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Free Questions › ACCA › Strategic Business Reporting
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 31
Which item is classified as other comprehensive income (OCI) rather than profit or loss?
Select an option first.
Correct answer: C — Revaluation gain on PPE under the revaluation model
Explanation: C is correct: revaluation gains on PPE under IAS 16 revaluation model go to OCI and accumulate in the revaluation surplus — they do not pass through profit or loss. A, B and D are all profit or loss items.
Question 32
Under IFRS 9, a financial asset is classified at amortised cost if:
Select an option first.
Correct answer: B — It passes the SPPI test and the business model is to hold to collect contractual cash flows
Explanation: B is correct: amortised cost requires (1) SPPI — cash flows are solely principal and interest, and (2) held-to-collect business model. A is wrong — trading = FVTPL. C is wrong — non-trading equity = FVTOCI election. D is wrong — FVTPL designation results in FVTPL, not amortised cost.
Question 33
Non-trading equity instruments under IFRS 9 may be irrevocably designated at:
Select an option first.
Correct answer: C — FVTOCI — with gains and losses never reclassified to profit or loss
Explanation: C is correct: entities may irrevocably elect FVTOCI for non-trading equity instruments. All fair value changes go to OCI, never recycled to P&L; dividends still go to P&L. A is wrong — FVTPL is the default if not designated. B is wrong — amortised cost is for debt instruments only. D is wrong — cost less impairment was old IAS 39.
Question 34
The effective interest method calculates interest income using:
Select an option first.
Correct answer: B — Effective interest rate applied to gross carrying amount
Explanation: B is correct: EIR applied to gross carrying amount produces a constant periodic return — capturing any premium/discount. A is wrong — coupon on nominal ignores premium/discount. C is wrong — risk-free rate is not used here. D is wrong — EIR is fixed at inception, not remeasured.
Question 35
Under IFRS 9 ECL Stage 1, the impairment allowance is:
Select an option first.
Correct answer: B — 12-month ECL — for assets where credit risk has not significantly increased since initial recognition
Explanation: B is correct: Stage 1 applies when credit risk has not significantly increased — the allowance equals 12-month ECL (probability of default in next 12 months × loss given default). A is wrong — lifetime ECL is Stage 2. C is wrong — a 12-month ECL is always recognised from inception. D is wrong — write-off is Stage 3 specific action.
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Question 36
Under IAS 36, value in use is:
Select an option first.
Correct answer: B — Present value of future cash flows expected from the asset or CGU
Explanation: B is correct: value in use = PV of estimated future cash inflows and outflows from continuing use and ultimate disposal, discounted at a pre-tax rate. A is wrong — that is FVLCOD. C is wrong — replacement cost is not IAS 36 methodology. D is wrong — net book value is carrying amount.
Question 37
Borrowing costs that must be capitalised under IAS 23 are:
Select an option first.
Correct answer: B — Directly attributable borrowing costs for a qualifying asset
Explanation: B is correct: IAS 23 requires capitalisation of borrowing costs directly attributable to acquiring, constructing or producing a qualifying asset (one taking substantial time to get ready). A is wrong — general costs not attributable to a qualifying asset are expensed. C is wrong — arrangement fees are amortised over the facility term. D is wrong — only attributable costs are capitalised.
Question 38
An income-based government grant under IAS 20 should be:
Select an option first.
Correct answer: B — Recognised in P&L on a systematic basis matching related costs
Explanation: B is correct: income grants are matched to the costs they compensate — spread over the relevant periods. A is wrong — grants do not go to equity. C is wrong — deducting from the asset is the capital approach for asset-based grants. D is wrong — immediate recognition mismatches timing.
Question 39
Under IFRS 5, a non-current asset is classified as held for sale when:
Select an option first.
Correct answer: B — Available for immediate sale in present condition and sale is highly probable, expected within 12 months
Explanation: B is correct: IFRS 5 requires: available for immediate sale, management committed, actively marketed at reasonable price, expected completion within one year. A is wrong — intention alone is insufficient. C is wrong — CA vs FV is not the trigger. D is wrong — a depreciated asset can still be in productive use.
Question 40
Assets classified as held for sale under IFRS 5 are measured at:
Select an option first.
Correct answer: B — Lower of carrying amount and fair value less costs to sell
Explanation: B is correct: on IFRS 5 classification, assets are remeasured to lower of carrying amount and FVLCTS; depreciation ceases. A is wrong — depreciation ceases on classification. C is wrong — FVTPL applies to financial instruments. D is wrong — NRV is an inventory term.
Question 41
Under IAS 24, which of the following is a related party?
Select an option first.
Correct answer: B — Key management personnel and entities they control or significantly influence
Explanation: B is correct: IAS 24 related parties include KMP, close family of KMP, and entities controlled/significantly influenced by them. A is wrong — major customers are not automatically related parties. C is wrong — competitors have no related party relationship. D is wrong — government entities are specifically excluded unless controlling the reporting entity.
Question 42
Under IAS 41, biological assets are generally measured at:
Select an option first.
Correct answer: B — Fair value less costs to sell, with changes in P&L
Explanation: B is correct: IAS 41 requires FV less costs to sell at each reporting date, with all changes in P&L, reflecting biological transformation. A is wrong — cost is only used when FV cannot be reliably measured. C is wrong — NRV is inventory. D is wrong — lower of cost/FV is also an inventory concept.
Question 43
The difference between functional and presentation currency is:
Select an option first.
Correct answer: B — Functional = currency of the primary economic environment; presentation = currency chosen for reporting
Explanation: B is correct: functional currency is determined by economic environment (cash generation); presentation currency is the entity's free choice for reporting. A is wrong — they can differ. C is wrong — presentation is a choice. D is wrong — functional currency only changes when economic environment changes.
Question 44
Under IFRS 15, a performance obligation is satisfied over time when at least one criterion is met. Which of the following is one criterion?
Select an option first.
Correct answer: B — Customer simultaneously receives and consumes the benefits as the entity performs
Explanation: B is correct: the three over-time criteria are: (1) simultaneous receipt/consumption; (2) entity creates/enhances asset customer controls; (3) no alternative use and entity has enforceable right to payment. A is wrong — right of return is variable consideration. C is wrong — materiality is not a criterion. D is wrong — advance payment creates a contract liability.
Question 45
Under IAS 16 revaluation model, revaluations must be carried out:
Select an option first.
Correct answer: B — Sufficiently regularly so carrying amount does not materially differ from fair value
Explanation: B is correct: no fixed frequency is prescribed — frequency depends on volatility of fair values. Volatile assets may need annual revaluation; stable assets less frequently. A is wrong — one-off revaluation creates staleness. C is wrong — five years is not specified. D is wrong — revaluation applies to both increases and decreases.
Question 46
An entity grants 1,000 options to each of 50 employees, vesting after 3 years. Grant-date FV per option = $6. By year-end 1, entity expects 5 will leave. Year 1 share-based payment expense is:
Select an option first.
Correct answer: C — $90,000
Explanation: C is correct: Expected vesting = 45 employees × 1,000 × $6 = $270,000 total. Year 1 = $270,000 ÷ 3 = $90,000. A is wrong — $300,000 ignores leavers (50 × 1,000 × $6 × 1/3 = $100,000 without leavers). B is wrong — $270,000 is total cost not annual. D is wrong — $180,000 is 2/3 of total.
Question 47
A defined benefit plan has: PV(DBO) = $8m; FV(plan assets) = $6.5m. Net defined benefit liability is:
Select an option first.
Correct answer: C — $1.5m
Explanation: C is correct: net DBI = $8m − $6.5m = $1.5m. A is wrong — $8m is the gross obligation. B is wrong — $6.5m is plan assets only. D is wrong — $14.5m is the sum, not the difference.
Question 48
A building: cost $2m, 40-year life, SL depreciation, no residual value. After 10 years revalued to $2.4m. Remaining life 30 years. Annual depreciation after revaluation is:
Select an option first.
Correct answer: C — $80,000
Explanation: C is correct: post-revaluation depreciation = $2.4m ÷ 30 years = $80,000. A is wrong — $50,000 = $2m ÷ 40 (original). B is wrong — $60,000 = carrying amount before revaluation ($1.5m) ÷ 30. D is wrong — $100,000 not supported.
Question 49
A $1,000 bond issued at $950, 5% coupon, 5-year term, EIR = 6.2%. Carrying amount at end of Year 1 is:
Select an option first.
Correct answer: B — $958.90
Explanation: B is correct: Interest (EIR) = $950 × 6.2% = $58.90. Cash coupon = $1,000 × 5% = $50. Carrying amount = $950 + ($58.90 − $50) = $958.90. A is wrong — $950 ignores Year 1 accrual. C is wrong — $1,000 is par at maturity. D is wrong — not derivable.
Question 50
Under IFRS 9, when a financial asset moves to Stage 2, the ECL allowance changes from:
Select an option first.
Correct answer: B — 12-month ECL to lifetime ECL
Explanation: B is correct: Stage 2 is triggered by significant increase in credit risk — allowance increases to full lifetime ECL. A is wrong — credit deterioration increases the allowance. C and D are wrong — ECL stages do not affect measurement category.
Question 51
After commencement of a lease under IFRS 16:
Select an option first.
Correct answer: B — ROU asset is depreciated; liability is reduced by payments but increased by interest unwinding
Explanation: B is correct: ROU asset is depreciated over shorter of lease term and useful life. Lease liability accrues interest (unwinding of discount) and is reduced by actual payments. A is wrong — both change. C is wrong — payments reduce the liability. D is wrong — ROU asset is depreciated.
Question 52
Annual lease payment $20,000 at year end; 5-year term; IBR 8%; PV annuity factor = 3.993. Initial lease liability is:
Select an option first.
Correct answer: B — $79,860
Explanation: B is correct: lease liability = $20,000 × 3.993 = $79,860. A is wrong — $100,000 is undiscounted total. C is wrong — $20,000 is one payment. D is wrong — two payments without discounting.
Question 53
A provision where outcomes range equally from $100,000 to $200,000 is measured at:
Select an option first.
Correct answer: C — $150,000
Explanation: C is correct: IAS 37 requires the midpoint of a continuous equally-likely range = ($100,000 + $200,000) ÷ 2 = $150,000. A is wrong — minimum understates. B is wrong — maximum overstates. D is wrong — reliable estimate exists.
Question 54
Deductible temporary difference = $500,000; tax rate = 20%. Deferred tax asset to recognise (subject to future profits) is:
Select an option first.
Correct answer: A — $100,000, subject to sufficient future taxable profits
Explanation: A is correct: DTA = $500,000 × 20% = $100,000, but only recognised to the extent future taxable profit is probable. B is wrong — $500,000 is the gross difference. C is wrong — $400,000 is net of tax. D is wrong — not supported.
Question 55
Which OCI item is NEVER recycled (reclassified) to profit or loss?
Select an option first.
Correct answer: C — PPE revaluation gains
Explanation: C is correct: PPE revaluation gains (IAS 16) stay permanently in equity (revaluation surplus) — transferred to retained earnings on disposal, never through P&L. A is wrong — cash flow hedge gains are recycled. B is wrong — FCTR is recycled on disposal. D is wrong — FVTOCI debt FV changes are recycled on derecognition.
Question 56
Under IFRS 15, when there is a significant financing component (advance payment), the entity should:
Select an option first.
Correct answer: B — Adjust the transaction price for time value of money, recognising interest expense
Explanation: B is correct: when customer pays significantly in advance, the entity adjusts for the significant financing component — recognising lower revenue and interest expense over the performance period. A is wrong — ignoring overstates revenue. C is wrong — the adjustment is also required. D is wrong — the entity incurs interest expense, not revenue.
Question 57
Under IAS 40, after initial recognition an entity must choose between:
Select an option first.
Correct answer: B — Cost model and fair value model — applied consistently to all investment properties
Explanation: B is correct: IAS 40 permits cost model (with FV disclosed) or fair value model (all changes in P&L), applied consistently. A is wrong — that is inventory. C is wrong — revaluation model is PPE (IAS 16). D is wrong — current cost is not an IAS 40 option.
Question 58
A simple trade receivable under IFRS 9 is classified at:
Select an option first.
Correct answer: C — Amortised cost
Explanation: C is correct: trade receivables have SPPI cash flows and the business model is to collect — amortised cost is appropriate. A is wrong — FVTPL is for trading assets or where SPPI fails. B is wrong — FVTOCI is for specific debt instruments or non-trading equity. D is wrong — not an IFRS 9 category.
Question 59
When PPE is revalued upward for the first time, the credit goes to:
Select an option first.
Correct answer: B — Revaluation surplus in equity (OCI)
Explanation: B is correct: initial upward revaluations are recognised in OCI and accumulate in the revaluation surplus within equity. A is wrong — revaluation gains go to P&L only if reversing a previous impairment charged to P&L. C is wrong — retained earnings are not adjusted on revaluation. D is wrong — no liability is created.
Question 60
Specifically borrowed $5m at 6% pa used on qualifying asset; also $3m of general borrowings at 5% pa used on same asset. Borrowing costs capitalised are:
Select an option first.
Correct answer: C — $450,000 ($300,000 specific + $150,000 general)
Explanation: C is correct: specific = $5m × 6% = $300,000. General = $3m × 5% = $150,000. Total = $450,000. A is wrong — omits general. B is wrong — omits specific. D is wrong — $750,000 overstates.
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