long term
Explanation: B is correct: IFRS S1 focuses on sustainability-related risks and opportunities with financial consequences — affecting future cash flows or the cost of capital. A is wrong — forward-looking information is central. C is wrong — all sustainability topics, not just environmental. D is wrong — IFRS S1 is independent of GRI.
Question 297
IFRS S2 climate disclosures are based on the framework of:
Select an option first.
Correct answer: B — Task Force on Climate-related Financial Disclosures (TCFD)
Explanation: B is correct: IFRS S2 is explicitly built on the TCFD's four-pillar framework: governance, strategy, risk management, and metrics & targets. A is wrong — GRI focuses on impact materiality. C is wrong — CDP is a disclosure platform. D is wrong — ILO covers labour standards.
Question 298
Under IFRS S2, physical climate risks include:
Select an option first.
Correct answer: C — Acute weather events and chronic shifts (e.g. rising sea levels) from climate change itself
Explanation: C is correct: physical risks = climate change itself — acute (floods, storms) and chronic (sea level rise, temperature increase). A and B are transition risks. D is wrong — reputational damage is a form of transition risk.
Question 299
The key difference between ISSB (IFRS S standards) and ESRS materiality is:
Select an option first.
Correct answer: B — ISSB uses financial (single) materiality; ESRS uses double materiality — both financial impact on entity AND impact on society/environment
Explanation: B is correct: ISSB focuses on financial materiality (effect on entity). ESRS adds impact materiality (effect on people/environment) = double materiality. A is wrong — positions are reversed. C is wrong — ESRS covers social and governance too. D is wrong — ISSB standards are mandatory in adopting jurisdictions.
Question 300
Which qualitative characteristic is enhancing (not fundamental)?
Select an option first.
Correct answer: C — Comparability
Explanation: C is correct: comparability is enhancing (with verifiability, timeliness, understandability). Relevance and faithful representation are the two fundamental characteristics.
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