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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 181
The foreign currency translation reserve (FCTR) arises from:
Select an option first.
Correct answer: B — Cumulative exchange differences from translating foreign operations — different rates for assets/liabilities vs P&L
Explanation: B is correct: FCTR accumulates the net exchange differences from using different rates (closing for balance sheet, average for P&L) in translating foreign subsidiaries. A is wrong — monetary item differences go to P&L. C is wrong — forward contract movements are hedging items. D is wrong — deferred tax is separate.
Question 182
On disposal of a foreign operation, the cumulative FCTR is:
Select an option first.
Correct answer: B — Reclassified to profit or loss as part of the disposal gain or loss
Explanation: B is correct: on disposal of a foreign operation, the cumulative FCTR is recycled to P&L — the previously deferred exchange gains/losses are now realised. A is wrong — the FCTR is not permanent. C is wrong — it goes through P&L. D is wrong — FCTR is a parent/group item.
Question 183
Goodwill in a foreign subsidiary is:
Select an option first.
Correct answer: B — An asset of the foreign operation translated at closing rate; exchange differences go to FCTR
Explanation: B is correct: under IFRS 3/IAS 21, goodwill on a foreign acquisition is denominated in the subsidiary's functional currency and retranslated at closing rate each year; differences go to FCTR. A is wrong — historical rate was old practice. C is wrong — goodwill does create translation differences. D is wrong — goodwill is not amortised under IFRS.
Question 184
Dividends paid to NCI in the consolidated cash flow statement are classified as:
Select an option first.
Correct answer: C — Financing cash outflows
Explanation: C is correct: dividends paid to NCI are returns to capital providers — financing outflows. A is wrong — financing relates to revenue-producing activities. B is wrong — investing relates to long-term assets. D is wrong — actual cash dividends are cash flows.
Question 185
The NCI share of profit in the consolidated income statement is:
Select an option first.
Correct answer: B — Shown below profit for the year as an allocation — not a deduction
Explanation: B is correct: consolidated P&L shows 100% of the group's revenues/costs; profit is then split between parent owners and NCI. NCI is an allocation of total profit, not a deduction. A is wrong — NCI is not deducted. C is wrong — NCI must be shown. D is wrong — NCI is equity, not finance.
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Question 186
NCI on the consolidated SFP represents:
Select an option first.
Correct answer: B — Equity interest in the subsidiary not attributable to the parent — shown within total equity
Explanation: B is correct: NCI is the portion of subsidiary equity held by other shareholders — presented within total consolidated equity, separate from the parent's equity. A is wrong — that is the parent's share. C is wrong — NCI is equity, not a liability. D is wrong — NCI includes NCI's share of identifiable net assets plus, under full goodwill, NCI's goodwill.
Question 187
Under IFRS 3, acquired in-process R&D is:
Select an option first.
Correct answer: B — Recognised as a separate intangible at FV at acquisition even if IAS 38 criteria not met independently
Explanation: B is correct: IFRS 3 requires separate recognition of all identifiable intangibles including in-process R&D at FV. A is wrong — expensing violates the acquisition method. C is wrong — it is separately identifiable so must be separated from goodwill. D is wrong — it is a definite asset, not contingent.
Question 188
The IFRS 3 measurement period lasts up to:
Select an option first.
Correct answer: B — 12 months from the acquisition date — provisional amounts can be adjusted retrospectively
Explanation: B is correct: the measurement period is up to 12 months. Adjustments are retrospective — comparatives are restated as if final amounts were known at acquisition. A is wrong — 12 months, not 6. C is wrong — 12 months maximum. D is wrong — unlimited adjustment is not permitted.
Question 189
Equity method goodwill on an associate acquisition is:
Select an option first.
Correct answer: B — Included within the investment carrying amount — not separately recognised or amortised
Explanation: B is correct: equity method goodwill is subsumed in the investment carrying amount — not disclosed separately, not amortised (full IFRS). A is wrong — no separate line. C is wrong — not amortised under full IFRS. D is wrong — the entire investment is tested for impairment only when indicators exist.
Question 190
Under IAS 28, once the carrying amount of an associate investment reaches zero:
Select an option first.
Correct answer: B — The investor stops recognising further losses unless it has incurred obligations on behalf of the associate
Explanation: B is correct: losses beyond nil carrying amount are only recognised if the investor has legal/constructive obligations or has made payments on the associate's behalf. A is wrong — continued losses without obligations would create a debit balance unfairly. C is wrong — derecognition is not triggered. D is wrong — no switch to consolidation.
Question 191
In a step acquisition achieving control, the previously held equity interest is:
Select an option first.
Correct answer: B — Remeasured to FV at acquisition date with the gain/loss in P&L — included in the goodwill calculation
Explanation: B is correct: IFRS 3 requires the previously held interest to be remeasured to FV at the date control is achieved — with the gain/loss in P&L — and used in the goodwill calculation. A is wrong — it is a key input. C is wrong — historical cost violates fair value principle. D is wrong — goodwill is calculated when control is achieved.
Question 192
A partial disposal retaining control is:
Select an option first.
Correct answer: B — An equity transaction — difference between proceeds and NCI change in equity, no P&L gain/loss
Explanation: B is correct: IFRS 10 — within-control disposals are equity transactions. Proceeds vs NCI carrying amount change → equity adjustment. No P&L. A is wrong — goodwill not derecognised. C is wrong — no P&L. D is wrong — only on loss of control.
Question 193
Under IFRS 11, a joint operation is one where parties have:
Select an option first.
Correct answer: B — Rights to individual assets and obligations for individual liabilities
Explanation: B is correct: joint operations — parties have direct rights to specific assets and obligations for specific liabilities; each recognises their own share. A is wrong — rights to net assets = joint venture. C is wrong — independent appointment = control, not joint operation. D is wrong — unanimous consent = joint control but doesn't distinguish JO from JV.
Question 194
Goodwill is not amortised under IFRS because:
Select an option first.
Correct answer: A — It has no value
Explanation: B is correct: goodwill represents expected synergies with an indefinite life — cannot predict diminishment over a specific period. Instead tested annually for impairment. A is wrong — goodwill has value. C is wrong — 10-year amortisation is IFRS for SMEs. D is wrong — EPS impact is not a policy basis.
Question 195
Intragroup balances are eliminated on consolidation because:
Select an option first.
Correct answer: B — The group is presented as a single entity — internal receivables/payables would not exist in a single entity's accounts
Explanation: B is correct: consolidation presents the group as if it were one entity — internal balances are not external obligations. Elimination prevents double-counting. A is wrong — arm's length is a tax concept. C is wrong — IAS 27 governs separate statements. D is wrong — balances may contain no profit.
Question 196
Which of the following is NOT eliminated on consolidation?
Select an option first.
Correct answer: D — External dividends paid by parent to its own shareholders
Explanation: D is correct: dividends paid by the parent to its external shareholders are genuine external transactions — shown in consolidated equity. A, B and C are all intragroup items eliminated.
Question 197
Exchange differences in translating a foreign subsidiary arise because:
Select an option first.
Correct answer: B — Assets/liabilities are translated at closing rate but equity at historical rates and P&L at average rates
Explanation: B is correct: different rates for different elements — closing for assets/liabilities, historical for equity, average for P&L — create the translation differences that go to the FCTR. A is wrong — accounting policy differences are addressed separately. C is wrong — exchange rates are market-determined. D is wrong — same currency means no translation differences.
Question 198
Parent acquires 70% of Sub for $560,000. FV of identifiable net assets = $650,000. NCI at FV = $175,000. Goodwill is:
Select an option first.
Correct answer: A — $85,000
Explanation: A is correct: Goodwill = $560,000 + $175,000 − $650,000 = $85,000. B is wrong — incorrect subtraction. C is wrong — positive goodwill. D is wrong — $175,000 is NCI FV only.
Question 199
Using partial goodwill (NCI = 30% × $650,000 = $195,000) for same acquisition, goodwill is:
Select an option first.
Correct answer: B — $105,000
Explanation: B is correct: Goodwill = $560,000 + $195,000 − $650,000 = $105,000. A is wrong — $85,000 is the full goodwill result. C is wrong — $195,000 is NCI only. D is wrong — there is positive goodwill.
Question 200
Parent owns 80% of subsidiary. Subsidiary post-acquisition profit = $200,000. NCI share in consolidated P&L is:
Select an option first.
Correct answer: B — $40,000
Explanation: B is correct: NCI = 20% × $200,000 = $40,000. A is wrong — $160,000 is the parent's 80% share. C is wrong — $200,000 is total. D is wrong — NCI always shares in profit.
Question 201
Subsidiary net assets at year end = $900,000; at acquisition = $600,000; parent owns 75%. NCI in consolidated SFP is:
Select an option first.
Correct answer: A — $225,000 (post-acquisition)
Explanation: A is correct: NCI = 25% × $900,000 current net assets = $225,000. B is wrong — $150,000 = 25% × $600,000 at acquisition, ignoring post-acquisition growth. C is wrong — $675,000 = 75% share. D is wrong — not supported.
Question 202
Associate acquired for $500,000. Profit = $80,000. Dividends = $20,000. Carrying amount at year end (equity method) is:
Select an option first.
Correct answer: C — $560,000
Explanation: C is correct: $500,000 + $80,000 − $20,000 = $560,000. A is wrong — ignores movements. B is wrong — $580,000 ignores dividend. D is wrong — $480,000 ignores profit.
Question 203
Foreign currency strengthened (closing rate higher than opening). Translating net assets at closing rate gives:
Select an option first.
Correct answer: B — An exchange gain in FCTR (positive translation difference)
Explanation: B is correct: when the foreign currency strengthens, translating net assets at a higher closing rate gives a larger sterling/reporting currency value — positive FCTR (exchange gain on consolidation). A is wrong — strengthening = gain not loss. C is wrong — there is always a difference. D is wrong — deferred tax is separate.
Question 204
Under IFRS 3, an acquired contingent liability of the acquiree is recognised when:
Select an option first.
Correct answer: B — It is a present obligation whose FV can be reliably measured — even if outflow is not probable
Explanation: B is correct: IFRS 3 requires recognition when there is a present obligation and reliable FV measurement — diverging from IAS 37 which additionally requires probability. A is wrong — IFRS 3 does not require probability. C is wrong — IFRS 3 criteria differ from IAS 37. D is wrong — acquiree recognition is not required.
Question 205
Consolidated disposal gain on loss of control is:
Select an option first.
Correct answer: B — Proceeds + FV of retained interest − carrying amount of subsidiary net assets (incl. goodwill) − NCI carrying amount
Explanation: B is correct: consolidated gain = proceeds + FV retained interest − derecognised net assets (incl. goodwill and NCI). The retained interest is remeasured to FV. A is wrong — this is the parent's separate accounts gain. C is wrong — same issue. D is wrong — incomplete.
Question 206
Under IAS 28, if associate accounting policies differ from investor's, the investor should:
Select an option first.
Correct answer: B — Adjust associate's statements to investor's policies before applying equity method
Explanation: B is correct: IAS 28 requires adjustments to align with investor's policies before equity method application — for consistency. A is wrong — different policies create inconsistency. C is wrong — adjustment is required. D is wrong — investor cannot change its own policies.
Question 207
Upstream sale: subsidiary (80% owned) sells to parent at profit of $40,000 in closing inventory. Consolidation effect is:
Select an option first.
Correct answer: B — 100% eliminated from inventory and P&L — NCI bears 20% of the elimination ($8,000 less NCI profit)
Explanation: B is correct: for upstream sales (subsidiary → parent), 100% of unrealised profit is eliminated from both inventory and group P&L. Since the profit arose in the subsidiary, NCI's 20% share is also reduced — NCI profit decreases by $8,000. A is wrong — the inventory elimination is 100%. C is wrong — 100% not 80%. D is wrong — arm's length is irrelevant.
Question 208
Goodwill in a foreign subsidiary is retranslated at:
Select an option first.
Correct answer: B — Closing rate at each reporting date — differences go to FCTR
Explanation: B is correct: goodwill is treated as an asset of the foreign operation and retranslated at closing rate; exchange differences accumulate in FCTR. A is wrong — historical rate was old practice. C is wrong — average rate is for P&L. D is wrong — retranslation is required.
Question 209
Under IFRS 3, an acquired asset is 'identifiable' if:
Select an option first.
Correct answer: B — It is separable OR arises from contractual or legal rights
Explanation: B is correct: identifiable = separable (can be sold, transferred, licensed separately) OR arises from contractual/legal rights. A is wrong — assets not previously recognised can still be identifiable. C is wrong — independent cash flows is the CGU test. D is wrong — certainty of FV is not the criterion.
Question 210
A parent sells 30% of its subsidiary reducing holding from 80% to 50%. Control retained. Proceeds = $300,000. Increase in NCI carrying amount = $125,000. Equity entry is:
Select an option first.
Correct answer: A — Dr Cash $300,000; Cr NCI $125,000; Cr Equity $175,000
Explanation: A is correct: equity transaction — Cash received $300,000. Increase NCI $125,000. Residual to equity = $175,000 (credit). Entry: Dr Cash $300,000; Cr NCI $125,000; Cr Equity $175,000. No P&L impact. B is wrong — equity is credited, not debited. C is wrong — no P&L. D is wrong — goodwill is not derecognised.
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